SCOTUS Resolves Circuit Split and Holds Trademark Plaintiffs Need Not Show Willfulness to Obtain Profits

On April 23, 2020, the Supreme Court of the United States ruled in a unanimous decision written by Justice Gorsuch that a plaintiff suing for trademark infringement need not show the defendant willfully infringed the plaintiff’s mark to obtain a profits award.  The decision resolves a longstanding circuit split and signals a shift in the law of multiple circuit courts of appeal, while its impact on trademark litigation from a practical standpoint remains to be seen.

The case, Romag Fasteners, Inc. v. Fossil Inc., involved allegations by Romag that Fossil was selling counterfeit magnetic handbag fastening snaps bearing Romag’s mark.  Romag prevailed at trial, with the jury finding Fossil had infringed Romag’s mark but rejecting the allegation that fossil committed willful infringement.  Following on the jury’s findings, the district court declined to award Romag the profits Fossil earned from its infringement, pointing to controlling Second Circuit law requiring that Romag show willful infringement to obtain a profits award, which the jury found it had not. 

In taking the case, the Court addressed a longstanding circuit split.  Before the Court’s decision, the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits did not require a showing of willful infringement for a plaintiff to recover the defendant’s profits, while the Second, Eighth, Ninth, Tenth, and D.C. Circuits required proof of willful infringement for a profits award.

In reaching its decision, the Court focused on the language of the Lanham Act’s provision governing remedies for trademark violations, which provides:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark office . . . shall have been established . . . , the plaintiff shall be entitled  . . . to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

The Court noted the language of the statute does not require willfulness as a precondition to a profits award.  The Court also pointed to language in other sections of the Lanham Act that speaks to a defendant’s mental state as evidence that “the Lanham Act exhibits considerable care” with such requirements and the “absence of any such standard” in the remedies provision “seems all the more telling.”  The Court went on to reject Romag’s various arguments for requiring willfulness. 

But the Court did not dismiss willfulness entirely as a consideration when awarding profits.  Rather, the Court made clear that, given traditional principles underlying the Lanham Act and elsewhere in law and equity, “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate.”  The Court then concluded, “acknowledging that much is a far cry from insisting” on profits as an “inflexible precondition to recovery.”  Concurring opinions by Justices Alito and Sotomayor emphasized the continued importance of willfulness to the profits award analysis: Justice Alito reiterated that “willfulness is a highly important consideration . . . but not an absolute precondition,” while Justice Sotomayor concurred in the judgment only, stating that “a district court’s award of profits for innocent or good-faith trademark infringement,” as opposed to willful infringement, would not be consistent with principles of equity.

While the Romag decision shifts the letter of the law in circuits that previously required willfulness as a precondition to a profits award, the extent of its practical impact remains to be seen.  On the one hand, Romag may provide extra force to claims of trademark infringement and trigger an increase in lawsuits from trademark plaintiffs who believe their path to a profits award is now easier.  On the other hand, circuit courts that previously required willfulness as a precondition to profits (or those circuit courts that did not, for that matter) can find ample language in the Romag decision to support a continued high bar for profits awards, where willfulness may remain a crucial factor, albeit not a strict prerequisite.

As courts begin to apply Romag, companies should continue to bear in mind the potential importance of a defendant’s intent or state of mind in litigating trademark claims.