To recover a trademark infringer’s profit, must a trademark owner prove that the infringer acted willfully? On Tuesday the Supreme Court will hear oral argument in Romag Fasteners, Inc. v. Fossil, Inc., a case in which the Federal Circuit held that willfulness is a prerequisite to disgorgement of profits in trademark cases. Here is our argument preview.
Romag Fasteners argues in its opening merits brief that “[t]he Lanham Act does not require a showing of willfulness as a prerequisite to awards of infringers’ profits” for three reasons.
First, according to Romag, the relevant statutory provision, 15 U.S.C. § 1117(a), “by its terms, does not require a showing of willfulness as a prerequisite to awards of infringers’ profits in all cases.” And “[t]hat omission,” says Romag, “is dispositive.” Moreover, though, according to Romag, “[t]he broader structure of the Act confirms the absence of any willfulness requirement to recover infringers’ profits here.” This is so, it argues, because, “[t]hroughout the Lanham Act, Congress conditioned liability and relief on defendants’ mental state” and, as a result, “[r]eading an implicit willfulness requirement into section 1117(a) to recover infringers’ profits creates tension—if not outright conflict—with the mental-state requirements in these other provisions.”
Second, Romag argues, “[e]quity . . . gives courts discretion to shape relief to all the circumstances of a given case.” The Court, it explains, “accordingly has rejected bright-line rules for equitable remedies in other intellectual-property contexts.” And when analyzing courts’ exercise of their equitable powers in trademark cases prior to the codification of the statutory provision in question, it continues, “[c]ourts often granted profits awards under the common law of trademark infringement without requiring or discussing willfulness.”
Third, Romag contends its “interpretation of section 1117(a) best promotes the Lanham Act’s goals of protecting mark holders and the public.” This is so, it argues, because “[o]ften, an award of infringers’ profits will be the only meaningful remedy for infringement,” and “[a] rigid willfulness requirement could preclude any recovery” in many cases.
Fossil’s response brief contends that “Romag asks th[e] Court to open a door that trademark law closed long ago.” In particular, Fossil maintains that “[t]he text of the statute and the traditional trademark law that it reflects foreclose [Romag’s] interpretation.”
With respect to the text of the statute, Fossil argues that “[b]y subjecting a plaintiff’s entitlement to monetary remedies ‘to the principles of equity,’ Section 1117(a) imports traditional trademark law’s limits on monetary remedies.” And, according to Fossil, “[o]ne of those limits is the principle that a court would not order an accounting of an infringer’s profits unless the plaintiff showed willful infringement.” Fossil also argues that, while “Romag . . . points to a slew of . . . Lanham Act provisions,” “each of these provisions continues to serve a purpose under Fossil’s plain-text reading of Section 1117(a).”
With respect to “traditional trademark law,” Fossil contends that “[a] review of the relevant history shows a clearly established principle of equity under which a court would compel an accused infringer to account for its profits, and turn them over to a plaintiff, only if the infringer willfully infringed a trademark.”
Fossil also makes a policy argument. It contends that “[o]pening the door to a defendant’s profits award without a requirement of willfulness will give opportunistic litigants a powerful tool to extort windfall settlements.” And it criticizes Romag for “not offer[ing] a common sense reason to require an innocent defendant to turn over its profits.”
Romag’s arguments in its reply brief begin, again, with the text of the statute, pointing out that “[t]he Lanham Act repeatedly limits the availability of certain remedies for trademark infringement to willful violations, while authorizing relief for other violations irrespective of the infringer’s mental state.” Romag also contends that the statutory “instruction to apply ‘principles of equity’ . . . reinforces Congress’ intent to give courts flexibility to tailor awards based on all relevant circumstances, including the infringer’s degree of culpability, whether innocent, in bad faith, or in between—like recklessness or callous disregard for the mark holder’s rights.” With respect to Fossil’s arguments based on precedent, Romag alleges that “Fossil cherry-picks pre-Lanham Act sources to divine an across-the-board willfulness requirement.” Even most of those cases, says Romag, “rely on the infringer’s willfulness without articulating any bright-line requirement,” and so they are “just as consistent with Romag’s view.” And, anyway, Romag points to “substantial contrary authority eschew[ing] a willfulness requirement, thus disproving a settled rule.”
Four amicus briefs argued in support of Romag’s position that willfulness is not a prerequisite to disgorgement of profit in trademark cases. Parties filing these briefs included:
- American Bar Association
- American Intellectual Property Law Association
- International Trademark Association
- Intellectual Property Law Association of Chicago
Two amicus briefs argued in support of Fossil’s contrary position that willfulness is a prerequisite to disgorgement of profits:
- Intellectual Property Owners Association
- Intellectual Property Law Professors
This case likely will turn on the Court’s view of the relevant statutory language:
“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 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 . . . .”15 U.S.C. § 1117(a).
But should the Court conclude that the “principles of equity” allow for discretion rather than a strict requirement of willfulness, this case would fall in line with a number of recent decisions by the Court. In those decisions, the Court reviewed holdings by the Federal Circuit constraining district courts’ discretion in fashioning appropriate remedies in patent cases. Indeed, in both Octane Fitness, LLC v. ICON Health & Fitness, Inc. in 2014 and Halo Electronics, Inc. v. Pulse Electronics, Inc. in 2016, the Supreme Court, while of course interpreting different statutory provisions than the one at issue in this case, rejected bright-line rules in favor of discretion in the analysis of remedies in patent cases. In Octane Fitness, the Court held that “[t]he framework established by the Federal Circuit [for awarding attorney’s fees in patent litigation] is unduly rigid, and it impermissibly encumbers the statutory grant of discretion to district courts.” Likewise, in Halo Electronics, the Court held that the Federal Circuit’s test for enhanced damages in patent cases “unduly confines the ability of district courts to exercise the discretion conferred on them.” A contrary approach in this trademark case would thus represent a divergence from the approach used in patent cases.
We will report on the oral argument in this case, which, again, will take place on Tuesday.