Supreme Court Makes Clear – Plaintiffs Do Not Need to Prove Willfulness Before Lost Profits Can Be Awarded for Trademark Infringement

In a 9-0 decision, the Supreme Court held that a plaintiff is not required to prove a defendant willfully infringed a trademark as a prerequisite to a court awarding lost profits damages. Romag Fasteners, Inc. v. Fossil, Inc., 590 U. S. ____ (2020).

Romag is a trademark dispute involving Fossil handbags. Romag and Fossil had entered into an agreement allowing Fossil to use Romag brand fasteners. After the initial success of the agreement, Romag discovered factories in China manufacturing the bags were using counterfeit Romag fasteners – and Fossil “was doing little to guard against the practice.” When the parties could not resolve the dispute, Romag sued Fossil for trademark infringement. The jury found that Fossil acted “in callous disregard” of Romag’s rights, but did not act willfully (as defined by the district court). Applying Second Circuit precedent, the Court denied Romag’s claim for lost profits based upon the lack of willfulness, thereby ripening the case for Supreme Court review.

In resolving a split among the circuits, the Court focused on the plain language of the Lanham Act (17 U.S.C. §1125) which uses the term willfulness for lost profits in cases of trademark dilution, but contains no such limitation for trademark infringement. The Court dismantled Fossil’s argument that the Lanham Act’s reference to “principles of equity” for trademark infringement lost profits means “willfulness,” either as a term of law or from a historical basis. In reaching its decision, the court recognized “that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate” without equating this to a requirement to prove willfulness.

The decision leaves open a question as to how “innocent” or “good-faith” infringement will be addressed in the aftermath of Rogmag. Justice Sotomayor noted in her concurrence that the weight of authority indicates that profits were “hardly, if ever, awarded for innocent infringement,” in contrast to the majority’s suggestion that courts of equity were just as likely to award profits for such “willful” infringement as they were for “innocent” infringement.