Today the Supreme Court issued its decision in Romag Fasteners, Inc. v. Fossil, Inc., ruling that trademark owners need not prove willfulness to disgorge infringers’ profits. Justice Gorsuch authored the opinion for the Court, which vacated and remanded a contrary decision by the Federal Circuit. Justice Gorsuch’s opinion was joined by every member of the Court except Justice Sotomayor. Here are the details.
Justice Gorsuch framed the question presented as whether the “categorical rule” adopted by the Federal Circuit (and other Circuits)—that trademark owners may disgorge infringers’ profits only after showing willful infringement—“can be reconciled with the statute’s plain language.” He concluded that it cannot be.
He noted that the language of statute “spells trouble for Fossil,” which supported the requirement to prove willfulness. The statutory section governing trademark dilution does explicitly require willfulness to disgorge profits, but the section Fossil relied upon for its cause of action does not. Justice Gorsuch noted that the Court usually does not “read into statutes words that aren’t there.” He also found no support for Fossil in the statute’s structure. Other sections mention mental states and set various mens rea standards, and so the “absence of any such standard in the provision before us, thus, seems all the more telling.”
Justice Gorsuch rejected Fossil’s remaining arguments. While Fossil relied upon language that an award of profits is “subject to the principles of equity,” he explained that this contention “would require us to assume that Congress intended to incorporate a willfulness requirement here obliquely while it prescribed mens rea conditions expressly elsewhere throughout the Lanham Act.” Moreover, he wrote, the more natural meaning of this phrase in the context of the statute suggests fundamental rules that apply more systematically across claims and practice areas. Other areas of intellectual property do not include this prerequisite. And anyway, he went on, “it’s far from clear whether trademark law historically required a showing of willfulness before allowing a profits remedy.”
“At the end of it all,” Justice Gorsuch’s opinion for the court explains, “the most we can say with certainty is” that “[m]ens rea figured as an important consideration in awarding profits in pre-Lanham Act cases.” And while there are policy arguments in favor of a requirement of willfulness being a prerequisite to disgorgement of profits, the Court indicated “the place for reconciling competing and incommensurable policy goals like these is before policymakers” rather than the Court.
Notably, Justice Alito filed a short concurring opinion, which Justices Breyer and Kagan joined. In it, Justice Alito expressed his view that “[t]he relevant authorities, particularly pre-Lanham Act case law, show that willfulness is a highly important consideration in awarding profits under §1117(a), but not an absolute precondition.” This concurring opinion effectively highlights that the majority opinion does not indicate that willfulness is a highly important consideration in the relevant analysis.
Justice Sotomayor filed an opinion concurring only in the judgment. She diverged from the rest of the Court because, in her view, “[t]he majority suggests that courts of equity were just as likely to award profits for such ‘willful’ infringement as they were for ‘innocent’ infringement.” In her view, “that does not reflect the weight of authority, which indicates that profits were hardly, if ever, awarded for innocent infringement.” In particular, she believes a “district court’s award of profits for innocent or good-faith trademark infringement would not be consonant with the ‘principles of equity’ referenced in [the statute] and reflected in the cases the majority cites.” Thus, while the majority and Justice Alito focus on willfulness, Justice Sotomayor goes to the opposite extreme, indicating that good-faith infringers should not be forced to disgorge their profits.
The immediate impact of the Court’s decision was to vacate the judgment and remand the case to the Federal Circuit. And the Court’s holding allows for the possibility that disgorgement of profits may be available even when a trademark owner cannot show willful infringement. But the majority opinion’s statement that “[m]ens rea figured as an important consideration in awarding profits in pre-Lanham Act cases” likely highlights the continuing importance of willfulness even after this holding. The holding, therefore, seems unlikely to make a significant impact in most cases. Time, however, will tell.