28 Jun’20

Romag v. Fossil: Resolving a Circuit Split on Willfulness and Profit Awards for Trademark Infringement

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In the midst of the COVID pandemic, the Supreme Court resolved an issue that was split evenly between the circuit courts. The issue before the Court was whether the Lanham Act, which is the federal statute governing trademarks, required a plaintiff to prove that the defendant had willfully infringed their trademark before the plaintiff could recover the infringer’s profits. In a surprisingly unanimous decision, the Supreme Court in Romag v. Fossil 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 a profits award.

This dispute began when Fossil signed an agreement with Romag that allowed Fossil to use Romag’s magnetic snap fasteners in Fossil’s handbags and other products. During the initial years of the relationship, both parties were content with the arrangement but after some time, Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners. Romag alleged that Fossil did little to prevent the factories from continuing this practice and when both parties were not able to resolve the issue internally, Romag initiated litigation. A trademark case followed with Romag accusing Fossil of infringing its trademark and falsely representing that the fasteners came from Romag. At trial, a jury agreed with Romag and found that Fossil acted in callous disregard of Romag’s rights but rejected Romag’s claim that Fossil had acted willfully and therefore denied Romag’s recovery of Fossil’s profits. This decision by the jury was based on the definition of the district court which relied upon precedent from the Second Circuit. The Second Circuit happened to be one of the six circuits that required proof of willful infringement as a precondition to a profits award. This case was then accepted by the Supreme Court to resolve the split.

The Supreme Court was careful to rely on the plain language of the Lanham Act in describing the unanimous holding. This is important because the plain language of the Lanham Act does require willfulness as a precondition to a profits award for a trademark dilution cause of action. However, Romag’s cause of action was not for dilution (conduct that lessens the association consumers have with a trademark), it was for the false and misleading use of their trademarks and the plain language of that section does not require proof of willfulness. Fossil, and half of the circuit courts, had read into this cause of action the willfulness requirement of a dilution cause of action. The Supreme Court rejected this inclusion of willfulness language where the Act had been silent, holding that courts must be more careful when reading into statutes words that are not there when Congress has included that language elsewhere in the same statutory provision. In making its decision, the Supreme Court refused to insert this language, and noted other examples within the Lanham Act where the statutes speak to mental states and how the mental state impacts the damages award (i.e., increasing damages for intentional acts and with specific knowledge, increasing the statutory cap on damages for certain willful violations and limiting the types of awards for innocent infringers). With these references in mind, the Supreme Court made it clear that, while the mental state of a trademark defendant is a “highly important consideration in determining whether an aware of profits is appropriate,” the use of willfulness as an “inflexible precondition to recovery” cannot be read into the statute as written. Based on this determination, the Supreme Court vacated the judgment of the court of appeals and remanded the case for further proceedings consistent with its opinion and left the door open for policymakers to insert this language into the Lanham Act should it determine that this requirement for willfulness would further the goals of the statute.

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