Willfulness Not Required for an Award of Profits for Trademark Infringement under the Lanham Act
In Romag Fasteners, Inc. v. Fossil, Inc., 590 U.S. ____ (April 23, 2020), the Court held that a showing of willfulness in a trademark case is not required to receive an accounting of profits.
In 2002, Romag Fasteners, Inc. (“Romag”) and Fossil, Inc. (“Fossil”) reached an agreement allowing Fossil to use Romag’s fasteners in Fossil’s products. Upon discovering that certain factories used by Fossil to manufacture the products were using counterfeit Romag fasteners, Romag filed suit for trademark infringement.
Romag sought an accounting of Fossil’s profits due to its trademark violations. Fossil argued — successfully at both the district and circuit court levels — that an award of profits under Section 43(a) of the Lanham Act requires a showing of willfulness, and that the jury’s finding of “callous disregard” was insufficient.
Section 35(a) of the Lanham Act provides:
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 . . . , 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.
15 U.S.C. § 1117(a) (emphasis added).
“Immediately,” noted the Court, “this language spells trouble for Fossil and the circuit precedent on which it relies.” Romag, 590 U.S. *2. The Court refused to read into the statute words that were not there, noting, “[i]t’s a temptation that we are doubly careful to avoid when Congress has (as here) included the term in question elsewhere in the very same statutory provision.”
The Court was equally unpersuaded by Fossil’s argument that the statutory language regarding an award of defendant’s profits was “subject to the principles of equity.” According to Fossil, courts sitting in equity historically required a showing of willfulness before authorizing an award of profits and so “subject to the principles of equity” in the statute should be taken to mean “subject to a showing of willfulness.” After reviewing pre-Lanham Act cases, the Court concluded that the cases support “the ordinary principle that a defendant’s mental state is relevant to assigning an appropriate remedy,” but not determinative. Id. at *2-7 (emphasis added).
Justices Alito, Breyer and Kagan agreed with the majority opinion, concurring only to note that “willfulness is a highly important consideration in awarding profits … but not an absolute precondition.” Justice Sotomayor concurred in the judgement only, noting that courts of equity defined willfulness to encompass a range of mental states. Thus, Sotomayor reasoned, an award of profits for innocent or good-faith trademark infringement would not be in line with the “principles of equity” referenced in the statute and existing case law.
What does this decision mean for you?
Romag clarifies a long-standing circuit split. After Romag, plaintiffs need not show that a defendant acted willfully to be awarded profits for trademark infringement under the Lanham Act. Given the Court’s reasoning, together with the statutory language of Section 35(a), it now seems likely that willfulness is also not required for an accounting of profits for infringement of an unregistered mark, for false advertising, or for cybersquatting in violation of Section 43(a) or 43(d) of the Lanham Act. Because an accounting of profits is typically a potentially powerful remedy, it seems likely that the Romag decision will encourage trademark owners to file suits they might otherwise forego, and will likely encourage potential trademark infringers (or even just alleged infringers) to tread carefully once put on notice of a claim of infringement.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.