Argument Recap / Featured

On Tuesday, the Supreme Court heard oral argument in Romag Fasteners, Inc. v. Fossil, Inc. As we noted in our argument preview, in this case the Court is considering whether, to recover a trademark infringer’s profit, a trademark owner must prove that the infringer infringed willfully. Here is our argument recap.

Lisa Blatt argued for Romag Fasteners. She began her argument by stating that “[t]he Lanham Act authorizes courts to remedy trademark violations by awarding infringers profits subject to the principles of equity.” Indeed, she seemed to narrow the focus of the case by saying that “[t]he question presented here is whether the phrase ‘principles of equity’ requires trademark owners to prove willfulness as an absolute precondition to profit awards.” According to Blatt, “[t]he answer is no for three reasons.” First, “the phrase ‘principles of equity’ signifies a multifactor analysis where no one factor is controlling.” Second, “[t]he statutory text and structure supersede any settled willfulness requirement.” And, third, “there was no such settled background willfulness requirement” anyway.

Justice Sotomayor asked the first question, whether “equity would sustain an award for innocent or good-faith infringement without a more culpable state of mind.” Blatt responded that “you would need a greater showing of . . . the other equitable factors.” She focused on the “first and foremost” factor of “whether . . . no other relief could adequately compensate the plaintiff,” as well as a “second equitable factor,” the idea that “you don’t get to hold on to profits that don’t correctly belong to you if you violated the law to get them.” She also argued that, while “not voluminous . . . there are examples, both pre-Lanham Act and post-Lanham Act, where courts in cases of innocent infringement did award profits.”

In response to follow up questions from Justice Kavanaugh, Blatt identified three such cases: Mishawaka from the Supreme Court, Oakes from an Alabama court, and Prest-O-Lite from a New Jersey court. As it turned out, this last exchange raised a dispute that would take up substantial time both in Blatt’s and her counterpart’s oral argument: the correct understanding of these cases, and in particular whether they held that willfulness is not a prerequisite to an award of profits in trademark infringement cases. Blatt also explained that “the very cases from the common law that articulate a willfulness requirement say in the very same sentence: But there was some conflict in the decision.” The point, she went on, is that it wasn’t “a . . . clear rule.”

Justice Breyer highlighted a different part of the relevant statutory section. He explained that it says “if the court shall find that the amount of recovery based on profits is either inadequate or excessive, the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.” He asked, based on this provision, could a court say that a party wasn’t willful “but we have a sentence here which gives us total discretion in the interest of justice to give the damages that we think are just and fair” and so “nobody is going to be hurt by accepting” the willfulness requirement as a condition imposed by the other statutory language reciting “principles of equity.” Blatt responded that “[s]ix circuits read that sentence as saying they cannot award profits if willfulness is not shown.” Moreover, she turned the question around to argue that if the Court adopts her position then “there’s no harm, there’s no risk of a windfall because no matter where you come up with your award, the Court can always reduce it or raise it, depending on the circumstances.” She later explained that she was not “reading [willfulness] out,” but instead “just saying that it’s not a precondition.” In other words, “it’s a sliding scale.”

Justice Alito asked: “Of the cases where courts have said that willfulness is a necessary condition, which one would you cite as . . . leading to the most unjust result?” Blatt eventually said that she had not “seen cases where there was a mean court saying: Looks like you deserve it but I’m constrained by this willfulness requirement.”

Justice Breyer later asked: “What [does] ‘principles of equity’ require?” Blatt answered: “the defendant’s culpability, the need (that other relief doesn’t adequately compensate the plaintiff), and [whether] you’re holding on to profits that don’t rightfully belong” to you. Importantly, she said, “[t]he only thing they’re disagreeing about is whether willfulness is a gateway on/off switch.”

Neal Katyal argued for Fossil. He began his argument by stressing that Blatt “tries to make this case seem easy, but to do that, she has to sweep both Congress’s words and two centuries of history under the rug.” He argued “Congress expressly made the Lanham Act’s monetary awards . . . subject to the ‘principles of equity,’ and over many decades courts developed a principle that governs cases like this one.” In particular, he said, “[t]hey required willfulness for the equitable remedy of profits awards, unlike for injunctions.” Then, focusing on the issue that would become the central part of his argument, he argued that, “[f]or all the dust my friend tries to kick up about the cases in her brief, here’s the bottom line on all the cited cases: Not one of them, none, actually awarded profits without willfulness in two centuries, either here or in the U.K., and in response to Justice Alito, she hasn’t been able to give you a single example of an unjust result as a result of this long tradition.” Moreover, he argued, “[f]ive different treatises set out this rule,” “[m]any cases speak of this categorical rule,” and “Congress legislated against the backdrop of that practice.”

