Legal Update: Supreme Court Rules Willfulness Not Required for Disgorgement of Profits From Trademark InfringersApril 2020
The Supreme Court overturned Second Circuit precedent today finding that a showing of willfulness is not required to obtain a trademark infringer’s profits under Section 1125(a) of the Lanham Act.
Up until now, several jurisdictions, including the Ninth Circuit, have required a finding of willfulness to award an infringer’s profits as damages in a trademark infringement action. In the case at issue, the Second Circuit ruled that Romag Fasteners, Inc. (“Romag”) was not entitled to an award of Fossil, Inc.’s (“Fossil”) profits from the sale of products manufactured with counterfeit Romag fasteners, despite the jury finding that Fossil had acted callously but not willfully.
15 U.S.C. section 1117(a) provides that a trademark owner who proves infringement is entitled to (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action,” subject to the principles of equity, but, by its language only explicitly requires an additional showing of a “willful violation” for violations of section 1125(c) for trademark dilution. In the Romag case, the Second Circuit court had ruled that a finding of willful infringement was similarly required in order to award profits for suits under section 1125(a) for trademark infringement basing that decision on the precedent of historical equity courts, which required willfulness in order to award defendant’s profits.
In its decision today, the Supreme Court disagreed, stating that a finding of willfulness was not an “absolute precondition” but reiterating that an examination of the intentionality of the conduct should still factor heavily into whether the court will include defendant’s profits in an award. The Court found it persuasive that the language of the Lanham Act (and indeed the very same section of that Act) specifically requires a showing of willfulness in certain cases (dilution) and conspicuously does not include that requirement for others (infringement; cyberpiracy).
From a practical standpoint, brand owners should be encouraged by this ruling as reinforcing the value of their brands. However, they will likely still be required to demonstrate some element of knowledge, intent, or recklessness as well as show that the balance of equities are in their favor in order to obtain an award of defendant’s profits. Of course, damages sustained by plaintiff (and statutory damages in anti-counterfeiting and cyber-piracy cases) are unaffected by this ruling and also remain an available measure of relief.