Supreme Court Rules that Proving Willfulness is not a Prerequisite to Recover Trademark Infringer’s Profits

Monday, April 27, 2020

On April 23, 2020, the U.S. Supreme Court resolved a circuit split on the issue of whether a plaintiff must prove that a defendant acted willfully in order to recover the profits made by a trademark infringer in a suit brought under the Lanham Act. In a unanimous ruling in the case of Romag Fasteners, Inc. v. Fossil, Inc., the Court ruled that willful infringement is not a prerequisite, stating that “[a] plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.”

Case Background

In 2010, Romag Fasteners, Inc. (“Romag”) sued Fossil, Inc. and certain retailers of Fossil products (collectively “Fossil”) for trademark infringement under 15 U.S.C. §1125(a). This dispute arose from the parties’ earlier agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other accessories. Following the agreement, Romag learned that some of the factories Fossil hired in China to make its products were using counterfeit Romag fasteners. Romag sued alleging that Fossil knowingly used Romag’s mark without consent. The jury agreed.

After a seven-day trial, the jury returned a verdict awarding Romag $51,052.14 in reasonable royalty damages.  The jury also made an advisory award of just over $90,000 in Fossil’s profits for unjust enrichment, and over $6,700,000 in Fossil’s profits to deter future trademark infringement. Romag Fasteners, Inc. v. Fossil, Inc., 29 F.Supp. 3d 85 (D. Conn. 2014). Despite finding that Fossil had acted with “callous disregard” for Romag’s trademark rights, the jury found that Fossil’s infringement was not willful. Accordingly, the district court found that Romag was not entitled to an award of Fossil’s profit because, as a matter of law, willfulness is a necessary requirement for an award of profits. Applying the Second Circuit’s law, the Federal Circuit affirmed. Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016).

The Supreme Court Decision

Under the Lanham Act, trademark owners can recover profits earned by an infringer in cases involving trademark confusion or false designation of origin “subject to the principles of equity.” 15 U.S.C. §1117(a). However, while Section 1117(a) mentions “willful violation” for certain violations of the Lanham Act, the Lanham Act does not expressly require willfulness for infringement claims. Because some courts of appeal applied an implied requirement of willfulness in such cases, and others didn’t, the Court sought to resolve the circuit split in the Romag Fasteners case, and ultimately determined that a finding of willfulness is not required unless the statute mandates it.

Writing for the Court, Justice Gorsuch explained that the plain language of Section 1117(a) of the Lanham Act “makes a showing of willfulness a precondition to a profits award in a suit under §1125(c) for trademark dilution, but §1125(a) has never required such a showing.” The Court reasoned that “[r]eading words into a statute should be avoided, especially when they are included elsewhere in the very same statute.” In a concurring opinion, Justice Alito reinforced this argument, writing that “[t]he relevant authorities, particularly pre-Lanham Act case law, show that willfulness is a highly important consideration in awarding profits under §1117(a), but not an absolute precondition.” In other words, since Congress had expressly required a willfulness requirement in some parts of the Lanham Act, the absence of the same requirement in other parts suggests that Congress meant to exclude it.

The Court also rejected Fossil’s appeal to policy. Declining to rule on whether a willfulness element is necessary to “deter ‘baseless’ trademark suits[,]” the Court found that “the place for reconciling competing and incommensurable policy goals like these is before policymakers.” 

While refusing to find an implied requirement of willful infringement, Justice Gorsuch explained “willfulness” should be an important consideration in determining whether to assess an award of the defendant’s profits. “[W]e do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances.”

Conclusion

The Romag Fasteners ruling resolved a circuit split and now it is clear that a plaintiff need not prove willful infringement as a prerequisite to disgorging an infringer’s profits.  Parties will no longer need to evaluate a circuit’s position on this aspect of damages when determining where to bring a lawsuit.