By Melissa A. McCurdy, Partner, Standley Law Group LLP
It is often the case that the profits earned by a defendant from selling a product which infringes upon the trademark of another dwarf the plaintiff’s actual damages. You would therefore be hard-pressed to find an issue more important to forum selection in a trademark infringement suit than whether a successful plaintiff must prove willful infringement as a prerequisite to recovering the defendant’s profits. There is presently a six-to-six split amongst the circuits regarding whether willfulness must be shown, but the United States Supreme Court is set to resolve that split in the case of Romag Fasteners v. Fossil, No. 18-1233 (2019).
Within the United States, trademarks are governed at the Federal level by the Lanham Act. The Lanham Act defines a trademark to include “any word, name, symbol, or device, or any combination thereof” that a person or business uses in commerce to distinguish their goods or services from those of others. 15 U.S.C. § 1127. Trademark owners correspondingly are given a cause of action against “any person who… uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin…which…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.” 15 U.S.C. § 1125 (a)(1)(A).
The Lanham Act addresses damages for trademark infringement in 15 U.S.C. §1117 wherein it is provided that “[w]hen a violation or 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)…the plaintiff shall be entitled… 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…” The language “a willful violation under section 1125(c)” was added to this statutory provision via amendment in 1999. As can be seen, the statute does not state that willfulness is required to recover the defendant’s profits if trademark infringement is established under section 1125(a).
Each of the Circuits has addressed whether the plaintiff must prove that the defendant’s trademark infringement was willful prior to being eligible to recover the defendant’s profits. In the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits willfulness is not required. In these circuits, factor-based analysis is used to determine whether the principles of equity warrant an award of the defendant’s profits. In the Second, Eighth, Ninth, Tenth and D.C. Circuits the plaintiff must prove that the defendant’s infringement was willful if it wants a shot at the defendant’s profits. These Courts reason that the 1999 amendment to Section 1117 did not upend the long-settled willfulness prerequisite to recovering the defendant’s profits under Section 1125(a). In the First Circuit, willfulness is required unless the plaintiff and defendant are direct competitors.
The facts of this case are not entirely unusual in trademark law. Romag provides magnetic fasteners that are used on leather products such as wallets and handbags. Romag entered into a supply agreement with Fossil under which it would supply Fossil with fasteners for its leather goods. When Romag discovered Fossil products in commerce that were bearing counterfeit Romag snaps, Romag sued Fossil for trademark infringement and various related claims. That case was filed in the United States District Court for the District of Connecticut, which is in the Second Circuit. At the conclusion of trial, the jury found that Fossil infringed Romag’s trademark, that the infringement was not willful, and awarded Romag $6,800,000 of Fossil’s profits. A subsequent two-day bench trial resulted in the Court finding that because Fossil was not a willful infringer, the award of profits could not stand as a matter of law.
Because the case also involved patent claims, the appeal of the case went to the Federal Circuit. Applying Second Circuit law to the issue of damages for trademark infringement, the Federal Circuit affirmed the denial of profits explaining that there was nothing in the Lanham Act suggesting Second Circuit precedent on the issue was no longer good law. More specifically, “the [1999 amendment] concerning willfulness in dilution cases [in Section 1117] does create a negative pregnant that willfulness is always required in dilution cases but never for infringement.”
Romag filed a petition for certiorari which was granted by the Supreme Court. The question presented is whether, under Section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a), 15 U.S.C. § 1125(a). In its briefing, Romag has taken the position that if Section 1117 required willfulness as a prerequisite to recovering profits for trademark infringement under Section 1125(a), the statute would say so just as it does for dilution. Fossil has taken the position that an award of profits is “subject to the principles of equity” and those principles have required willfulness under settled law.
The case was argued before the Supreme Court on January 14, 2020. During the argument, much of the Supreme Court’s questioning focused on whether a willfulness requirement to the recovery of profits in trademark infringement cases would limit the ability of the courts to address reckless behavior. The Court did not provide a clear signal as to which way its decision would fall. Be sure to keep an eye out for this important Supreme Court decision in the near future.
If you have any questions relating to this subject matter, contact a trademark attorney to seek advice.