Supreme Court Rules Proof of Willfulness Not a Precondition to Profits in Trademark Infringement Actions

On April 23, 2020, the United States Supreme Court resolved a circuit split and held that plaintiffs in Lanham Act trademark infringement cases do not need to show the defendant infringed willfully in order to recover the defendant’s profits. Romag Fasteners, Inc. v. Fossil Group, Inc., Case No. 18-1233, ___ U.S. ___ (Apr. 23, 2020)

Romag Fasteners, Inc. sells fasteners for use with leather goods. Fossil Group, Inc. designs, markets, and distributes fashion accessories, including handbags. The parties agreed that Fossil would use Romag’s fasteners in Fossil’s handbags. Romag later discovered that Fossil’s factories in China were using counterfeit fasteners. Romag sued Fossil for infringing Romag’s trademark and, among other relief, sought to recover the profits Fossil earned as a result of the infringement. A jury found that Fossil had acted “in callous disregard” of Romag’s rights, but rejected Romag’s allegation that Fossil had acted willfully in infringing Romag’s rights.

Because the jury found that Fossil’s infringement was not willful, the trial court declined to order Fossil to pay its profits to Romag. The U.S. Court of Appeals for the Second Circuit had previously held that plaintiffs had to show that a defendant’s infringement was willful before the plaintiff could recover the defendant’s profits under the federal trademark statute, the Lanham Act. This was not the rule in all circuits. The Supreme Court granted certiorari to resolve the split among the circuits.

The Lanham Act provides that when a plaintiff establishes certain violations of the statute, it “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.” 15 U.S.C. § 1117(a).

In reviewing the case, the Supreme Court observed that the statute does not expressly require willfulness as a precondition for recovery of the kind of claims brought by Romag, though the statute does expressly require such a finding for other types of Lanham Act claims and for certain other types of remedies. The Court rejected Fossil’s argument that courts of equity had required proof of willfulness as a precondition to an award of profits in trademark disputes, but acknowledged that it has been an important consideration. The Court also considered Fossil’s argument that a policy requiring a finding of willfulness as a precondition of recovery of defendant’s profits would deter baseless infringement lawsuits, but declined to decide the case on that issue. Instead, the Court vacated the judgment of the U.S. Court of Appeals for the Second Circuit and remanded the case for further proceedings consistent with its opinion.

Justice Alito wrote a single paragraph concurring opinion explaining that the relevant authorities show that willfulness is a highly important consideration in awarding profits under the relevant section of the Lanham Act, but not a necessary precondition. Justice Sotomayor wrote a short opinion concurring in the holding that willfulness is not required for an award of profits, but expressing her view that longstanding principles of equity would not permit an award of profits for innocent infringement.