By J. Graham Matherne

The Lanham Act sets forth various remedies for trademark infringement including the potential recovery of the infringer’s profits. 15 U.S.C. § 1117(a). Prior to April 23, 2020, there was a split in the federal circuits as to whether an award of infringer’s profits required a finding that the infringement was willful. Some circuits required a finding of willfulness as a threshold before considering award of infringer’s profits (D.C., 1st, 2nd, 8th, 9th and 10th). The others addressed “willfulness” as one of many factors to consider in deciding whether to award infringer’s profits (3rd, 4th, 5th, 6th, 7th, 11th).

On April 23, 2020, the United States Supreme Court (“Court”) decided the issue in the case Romag Fasteners, Inc. v. Fossil, Inc., et al., (#18-1233) (April 23, 2020) 590 U.S. _____________ (2020) through holding that willful infringement was not a prerequisite to an award of infringer’s profits.

Romag was the owner of the mark “ROMAG” which it used in women’s accessories. It sued Fossil for trademark infringement arising from Fossil’s manufacture and sale of handbags with counterfeit “ROMAG” branded magnetic snap fasteners. The jury found that Fossil had acted in “callous disregard” to Romag’s trademark rights and returned an advisory award of $6.7 million of Fossil’s profits. The jury, however, fell short of finding that Fossil’s acts of infringement were “willful.” The district court refused to award infringer’s profits to Romag because, under controlling Second Circuit precedent, a finding of willfulness was required before an award of infringer’s profits could be considered. Romag Fasteners, Inc. v. Fossil Inc., 29 F. Supp. 3d 85, 109 (D. Conn 2014). Upon appeal to the Federal Circuit Court of Appeals, the district court’s ruling was affirmed. Romag Fasteners, Inc. v. Fossil Inc., et al., 817 F. 3d 782 (Fed Cir 2016).

In its recently released decision, the Court first examined the relevant statutory language regarding remedies for trademark violations – 15 U.S.C. § 1117(a) – which states:

When . . . a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established . . . , the plaintiff shall be entitled . . . 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.

Clearly, under the statutory text, a violation of § 1125(c) (i.e. trademark dilution) expressly requires willfulness for infringer’s profits to be awarded. But under that same text, a violation of § 1125(a), as established by Romag (i.e. false and misleading designation of origin), “has never required a showing of willfulness to win defendant’s profits.” Romag 590 U.S. at ______ (Slip op. at p. 3) (emphasis in original). The Court further noted the numerous instances within the trademark provisions of the Lanham Act where state of mind/mens rea (e.g. ”willfulness”) is expressly addressed (1). With that as a backdrop, the Court noted that the absence of express “willfulness” language in § 1117(a) regarding an award for a § 1125(a) violation, “seems all the more telling” that a willfulness standard is not required. Slip op. at pp. 3-4.

The Court then addressed Fossil’s argument that the qualifying language set forth in § 1117(a) – that awards are to be made “subject to the principles of equity” – included the notion that a finding of willful infringement must be present in order to award infringer’s profits.

The Court stated that accepting Fossil’s contention that “principles of equity” included a required finding of willfulness would be at tension with language of the Lanham Act’s other provisions where mens rea conditions were expressly prescribed. Slip op. at p. 4.

The Court also explained that the phrase “principles of equity” had its roots in broader fundamental truths that generally contain “transsubstantive guidance” on fundamental matters, concluding that

it seems a little unlikely Congress meant “principles of equity” to direct us to a narrow rule about a profits remedy within trademark law.

Slip op. at p. 5. (2)

The Court continued by noting that historically, whether under the Trademark Act of 1905 or even before under the common law, courts were not uniform in requiring a finding of willfulness prior to awarding infringer’s profits and that “the vast majority of the cases both Romag and Fossil cite simply failed to speak clearly to the issue one way or another.” Slip op. at p. 6. The Court concluded:

At the end of it all, the most we can say with certainty is this. Mens rea figured as an important consideration in awarding profits in pre-Lanham Act cases. This reflects the ordinary, transsubstantive principle that a defendant’s mental state is relevant to assigning an appropriate remedy
. . .
[W]e do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition [of willfulness] to recovery [of infringer’s profits] Fossil advances.

Slip op. at pp. 6-7 (brackets added).

The Romag decision creates certainty in the area addressed – infringer’s profits can be awarded without the necessity of a willful infringement finding. But, while a finding of willfulness is not a precondition, it will be – and should be – an important factor in determining whether an award of infringer’s profits is appropriate.

At least two issues will be matters for future development under the Romag decision: 1) what factors will be considered to determine whether an award of infringer’s profits is appropriate and 2) what degree of mens rea of the infringer will be afforded what weight in the analysis.

Since, under Romag, “willfulness” is not a threshold issue for an award of infringer’s profits, but instead is an important factor to consider, a question becomes what other factors should be considered. Perhaps the best guidance to this is found in the Court of Appeals decisions in those circuits where, prior to Romag, “willfulness” was not required for an award of infringer’s profits. In Quick Techs v. Sage Group, 313 F. 3d 338 (5th Cir 2002), the Fifth Circuit enumerated the following factors to consider: 1) intent of the infringer to cause confusion or to deceive, 2) whether / to what extent sales were diverted to the infringer, 3) whether other remedies (e.g. injunction or plaintiff’s actual damages) were adequate, 4) whether plaintiff delayed in asserting its rights, 5) the public interest in making infringement unprofitable, and 6) the egregiousness of the case (e.g. is it a “palming off” scenario). While there would be additional factors dependent on the case, it cannot escape notice that the first of these factors – intent of the infringer – focuses upon the trademark infringer’s mens rea which is “a highly important consideration in determining whether an award of profits is appropriate.” Romag, Slip op. at 7.

The importance of the infringer’s mens rea being high, the question then arises as to what degree of mens rea will command what degree of weight. The spectrum runs from an “innocent” infringer to a “willful” infringer and presumably, if not obviously, existence of the former will weigh heavily against an award of infringer’s profits, while the existence of the latter will strongly tilt in the other direction. Yet, as the jury found in the Romag case, there are other degrees of mens rea – e.g. “callous disregard.” One could also list in the space between “innocent” and “willful,” infringement described as negligent, accidental, grossly negligent, indifferent, or reckless. Presumably, in a sliding scale context, the greater or lesser degree of mens rea would be considered in relation to the strength or weakness of the other factors.

Upon remand, the district court in Romag will grabble with these issues as will other courts going forward. The immediate impact of Romag is clear – a finding of willfulness is not a prerequisite for the award of infringer’s profits. It will remain, however, open as to what the legacy of Romag will be as courts determine what degree of mens rea of the infringer deserves what weight in juxtaposition to other factors relevant to a determination of whether, under “principles of equity,” an award of infringer’s profits to a successful trademark infringement plaintiff is appropriate.

1.        See e.g.15 U.S.C. § 1117(b) (treble damages and attorney fees if infringement is “intentional”/”knowing”); § 1117(c) (increases statutory damages for certain “willful” violations); § 1125(d) (“bad faith intent to profit” needed for liability finding of cyber piracy violation). See Slip op. at pp. 3-4.
2.        At oral argument, Justice Gorsuch, who authored the Court opinion, commented that “’principles of equity’ [would be] an unusual way of saying ‘willfulness.’” Ronald Mann, “Argument

Analysis: Justices Dubious About Blanket Willfulness Requirement,” www.scotusblog.com/2020/01 argument.