by Dennis Crouch
Romag Fasteners, Inc. v. Fossil Group, Inc. (Supreme Court 2020)
The Lanham Act provides that a trademark owner can elect disgorgement of the defendant’s profits based upon “a violation under §1125(a) or (d) … or a willful violation under section 1125(c).”
- §1125(a) – TM infringement (likelihood of confusion)
- §1125(c) Dilution
- §1125(d) Cybersquatting
15 U.S.C. §1117(a). The statute appears to require willfulness as a prerequisite to profit disgorgement in the dilution context, but not for typical trademark infringement. However, the award must also conform “to the principles of equity.”
In this case, Romag proved its §1125(a) TM infringement case against Fossil, but the District Court refused to disgorge profits — holding that willfulness is a prerequisite to profit disgorgement in TM cases based upon a long line of pre-and-post Lanham Act decisions. The Federal Circuit then affirmed.
The Supreme Court has now reversed course, holding that a district court may award the plaintiff with “the defendant’s ill-gotten profits” even without a showing of willfulness. However, the court does not go so far as to say plainly that a winning plaintiff “is entitled . . . to recover (1) defendant’s profits.” Rather, the court takes a somewhat middle-road — holding that the principles of equity indicate that an infringer’s mens rea (mental state) is “a highly important consideration in determining whether an award of profits is appropriate.” However, the mental state consideration does not require an “inflexible precondition” of willfulness.
The majority opinion is authored by Justice Gorsuch and joined by seven (7) other justices. Justice Alito joined the majority but also wrote a concurring opinion joined by Justices Breyer and Kagan. Justice Sotomayor also concurred.
The two concurring opinions appear written to attempt to clarify some internal inconsistencies within the Gorsuch opinion. The Alito concurrence is only 1 paragraph and appears written to reemphasize the holding that willfulness is a highly important consideration:
The decision below held that willfulness is such a prerequisite. That is incorrect. The 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.
Justice Sotomayor further explains that the majority “suggests that courts of equity were just as likely to award profits for such ‘willful’ infringement as they were for ‘innocent’ infringement.” Justice Sotomayor explains that the majority’s statement “does not reflect the weight of authority, which indicates that profits were hardly, if ever, awarded for innocent infringement.” The concurring opinion also points to a feature of possible confusion – that the willfulness definition was formerly more broadly defined to include a “range of culpable mental states–including the equivalent of recklessness.”
I will note that IP Remedies Professor Thomas Cotter has posted a short note about the opinion with the following to-the-point statement: “To say I am disgusted would be an understatement.” Prof. Cotter recalls that the Patent Statute also doesn’t say anything about willfulness, but that the Supreme Court recently reaffirmed that willfulness is a requirement for enhanced damages under Section 284 (“the court may increase the damages up to three times the amount found or assessed.”).