Damages in Trademark Infringement: Is Willfulness Required for Defendant’s Profits?

Author: Patrick Mulkern

Introduction

On June 28, 2019, the Supreme Court agreed to take up a case that looks to settle an equally-divided circuit split regarding the threshold evidentiary showing required before a trademark infringement plaintiff can recover the infringer’s profits. In Romag Fasteners, Inc. v. Fossil, Inc. et al., Case No. 18-1233, the petitioner sought a writ of certiorari on the question of: “Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a), 15 U.S.C. § 1125(a).”

Underlying Dispute

The case stems from a long-standing dispute between Petitioner Romag Fasteners, Inc. (“Romag”) and Respondents Fossil, Inc. and its retailers (collectively, “Fossil”). Romag sells patented magnetic snap fasteners under the ROMAG trademark. Fossil designs and distributes various items like handbags. In 2002, Romag and Fossil entered into an agreement where Fossil would use Romag’s fasteners in its products. In 2010, however, Romag discovered certain Fossil products were being sold in the United States with counterfeit fasteners bearing the ROMAG mark.

Romag brought suit against Fossil in November 2010, alleging both patent and trademark infringement. In April 2014, a jury found that Fossil had infringed Romag’s trademark, infringed Romag’s patent, but that none of Fossil’s violations were willful. The jury then awarded about $90,000 in Fossil profits to Romag “to prevent unjust enrichment” and another $6.7 million in profits to Romag “to deter future trademark infringement”—attributing 1% of Fossil’s profits to its trademark infringement. The district court ultimately determined, however, that “Romag is not entitled to any award of profits as a result of [its] failure to prove that Fossil’s trademark infringement was willful.”

Romag appealed to the Federal Circuit, which affirmed the district court’s ruling, though noting the circuit split on the issue of whether willfulness was required for an award of an infringer’s profits. Romag then filed a writ petition, seeking resolution of two questions: (1) the trademark question raised here, and (2) an unrelated patent question involving laches. The Supreme Court had addressed the second patent question in an intervening decision and so Romag’s petition was granted, the Federal Circuit’s decision was recalled, and the case was remanded to the district court for evaluation of that patent damages issue.

In November 2017, the district court entered an amended judgment. Romag again appealed, though Fossil opposed review of the trademark issue claiming it had already been litigated. In February 2019, the Federal Circuit agreed with Fossil and limited the appeal to the patent damages issues. Romag then petitioned the Supreme Court for review.

Petition for Certiorari

Romag’s petition is predicated on the significant and stark split among the circuits with respect to whether a trademark plaintiff must establish willful infringement before it can be entitled to an award of the infringer’s profits. Six have said “yes, they do”; six have said “no, they do not.”

The Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits do not require a willfulness showing before an award of profits. Instead, the infringer’s intent is just one of several factors in a flexible analysis. See, e.g., Quick Techs., Inc. v. Sage Grp. PLC, 313 F.3d 338, 349 (5th Cir. 2002) (“plain language of 1117(a)” includes no bright-line rule; “willful infringement” is instead “an important factor which must be considered”).

The First, Second, Eighth, Ninth, Tenth, and D.C. Circuits do require a threshold showing of willfulness before a plaintiff can litigate their entitlement to recover an infringer’s profits. The Second, Eighth, Ninth, Tenth, and D.C. Circuits require that willfulness showing in all instances. See, e.g., Stone Creek, Inc. v. Omnia Italian Design, Inc., 875 F.3d 426, 441 (9th Cir. 2017) (“willfulness remains a prerequisite for awarding a defendant’s profits”). The First Circuit requires a willfulness showing only if the litigants are not direct competitors. See, e.g., Fishman Transducers, Inc. v. Paul, 84 F.3d 187, 191 (1st Cir. 2012) (describing the direct-competition context as the “primary exception” to the “usual[] require[ment]” of willfulness).

Against this backdrop, Romag argued that a willfulness requirement “often determines whether the mark holder can recover any monetary remedy for a trademark violation” for compensation based on a plaintiff’s actual damages “is often difficult to measure and obtain.” Pet. at 20. While many courts require actual confusion to receive damages, “literally hundreds of cases . . . have universally acknowledged that proof of actual confusion is extremely difficult, if not almost impossible, to secure.” Id. Therefore, Romag explained, “[a]n award of the infringer’s profits . . . can be the difference between a meaningful recovery for trademark infringement and no recovery at all.”

Next Steps

The Supreme Court granted the petition without comment. Though not yet formally set, a joint motion following the petition being granted suggests the case will be heard during the January 2020 term—with a decision likely announced in Summer 2020. Given the binary outcome that is likely to result—yes, willfulness is required; or no, willfulness is not required—the decision may potentially have a significant impact on the scope of damages available in trademark cases for half the country. Whether they become easier or more difficult to secure for that half, though, remains to be seen.

About the author: Patrick J. Mulkern is an associate in Gordon Rees Scully Mansukhani’s Intellectual Property Practice Group. His practice focuses on intellectual property litigation and transactional matters, with a particular emphasis on patent, trademark, and trade secret litigation. Mr. Mulkern is a registered patent attorney and his biography can be found here.

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