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Supreme Court Holds Willfulness Not Required For Disgorgement of Profits From Trademark Infringement

April 27, 2020

Supreme Court

The United States Supreme Court recently held that a plaintiff need not show that a defendant willfully infringed the plaintiff's trademark as a requirement for recovering the defendant’s profits. Romag Fasteners, Inc. v. Fossil Grp., Inc., No. 18-1233, 2020 U.S. LEXIS 2408, at *12-13 (U.S. Apr. 23, 2020).

Romag Fasteners, Inc. sued Fossil, Inc. for patent and trademark infringement after Romag discovered that factories hired by Fossil to make its products were using counterfeit Romag fasteners. Romag Fasteners, Inc. v. Fossil, Inc., No. 2018-2417, slip op. at 1 (Fed. Cir. Feb. 5, 2019). Romag asked the district court to require Fossil to pay Romag any profits earned from Fossil’s infringement of Romag’s trademarks. Romag Fasteners, 2020 U.S. LEXIS 2408, at *4-5. The court refused after a jury found that Fossil had only acted “in callous disregard” of Romag’s rights, and had not acted willfully. Id. at *4. On appeal, the Federal Circuit affirmed the district court. See Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016). Following resolution of the patent infringement issues, Romag asked the Federal Circuit to reconsider the damages for trademark infringement. Romag Fasteners, No. 2018-2417, slip op. at 1. The Federal Circuit dismissed Romag’s request following a motion to dismiss by Fossil. Id. at 3. Romag appealed to the Supreme Court, and the Court granted certiorari on the question of whether willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a). Pet. for Writ of Certiorari, at I.

In an opinion authored by Justice Gorsuch, the Court looked to the statutory language that provides for remedies under the Lanham Act. See Romag Fasteners, 2020 U.S. LEXIS 2408, at *5 (citing 15 U. S. C. §1117(a)). Though the statute specifically requires willfulness for a profits award under §1125(c) for dilution, it does not state the same for recovery of profits under §1125(a), the section under which Romag sought relief. Id. at *6. The Court also examined the Lanham Act generally, noting that the Act explicitly addresses mental states in various sections, and finding it was “telling” that there was no express mention of mental state as a precondition for a profits award under §1125(a). Id. at *7. Fossil’s arguments did not persuade the Court because the statute’s historical meaning did not require a showing of willfulness to recover profits for trademark infringement, and historical legal authority did not clearly require such a showing either. While rejecting the strict requirement of a showing of willfulness, the Court stressed that “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate.” Id. at *12. Thus, the Court vacated the Federal Circuit’s judgment and remanded the case.

Though the Court’s decision appears to lower the burden for claimants seeking to recover the defendant’s profits attributable to the infringement, the claimant seeking an infringer’s profits must still prove the infringer’s culpable intent or callous disregard of the trademark owner’s rights. Thus, trademark claimants must develop proof of the infringer’s culpable “state of mind,” which amounts to more than just an “innocent’ infringement. See, e.g., id. at *3.

In a concurring opinion, Justice Alito, joined by Justice Breyer and Justice Kagan, explained that authoritative sources and pre-Lanham Act cases showed that willfulness is not strictly required for awarding profits under §1117(a) and that willfulness should be considered in the damages analysis.

Justice Sotomayor also wrote a concurring opinion and disagreed with the majority’s point that courts of equity were just as likely to award profits for willful infringement as they were for innocent infringement. Justice Sotomayor found that legal authority indicated profits were generally not awarded for innocent infringement. 

For more information about this decision, please contact Jennifer Fraser (202-906-8712 jfraser@dykema.com), Dan Harkins (210-554-5285 dharkins@dykema.com), Ryan Borelo (210-554-5216 or rborelo@dykema.com), or your Dykema relationship attorney.

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