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SCOTUS to Address Whether Lanham Act Requires Willful Infringement for Profit Disgorgement
Section 35 of the Lanham Act, 15 U.S.C. §1117(a), provides a remedy in false advertising, trademark infringement and dilution cases allowing for a plaintiff's recovery of illicit profits earned by a defendant that are attributable to its wrongful conduct. For more than two decades, Lanham Act plaintiffs in the Second Circuit have been required to make a showing that the defendant engaged in willful misconduct as a prerequisite to a disgorgement award. While this approach is consistent with that of the First, Eighth, Ninth, Tenth, and District of Columbia Circuits, no such requirement exists in the Third, Fourth, Fifth, Seventh, or Eleventh Circuits, which allow disgorgement as a remedy without requiring a threshold showing of willfulness. Rather, the defendant's intent is merely one factor in an analysis under "principles of equity" in those circuits. See, 15 U.S.C. §1117(a).
The U.S. Supreme Court recently agreed to resolve this circuit split, granting certiorari in Romag Fasteners v. Fossil. In the underlying action, the U.S. Court of Appeals for the Federal Circuit applied the Second Circuit's willfulness requirement to deny the plaintiff any opportunity to recover the defendants' profits on account of the plaintiff's failure to show that the defendants' infringement of magnetic snap fasteners for handbags and other leather goods was willful. See, Petition for Writ of Certiorari, Romag Fasteners v. Fossil, U.S. March 22, 2019, cert. granted, June 28, 2019 (No. 18-1233). The Supreme Court's long-anticipated resolution of this question that has divided the circuit courts of appeal has the potential to alter significantly false advertising and trademark litigation practice.
Lanham Act's Willfulness Language
Though some courts have read a willfulness requirement into the Lanham Act for several decades, the issue came to the front in 1999 when Congress amended §35 of the Lanham Act to read:
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 principles of equity, to recover (1) defendant's profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.
The 1999 amendment added the word "willful" in reference to a violation under §43(c) of the Lanham Act, which applies to the dilution of famous marks. At the same time, Congress did not insert "willful" into §43(a), which governs false advertising, trademark and trade dress infringement claims. The legislative history of the 1999 amendment is silent on the issue of whether Congress intended to change the standard for recovering Lanham Act defendants' ill-gotten profits. In the two decades since this amendment — and even before then — courts have wrestled with whether a plaintiff must prove a defendant's conduct was willful in order to recover its profits as damages.
The Romag Facts
Romag Fasteners is a Connecticut-based family business manufacturing patented magnetic snap fasteners. Fossil designs, markets and distributes fashion accessories, but uses foreign manufacturers to make its products. In 2010, Romag discovered Fossil products using counterfeit snaps bearing the Romag mark, and sued Fossil and its distributors in the District of Connecticut for patent and trademark infringement. After a seven-day trial, a jury awarded Romag nearly $6.8 million in profits, as well as approximately $66,000 in royalties.
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