U.S. Supreme Court holds willfulness not a prerequisite to disgorgement of profits to plaintiff on trademark claim brought under Section 43(a) of Lanham Act, resolving circuit court split.
Romag Fasteners, a manufacturer of magnetic snap fasteners for use in leather goods, sued Fossil, Inc., a fashion accessory brand, for trademark infringement under Section 43(a) of the Lanham Act, alleging that Fossil used counterfeit Romag fasteners on handbags and other products. At trial, the jury found that Fossil had infringed Romag’s trademark with “callous disregard” for Romag’s rights, but rejected Romag’s claim that Fossil had willfully infringed its trademark. The district court refused Romag’s request for disgorgement of the profits that Fossil had earned as a result of the trademark violation, citing Second Circuit precedent requiring a finding of willfulness as a precondition to such an award. On appeal, the U.S. Court of Appelas for the Federal Circuit affirmed.
In a unanimous decision, the U.S. Supreme Court vacated and remanded the case, holding that a finding of willfulness is not a prerequisite to an award of defendants’ profits in trademark infringement actions under Section 43(a) of the Lanham Act. In doing so, the Court resolved a circuit split: the First, Second, Eighth, Ninth, Tenth and D.C. Circuits had allowed profit disgorgement only if the infringement was willful, while the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits had applied a broader analysis in which willfulness is a factor, but not dispositive.
Section 35 of the Lanham Act, which sets forth the remedies available for trademark violations, reads in relevant part: “When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) [i.e., Section 43(a)] or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled … subject to the principles of equity, to recover (1) defendant’s profits. …”
The Court reasoned that Section 35 expressly requires willfulness as a precondition to a profits award for a trademark dilution claim under 15 U.S.C. § 1125(c)—but not for a trademark infringement claim under 15 U.S.C. § 1125(a) (i.e., Section 43(a) of the Lanham Act). The Court declined to read a willfulness requirement into the portion of the text regarding Section 43(a), especially since Congress had “included the term in question elsewhere in the very same statutory provision.” A wider look at the Lanham Act’s structure, the Court noted, demonstrates that the Act “speaks often and expressly about mental states,” by, for example, providing for treble damages and attorneys’ fees where defendants act intentionally and with specified knowledge and by increasing caps on statutory damages for certain willful violations. The care with which the Act as a whole addresses defendants’ state of mind, the Court held, further counseled against reading a willfulness requirement into the relevant portion of Section 35.
Fossil argued that Section 35 imposed a willfulness requirement by specifying that “a violation under section 1125(a)” can trigger an award of defendant’s profits “subject to the principles of equity.” The Court held, however, that no reason existed to interpret “principles of equity” to mean that a plaintiff must prove that a defendant acted willfully. “Principles of equity,” the Court opined, refers broadly to trans-substantive topics such as modes of proof and defenses and “more naturally suggests fundamental rules that apply more systematically across claims and practice areas”—and were not intended to refer to a specific mens rea requirement.
Furthermore, the Court held, it is far from clear whether trademark law historically required a showing of willfulness for a profits remedy. The Trademark Act of 1905, the Lanham Act’s statutory predecessor, did not contain such a requirement, and legal authority both preceding and shortly following that 1905 statute was at best contradictory on the subject of a willfulness requirement.
The Court, however, was careful to note that willfulness is still an important factor for courts to consider when weighing an award of profits. Justice Gorsuch, writing for the Court, stated: “[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 to recovery Fossil advances.”
Summaries prepared by Frank D’Angelo and Lisa Rubin