Guest Post by Prof. Pamela Samuelson.
Yesterday, Dennis Crouch provided an overview of the Supreme Court’s recent decision in Romag Fasteners, Inc. v. Fossil, Inc. and the various opinions of the Justices.
Today I consider the implications of Romag for whether juries or only judges can decide about disgorgement of a trademark infringer’s profits in trademark cases. None of the Justices addressed that issue directly. Yet, the majority opinion repeatedly characterized disgorgement of profits as an equitable remedy and emphasized transsubstantive principles of equity as lodestones for the exercise of equitable discretion in granting this remedy. Because of this, I believe the Court implicitly decided that disgorgement is a matter for courts, and not for juries, to decide. This has very important implications for disgorgement awards in intellectual property (IP) cases more generally.
This implicit ruling in Romag is consistent with the Court’s ruling in Petrella
v. Metro-Goldwyn-Mayer, Inc., 572 US. 663 (2014). Although holding that laches was not a complete defense to copyright infringement, the Court in Petrella stated that disgorgement was an equitable remedy. Id. at 668 n.1. It opined that “the District Court, in determining appropriate injunctive relief and assessing profits, may take account of [Petrella’s] delay in commencing suit. In doing so, however, that court should closely examine MGM’s alleged reliance on Petrella’s delay.” Id. at 687. The Court was, moreover, receptive to “any other considerations that would justify adjusting injunctive relief or profits.” Id. at 687-88.
Unfortunately, the Court failed to acknowledge disgorgement as an equitable remedy in Samsung Electronics Co. v. Apple, Inc., 137 S.Ct. 429 (2016) or to invoke equitable principles as relevant considerations in awarding disgorgement in design patent cases. The Solicitor General’s brief in Samsung contemplated that juries would make disgorgement awards and offered a complex (and deeply flawed) multi-factor test for deciding whether the relevant article of manufacture whose profits must be disgorged was the end product (e.g., smartphones) or only some part of it (e.g., rounded corners with bezel).
Who knows what Judge Koh would have ordered had she ruled on how much of Samsung’s profits should be disgorged for infringement of three small Apple design patents? It is, however, unlikely that she would have settled on $533 million, the amount that the jury awarded on remand, given that she had previously reduced a $1.05 billion total-profit-on-end-products jury award to $399 million. This is the amount that the Court vacated in Samsung because the lower courts had wrongly held that all profits on end products must be disgorged.
That disgorgement is an equitable remedy that only judges can order in an IP case was further recognized in Texas Optoelectronic Solutions, Inc. v. Renesas Elecs. Am., Inc., 895 F.3d 1304 (Fed. Cir. 2018). In this state law trade secrecy case, the Federal Circuit vacated a jury’s disgorgement award of $48.8 million on the ground that it was improper for juries to award an equitable remedy. The court reviewed at length the historical record of the disgorgement remedy in IP cases. Id. at 1319-25. It cited the Court’s decision in Sheldon v. Metro-Goldwyn-Mayer Pictures Corp., 309 U.S. 390, 399 (1940) for the proposition that “recovery of profits … had been allowed in equity both in copyright and patent cases as appropriate equitable relief incident to a decree for an injunction.” Id. at 1324. Had the Federal Circuit recognized this principle a few years before, it would have been Judge Koh, not a jury, who would have decided how much of Samsung’s profits should be disgorged.
Petrella notwithstanding, only one copyright decision has thus far ruled that the award of infringer profits is a matter for judicial discretion, not for juries. See
Fair Isaac Corp. v. Fed. Ins. Co., 2019 WL 5057865 (D. Minn. 2019) (disgorgement of profits held an equitable remedy for which a jury award was unavailable in a software copyright infringement case).
Romag is not the only trademark decision to have reserved disgorgement awards to the discretion of judges. A number of trademark cases have ruled that only judges, not juries, can render disgorgement awards. See Hard Candy LLC v. Anastasia Beverly Hills, 921 F.3d 1343, 1355-59 (11th Cir. 2019) (denying trademark plaintiff’s demand for a jury trial on its disgorgement claim); Fifty-Six Hope Rd. Music, Ltd. v. A.V.E.L.A., Inc., 778 F.3d 1059, 1074–76 (9th Cir. 2015).
In a forthcoming article, colleagues and I point out that traditional principles of restitution and unjust enrichment support awards of disgorgement of profits insofar as they are (1) levied against conscious wrongdoers, (2) attributable to the wrongful conduct, and (3) subject to equitable discretion. Justice Sotomayor’s concurrence in Romag rightly noted that innocent or good faith infringers should not have to disgorge profits because the goal of this remedy is to ensure that conscious wrongdoers do not profit from their misdeeds. Insofar as the majority opinion in Romag contemplated that profits of innocent trademark infringers could be disgorged, it is at odds with traditional equitable principles. In Romag, both laches and inequitable conduct should preclude profits disgorgement upon remand. For a further elaboration on this point and about equitable discretion in IP disgorgement cases more generally, see Pamela Samuelson, John M. Golden, & Mark P. Gergen, Recalibrating Disgorgement Awards in Intellectual Property Cases, B.U. L. Rev. (forthcoming 2021), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3529750.
