On Thursday April 23, 2020, the United States Supreme Court ruled in Romag Fasteners, Inc. v. Fossil Group, Inc. 590 U. S. ____ (2020) 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.
Background
The Petitioner, Romag Fasteners, Inc. (“Romag”) is one of the leading producers of magnetic snaps, clasps and fasteners used in leather goods such as wallets, handbags and purses. In 2002, Romag entered into an agreement with Fossil Group, Inc. (“Fossil”) to use Romag fasteners in various Fossil products. After almost eight years of incorporating Romag fasteners into Fossil products, the president of Romag discovered that certain Fossil goods sold in the United States contained counterfeit fasteners bearing the Romag trademark. After informing Fossil of the counterfeit fasteners, Fossil did little to combat the counterfeit issue leaving Romag to seek legal remedies to enforce its intellectual property rights. In 2010, Romag sued Fossil in United States District Court for the District of Connecticut alleging trademark infringement pursuant to 15 U.S. Code § 1125 for false or misleading use of the Romag trademark.
On April 4, 2014, after a seven day trial, the District Court found that Fossil did infringe Romag’s trademark and the jury awarded Romag trademark damages in the amount of $90,000 under an unjust enrichment theory and over $6.7 million in profits to deter future trademark infringement. Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016) The District Court determined that Fossil acted with “callous disregard” for Romag’s trademark rights but found that the infringement was not willful.
Romag subsequently appealed to the United States Court of Appeals for the Federal Circuit. Consistent with governing Second Circuit precedent, the Court of Appeals ruled that a showing of willfulness was required for an award of profits. Romag petitioned the U.S. Supreme Court for a writ of certiorari.
Supreme Court ruling
Romag alleged that Fossil violated 15 U. S. C. §1125(a) which establishes a cause of action for the false or misleading use of trademarks. By producing leather goods with counterfeit Romag fasteners bearing the Romag trademark, Fossil falsely represented to consumers that the fasteners were authentic Romag fasteners. The applicable language of 15 U. S. C. §1125(a) states:
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which— (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person…shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
The Lanham Act provision 15 U.S. Code § 1117(a) which governs remedies for trademark violations pursuant to 15 U. S. C. §1125(a) states the following:
When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.
Relying on the plain language of the Lanham Act, the Supreme Court noted that § 1117(a) explicitly states that a “willful violation” is required for an award of profits in a suit pursuant to 1125(c) for trademark dilution but does not require such a showing for suits brought under 1125(a). The Supreme Court noted that
the Lanham Act speaks often and expressly about mental states when it has intended for mental states to be considered for various remedies. The Supreme Court highlighted the following sections of the Lanham Act that explicitly mention mental states such as § 1117(b), §1117(c), §1118 and § 1114.
Principles of Equity
To support its assertion that a showing of willfulness is required for an award of profits, Fossil pointed to the limitations written into § 1117(a) that an award of profits is subject to “principles of equity.” According to Fossil, equity courts have historically required a showing of intentionality before authorizing a remedy of profits in trademark disputes. Fossil provided that a “willfulness requirement was so long and universally recognized that today it rises to the level of a ‘principle of equity.’” The Supreme Court rebuked this assertion and stated that this would require the Supreme Court to assume Congress intended for “principles of equity” as mentioned in § 1117(a) to include willfulness, while in other parts of the Lanham Act, Congress expressly laid out mental state requirements. As the Supreme Court stated, “it seems a little unlikely Congress meant “principles of equity” to direct us to a narrow rule about a profits remedy within trademark law.” 590 U. S. ____ (2020) In further rebuttal of Fossil’s contention that trademark law has historically required a showing of willfulness for an award of profits, the Supreme Courts cites case law provided by Romag where willfulness was not required for an award of profits and cites case law provided by both Romag and Fossil where courts failed to clearly speak to the issue one way or another.
Why this ruling is important
After decades of confusion and multiple Circuit splits, U.S. courts now have guidance from the U.S. Supreme Court that while a defendant’s mental state can be taken into consideration, a showing of willful infringement is not required to obtain an award of profits. The plain language of the Lanham Act clearly shows that when Congress requires a showing of willfulness, it explicitly provides for it without the need to assume. Given the fact that trademark law is intensely fact-specific, the Lanham Act provides much discretion to the courts to adjust awards for infringement including profits, damages and attorney fees.
A requirement of willfulness under §1125(a) would have undermined the courts discretionary powers and taken from the courts their flexibility to balance other principles of equity when authorizing awards of profit. As the ABA stated in their Amicus Brief, “[I]n the circuits that currently require willfulness, courts lose much of their discretion. In those jurisdictions, the equitable analysis under § 1117(a) becomes a “two-step process: (1) a finding of willfulness or bad faith; and [then] (2) a weighing of the equities. Such an analysis would prevent the Courts from starting an analysis of equities until a finding of willful infringement was made.” A willfulness threshold would undercut the Court’s ability to holistically review each trademark infringement case and rip from their judicial hands their ability to weight other facts of the case. By sticking to the language of the Lanham Act, the Supreme Court has placed power back in the Court’s hands to analyze trademark infringement cases on its merits without having to make an initial finding of willfulness.