Supreme Court Rules Willfulness Not a Prerequisite to Obtain Disgorgement of Trademark Infringer’s Profits

Summary

On April 23, 2020, the U.S. Supreme Court unanimously held in Romag Fasteners Inc. v. Fossil Inc. that a finding of “willfulness” is not required as a precondition to an award of an infringer’s profits. The decision resolves a split between federal courts across the country in awarding the defendant's profits in trademark infringement cases.


Background of the Case

Fossil and Romag had entered into an agreement whereby Fossil, a bag, watch, and accessory manufacturer, would use Romag’s fasteners on Fossil’s various bags and purses. In 2010, Romag sued Fossil for using counterfeit fasteners that bore Romag’s “ROMAG” trademark. After a jury trial in the U.S. District Court for the District of Connecticut, the jury determined that Fossil had infringed Romag’s trademark rights, and awarded Romag $6.7 million of Fossil’s profits under a deterrence theory. Although the jury found that Fossil had treated Romag’s trademark rights with “callous disregard,” the jury did not find that Fossil “willfully infringed” Romag’s trademark rights. The District Court declined to award Romag Fossil’s profits, reasoning that, “a finding of willfulness remains a requirement for an award of defendant’s profits in this [Second] Circuit.” Romag appealed the decision to the U.S. Court of Appeals for the Federal Circuit, which affirmed the lower court’s ruling. Romag filed a petition for certiorari, which the Supreme Court granted.

Decision

Writing for the Court, Justice Gorsuch reversed the Federal Circuit’s decision. Justice Alito wrote a concurrence that was joined by Justices Breyer and Kagan. Justice Sotomayor also wrote a concurrence.

To address whether willfulness is a prerequisite to an award of the infringer’s profits, the Court examined the language of the Lanham Act, which is the statutory basis for Federal trademark law. The Court discussed that the Lanham Act “speaks often and expressly” about the defendant’s state of mind. For example, Section 1117(b) requires intentional acts committed with knowledge for enhanced damages, and Section 1117(c) increases statutory damages for certain willful violations. Specifically, the Court observed that the Lanham Act explicitly requires a finding of “willfulness” as a prerequisite to disgorge a defendant’s profits for trademark dilution under Section 1125(c). The Court noted, however, that disgorgement of profits for violations of Section 1125(a), which include trademark infringement, does not have any such requirement. The Court concluded that willfulness is not an “inflexible precondition to recover” an infringer’s profits. Therefore, the Court vacated the Federal Circuit’s judgment and remanded the case.

Observations

This decision resolves a split among the circuit courts. Plaintiffs can now seek disgorgement of defendants’ profits in trademark infringement actions, even without a finding of willfulness. The Court emphasized, however, that “a defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate.”