SCOTUS Rules Willful Trademark Infringement Not Required to Recover Profits

SCOTUS Rules Willful Trademark Infringement Not Required to Recover Profits

Trademark infringement cases just got a little more costly. In a unanimous decision, the U.S. Supreme Court held that a plaintiff doesn’t have to show willful trademark infringement by the defendant to obtain an award of profits.

Circuit Split Over Profit Awards

The Supreme Court’s decision resolves a circuit split over when a plaintiff in a trademark infringement suit may recover the defendant’s profits. The Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits made an infringer’s profits available under the Lanham Act without requiring a threshold showing of willfulness. Instead, the infringer’s intent is merely one of several factors considered when determining an equitable remedy. Meanwhile, the other six circuit courts of appeal have reached the opposite conclusion. In the Second, Eighth, Ninth, Tenth, and District of Columbia Circuits, plaintiffs must first clear the hurdle of showing willful infringement before they are entitled to profit awards. The First Circuit imposes the same requirement where the parties are not direct competitors.

In Romag Fasteners Inc. v. Fossil Inc, the jury found that respondents Fossil, Inc. and Fossil Stores I, Inc. (collectively, “Fossil”) had infringed petitioner Romag Fasteners, Inc.’s trademark rights. However, the jury also determined that Fossil’s infringement was not willful. Second Circuit law, which the Federal Circuit applied because the case was filed in the District of Connecticut, thus precluded Romag from receiving any of Fossil’s profits. Romag asked the Supreme Court to provide clarity regarding the award of profits, arguing that “the distinction between treating willfulness of infringement as a weighty concern, on the one hand, and as a dispositive concern, on the other hand, can change the outcome of a case.”

Supreme Court Rejects Willful Infringement Standard

The Supreme Court held that a plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to an award of profits. Justice Neil M. Gorsuch wrote on behalf of the Court.

The Court cited the text of the Lanham Act in support of its decision, noting that the statute’s provision governing remedies for trademark violations, 15 U.S. Code §1117(a), makes a showing of willfulness a precondition to a profits award in a suit under §1125(c) for trademark dilution, while §1125(a) has never required such a showing. According to Gorsuch, “A wider look at the statute’s structure gives us even more reason for pause.”

Gorsuch notes that the “Lanham Act speaks often and expressly about mental states,” highlighting several provisions that restrict remedies to cases of “willful,” “intentional,” “innocent” or “bad faith” conduct. “Without doubt, the Lanham Act exhibits considerable care with mens rea standards,” Gorsuch writes. “The absence of any such standard in the provision before us, thus, seems all the more telling.”

The Court next turned Fossil’s argument that term “principles of equity,” as used in §1125(a), includes a willfulness requirement.  In rejecting the argument, Gorsuch noted that principles of equity are “trans-substantive guidance on broad and fundamental questions about matters like parties, modes of proof, defenses, and remedies.” Accordingly, “it seems a little unlikely Congress meant ‘principles of equity’ to direct us to a narrow rule about a profits remedy within trademark law.” 

The Court also concluded that based in the record before it, it is “far from clear” whether trademark law historically required a showing of willfulness before allowing a profits remedy. “At the end of it all, the most we can say with certainty is this,” Gorsuch wrote. “Mens rea figured as an important consideration in awarding profits in pre-Lanham Act cases. This reflects the ordinary, trans-substantive principle that a defendant’s mental state is relevant to assigning an appropriate remedy.”

With regard to Fossil’s argument that more stringent restraints on profits awards are needed to deter “baseless” trademark suits and Romag’s argument that its reading of the statute will promote greater respect for trademarks in the “modern global economy,” the Court held that it was for Congress to determine the weight of these policy arguments. “This Court’s limited role is to read and apply the law those policymakers have ordained, and here our task is clear,” Justice Gorsuch wrote.

Justice Samuel A. Alito Jr. wrote a concurring opinion, which was joined by Justices Stephen G. Breyer and Elena Kagan. Alito emphasized that willfulness is “a highly important consideration” in awarding profits in trademark infringement suits, but also acknowledged that it is “not an absolute precondition.”

Key Takeaways

Under the Supreme Court’s decision, trademark owners can now seek to recover the infringer’s profits in all trademark infringement cases. For everyone else, the decision underscores the need to be diligent about performing trademark searches.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Ivan Tukhtin, or the Scarinci Hollenbeck attorney with whom you work, at 201-896-4100.