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At Long Last, Supreme Court Resolves Circuit Split Over Lanham Act Profits

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By Mary Hallerman

The Supreme Court unanimously held that willfulness is not prerequisite to an award of a defendant’s profits under the Lanham Act. The decision in Romag Fasteners, Inc. v. Fossil Group resolved a longstanding circuit split on this issue, but given the swift manner the Supreme Court dealt with the issue, one wonders why courts were even split in the first place.

The Lanham Act provides that a prevailing plaintiff is entitled to recover a defendant’s profits “subject to the principles of equity.” See 15 U.S.C. § 1117(a). Certain circuits—the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh—considered willfulness as one of several factors in determining whether to award defendant’s profits. But other circuits—the Second, Eighth, Ninth, Tenth, D.C., and Federal—held that a plaintiff must establish willfulness in order receive such relief. (The First Circuit held that willfulness must be shown where the parties did not compete.)

This case originated from the Federal Circuit by way of the Second Circuit. Romag, seller of magnetic fasteners, had agreed to allow Fossil, maker of handbags and other fashion products, to use the fasteners in Fossil’s products. Romag later discovered that Fossil had used counterfeit  fasteners in its products and sued Fossil for trademark infringement. Romag sought an award of Fossil’s profits. Following Second Circuit precedent, the district court held that Romag was not entitled to such a recovery because the jury had found that Fossil had not acted willfully. The Federal Circuit, applying Second Circuit law, affirmed the district court’s decision.

The Supreme Court reversed, and basic principles of statutory interpretation dictated the result. Relying on the plain language of the statutory provision and other portions of the Lanham Act, the Supreme Court held that Section 1117(a) does not require willfulness for a profit award. “Willfulness” does not appear in the text of Section 1117(a), while it appears in other parts of the statute. For example, 15 U.S.C. § 1125(c) requires that a plaintiff who prevails on a trademark dilution claim prove willfulness in order to recover damages or profits. Elsewhere, the Lanham Act specifies the level of intent necessary to prove a claim (for example, “bad faith intent to profit” for cybersquatting claims under 15 U.S.C. § 1125(d)(1)(A)(i)), but no similar language appears in Section 1117(a).

While willfulness is not a precondition to recovering profits under Section 1117(a), the Supreme Court agreed that it remained a “highly important consideration.” Indeed, Justice Sotomayor wrote a concurring opinion to emphasize that awarding an innocent infringer’s profits to a prevailing plaintiff would not be equitable and “would not be consonant with” the statute.

The impact of this decision will be felt most heavily in those circuits now finding themselves on the wrong side of the circuit split (the Second, Eighth, Ninth, Tenth, D.C., Federal and, to a lesser extent, First Circuits). While Lanham Act plaintiffs in these circuits will now have an easier time opening the door to a profits award, they will still need to show that the defendant’s intent and other factors weigh in favor of that relief. The decision likely will also have implications beyond the availability of trademark infringement remedies in these circuits, as Section 1117(a) also applies to false advertising cases brought under Section 1125(a).