In a unanimous ruling delivered by Associate Justice Neil Gorsuch, the U.S. Supreme Court held on April 23, 2020 that a plaintiff does not have to show that a defendant "willfully" infringed the plaintiff’s trademark as a precondition to an award of the infringing defendant's profits. Acknowledging that while “[a]n innocent trademark violator often stands in very different shoes than an intentional one,” the Court considered whether a categorical rule that “a plaintiff can win a profits remedy… only after showing the defendant willfully infringed its trademark... can be reconciled with the statute’s plain language.” Romag Fasteners, Inc. v. Fossil Group, Inc. (fka Fossil, Inc.) et al., 590 U.S. ___ (2020) (emphasis in original). Concluding in the
negative, the Court vacated a Second Circuit ruling affirming a District Court’s refusal to award to plaintiff Romag Fasteners defendant Fossil’s profits from its infringement of Romag Fasteners’ trademark.
The case was brought by Romag Fasteners, maker of magnetic snap fasteners for use with leather goods, against handbag seller Fossil, which allowed factories in China to manufacture its bags with counterfeit Romag fasteners. Finding for Romag after trial, a jury found that Fossil had acted “in callous disregard” of Romag’s trademark rights, but declined to find that Fossil had acted “willfully” (as the trial court defined the term). On that basis, the trial court, following controlling appellate precedent, refused Romag’s request for an award of Fossil’s profits from the infringing products, and the Second Circuit affirmed on appeal. Noting a split between
the Second and other Circuit Courts of Appeal on this issue, the Supreme Court granted cert. 558 U.S. ___ (2019).
Starting with the relevant statutory language, Justice Gorsuch quotes 15 U.S.C. §1117(a): “When a violation of any right of the registrant of a mark… a violation under section 1125(a) or (d)… or a willful violation under section 1125(c)… shall have been established… the plaintiff shall be entitled… to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.” (Emphasis added.) He then explains that “[t]he statute does [indeed] make a showing of willfulness a precondition to a profits award… under §1125(c),” for trademark dilution, but highlights that plaintiff here “proved a violation of §1125(a)… for the false and misleading use of trademarks,” a cause of action for
which “the statutory language has never required a showing of willfulness to win a defendant’s profits.” Id. (emphasis in original).
In the face of such unhelpful statutory language, Fossil sought to argue that insofar as damages awards under §1125(a) are “subject to the principles of equity,” 15 U.S.C. §1117(a), and “equity courts historically required a showing of willfulness before authorizing a profits remedy in trademark disputes,” 590 U.S. at ___, such principle should be recognized as carried forward by the Lanham Act today. Both skeptical of Fossil’s historical reading and clearly loathe “to assume that Congress intended to incorporate a willfulness requirement here obliquely while it prescribed mens rea conditions expressly elsewhere throughout the Lanham Act,” id., the Court conceded that “a trademark
defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate,” but labeled that “a far cry from insisting on the inflexible precondition to recovery [i.e., a finding of willfulness] Fossil advances.” Id. at ___.
Fossil’s last appeal was to policy, arguing that “stouter restraints on profits awards are needed to deter ‘baseless’ trademark suits,” while Romag countered that its reading of the statute would “promote greater respect for trademarks in the ‘modern global economy.’” Id. Summarily dismissing such policy considerations (noting in an aside, “[a]s these things go, amici amplify both sides’ arguments”), Justice Gorsuch explained:
| ||“[T]he place for reconciling competing and incommensurable policy goals is before policymakers. The Court’s limited role is to read and apply the law those policymakers have ordained, and here our task is clear. The judgement of the court of appeals is vacated, and the case is remanded for further proceedings consistent with this opinion.” |
Four Justices submitted or joined concurring opinions to express the grounds on which they joined in the Court’s judgment.
A lesson from Romag Fasteners v. Fossil for both trademark owners and infringers, as well as their counsel, is that failure or inability to show a liable trademark infringer’s “willfulness” is not an absolute bar to, or protection against, recovery of an infringer’s profits.