In a decision some believe may generate more trademark infringement litigation, the U.S. Supreme Court recently ruled that a trademark owner does not have to prove a defendant acted willfully to receive a profits remedy in some cases.
On April 23, 2020, on appeal from the Second Circuit Court of Appeals, the Court decided Romag Fasteners, Inc., v. Fossil, Inc. Under an agreement between Romag and Fossil, Romag made magnetic fasteners used on Fossil’s handbags and other products. Romag learned, however, that factories making Fossil products in China were using counterfeit Romag fasteners and Fossil was doing little to prevent the practice. Eventually, Romag sued. Although a jury agreed that Fossil had infringed, it rejected Romag’s claim that Fossil acted willfully. In turn, that meant Romag couldn’t seek an award of Fossil’s profits as a remedy for the infringement.
Justice Gorsuch, writing for the Court, recognized that remedies for trademark infringement are broad but not unlimited. For example, certain innocent infringers are subject only to injunctions (Section 1114 of the Lanham Act), and willfulness is required for an award of profits for successful dilution claim under Section 1125(c) of Lanham Act. In this case however, the Court noted that the language of the statute does not make willfulness a precondition to a profits award when the plaintiff prevails on an infringement claim under Section 1125(a) of the Lanham Act.
Fossil asserted that “principles of equity” as demonstrated by historical infringement decisions nevertheless required a showing of willfulness. The Court disagreed. Acknowledging that although the defendant’s state of mind is a “highly important consideration” in assigning an appropriate remedy, Section 1125(a) of the Lanham Act does not require a showing of willfulness as an “inflexible condition” to the recovery of Fossil’s profits.
The initial decision whether to sue for trademark infringement sometimes hinges on the economic balance of costs versus potential recovery. By removing the willfulness requirement, the Romag Court arguably increases the potential of a monetary award to trademark plaintiffs. Fossil, in fact, argued that such a result would inevitably lead to an increase in Section 1125(a) claims brought under the Lanham Act. Whether that is true or not, the Romag Court pointed out that Fossil’s argument was ultimately an appeal based on policy and such policy considerations must be left to policymakers not the Court, whose “limited role is to read and apply the law those policymakers have ordained.”
Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. The author has provided the links referenced above for information purposes only and by doing so, does not adopt or incorporate the contents. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.