On April 23, 2020, the Supreme Court of the United States released its decision in Romag Fasteners, Inc. v. Fossil Group, Inc., fka Fossil, Inc., et. al. In a unanimous decision, the court vacated and remanded the decision of the Court of Appeals for the Federal Circuit, stating in the majority opinion written by Justice Gorsuch, “A plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a pre-condition to a profits award.” The court noted that the Lanham Act “makes a showing of willfulness a precondition to a profits award in a suit under §1125(c) for trademark dilution, but §1125(a) has never required such a showing. Reading words into a statute should be avoided, especially when they are included elsewhere in the very same statute. That absence seems all the more telling here, where the Act speaks often, expressly, and with considerable care about mental states.”
In a concurring opinion, Justice Alito stated that the “relevant authorities, particularly pre-Lanham Act case law, show that willfulness is a highly important consideration in awarding profits under §1117(a), but not an absolute precondition.” As mentioned above, and more fully discussed in Justice Gorsuch’s opinion, it should be noted that the decision does not affect any willfulness requirement in trademark dilution cases brought under the Lanham Act, 15 U.S.C. §1125(c).
Background and Case Summary
In 2002, Romag Fasteners, a manufacturer of magnetic fasteners for wallets and purses, entered into an agreement with Fossil Group, a leather goods and handbag manufacturer, for Fossil to use Romag’s fasteners and trademark in the manufacture and sale of Fossil’s leather goods. In 2010, Romag discovered that Fossil’s factories in China were using counterfeit Romag fasteners, with Romag subsequently filing suit against Fossil and certain Fossil retailers for trademark infringement under the Lanham Act (specifically 15 U.S.C. §1125(a)).
Romag sought an award of $6.8 million of Fossil’s profits for trademark infringement. At trial in the District of Connecticut, the jury found Fossil liable for patent and trademark infringement, and ruled for Romag to be awarded $6.8 million of Fossil’s profits. However, the jury also determined that Romag was not entitled to Fossil’s profits because Fossil’s infringement not willful, which resulted in the trial court denial of Fossil’s profits, noting the Lanham Act requirement of proof of willfulness for an award of the infringer’s profits; the ruling was affirmed on appeal to the Court of Appeals for the Federal Circuit, citing Second Circuit precedent.
After taking up the case at the Supreme Court, Justice Gorsuch noted that not all circuits agree with the Second Circuit precedent, and with its ruling ruling the Supreme Court has resolved the dissonance. The decision found support from the American Bar Association, the International Trademark Associations, the American Intellectual Property Law Association, and the Intellectual Property Law Association of Chicago, all of whom argued in their amicus briefs that the court should rule that proof of willfulness not be required to recover an infringer’s profits.
While this decision clarifies that willfulness is no longer required to obtain an infringer’s profits as a monetary remedy, it leaves to judicial discretion the consideration of other factors in evaluating whether this measure is to be available.
Hemming Morse Expertise
Hemming Morse experts frequently analyze infringers’ profits as a remedy in trademark infringement matters. In that context, while the trademark owner has the burden to adduce revenues gained as a result of the infringement, the burden then shifts to the accused infringer to prove offsets to that revenue, such as costs (to arrive at profits, with the question of which costs are to be deducted varying by circuit) and apportionment (to arrive at the portion of the profits that are to be ascribed to the infringing activity, as compared to other contributing factors). In some instances, an infringer’s profits might also be seen in a reduction in costs, even without additional revenues.
Our experts have recently analyzed and provided expert testimony on infringers’ profits relating to unauthorized use of trademarks in the sale of trading cards, popcorn, mattresses, and banking services.