On April 23, 2020, the United States Supreme Court unanimously held that the Lanham Act does not require a plaintiff in a trademark infringement lawsuit to show that a defendant willfully infringed the plaintiff’s trademark as an “inflexible precondition” to an award of defendant’s profits. A defendant’s state of mind, however, remains an important consideration when determining the propriety of disgorging a defendant’s profits. Romag Fasteners, Inc. v. Fossil, Inc., No. 18-1233 (April 23, 2020).
The Lanham Act makes a variety of remedies available to a trademark owner, including the trademark owner’s damages, the infringer’s profits, and injunctive relief. 15 U.S.C. § 1117(a). Until now, the federal appellate courts had different views of what a trademark owner had to prove to obtain disgorgement of an infringer’s profits. The Second, Eighth, Ninth, Tenth, and District of Columbia Circuits required a plaintiff to show willful infringement as a necessary condition of awarding the defendant’s profits, and the First Circuit required willfulness only when the parties were not direct competitors. In contrast, the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits approved awarding an infringer’s profits without proof of willful infringement; although, even those courts recognized that willful infringement bolstered claims for disgorgement of profits.
The Supreme Court resolved this circuit split in Romag, clarifying that proof of willful infringement is not required and making it easier to obtain a profits award. This is important given the relative ease of showing an infringer’s profits, whereas a trademark owner often has a more difficult time proving its own damages arising from infringement.
In Romag, the parties had an agreement regarding Fossil, Inc.’s (Fossil) use of Romag Fasteners, Inc.’s (Romag) fasteners on its leather goods. Romag later learned that Fossil’s Chinese factories used counterfeit Romag fasteners and that Fossil did not take adequate precautions against this practice. Romag eventually sued Fossil for trademark infringement and sought damages including Fossil’s profits garnered from the infringement. Romag prevailed at trial on the issue of liability. However, in assessing damages, the jury rejected Romag’s accusation that Fossil acted willfully. Instead, the jury found that Fossil acted “in callous disregard” of Romag’s rights. Consequently, the district court followed Second Circuit precedent and denied Romag’s request for disgorgement of Fossil’s profits. The Federal Circuit affirmed, and Romag appealed to the Supreme Court.
The Supreme Court granted certiorari to review the issue of whether, under § 1117(a) of the Lanham Act, willfulness is required to award an infringer’s profits for trademark infringement under § 1125(a). The Court reversed the Second Circuit and held that the statute does not require a trademark infringement plaintiff to show that a defendant committed willful infringement as a prerequisite to a profits award. In support, the Court noted that the Lanham Act lacks any reference to a mental state requirement for an award of defendant’s profits in a trademark infringement lawsuit, whereas other portions of the Lanham Act expressly contain a particular mental state requirement for the availability of certain remedies. For example, relief under the anti-dilution portion of the Lanham Act, § 1125(c), requires a plaintiff to show that a defendant “willfully intended” to trade on the recognition of, or harm the reputation of, a famous trademark. Similarly, § 1117(b) of the Lanham Act provides enhanced damages versus intentional counterfeiters.
The Court also rejected Fossil’s argument that “principles of equity” made willfulness a prerequisite to a profits award. The majority opinion, authored by Justice Gorsuch, found that pre-Lanham Act federal trademark cases did not consistently require proof of willfulness in order to obtain a profits award, thus undermining Fossil’s equitable argument. Justices Alito, Breyer, and Kagan wrote separately to note that willfulness remains a “highly important consideration” but not an “absolute precondition.” Romag, slip. op., at 10. In a concurring opinion, Justice Sotomayor wrote that the weight of pre-Lanham Act authority nevertheless “indicates that profits were hardly, if ever, awarded for innocent infringement.” Romag, slip. op., at 11.
Going forward, a defendant’s mental state remains an important factor courts consider when determining damages in trademark infringement cases. Although willfulness cannot serve as an absolute prerequisite to a profits award, a trademark plaintiff will still want to gather and present proof of willful infringement to strengthen its claim for profit disgorgement because a trademark defendant’s mental state remains a “highly important consideration in determining whether an award of profits is appropriate.” Romag, slip op., at 7 (emphasis added). As a practical matter, juries and courts likely will find evidence of a higher level of culpability more persuasive when assessing whether to award profits, as has been the case in those circuits which previously did not require willfulness as a prerequisite of a profits award.