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Supreme Court clarifies rules for remedies in trademark litigation

White & Case Technology Newsflash

Willful infringement is no longer required for trademark owners to recover infringers' profits. In Romag Fasteners v. Fossil Group, the Supreme Court resolved a longstanding circuit split.1 The unanimous opinion has important practical implications for trademark litigants and licensees.

In 2002, Fossil contracted with Romag to use Romag's magnetic clasps on its products. Under the agreement, Fossil instructed its factories in China to purchase fasteners from Romag's Chinese manufacturer. Romag discovered that Fossil's factories used counterfeit clasps when sales to Fossil's factories "declined precipitously" from 2008 to 2010.2 Romag sued Fossil for trademark infringement under 15 U.S.C. § 1125(a) for false designation of origin, seeking an order requiring Fossil to turn over the profits it earned because of the trademark violation.

The evidence at trial showed that Fossil paid full price for fasteners used by its factories and that Fossil did not act "in reckless disregard, with willful blindness, or with actual knowledge" of the counterfeit clasps.3 The jury decided Fossil did not willfully infringe Romag's trademark, but instead acted only "in callous disregard." As such, the district court did not order disgorgement of profits, citing Second Circuit precedent that the infringer's conduct must be "willful" for such an award. The Federal Circuit, applying Second Circuit law, affirmed the jury's determination.

In a brief opinion, Justice Gorsuch reasoned that the plain language of the Lanham Act does not support a categorical rule that plaintiffs must prove defendants willfully infringed a trademark to receive a profits award. Section 1117(a) clearly states that plaintiffs may be entitled to the defendant's profits for "a violation under section 1125(a)" for trademark infringement, compared to "a willful violation under section 1125(c)" for trademark dilution.4 Considering that "the Lanham Act speaks often and expressly about mental states," the Court found the lack of a specific willfulness standard in the language of the statute to be particularly telling.5 Although section 1117(a) also states that remedies are "subject to the principles of equity," the Court did not think any such principles required "a narrow rule about a profits remedy within trademark law."6

In a concurring opinion, Justice Sotomayor noted that courts of equity have defined "willfulness" to include a range of mental states including recklessness, but excluding negligence and good faith. Awarding profits for innocent infringement, according to Justice Sotomayor, would be against "the weight of authority."7 District courts will be left to interpret whether factual scenarios closer to innocence merit disgorgement of profits—including Fossil's conduct here, as the Supreme Court remanded the case.

Moving forward, this decision will make it easier for trademark owners to recover infringers' profits, increase the damages awarded for trademark infringement and give trademark owners a greater incentive to pursue infringement claims. Trademark licensees and businesses generally will need to undertake more thorough due diligence to ensure no part of their operations or supply chains place them in the position of being inadvertent trademark infringers.

 

1See Romag Fasteners, Inc. v. Fossil Group, Inc., 590 U.S. _ (2020). The Second, Eighth, Ninth, Tenth, and District of Columbia Circuits previously required plaintiffs to prove that infringement was willful, while the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits did not.
2 Petition for Writ of Certiorari for Plaintiff-Appellant, Romag Fasteners, Inc. v. Fossil Group, Inc.
3 Romag Fasteners, Inc. v. Fossil, Inc., 2014 U.S. Dist. LEXIS 109604, at *23 (D. Conn. Aug. 8, 2014).
415 U.S.C. § 1117(a).
5Romag Fasteners, 590 U.S. _ (2020), slip op. at 3.
6 Id., slip op. at 5.
7 Id., slip op. at 1 (Sotomayor, J. concurring).

 

Betty Zhang (White & Case, Law Clerk, New York) contributed to the development of this publication.

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