On June 28, the U.S. Supreme Court granted certiorari in Romag Fasteners Inc. v. Fossil Inc. et al., agreeing to weigh in on the question of whether plaintiffs in trademark infringement cases must demonstrate that defendants acted willfully in order for plaintiffs to receive a portion of defendants’ profits.
Whether willfulness is a prerequisite to an award of defendants’ profits in trademark infringement cases is a question that has deeply divided the U.S. circuit courts. Half of the circuits have answered the question in the affirmative.[1] The other half have answered the question in the negative.[2] These latter circuits that do not require a threshold showing of willfulness merely view willfulness as one of many factors considered in fashioning an equitable remedy.
Put simply, the circuit split arises from divergent views on the meaning of the phrase “subject to the principles of equity” contained in Section 35 of the Lanham Act, which reads in relevant part, “subject to the principles of equity,” a plaintiff shall be entitled to recover defendants’ profits, any damages sustained by the plaintiff, and the costs of the action.[3] The act goes on to state that in cases in which defendants’ profits are awarded, courts have some discretion in adjusting those awards upwards or downwards, depending on the specific circumstances.
The underlying dispute between Romag and Fossil has been ongoing since 2010, when Romag sued Fossil in federal court in Connecticut for both trademark and patent infringement — claims stemming from Fossil’s alleged sale of handbags bearing Romag’s trademark and using a version of Romag’s patented magnetic snap fasteners. A jury found in favor of Romag but also found that Fossil’s infringement was not willful, precluding Romag from any award of Fossil’s profits under Second Circuit law.
In its petition for certiorari, Romag argued that a requisite showing of willfulness is wrong on both statutory and policy grounds. Section 35 of the Lanham Act provides that an award of defendants’ profits is available for a violation under Section 1125(a) or (d) or a willful violation under Section 1125(c). Romag argued that the act’s limitation of remedies to “willful violations” under 1125(c) (covering trademark dilution claims) but not under 1125(a) (trademark infringement) or 1125(d) (cyberpiracy) reflects a deliberate decision by Congress not to condition monetary awards for infringement on a showing of willfulness.
Romag also claimed that imposing a threshold willfulness requirement hinders the goals of the Lanham Act by eliminating an alternate means of compensating a trademark owner for its injuries. Trademark infringement plaintiffs have long argued that because actual damages in trademark infringement cases are difficult to measure, disgorgement of a defendant’s profits is the only meaningful financial relief a plaintiff can obtain. A strict willfulness standard would allow defendants who act negligently or with callous disregard for the trademark owner’s rights to profit handsomely from the use or sale of infringing goods or services.
As a result, a Supreme Court decision in Romag’s favor (finding that willfulness is not a threshold requirement for an award including defendants’ profits) would be greatly advantageous to trademark owners. In particular, such a holding would make it much easier to prove and collect damages as part of an infringement action, thus making such actions more attractive to trademark owners given the increased value such a decision would provide for any given action (by increasing the amount recoverable by an infringement plaintiff).
However, such a holding would be a double-edged weapon as well because such exposure would also greatly increase the risks for potential trademark infringers — thereby acting as a serious disincentive to marketing efforts that would otherwise be arguably infringing (or at least a close call). In particular, by increasing the exposure against a potential trademark infringer (via the exposure to the risks of the increased damages noted above), this decision would likely dissuade potential infringers from using marks that would be too similar to existing marks in use. In short, the costs of infringement would be raised so as to mitigate against the use of marks that would otherwise have been used.
Similarly, a Supreme Court decision in Fossil’s favor (finding that willfulness is a threshold requirement) would make damages claims in trademark infringement actions much more difficult to maintain, thus eliminating the disincentive noted above to using trademarks that might otherwise be “close calls” as to findings of infringement.
Either way, this case is appropriate for Supreme Court review. As noted above, a clear split among the circuits exists on this issue of federal law that is outcome determinative based solely on the jurisdiction in which a case may be filed. Such a situation is at odds with a system (here federal trademark law) that should provide uniformity across the nation (and its economic landscape).
Moreover, this split arises repeatedly given the large number of cases addressing this issue — thus, it is not a split that arises infrequently but has widespread ramifications throughout the country. Consequently, the time is ripe for the Supreme Court to take action on this specific issue to unify the circuits and establish a single, unitary standard applicable across the entire federal court system (and the United States business landscape).
The Supreme Court granted Romag’s certiorari petition in June, agreeing to hear the case without further explanation (which is not unusual). The court likely will render a decision sometime during the next term when the court reconvenes later this fall.
Originally published by Law360 on September 27, 2019.
Kenneth K. Dort is a partner and Tore Thomas DeBella is an associate at Drinker Biddle & Reath LLP.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
[1] See Tamko Roofing Products, Inc. v. Ideal Roofing Co. , 282 F.3d 23 (1st Cir. 2002); Merck Eprova AG v. Gnosis S.p.A. , 760 F.3d 247, 261 (2d Cir. 2014); Minn. Pet Breeders, Inc. v. Schell & Kampeter, Inc. , 41 F.3d 1242, 1247 (8th Cir. 1994); Stone Creek, Inc. v. Omnia Italian Design, Inc. , 875 F.3d 426, 441 (9th Cir. 2017), cert. denied, 138 S. Ct. 1984 (2018); W. Diversified Servs., Inc. v. Hyundai Motor Am., Inc. , 427 F.3d 1269, 1273 (10th Cir. 2005); and ALPO Petfoods, Inc. v. Ralston Purina Co. , 913 F.2d 958, 968 (D.C. Cir. 1990).
[2] See Banjo Buddies, Inc. v. Renosky , 399 F.3d 168 (3d Cir. 2005); Synergistic Int’l, LLC v. Korman , 470 F.3d 162, 175 (4th Cir. 2006); Quick Technologies, Inc. v. Sage Group PLC , 313 F.3d 338 (5th Cir. 2002); Laukus v. Rio Brands, Inc. , 391 F. App’x 416, 424 (6th Cir. 2010); Roulo v. Russ Berrie & Co. , 886 F.2d 931, 941 (7th Cir. 1989); and Optimum Techs., Inc. v. Home Depot U.S.A., Inc. , 217 F. App’x 899, 902 (11th Cir. 2007).
[3] 15 U.S.C. §1117.
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