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July 02, 2020

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U.S. Supreme Court Rules that Profits Available Even from Non-Willful Trademark Infringers

The U.S. Supreme Court unanimously held today (April 23, 2020) that a brand owner is not required to prove a defendant’s trademark infringement was willful as a precondition to an award of the defendant’s profits. The Court’s decision – Romag Fasteners, Inc. v. Fossil Group, Inc.[1] – vacated the decision of the Federal Circuit, which held that, under Second Circuit law, an award of profits could not be sustained for Romag’s failure to establish Fossil’s infringement was willful.[2]  The Court’s decision resolves a Circuit split regarding the interpretation of Section 1117(a) of the Lanham Act, which states in pertinent part:

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 …, 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.

Justice Gorsuch, writing for Court, explains that “this language spells trouble for Fossil” because it expressly requires a showing of willfulness for an award based on a dilution claim (Section 1125(c)), but not so for an infringement claim.  The Court further explained that the Lanham Act “speaks often and expressly about mental states,” such that “[t]he absence of any such standing in the provision before [the Court] seems all the more telling.”

The Court rejected Fossil’s argument that Section 1117(a)’s use of the phrase “subject to the principles of equity” implied a requirement of willfulness before profits could be disgorged.  According to Fossil, equity courts historically required a showing of willfulness before awarding profits.  The Court refused to find that Congress intended to “obliquely” incorporate a willfulness requirement where it otherwise “prescribed mens rea conditions expressly.”  Moreover, the Court found that the phrase “principles of equity,” at least in this context, could not be reasonably read to incorporate a narrow, substantive rule.  Instead, it referred to “transsubstantive guidance on broad and fundamental questions.”  (Judge Gorsuch acknowledged that an important “transsubstantive principle” is considering a defendant’s mental state when determining an appropriate remedy.)  Furthermore, it rejected the historical proposition at the heart of Fossil’s argument, finding that “it’s far from clear” that equity courts required a showing of willfulness before awarding profits.

Justice Sotomayor penned a concurrence disputing the majority’s “suggest[tion] that courts of equity were just as likely to award profits for such ‘willful’ infringement as they were for ‘innocent’ infringement.”  According to Justice Sotomayor, awarding profits in instances of “innocent or good-faith trademark infringement would not be consonant with the ‘principles of equity’” referred to in Section 1117(a).

In short, until an act of Congress specifically provides otherwise, a plaintiff need not prove a defendant’s willfulness to recover the defendant’s profits in an action for trademark infringement.  Still, such willfulness remains an important consideration when determining the appropriateness of an award of profits.

FOOTNOTES

[1] Case No. 18-1233, 590 U.S. ____
[2] Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782 (Fed. Cir. 2016).

Copyright © 2020, Sheppard Mullin Richter & Hampton LLP.National Law Review, Volume X, Number 115

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 Jason Mueller Sheppard Mullin Intellectual Property
Partner

Jason Mueller is a partner in the Intellectual Property Practice Group in the firm's Dallas Office, serves on the Diversity and Inclusion committee and leads the Veterans at Sheppard affinity group within the firm.

Jason provides strategic business counseling on intellectual property and advertising issues, and has extensive trial and appellate experience in copyright, trademark, trade secret, patent and false advertising cases. As lead trial lawyer, he has tried cases before juries in the Eastern, Northern and Southern Districts of Texas to verdict. Outside of Texas Jason has...

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Carlo F. Van den Bosch, Sheppard Mullin Intellectual Property attorney, law firm
Partner

Carlo F. Van den Bosch is the co-chair of the firm's Intellectual Property Practice Group, which was recognized by U.S. News & World Report with a 2010 National Tier 1 ranking. Mr. Van den Bosch has been profiled as one of 75 Leading IP Litigators in California, and one of 10 top IP attorneys under 40 nationwide.

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Paul Bost, Intellectual Property Attorney, Sheppard Mullin, Law Firm
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Paul Bost is an associate in the firm's Intellectual Property Practice Group in the firm's Century City office. His Intellectual Property Practice covers in depth all laws governing patents, trademarks, copyrights, trade secrets, false advertising, unfair competition, counterfeiting, grey marketing, and all matters involving intellectual property. 

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