Guest Post by Prof. Pamela Samuelson.
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.