Legal Update: Romag and the Damages DilemmaMay 2021
Last year, the Supreme Court issued a highly-anticipated ruling in Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), where it held that a showing of willful infringement is not an “inflexible precondition to recovery.” The Supreme Court sent the case back to the district court in Connecticut to conduct further proceedings to determine counterfeit damages. On April 29, the district court issued an order awarding the plaintiff only $90,759.36 in lost profits out of the sought minimum of over $13 million. The court rejected the jury’s advisory award of over $6.7 million of disgorgement of the defendant’s profits. The decision serves as a warning signal for trademark owners as they position their counterfeit claims for resolution.
While the Court’s reasoning is based on the balancing of the equitable factors outlined in 4 Pillar Dynasty LLC v. New York & Co., Inc., 933 F.3d 202 (2d. Cir. 2019), its decision to slash the plaintiff’s request for counterfeit damages largely stems from the plaintiff’s “chicanery.” The Court states: “Moreover, Romag engaged in chicanery in litigating this case by delaying commencement of this lawsuit to maximize its leverage over Fossil and made misrepresentations to the Court which should not be rewarded by an award that substantially exceeds its actual damages.” For instance, while Romag could have (and according to the court, should have) brought suit against the defendant in June 2010, it did so in November 2010, just a few days before Black Friday, which the court noted was an attempt to force a quick settlement, a tactic used twice before.
Furthermore, and maybe more importantly, Romag did not pursue statutory damages under the Lanham Act when seeking lost profits. The Court determined that “Romag will not be rewarded for ‘gambling’ and pursuing a more uncertain, but potentially higher, disgorgement award where a remedy at law would have adequately compensated it, particularly as it smacks of its earlier gamble in delaying commencement of its suit to get a settlement advantage.” Stated differently, damages should reflect the plaintiff’s true injury, not greed.
Sideman & Bancroft always considers the best approaches in pursuing trademark claims, including assessing prospective damages to maximize the results for our clients and the deterrent impact on counterfeiters. The Romag district court decision demonstrates how fraught the strategic decisions can be. We will continue to soberly weigh all of the factors to put our clients in the best position to avoid such stumbles.
The Court’s order is here.