Justices Loosen Rules for Profit Recovery in Trademark Cases

WASHINGTON (CN) — The Supreme Court on Thursday ruled a trademark holder does not need to prove willfulness in order to receive a profits award in an infringement suit.

Romag, a Connecticut-based company that produces and sells magnetic snaps used on wallets and handbags, sued fashion designer Fossil after finding some of the company’s products were using counterfeit Romag products. 

A jury sided with Romag and awarded the company more than $6.7 million in profits, but a federal judge ruled after a two-day bench trial Romag was not entitled to the money because it had not shown Fossil willfully infringed on the trademark. 

The Federal Circuit initially upheld the decision, but the Supreme Court sent the case back after deciding another dispute that raised similar questions. The Federal Circuit sent the case back to the federal judge, who reinstated the jury’s verdict. The Federal Circuit upheld that decision in February 2019.

On Thursday, the nation’s highest court vacated the Federal Circuit and ruled unanimously that plaintiffs in a trademark case do not have to prove that infringement was intentional to win an award of lost profits from the infringing company.

Justice Neil Gorsuch penned the court’s opinion and rejected Fossil’s argument that “stouter restraints on prof­its awards are needed to deter ‘baseless’ trademark suits.”

“We do not doubt that a trademark defendant’s mental state is a highly important consideration in deter­mining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances,” Gorsuch wrote.

The court instead sided with Romag’s position that a looser reading of the law promotes greater respect for trademarks in the modern economy.

“The place for reconciling competing and incom­mensurable policy goals like these is before policymakers. This Court’s limited role is to read and apply the law those policymakers have ordained, and here our task is clear,” the ruling states.

Justice Samuel Alito wrote a single-paragraph concurrence and was joined by Justices Stephen Breyer and Elena Kagan.

“The relevant authorities, particularly pre-Lanham Act caselaw, show that willfulness is a highly important considera­tion in awarding profits under §1117(a), but not an absolute precondition,” Alito wrote. “I would so hold and concur on that ground.”

Justice Sonia Sotomayor also concurred separately Thursday, saying courts have defined willfulness to include “a range of culpable mental states—including the equivalent of recklessness, but ex­cluding ‘good faith’ or negligence.”

“A district court’s award of profits for innocent or good-faith trademark infringement would not be consonant with the ‘principles of equity’ referenced in §1117(a) and reflected in the cases the majority cites,” Sotomayor wrote. “Because the majority is agnostic about awarding profits for both ‘willful’ and innocent infringement as those terms have been understood, I concur in the judgment only.”

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