Justice Sotomayor again asked the first question. She first, however, explained that her “basic problem is that . . . looking at these cases, the term ‘willfulness’ over the centuries has been differently defined by different people,” including some who have included recklessness. Indeed, she went on, “there are cases–not many, I grant you–where something less than willfulness was the basis for a recovery.” As for her question, she asked how the Court, in light of this history, could write an opinion agreeing with his position that willfulness, “being just conscious avoidance, not recklessness, not callous disregard,” is required? Katyal argued that “there is a universal lowest common denominator of willfulness at least meaning what exactly the district court charged here, which is the defendants must be actually aware of the infringing activity.”

After Justice Ginsburg expressed skepticism with a “plaint text” argument by highlighting that the statutory language does not say “willfulness” but instead “principles of equity,” Justice Kavanaugh asked, “why should we assume that Congress wanted to exclude reckless infringement?” Katyal responded: “Because Congress in 1946 acted against the backdrop of long-standing, consistent practice.” Before he could finish his answer, however, Justice Kavanaugh responded, “But as Justice Sotomayor points out, willfulness is a vague word, ambiguous word, [and] sometimes covered what we would consider recklessness. So why would you, therefore, exclude reckless [behavior]?” Katyal responded he would exclude reckless behavior because “here” what was always required was “at least actual knowledge, subjective knowledge, and not recklessness.”

After Justice Gorsuch picked up Justice Ginsburg’s focus on the text not including “willfulness” but instead “principles of equity,” Katyal returned to the argument that “the long-standing practice for two centuries is that willfulness has been required, and that’s why there’s not a single example on the other side” and “every single case that’s given profits awards in two centuries has required willfulness.” He later continued this argument by saying “there isn’t any tradition, there isn’t any example on the other side, and there’s treatise after treatise.” And, in response to Justice Breyer’s concern with excluding “callous disregard,” Katyal highlighted that Blatt, in his words, “can’t come up . . . with a single time in which this happened, an unjust result, in two centuries.” He continued: “And the reason for that is trademark law focuses on protection of consumers in which injunctions and damages have always been enough.”

Justice Kagan eventually asked Katyal to address the three cases highlighted by Blatt, and also highlighted that while Katyal “point[s] to a lot of cases in which the results come out your way, there are comparatively few where the court sets out the rule as a categorical one” but rather “seem to be thinking of willfulness as a factor, a significant factor, but not a gateway requirement.” In response, Katyal highlighted “five separate treatises” and “37 of the 50 cited cases” as setting out the rule he proposes or saying that “willfulness is the only factor.” And, he argued, Blatt’s cases “do not stand up.” He then proceeded to address individually each of the three cases, only conceding “the theoretical possibility of Oakes.”

Later, Justice Kavanaugh asked about excluding “subjective recklessness, conscious disregard of a substantial risk.” When Katyal conceded that the cases had not addressed that circumstance “one way or the other,” Justice Kavanaugh said “that’s the key, right?” Katyal responded that, no, here “the evidence at trial would at most support a finding that Fossil was negligent.”

Justice Ginsburg then asked Katyal to “explain the features of trademark that make it different from copyright and patent where . . . you can get profits without showing willfulness.” Katyal responded that trademark law is “fundamentally different” because those “are about ownership” while trademark law is “about consumer confusion and protection of consumers.”

In her rebuttal time, Blatt began by saying that she didn’t know what to say. She continued, “I didn’t go to a fancy school, but I’m very confident in my representation of the case law.” She then discussed each of the three cases that Katyal attempted to distinguish. She also highlighted the “leading cite of the law professors'” amicus brief, a source she said explained that the issue was “unclear when the Lanham Act was enacted.” She also argued that “three out of their eight cases say there was a conflict.” As a result of all this, she argued, “you don’t have a basis to presume that Congress wanted you to read in an unstated requirement.”

Before Blatt sat down, and in an obvious response to Blatt’s statement in her rebuttal that she “didn’t go to a fancy law school,” Justice Ginsburg said that “Texas is a fine school.” Notably, according to her online biography, Blatt attended the University of Texas School of Law, clerked for Ginsburg, and has argued almost 40 cases at the Supreme Court.

As mentioned in our argument preview, 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 the area of patent law. That said, the case appears to turn on which side has the better argument about whether Congress was codifying a uniform common law approach in the trademark area. Regardless, we will report on the Court’s resolution of the case as soon as it issues its opinion.