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April 28, 2020

Stroock Special Bulletin

By: Laura Goldbard George, Binni N. Shah

Resolving a long-standing circuit split, the Supreme Court of the United States unanimously ruled on April 23, 2020, that willfulness is not a requirement for an award of defendant’s profits in a trademark infringement action under section 1125(a). Romag Fasteners, Inc. v. Fossil Group, Inc., 590 U.S. ___, 2020 WL 1942012 (Apr. 23, 2020) (“Slip. Op.”). However, while willfulness is no longer a threshold issue, an infringer’s mental state remains an important consideration as to whether a profits award is appropriate.

Plaintiff Romag Fasteners (“Romag”) sued Defendant Fossil Group, Inc. (“Fossil”) for trademark infringement based on the sale of Fossil-branded products incorporating counterfeit Romag fasteners under 15 U.S.C. § 1125(a). At trial, the jury did not find that Fossil had acted willfully, although it had found that Fossil acted in “callous disregard” of Romag’s rights. 2020 WL 1942012, at *2. The district court denied Romag’s request for Fossil’s profits in light of Second Circuit precedent requiring a finding of willfulness before awarding profits. Id.

In vacating the decision below, the Supreme Court relied primarily on the construction of the language of 15 U.S.C. § 1117(a), which states:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

2020 WL 1942012, at *2. The Supreme Court noted that only violations under § 1125(c) (i.e., dilution by blurring or tarnishment) explicitly require a finding of willfulness as a precondition for an award of profits, but that “a violation under section 1125(a) or (d) of this title” did not. Id. citing 15 U.S.C. §1117(a). Moreover, the Supreme Court found that the Lanham Act “exhibits considerable care with mens rea standards” in other sections of the act and the “absence” of the mens rea standard in the above section is telling. Id. As a result, the Supreme Court was unwilling to read a requirement into the statute that did not exist.

The Supreme Court rejected Fossil’s argument that the phrase “subject to the principles of equity” in section 1117(a) created a precondition of willfulness because in trademark law, the willfulness requirement “was so long and universally recognized that today it rises to the level of a ‘principle of equity’ the Lanham Act carries forward.” Id. at *3. The Court stated that “principles of equity” does not “bring to mind a substantive rule about mens rea from a discrete domain of trademark law,” but instead suggests “fundamental rules that apply more systematically across claims and practice areas.” Id. Thus, the Court concluded that it would be unlikely that “Congress meant ‘principles of equity’ to direct [the Court] to a narrow rule about a profits remedy within trademark law.” Id. Moreover, the Court found that historical precedent is far from clear as to whether willfulness was required before allowing a profits remedy because historical cases support both interpretations. Id.

The Supreme Court recognized that each side (as well as the amici), perhaps, had advanced meritorious policy considerations. Fossil, the infringer, argues that “stouter restraints on profits awards are needed to deter ‘baseless’ trademark suits.” Id. at *4. On the other hand,  Romag, the trademark owner, argues that “its reading of the statute will promote greater respect for trademarks in the ‘modern global economy.’” Id. However, the Supreme Court declined to weigh the competing policy goals, leaving that decision to the policymakers, and instead stated that it was simply the job of the Supreme Court to “read and apply the law that those policymakers have ordained.” Id. Thus, as the law is currently written, willfulness is not a precondition to an award of profits for infringement of a registered mark, or under 15 U.S.C. § 1125(a) or (d). Id.

The Supreme Court’s decision appears to validate the approach taken by a number of other Circuit Courts, including the Third, Fourth, Fifth and Sixth Circuits. In these Circuits, willfulness was an important equitable factor to be considered in conjunction with other non-exclusive factors.[1] In these Circuits, district courts consider “(1) whether the defendant had the intent to confuse or deceive, (2) whether sales have been diverted, (3) the adequacy of other remedies, (4) any unreasonable delay by the plaintiff in asserting his rights, (5) the public interest in making the misconduct unprofitable, and (6) whether it is a case of palming off” to determine whether profits should be awarded.”[2]

Thus, while the Supreme Court’s decision in favor of the more permissive standard could arguably lead to an increased frequency of awards of disgorged profits, it is more likely that the decision will not meaningfully expand the awards of profits. As this Court has made clear, an infringer’s mental state is still a highly important consideration in the analysis.

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For More Information:

Laura Goldbard George

Binni N. Shah

[1] See Banjo Buddies, Inc. v. Renosky, 399 F.3d 168, 176 (3d Cir. 2005); Quick Techs., Inc. v. Sage Group PLC, 313 F.3d 338, 349 (5th Cir. 2002) (holding that the plain language of section 1117(a) indicated that a bright-line rule requiring a finding of willfulness for an accounting of profits would be contrary to the statute); Laukus v. Rio Brands, Inc., 391 Fed. Appx. 416, 424 (6th Cir. 2010).

[2] Synergistic Int’l, LLC v. Korman, 470 F.3d 162, 175 (4th Cir. 2006); see also Banjo Buddies, 399 F.3d at 175 (identifying non-exhaustive list of factors); Quick Techs., 313 F.3d at 349 (same); Laukus, 391 Fed. Appx. at 424 (affirming the district court’s approach of considering factors identified in Quick Technologies to determine whether profits should be awarded).

This Stroock publication offers general information and should not be taken or used as legal advice for specific situations, which depend on the evaluation of precise factual circumstances. Please note that Stroock does not undertake to update its publications after their publication date to reflect subsequent developments. This Stroock publication may contain attorney advertising. Prior results do not guarantee a similar outcome.

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