Supreme Court rules on willfulness requirement to obtain infringer’s profits

BVWireIssue #212-2
May 13, 2020

intellectual property, economic damages & lost profits
patent infringement

In a trademark infringement case that turned on whether the plaintiff had to show willful infringement by the defendant to obtain the infringer’s profits, a unanimous U.S. Supreme Court recently answered no. The case went to the Supreme Court because a number of U.S. Courts of Appeals had been split on whether willfulness was a precondition under the applicable section of the Lanham Act.

The plaintiff was Romag Fasteners, which sells patented snap fasteners under a registered trademark. The defendant was Fossil Inc., which designs, markets, and distributes fashion accessories. It does not manufacture products but has contracts with overseas factories, including in China. Fossil and Romag had an agreement that Fossil would use Romag’s fasteners in its products. Later Romag discovered that certain Fossil products (handbags) made in factories in China used counterfeit snaps.

Romag sued Fossil, alleging patent and trademark infringement and asking for injunctive relief and monetary damages, including a court order to hand over profits Fossil had made by infringing Romag’s trademark. The district court rejected the request, noting Romag did not prove the infringement was willful, and, in “this” circuit (2nd Circuit), “a finding of willfulness remains a requirement for an award of defendants’ profits.” The Federal Circuit Court of Appeals affirmed. At the same time, some other circuits did not agree with the 2nd Circuit’s willfulness rule.

Romag asked the U.S. Supreme Court for review. This was a statutory-interpretation case. The Lanham Act prohibits unfair competition, fraud, and the “deceptive and misleading use of [trade] marks.” Section 35 of the Act specifies remedies for certain trademark violations, including the plaintiff’s right to the defendant’s profits (besides actual damages and attorney’s fees).

The Supreme Court said the statutory language was clear. It required a showing of willfulness for a profits award for a section 1125(c) violation. But the statute “has never required a showing of willfulness for a violation of section 1125(a).” Romag proved a violation of section 1125(a), “a provision establishing a cause of action for the false or misleading use of trademarks,” the high court noted.

The Supreme Court emphasized that, “in cases like that, the statutory language has never required a showing of willfulness to win a defendant’s profits.” The court went on to say that reading into a statute words that aren’t there is something the court was careful to avoid, particularly “when Congress has (as here) included the term in question elsewhere in the very same statutory provision.” In other words, the absence of the term meant something.

The court was not receptive to policy arguments from either side and amici. For example, Fossil argued that a showing of willfulness should be required, if only to serve as a deterrent to “baseless” trademark suits. Romag argued that its position, against requiring willfulness, would promote greater respect for trademarks in the “modern global economy.” The court was not the venue for reconciling competing policy goals, Justice Neil Gorsuch wrote. The court’s role was limited “to read and apply the law [] policymakers have ordained.” The task in this case was clear, the court said.

The Supreme Court’s opinion can be found here.

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