Trademark Owners Secure Key Victory in U.S. Supreme Court
By Procopio Partner Lisel M. Ferguson and Associate Tiffany Salayer
Can a trademark owner suffering infringement win an award for profits even if the infringer is not found to have done so willfully? The answer is now a definitive yes thanks to a recent U.S. Supreme Court decision. Specifically, the High Court distinguished an award for profits under the Lanham Act provisions governing trademark violations, section 1125(a), and dilution (section 1125(c)).
In Romag Fasteners, Inc. v. Fossil Inc., Romag sued Fossil for trademark infringement under Section 1125(a) as Fossil claimed to use Romag fasteners on its handbags, but Romag believed Fossil was actually using counterfeit fasteners from China — and that Fossil was doing little to guard against the practice of using counterfeits while claiming the fasteners where made by Romag thereby infringing upon the trademark for “Romag.” The jury agreed with Romag, and found that Fossil had acted “in callous disregard” of Romag’s rights. At the same time, however, the jury rejected Romag’s accusation that Fossil had acted willfully, as that term was defined by the district court.
The Supreme Court accepted the Romag case to resolve the dispute between the Second Circuit’s precedent requiring a plaintiff to show that defendant’s violation of its trademark rights was willful in order to collect defendant’s ill-gotten profits. The Lanham Act, 15 U. S. C. §1117(a), the Federal Statute governing damages in a trademark case, 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 . . . , 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.
While the above statute requires a showing of willfulness as precondition to a profits award under §1125(c) for trademark dilution, a violation of §1125(a), a provision establishing a cause of action for the false or misleading use of trademarks, “has never required a showing of willfulness to win a defendant’s profits.”*
Fossil argued that the “principle of equity” language in the statute required a showing of willfulness to obtain a remedy based on profits for trademark infringement. However, looking at the standard language and applying the definition and history of use to the term “principle of equity” the Supreme Court found Congress had used the term to refer to “laches, estoppel, and acquiescence.”** The Court further found that the vast majority of the cases cited by both Parties simply failed to speak clearly on the issue one way or another.*** Lastly, the Court looked at Mens rea and found mens rea was an important consideration across legal contexts, not just in equity.**** Mens rea is a principle reflected in the Lanham Act’s text, too, which permits greater statutory damages for certain willful violations than for other violations.***** However, the Court does not read into statutes words that are not there, especially where Congress has (as here) included the term in question elsewhere in the very same statutory provision. Therefore, the Court vacated the judgment of the court of appeals and remanded the case for further proceedings consistent with its opinion.
This decision by the Supreme Court is a victory for trademark owners, lowering the bar required for them to receive court-ordered compensation. Now, trademark infringers can be forced to disgorge their profits, even in the absence of a showing of “willful” infringement.
* Romag Fasteners, Inc. v. Fossil Inc., No. 18–1233 slip op. (U. S. April 23, 2020). https://www.supremecourt.gov/opinions/19pdf/18-1233_5he6.pdf
** 15 U. S. C. §1069.
*** See, e.g., Hostetter v. Vowinkle, 12 F. Cas. 546, 547 (No. 6,714) (CC Neb. 1871); Graham v. Plate, 40 Cal. 593, 597–599 (1871); Hemmeter Cigar Co. v. Congress Cigar Co., 118 F. 2d 64, 71–72 (CA6 1941).
**** See, e.g., Smith v. Wade, 461 U. S. 30, 38–51 (1983) (42 U. S. C. §1983); Morissette v. United States, 342 U. S. 246, 250–263 (1952) (criminal law) Wooden-Ware Co. v. United States, 106 U. S. 432, 434–435 (1882) (common law trespass).