Opinion analysis: Justices reject “willfulness” requirement for requiring trademark infringers to disgorge profits
on Apr 23, 2020 at 12:43 pm
In a term with blockbuster decisions hovering on the horizon about disclosure of presidential records, abortion, workplace discrimination on the basis of sexual orientation and protections for Dreamers, Romag Fasteners, Inc. v. Fossil, Inc. will be on any observer’s list for least earth-shattering decision of the year.
Romag Fasteners considers one of the many remedies that the federal Lanham Act establishes for the infringement of trademarks – the obligation of the infringer to disgorge the profits it made from the sale of infringing products. The question in the case was whether the Lanham Act categorically conditions that relief on a finding that the infringer acted willfully. As the argument presaged so clearly, the justices had no trouble in rejecting unanimously any absolute willfulness requirement. It took Justice Neil Gorsuch less than seven pages to explain that result.
The brevity of the opinion reflects the straightforwardness of the dispute. Romag makes fasteners, protected by patents and trademarks, which Fossil uses on its bags. Fossil’s bags are manufactured in China, at a facility that routinely used counterfeit fasteners instead of purchasing authentic fasteners from Romag’s licensed Chinese manufacturer. Ultimately, a jury concluded that Fossil acted with “callous disregard” for Romag’s trademark rights, though it did not go so far as to label Fossil’s conduct “willful.”
The textual argument is so one-sided that it is surprising that the case got to the Supreme Court in the first place. The relevant statute states that a plaintiff, “subject to the principles of equity,” can recover profits for “a violation of any right of the registrant of a [federally registered] mark …, a violation under section 1125(a) …, or a willful violation under section 1125(c).” Gorsuch blandly notes that the statute “spells trouble for Fossil,” explaining that the statute “does make a showing of willfulness a precondition to a profits award … under §1125(c),” but that has no relevance here, because “Romag … proved a violation of §1125(a), … [a]nd in cases like that, the statutory language has never required a showing of willfulness.”
Gorsuch also points out that the “Lanham Act speaks often and expressly about mental states,” quoting five other provisions that limit remedies to cases of “willful,” “intentiona[l],” “innocent” or “bad faith” conduct. All of which, he continues, makes “[t]he absence of any such standard in the provision before us … see[m] all the more telling.”
At that point, Gorsuch turns to Fossil’s central argument, which he explains as an effort to “conjure a willfulness requirement” out of the statutory reference to “principles of equity.” Gorsuch offers two reasons for rejecting that argument. First, as a matter of text, he explains that principles of equity are “transsubstantive guidance on broad and fundamental questions about matters like parties, modes of proof, defenses, and remedies.” Thus, to put it mildly, “it seems a little unlikely Congress meant ‘principles of equity’ to direct us to a narrow rule about a profits remedy within trademark law.” Second, as a matter of history, he suggests that a review of the cases on which Romag and Fossil rely reveals a wide range of “different understandings about the relationship between mens rea and profits awards in trademark cases.” In the end, Gorsuch concludes, “the most we can say with certainty is [that m]ens rea figured as an important consideration … in pre-Lanham Act cases.” That is a “far cry” from justifying the “inflexible precondition to recovery” that Fossil needs to prevail here.
These posts often end with some explanation of the likely future import of decisions that might seem insignificant at first (or even second) glance. I can’t offer such a prediction here, because Romag Fasteners, which resolves a minor circuit conflict about the Lanham Act, strikes me as a case that will go down in history as no more important than it seems today.