By: Sahar A. Ahmed and Monica Riva Talley
On April 23, 2020, Justice Neil Gorsuch delivered a unanimous opinion in Romag Fasteners, Inc. v. Fossil, Inc., clarifying that a Lanham Act provision does not require a plaintiff to prove that acts of infringement are willful before recovering defendant’s earned profits.
Romag Fasteners, Inc., a seller of magnetic snap fasteners for leather goods, entered into an agreement with Fossil that allowed Fossil to incorporate Romag’s fasteners into its handbags and other products. Romag soon learned that the factories in China hired to produce Fossil’s handbags were using counterfeit versions of Romag’s fasteners. Concerned that Fossil was not taking adequate preventative measures against such counterfeiting conduct, Romag sued Fossil in the District of Connecticut for trademark infringement (15 U.S.C. §1114) and false designation of origin (15 U.S.C. §1125(a)).
Despite the jury finding that Fossil acted “in callous disregard” of Romag’s rights, the district court refused to award Romag with damages equating to Fossil’s earned profits because the “callous disregard” mens rea finding did not rise to the intentional standard of willful conduct. The district court’s ruling was supported by a controlling Second Circuit precedent that interpreted sections 1125(a) and (d) to require willful conduct before a plaintiff may collect defendant’s profits. The Eighth, Ninth, Tenth, and the District of Columbia Circuits agreed and follow the same interpretation.
Section 15 U.S.C. §1117(a) of the Lanham Act governs remedies for trademark violations. Writing for the majority, Justice Gorsuch clarified that after reading the plain language of the statute, only trademark dilution allegations under section 1125(c) require such a showing of an infringer’s willfulness. Trademark infringement violations falling under sections 1125(a) and (d) are not subject to the same explicit willful precondition.
The split among circuits as to the proper interpretation of 15 U.S.C. §1117(a) arose after Congress amended the Lanham Act in 1999 to read, “a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title,” intending to clarify that the same damages remedy for infringement and false designation can be available for willful trademark dilution claims. Several courts, including the above mentioned circuit courts, did not read the added “willful violation” language as only applying to dilution claims. But as Gorsuch explained, courts cannot read words into statutes that are not there, especially when Congress included the term of interest elsewhere within the same statutory provision. By including the term elsewhere in the same provision, the majority reasoned that Congress intended to exclude the mens rea standard from section 1125(c).
Mens rea and mental states are often expressly included in statutory trademark provisions of the Lanham Act. For example, section 1117(b) of the Act provides damages awards for intentional and knowing conduct, and section 1117(c) increases a maximum statutory damages award when violations are willful. Fossil defended its case by arguing that the language “subject to the principles of equity” within the same provision supplants the willful mens rea prerequisite. The Court, however, was not persuaded that the referenced principles of equity language would require a mens rea showing by Romag. Instead, it defined “principles of equity” to provide merely “transsubstantive guidance” on questions pertaining to parties, modes of proof, defenses, and remedies. The Supreme Court acknowledged that a trademark defendant’s mental state is highly important in determining a plaintiff’s entitlement to profit damages, but discerned that such an acknowledgement is a “far cry from insisting on [an] inflexible precondition to recovery.”
Two Key Takeaways
First, the recent decision provides certainty on an important factor to weigh when considering trademark litigation – both because an infringer’s willfulness can be difficult to prove, and an infringer’s profits are typically easier to quantify, and larger, than a plaintiff’s actual damages. For trademark plaintiffs, this means litigation may appear a more attractive enforcement option. Second, for those launching new branding initiatives, it underlines the need for appropriate clearance of marks prior to adoption.
This article appeared in the April 2020 issue of MarkIt to Market. To view our past issues, as well as other firm newsletters, please click here.