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Show Me The Money: Supreme Court Rules That Trademark Infringers May Disgorge Profits Even If The Law Was Not Willfully Violated

The U.S. Supreme Court confirmed that brand owners are not required to prove willful intent before obtaining a defendant’s lost profits. On April 23, 2020, the Supreme Court resolved a longstanding circuit split and unanimously held that trademark infringers may have to hand over their profits even if they did not willfully infringe.

In Romag Fasteners, Inc. v. Fossil Group, Inc., the Supreme Court was tasked with determining whether the rule that a plaintiff can win a profit remedy only after showing a defendant willfully infringed its trademark can be reconciled with the statute’s plain language. Ultimately, the Supreme Court sided with the plaintiffs, Romag Fasteners (Romag), holding that:

“[a] plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.”

Romag and defendant Fossil Group (Fossil) signed an agreement to use Romag’s handbag fasteners in Fossil’s leather goods. Later Romag discovered that factories in China, which Fossil hired to make its products, were using counterfeit Romag fasteners and Fossil was not working to curb the infringement. Romag sued Fossil, along with certain Fossil retailers, for trademark infringement pursuant to 15 U. S. C. § 1125(a). This provision establishes a cause of action for the false or misleading use of trademarks.

Although the jury found that Fossil acted “in callous disregard”, the jury did not find Fossil acted willfully, as it was defined in the case. In deciding whether to award profits, the district court noted that controlling Second Circuit precedent requires a plaintiff seeking a profits award to prove that the defendant’s violation was willful so it did not award Fossil’s profits to Romag.

Fossil argued that courts have historically required a showing of willfulness before authorizing a profits remedy in trademark disputes. The First, Second, Eighth, Ninth, Tenth and D.C. Circuit all required willfulness. Meanwhile, the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuit allow for disgorgement of profits without willfulness. However, the Court pointed out that only the dilution section of the Lanham Act (§ 1117(a)) requires a showing of willfulness as a precondition to a profits award.

In this case, Romag alleged and a jury found Fossil violated § 1125(a) and engaged in trademark infringement and false representation, not dilution.

Although the Supreme Court noted that a trademark defendant’s mental state is highly important in determining whether an award of profits is appropriate, it found that the text of § 1125(a) has never required a showing of willfulness as a precondition to win a defendant’s profits award. The fact that other sections of the Lanham Act speak expressly about mental states, and the absence of any such language in § 1125(a), further supported the Supreme Court’s finding in favor of Romag. The Supreme Court’s decision was unanimous.

Moving forward, this decision will give intellectual property rights owners more support in enforcing against counterfeiters and infringers who disregard those owners’ rights. While there may be a rise in frivolous trademark actions being brought with the potential for windfall judgments, it is more likely that this decision will incentivize companies and manufacturers to think twice and be more cognizant of potential counterfeit products being used in their businesses and global supply chains. Looks like it is indeed time to show brand owners the money.

Copyright 2020 K & L GatesNational Law Review, Volume X, Number 127

TRENDING LEGAL ANALYSIS


About this Author

Alexis Crawford Douglas, Chicago, KL Gates Law Firm, Intellectual Property Attorney, Trademarks, Copyrights
Associate

Alexis Crawford Douglas concentrates her practice in the area of intellectual property, including a range of transactional and litigation matters related to trademarks and copyrights, along with the strategic management of intellectual property portfolios. Ms. Douglas regularly represents clients ranging from multi-national to start-up companies in a variety of industries including consumer products, marketing and advertising, healthcare and pharmaceuticals, food and beverage, financial, technology, and entertainment. 

Ms. Douglas regularly advises clients on global brand portfolios...

312.807.4346
 Anisha A. Mehta Associate Chicago IP Procurement and Portfolio Management
Associate

Anisha A. Mehta concentrates her practice in the area of intellectual property law. She is experienced in trademark clearance, prosecution, portfolio management, enforcement, domain name disputes and litigation.

Ms. Mehta represents clients ranging from multi-national to start-up companies in a variety of industries. She regularly advises clients on global brand portfolios and filing strategies as well as protection and enforcement of trademark, copyright and other intellectual property rights. She also performs trademark and copyright clearance and registration. Ms. Mehta has represented clients in a number of opposition and cancellation proceedings before the Trademark Trial and Appeal Board as well as federal court litigation in a range of areas, including trademark, trade dress, unfair competition, trade secret, design patent and copyright matters. Ms. Mehta has also handled Uniform Domain Name Dispute Resolution proceedings before the National Arbitration Forum and the World Intellectual Property Organization.

312-807-4227
Brittany L. Kaplan Associate Chicago IP Procurement and Portfolio Management
Associate

Brittany Kaplan concentrates her practice in intellectual property law, with a focus on trademark clearance, prosecution, protection, enforcement and supporting portfolio management for clients ranging from multi-national to start-up companies across industries. Ms. Kaplan also assists in advising clients on the selection and registration of trademarks in the United States and abroad, proper trademark usage, and trademark protection for packaging. In addition, Ms. Kaplan assists clients with copyright infringement and copyright proceedings, trade dress infringement, domain name disputes,...

312-807-4258