Impending Supreme Court Decision May Affect Trademark Infringement Damages
Successful litigants in trademark infringement cases may recover as damages, inter alia: (i) the infringer’s profits; and (ii) any damages sustained by the plaintiff. It can be difficult, however, to prove actual damages arising from trademark infringement. For this reason, the plaintiff often seeks to recover the infringer’s profits.
A case pending before the U.S. Supreme Court may affect a plaintiff’s ability to recover the infringer’s profits. Romag Fasteners, Inc. v. Fossil, Inc. (D. Conn. 2014) involved the use of magnetic snap fasteners on handbags made in China for the defendant. The defendant had contracted to use plaintiff’s magnetic snaps in its products, but plaintiff subsequently discovered that defendant was using unlicensed magnetic snaps bearing plaintiff’s trademark in some products. After a trial on the merits, the jury found the defendant liable for trademark infringement and awarded the infringer’s profits of more than $6.7 million. The District Court, however, subsequently held that plaintiff was not entitled to recover the infringer’s profits as a matter of law because the jury did not find that defendant’s infringement was willful. The jury merely found that defendant acted “with callous disregard” to plaintiff’s rights. On appeal, the Federal Circuit affirmed.
The U.S. Supreme Court granted certiorari inasmuch as there is a split between the various Federal circuit courts. Some, including the Second Circuit, require a finding that the infringement was willful for an award of the infringer’s profits, while others do not. The specific question presented to the Supreme Court is whether willful infringement is a prerequisite for an award of an infringer’s profits for a violation of 15 U.S.C. 1125(a). A decision is expected in the 1st Quarter of 2020.
As a preliminary matter, there is nothing in the plain language of 15 U.S.C. 1117(a) to indicate that willful infringement is necessary in order to recover defendant’s profits:
“When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.”
In fact, the lone reference to “willful” in the statute relates to trademark dilution under 15 U.S.C. 1125(c). Nevertheless, case law has imposed the requirement of willful infringement in some circuits.
From a policy standpoint, one factor in favor of requiring a finding of willful infringement is to prevent innocent infringers from being hit with large damage awards. On the other hand, is there any reason to disgorge profits in cases of willful infringement but not, for example, in cases of reckless infringement? From a brand protection standpoint, it matters little whether the infringer acted willfully or merely recklessly or “with callous disregard” to plaintiff’s rights.
We will continue to monitor this case and will report on further developments. In the meantime, litigants should take care to plead, endeavor to prove and ask the jury to find willful infringement in any trademark infringement action to the extent warranted.
