Supreme Court ruling provides increased potential for brand owners to seek infringers’ profits

published in McAfee & Taft tIPsheet | April 27, 2020

Brand owners may now have a valuable tool at their disposal thanks to an April 23, 2020, decision by the U.S. Supreme Court in Romag Fasteners, Inc. v. Fossil Group, Inc.

Although Section 1117 of the federal Lanham Act provides for an award of a defendant’s profits in an infringement lawsuit, federal circuit courts have been split as to when a profit award is available. Many circuits, including the Tenth Circuit Court of Appeals, have allowed a disgorgement of profits only in rare instances of willful infringement or when there was specific intent by the defendant to infringe. However, on April 23, 2020, the Supreme Court rejected these “inflexible precondition[s]” and unanimously ruled 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.”

The case before the Court was filed by Romag Fasteners, the maker of magnetic snap fasteners that are used with various goods. Romag sued Fossil and others for trademark infringement, and the jury awarded Romag $6.7 million of Fossil’s profits for the infringement. The district court reversed the award because the jury found Fossil acted in “callous disregard” of Romag’s rights and did not find Fossil acted “willfully.” That decision was upheld by the Federal Circuit, and the Supreme Court reversed. In writing for the Court, Justice Gorsuch found the issue to be limited to the text of the Lanham Act and held that a showing of willfulness as a prerequisite for a profits award has never been a requirement under the Lanham Act.

There are some limitations to the Supreme Court’s opinion. For example, although the Court rejected a willfulness requirement, the majority opinion does not provide a test for when profits should be allowed. In two separate concurring opinions, Justices Alito and Sotomayor respectively noted that “willfulness is a highly important consideration in awarding profits” and that an award of profits for “innocent or good-faith infringement” may not be proper. As a result, willfulness will remain a factor in determining whether profits should be awarded, and district courts will now be left determining when profits are allowed on a case-by-case basis. Nevertheless, the Romag decision makes clear that willful infringement is not necessarily required for a profits award.

Takeaways for brand owners

In light of Romag, trademark registration and use of a proper trademark notice in association with a mark is now more important than ever as it may help show that an infringer knew of and disregarded an owner’s rights in a mark to support a profits award. Trademark owners should take action now to ensure that they are properly protecting and providing notice of their rights in public advertising and marketing. Notice of trademark rights is most commonly provided through the use of ® (for federally registered marks) and TM or SM (for unregistered marks) on packaging and in advertising and marketing materials that use a company’s marks. Federal registration of key marks is also more important as registration can provide constructive notice of an owner’s rights. Companies should, however, thoroughly vet every new potential mark and logo before applying for registration or using it in commerce. Willful or not, thanks to Romag, every claim for trademark infringement now carries the risk of an award of profits.

We previously provided information on intellectual property notices in the article found here. For help with evaluating any new mark or trademark notice, feel free to contact the Intellectual Property attorneys with McAfee & Taft.