In a 9-0 decision that resolves a deep circuit split, the U.S. Supreme Court on April 23, 2020, confirmed that willfulness is not an absolute prerequisite to recovering lost profits for trademark infringement under the Lanham Act.
The decision comes in the case of Romag Fasteners, Inc. v. Fossil Group, Inc., No. 18-1233. In that case, Romag, which sells magnetic snap fasteners, alleged that wallet and handbag-maker Fossil infringed Romag’s registered trademark ROMAG® by using counterfeit Romag® fasteners on its products. After a seven-day trial, the jury found Fossil liable for infringement and made an advisory award of more than $6.7 million of Fossil’s profits. Importantly, while the jury found that Fossil acted with “callous disregard” for Romag’s trademark rights, the jury found that Fossil’s infringement was not willful.
After a two-day bench trial, the district court held that because Romag failed to prove willful infringement, Romag could not recover lost profits as a matter of law. On appeal, the U.S. Court of Appeals for the Federal Circuit noted that the courts of appeals were split on whether § 1117(a)’s requirement that awards of the defendant’s profits be “subject to the principles of equity” requires that the plaintiff prove willfulness as a condition to receiving lost profits. Applying Second Circuit law, the Federal Circuit affirmed.
On appeal to the U.S. Supreme Court, Romag argued that the plain language of the Lanham Act counsels against requiring willfulness to obtain lost profits. Among other things, Romag argued that while §1117(a) of the Lanham Act expressly requires “a willful violation” in order to award profits for trademark dilution under § 1125(c), the statute includes no such express requirement in cases of trademark infringement under § 1125(a). Similarly, §1117(c) provides for additional monetary relief in cases of willful counterfeiting. Thus, Romag argued, the mental state of the defendant is merely one of several equitable factors to consider in determining whether to award lost profits for violations of § 1125(a). Fossil, on the other hand, argued that courts of equity historically required a showing of willfulness before authorizing disgorgement of profits in trademark cases, and that the Lanham Act must have left this requirement intact.
The Supreme Court sided with Romag. While the Supreme Court recognized that “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate,” it did not agree with “the inflexible precondition to recovery Fossil advances.” Accordingly, the Supreme Court vacated the judgment of the court of appeals, and remanded for further proceedings.
Whether the parties, who are now in their 10th year of this litigation, will continue their battle in the courts remains to be seen. If they do, the district court will need to decide in the first instance whether the principles of equity favor a lost profits award in this case. Regardless of the outcome on remand, however, the law is now clear that while willfulness is an important factor, it is not dispositive in determining whether lost profits can be awarded for ordinary trademark infringement under the Lanham Act.