Supreme Court Decision Will Have Huge Economic Impact on Trademark Infringement Damages
July 11 2019
The Supreme Court has agreed to resolve a circuit split over when a court can order the payment of an infringer’s profits to a successful plaintiff as a measure of damages. The matter comes to the Supreme Court as an appeal from the Second Circuit decision in Romag Fasteners Inc. v. Fossil Inc. et al. In that case, the jury at the lower court found that Fossil had infringed Romag’s patent and trademark rights in a magnetic snap closure and made an advisory award that included an award of $6.7 million of Fossil’s profits for trademark infringement. The judge rejected the jury’s advisory award of Fossil’s profits for trademark infringement based on the lack of a finding of willful infringement. The lower court’s rejection was affirmed by the Second Circuit.
The determination of when an infringer’s profits are a proper measure of damages depends on the interpretation of 25 USC 1117(a) that was amended in 1999. The amended Section 1117(a) provides as follows:
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) 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 . . . .
Under Second Circuit precedent in existence prior to the 1999 amendment, a plaintiff had to establish willful infringement in order to recover an award of the defendant’s profits in a trademark action. In Romtag, the plaintiff argued that the 1999 amendment, which added the language “or a willful violation under section 1125(c),” effectively negated the requirement of finding of willful infringement before profits could be awarded for a violation under section 1125(a) because Congress failed to insert the word “willful” in the phrase “a violation under section 1125(a) or (d) of this title.” The trial court and the Second Circuit refused to adopt the plaintiff’s interpretation of the amended provision.
The following Circuit Courts are in agreement with the Second Circuit that a finding of willfulness is required before an award of the defendant’s profits can be made: the First Circuit, the Eight Circuit, the Ninth Circuit, the Tenth Circuit and the D.C. Circuit. Of those, only the Tenth Circuit affirmatively maintained its prior willfulness requirement after the 1999 amendment. In the Tenth Circuit case, Western Diversified Services., Inc. v. Hyundai Motor America, Inc., the court held, because an award of profits is “subject to the principles of equity” and “in light of the punitive nature of such an award and the increased risk of granting plaintiff a windfall, it was appropriate under the statute to require a showing that Defendant’s actions were willful to support an award of profits under 15 U.S.C. § 1117(a).” Compare that to the Ninth Circuit which characterized the argument that the 1999 amendments abrogated prior case law as a “shaky assumption” but did not affirmatively decide the question.
On the other side of the split are the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits, each of which have interpreted the 1999 amendment to permit an award of the defendant’s profits absent a finding of willful infringement. In Banjo Buddies, Inc. v. Renosky, the Third Circuit reasoned that in enacting the 1999 amendment, Congress was aware of the large body of case law requiring a finding of willfulness for an award of profits for a violation of section 1125(a), and its failure to add the word “willfulness” to that section of the statute indicated a desire to supersede the judicially created doctrine of requiring willfulness.
Romag petitioned the Supreme Court to hear the case in March 2019. Romag argued that “a plaintiff’s actual damages are often difficult to measure” and “an award of an infringer’s profits is often the only meaningful monetary relief that trademark owners can secure.” Romag contends that the willfulness requirement “sets the bar too high, depriving mark holders of an important remedy and failing adequately to deter infringement.”