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Supreme Court Rules Willfulness Not Required For Disgorgement of Trademark Infringement Profits

Resolving a circuit split, the Supreme Court (the “Court”) has held that willfulness is not a precondition for disgorgement of an infringer’s profits from the infringement in a trademark infringement case. In Romag Fasteners, Inc. v. Fossil Group, Inc., the Court considered willfulness as but one of the factors that may be considered in deciding whether or not to award an infringer’s profits to a trademark holder, rejecting the premise that a showing of willfulness is required before an infringer’s profits may be awarded.

Romag Fasteners, Inc. (“Romag”) sells magnetic snap fasteners for use in leather goods and Fossil Group, Inc. (“Fossil”) designs and distributes fashion accessories. The parties signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag eventually discovered that the factories Fossil hired in China to manufacture its products were using counterfeit Romag fasteners. Romag alleged that Fossil was doing little to guard against this practice and sued Fossil for trademark infringement. After trial, the jury found that Fossil had acted “in callous disregard” of Romag’s rights, but stopped short of finding that Fossil acted “willfully.” As part of its relief, Romag sought the profits that Fossil had earned due to infringement of Romag’s trademark. Relying on Second Circuit precedent, the district court denied Romag’s request for an award of profits, stating that such a profits award requires a finding that the defendant’s conduct was “willful.” Not all circuits agree with the Second Circuit’s rule regarding willfulness, and as such, the Court took this case to resolve the circuit split.

In its decision, the Court examined the statutory language of the Lanham Act provision governing trademark violations, noting that although a trademark dilution claim under 15 U.S.C. §1125(c) requires a showing of willfulness as a precondition to an award of profits, the same hurdle is not presented in the case of a successful trademark infringement claim under 15 U.S.C. §1125(a). The Court stated that it carefully avoids the temptation to “read into statutes words that aren’t there.” As the statutory provision governing trademark infringement does not specify a showing of willfulness on the part of the infringer as a precondition for an award of  profits pursuant to §1125(a), the Court declined to read such precondition into the statute.

The Court took a “wider look at the statute’s structure,” finding that the “Lanham Act speaks often and expressly about mental states.”  Therefore, “[t]he absence of any such standard” in §1125(a) “seems all the more telling.” The Court rejected Fossil’s policy-based argument that stricter restraints on profits awards are necessary to deter “baseless” trademark suits. In response to this argument, the Court stated that “the place for reconciling competing and incommensurable policy goals…is before policymakers.” The Court vacated the judgment of the court of appeals and remanded the case for further proceedings.

Takeaway: This recent Supreme Court decision settles the longstanding circuit split on the issue of willfulness and trademark remedies. The Court unanimously decided that willfulness is not a precondition to the award of profits in a trademark infringement case. That said, both Justice Gorsuch’s opinion of the Court and Justice Alito’s concurring opinion acknowledge the continued relevance of willfulness in awarding profits in the trademark infringement context. In fact, Judge Alito stated that willfulness is a “highly important consideration in awarding profits under §1117(a).” As a result of this ruling, brand owners may recover profits more often, and infringers should be aware of the potential for greater damages exposure. Brand owners should continue to monitor use of their trademarks and take enforcement actions where appropriate.

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