The Supreme Court unanimously ruled on April 23, 2020 that a plaintiff does not have to show infringement is willful to obtain a defendant’s award of profits under the Lanham Act. The underlying case involved Romag, a maker of magnetic fasteners, which alleged that Fossil was infringing its trademark by selling handbags made in China that used counterfeit fasteners. While the jury rejected Romag’s accusation that Fossil acted willfully, it found that Fossil acted in callous disregard of Romag’s trademark rights and awarded it $6.7 million in profits. The award was rejected by both the district and appellate courts because the Second Circuit only allows disgorgement of profits for willful infringement. The Court vacated the judgment and remanded. There has been a split in the circuits for some time, with the First, Second, Eighth, Ninth and Tenth Circuits requiring a finding of willfulness and the Third, Fourth, Fifth, Sixth, Seventh and Eleventh Circuits holding that willful infringement is not a prerequisite to disgorgement of profits.
In reaching its decision, the Court examined other sections of the Lanham Act that require specific mental states. Examples include §1117(a), which makes willfulness a precondition to an award of profits for trademark dilution, and §1117(b) which requires treble profits or damages and an award of attorney’s fees when a defendant engages in certain actions intentionally and with specified knowledge. It rejected the argument that Congress intended to incorporate a willfulness requirement obliquely while it expressly required mens rea conditions in other sections of the Act. In the concurring opinion, Justice Alito explained that willfulness is a highly important consideration in awarding profits but not an absolute precondition.
While willful, intentional conduct will remain an important consideration in whether to award disgorgement of a defendant’s profits, this is not good news for alleged infringers and increases uncertainty at trial.