Profit Disgorgement Allowed in TM Cases Without Showing Willfulness
What is sad about Samuelson is that she has been elevated from a mediocre position and ranking to being a giant intellect. All of this is based on SV money being behind her and the policies she advocates. Pretty sad for our country.
While one may certainly view what either or both of Samuelson AND any (purported) backer of what Samuelson does as merely being the actions of Rational Actors (playing the system as hard as possible for whatever Ends are desired),…
And regardless of Samuelson BEING a shill, or merely employing her own personal philosophies (intense dislike of the personal property nature of innovation protection vehicles — which MAY WELL merely be more of a socio-political bent, than any actual ‘being in the employ of’ situation),…
My view noted below link to patentlyo.com and expounded upon previously WOULD BE a fitting control of what MUST BE viewed as an abuse of position.
This though is a critical flaw in the wider nature of US Academia.
What seems like forever ago now, when I was exploring possible careers after becoming bored with management, I explored academia and was thoroughly appalled at the utter lack of meritocracy and instead, the level of groupthink and ‘advancement by how well you @tt@cked what were the aims of the established powers in academia. I had been raised to respect teachers and excelled under models of critical thinking. When I saw what passed as the ‘existing ruling party’ though, and what a career there would mean, I ran as fast as possible away from that ce$$p00l.
Don’t get me wrong – there are certainly fine people who are academics. But that would be despite the power system there, and most definitely not because of it.
Attorneys, are circumscribed by ethical rules based on the mere fact that what we do has such a close connection with the law.
And rightly so.
But it boggles the mind that those who are entrusted to form the basis of ‘legal reasoning’ AND who themselves often ADVOCATE (instead of objectively teach), not only LACK the level of ethical constraints binding attorneys, but have NO REAL ethical constraints at all.
ANY understanding of WHY attorneys are bound would lead one to think that teachers of attorneys would have even stricter bindings.
Probably comes to the law school getting many millions from SV to hire the “right” people. Probably that simple in this case.
I’ve read her stuff for like 15 to 20 years. Never impressed. She obviously does not understand technology, science, or innovation.
Pretty sad.
Thank you for the submission, Professor. Will the special master look at any sale under the mark?
It also seems to me that courts are likely to disgorge profits to more fully compensate trademark holders. For a long time, this was what happened in patent law.
If I may plug my own article, I tracked how equitable remedies influenced patent remedies in American law. link to open.mitchellhamline.edu
The not so hidden agendas of shills for the anti-patent, anti-IP, anti-property crowd are becoming very tiresome.
Romag did not hold, implicitly or otherwise, that disgorgement of profits is an equitable remedy exclusively for the Court, and not the jury, to decide.
15 U.S.C. 1117 expressly says that “The court shall assess such profits and damages or cause the same to be assessed under its direction.” There is nothing wrong with a court submitting the profits determination to the jury. The statute expressly permits it.
The nature of equity is that it doesn’t go to the jury to decide.
The expression here of “or cause the same to be assessed under its direction” cannot be made a nullity.
But that is “subject to the principles of equity”.
I will add, the language could refer to a special master that does the accounting.
Yes, certainly could, but by no means is that remotely indicated to be so exclusive.
But the preceding sentence says, “subject to the principles of equity.” Certainly that would be exclusive!
Not at all, J — leastwise as you seem to want this to be exclusively limited to only certain parties (as opposed to any party, but under the direction of the judge).
You cannot reach the position that you want to reach.
I do have to wonder though why you are so strident in attempting to reach that position.
Equitable claims are something for which you have no right to a jury trial under the Seventh Amendment. The court may use an advisory jury (although that is not required), but the judge still has the last say. He or she is required to review the evidence and the jury’s advisory verdict de novo.
Under Fed.R.Civ.P. 52, in a bench trial — including with an advisory jury — the judge is required to make specific findings of fact and conclusions of law.
So a litigant in an equitable case has the right to demand a bench opinion with specific findings. Unlike in a jury trial, where the jury generally makes very limited findings (“we find for the plaintiff and award it $X”).
The Romag opinion does not speak directly to the issue of whether disgorgement of profits requires a jury or not. There are some hints that it is equitable (hence no right to a jury), but that is all.
But a growing consensus of federal courts (including the 9th and 11th Circuits) is that it is an equitable remedy.
“… invoke equitable principles as relevant considerations in awarding disgorgement in design patent cases.”
Maybe because design patent cases have the explicit law written differently…
Is this professor a novice in IP matters?
The professor was summarizing the holding of Samsung v. Apple. Your quotation leaves out the writer’s opinion. Why did you leave out “unfortunately”?
I included enough to show that the writer’s opinion is nothing more than her desired philosophy masquerading as something else.
Samuelson should know better. Sadly, this just feeds the larger impression that academic writing is more about advocacy than instruction — and emphasizes my previous views that legal academics operate under NO ethical constraints and should have double the constraints that actual attorneys operate under.
“emphasized transsubstantive principles of equity as lodestones for the exercise of equitable discretion in granting this remedy.”
How about: apply the traditional guidelines of equity.
Just to be clear, The Gorsuch opinion repeatedly talks about the “transsubstantive” nature of equity.
From the majority opinion:
The “over-wordiness” is not limited to the Professor.
The other comment does apply to the Professor. Samuelson is fairly well known for using her academic chair as a bully pulpit for her ‘philosophical proselytizations.’
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