No longer a question of willfulness? Last week, the Supreme Court issued a long-awaited opinion that has the potential to significantly alter the trademark litigation landscape. Directly resolving a longstanding divide among the Circuits regarding the impact of willfulness in damages determinations, the Supreme Court held that a plaintiff is not required to prove willful infringement in order to seek a trademark infringer’s profits under the Lanham Act. The decision now stands to obviate the disparate precedents previously established by various Circuit Courts, especially the Second and Ninth Circuits, where a high volume of trademark cases are regularly heard.
In the case, Romag Fasteners, Inc. v. Fossil, Inc. et al., Case No. 18-1233, the U.S. Supreme Court focused its analysis on Section 35 of the Lanham Act (15 U.S.C. § 1117(a)) and how reference to “willful violation” in the statute guides what plaintiffs must provide in order to see an infringer’s profits. The relevant portion of the statute 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) [for trademark infringement] or (d) [for cybersquatting] of this title, or a willful violation under section 1125(c) [for dilution] of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and 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.
Before this ruling, many Circuits required plaintiffs to first prove willful infringement before they could seek a trademark infringer’s profits. The rule was supported by earlier case law that viewed the potential award of an infringer’s profits as a particularly harsh remedy, whereby a showing of willfulness was required to justify any such award as a matter of equity. This was a high threshold to meet, and this previous standard had far reaching impact because it was relied upon by influential Circuits such as the First, Second, Ninth, and Tenth.
The case centered around an action brought by Romag Fasteners, Inc. (Romag), a seller of handbag fasteners, against defendant Fossil, Inc. (Fossil). In the underlying action, Romag alleged that Fossil infringed its registered ROMAG trademark by using counterfeit fasteners on its Fossil products. Although issuing a finding infringement, the jury concluded that the Fossil’s infringement was not willful. Regardless, and in spite of this determination, the jury still held that Romag was entitled to Fossil’s profits on the infringement claim. The jury reasoned that imposition of this award was imperative to deter future infringement. Cutting against the jury’s determination, the District Court later cited Second Circuit precedent to strike the award of defendant’s profits based on the premise that the jury did not find willful infringement. At the appellate level, the Federal Circuit applied Second Circuit law and affirmed the District Court’s holding. Following this ruling, Romag appealed the case to the Supreme Court.
The Supreme Court reversed the Federal Circuit’s decision on appeal, holding that a showing of willful infringement could not be reconciled with the plain language of the Lanham Act. According to the Supreme Court, imposition of such a “categorical rule” would undercut the statutory language itself. However, while removing establishment of willfulness as prerequisite for an award of an infringer’s profits, the Supreme Court was careful to highlight that its holding did not eliminate consideration of a defendant’s mental state and intent when making determinations as to damages for relief in trademark infringement cases. Thus, while the Supreme Court emphasized that an infringer’s mental state and intent still constitute a “highly important consideration” when determining the possible award of an infringer’s profits, willfulness no longer serves as required precondition for an award granting such profits.
So what does this discussion of willfulness actually mean for trademark owners and infringers? How will the Supreme Court’s holding be interpreted by lower courts moving forward? At first blush, this holding may lead some plaintiffs to take a more aggressive approach to litigation and more often push for infringers’ profits. Depending on how courts respond, this could trigger a wave of windfall damage awards in trademark infringement cases. It will be interesting to see how much weight courts still give to willfulness as one factor to be considered when making determinations. Gone as a categorical rule, but still here as an important variable, willfulness assessments are likely to remain a key element of litigation strategy.
This potential impact applies to defendants as much as it does plaintiffs. Specifically, the Supreme Court’s decision will also likely change how many defendants assess litigation strategy. Facing an increased prospect of having to pay plaintiffs profits where infringement is found, defendants may be more motivated to try to settle cases out of court earlier in the litigation life cycle. Nonetheless, despite the Supreme Court’s holding, litigation remains unpredictable and plaintiffs must still weigh the expense of litigation against potential damages before rushing to dive headlong into litigation. While the holding may make is easier for plaintiffs to recover an infringer’s profits, it by no means guarantees such an award and plaintiffs must still approach litigation with eyes wide open. Much also depends on how lower courts interpret the Supreme Court’s holding, and only time will truly tell what place willfulness will continue to actually hold in awards of infringer’s profits.