Trademark Infringers Beware – Willfulness Not Required for Disgorgement
May 1 2020
For some time there has been a split among the Federal circuits as to whether evidence of willfulness is required in order to award disgorgement of profits for trademark infringement under Section 1125(a) of the Lanham Act. The split stems from how each Federal circuit interprets Section 1117(a) of the Lanham Act which was amended in 1999. The section reads 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 . . .
A number of Federal Circuits, including the Second and the Ninth, have interpreted the above to require a showing of willfulness for disgorgement in Section 1125(a) cases. Six Federal Circuits do not. On April 23, 2020 the United States Supreme Court made clear where it stands.
The matter came to the Supreme Court 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.
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 Romag, 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. Romag petitioned the Supreme Court to hear the case in March 2019.
SCOTUS unanimously rejected Fossil’s argument that a finding of willfulness is a requirement for an award of disgorgement of profits in a trademark infringement case. The High Court did acknowledge that “a defendant’s state of mind may have a bearing on what relief a plaintiff should receive,” however, the Court continued, “the statutory language has never required a showing of willfulness to win a defendant’s profits” in infringement cases under section 1125(a).
Fossil argued that failing to require a showing of willfulness for an award of profits in an infringement case will result in a flood of baseless and meritless trademark infringement cases. While the Court acknowledged that Fossil may make a good point from a policy perspective, the place for such an argument is with the policymakers, not with the court. “This Court’s limited role is to read and apply the law those policymakers have ordained, and here our task is clear.”
The Court’s decision resolves a major split among the circuits and, as a practical matter, creates a higher degree of jeopardy for a defendant in an infringement case in California.