On April 23, 2020, the United States Supreme Court unanimously ruled that a trademark infringement plaintiff does not have to show willfulness as a precondition for an award of defendant's profits from the infringement.  This case, Romag Fasteners Inc. v. Fossil Inc., resolves a circuit split on profit awards and represents a victory for trademark infringement plaintiffs.  As noted during oral argument, plaintiff's damages (as opposed to defendant's profits) are notoriously hard to prove in trademark cases and difficult to recover.  This decision may cause trademark owners who were previously apprehensive about pursuing trademark infringement litigation to reevaluate the value of bringing suit. 

Background 

In 2002, Fossil, a fashion accessories and handbags retailer, and Romag, a manufacturer of magnetic snap fasteners for wallets and handbags, entered into an agreement whereby Fossil was permitted to use Romag fasteners in their products.  In 2010, Romag discovered that certain Fossil handbags contained counterfeit snaps bearing the Romag mark.  Romag sued Fossil for trademark infringement under Lanham Act § 1125(a), alleging that Fossil knowingly adopted and used the Romag mark without Romag’s consent.

The jury found that Fossil infringed Romag’s trademark, but did not act willfully.  The jury, nonetheless, awarded Romag over $6.7 million in disgorged profits on the basis that Fossil had acted with “callous disregard” for Romag’s trademark rights.  

The district court struck the jury’s award, reasoning that willfulness was a prerequisite for an award of profits in the Second Circuit.  On appeal, the Federal Circuit affirmed.

Romag petitioned the Supreme Court to settle the question of whether the Lanham Act requires a showing of willfulness for a trademark plaintiff to be eligible for an award of an infringer's profits.

The Supreme Court Decision 

The Court’s decision hinged on the plain language of the Lanham Act.  The Lanham Act provides that willfulness is a precondition to profit awards in a suit under § 1125(c) for trademark dilution, but no such requirement appears in § 1125(a) for trademark infringement.  Relying on § 1117(a)’s language indicating that a violation of § 1125(a) can trigger an award of an infringer’s profits “subject to principles of equity,”  Fossil argued that courts have traditionally read § 1125(a) as requiring a showing of willfulness.  The Court was unconvinced by this argument, reasoning that such a reading “would require us to assume that Congress intended to incorporate a willfulness requirement here obliquely while it prescribed mens rea conditions expressly elsewhere throughout the Lanham Act.”

Fossil further warned that allowing profit awards without a showing of willfulness would encourage “baseless” trademark litigation.  The Court acknowledged Fossil's policy concern (and noted the competing policy concerns raised by the other side), but “the place for reconciling competing and incommensurable policy goals like these is before policymakers.”  Thus, the Court made clear that it was an inappropriate forum to make such a policy plea because the Court's "limited role is to read and apply the law those policy makers have ordained.”   

The Court was nevertheless careful not to remove willfulness entirely as a factor to be considered -- and thus it may remain as a component of the profit-award analysis.

Takeaway

The dispute between Romag and Fossil is not over.  This decision answers the important question of whether willfulness is a precondition for a profit award, but another important question lingers: to how much of Fossil's profits is Romag entitled and how will willfulness be factored into that consideration?  The case has been remanded to the lower court to determine the profits award.  We will watch for that decision and continue to follow this case and others to see how this decision impacts future profit awards in trademark lawsuits.  Given that courts maintain the discretion to adjust profit awards according to "the principles of equity," we expect to see courts differ in the calculus of how much profit is too much or too little.