Intellectual Property Law Knowledge Center

Supreme Court Ushers in Flexible Rule for Profit Payouts in Trademark Cases

May 4th, 2020

By Bridget H. Labutta

A plaintiff in a trademark infringement suit is not required to show willful infringement by the defendant to be awarded profits.

That is the unanimous ruling from the U.S. Supreme Court, handed down in a decision on April 23, 2020. Justice Neil M. Gorsuch wrote for the court that the Lanham Act does not require a finding of willfulness in suits for false or misleading use of trademarks. The Lanham Act is the primary federal statute governing trademarks in the United States.

The ruling comes in the case of Romag Fasteners v. Fossil, which the suit summarizes thusly:

“Romag sells magnetic snap fasteners for use in leather goods. Fossil designs, markets, and distributes a wide range of fashion accessories. Years ago, the pair signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Initially, both sides seemed content with the arrangement. But in time Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasteners—and that Fossil was doing little to guard against the practice. Unable to resolve its concerns amicably, Romag sued. The company alleged that Fossil had infringed its trademark and falsely represented that its fasteners came from Romag. After trial, a jury agreed with Romag, and found that Fossil had acted “in callous disregard” of Romag’s rights. At the same time, however, the jury rejected Romag’s accusation that Fossil had acted willfully, as that term was defined by the district court.

For our purposes, the last finding is the important one. By way of relief for Fossil’s trademark violation, Romag sought (among other things) an order requiring Fossil to hand over the profits it had earned thanks to its trademark violation. But the district court refused this request. The court pointed out that controlling Second Circuit precedent requires a plaintiff seeking a profits award to prove that the defendant’s violation was willful. Not all circuits, however, agree with the Second Circuit’s rule. We took this case to resolve that dispute over the law’s demands.”

In the unanimous opinion, Gorsuch concluded that a defendant’s mental state is an 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.”

The American Bar Association filed an amicus brief in the case, urging the justices to resolve a long-standing split among federal circuit courts over when to award profits in trademark infringement cases.

The ABA’s brief said “Though it has managed to divide the circuits for years, the question presented has a clear statutory answer.” Nothing in trademark law requires proof of willful infringement in order to award a trademark infringer’s profits to a plaintiff, the brief continued.

The ruling will have important ramifications for trademark infringement cases. If you have a question about a matter of trademark law, please contact me at 888.291.5676.

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