By: Alice Choi

On January 14, 2020, the Supreme Court heard oral arguments for Romag v. Fossil to decide whether a trademark owner is entitled to receive the profits of an infringing business rather than a normal damages award. Specifically, the court must decide whether said trademark infringer must act willfully in order for profits to be available as monetary relief.[1] Around the country, circuit courts are split on the issue. Six circuit courts require a showing of willful infringement while another six do not, although those courts do factor willfulness into the determination.[2] Oftentimes the only monetary relief available for plaintiffs is profits; thus, this case is an important one for trademark law.[3]

 

 

Background of the Case

In 2002, Romag and Fossil entered into an agreement where Romag would provide fasteners for Fossil to use in its .[4] Fossil, rather than manufacturing its own products, engages in contracts with other manufacturing companies.[5] Fossil told its manufacturing contractors to buy fasteners from Wing Yip, which was licensed to manufacture Romag fasteners.[6] However, despite Fossil’s instructions, one of its manufacturers bought fasteners from another company called Hechuang Metal Manufactory, which was manufacturing fasteners bearing Romag’s trademark without Romag’s authorization.[7] In 2010, Romag discovered that Fossil was using counterfeit fasteners; subsequently, Romag sued Fossil that same year in the District of Connecticut.[8] The jury ultimately decided that Fossil, although it did not do so willfully, infringed Romag’s trademark with “‘callous disregard.’”[9] Thus, the jury determined that Fossil must hand $6.7 million of its profits over to Romag in order to discourage any further infringement on the part of Fossil.[10]

However, the trial judge invalidated the jury’s award of profits because as determined by the Second Circuit, which has appellate jurisdiction over the District of Connecticut,[11] Fossil must act willfully in order for profits to be available as a monetary remedy, which the jury did not find.[12] Consequently, Romag appealed to the Federal Circuit, which agreed with the trial judge’s decision.[13] Romag then appealed to the Supreme Court, which sent the case back to the Federal Circuit, asking it to reconsider its decision in light of a recent Supreme Court decision.[14] The Federal Circuit upheld its decision to invalidate the jury’s awards of profits, stating that the recent decision was not relevant to this specific matter.[15] Thus, Romag appealed to the Supreme Court again, which agreed to hear the case on June 28, 2019.[16]

Summarizing the Oral Arguments

During the oral arguments, a main discussion topic was the meaning of the words in the Lanham Act.[17] The Latham Act provides for protection against trademark infringement. Specifically, 15 U.S.C. § 1117 of the Latham Act[18] lays out the different damages available for trademark owners.[19] The specific language of the Act at issue in this case is that the availability of profits as a monetary remedy is “subject to the principles of equity.”[20] Romag argued that Congress did not intend for willfulness to be a requirement by pointing out that while §1117 explicitly states that, in order to recover profits, willfulness is required in cases of dilution, §1117 does not explicitly state that willfulness is required to recover profits in trademark infringement cases. Thus, Romag argues that if Congress wanted willfulness to be a requirement, it would have explicitly said so in the statute.[21]

Fossil, on the other hand, argued that precedent shows that willfulness is required. It emphasized that “‘[e]very single case that’s given profit awards in two centuries has required willfulness.’” Furthermore, Fossil argued that even if this were not entirely true, the case law still shows that the infringer must, at least, be subjectively aware that they’re infringing a trademark and Fossil was only found to be negligent.[22]

Why is this Case Important?

The Latham Act provides a list of monetary remedies that a trademark owner can pursue[23]: (1) actual damages, (2) profits, (3) attorney’s fees, and (4) statutory remedies for counterfeiting.[24] Despite the various options provided in the Act, oftentimes, the only option trademark owners have in terms of monetary relief is profit. The statutory remedies are only available for counterfeiting. Counterfeiting is when someone, knowing that the trademark is registered with the USPTO, still goes ahead and copies it. Given the amount of money that a trademark infringer would have to pay in this circumstance (treble damages)[25], it doesn’t seem likely that trademark infringers would intentionally engage in this conduct. Furthermore, §1117(a) states that “the court in exceptional cases may award reasonable attorney fees to the prevailing party.”[26] The court takes the word “exceptional” very seriously as recovery of attorney’s fees are rarely granted. Finally, it’s difficult for trademark owners to recover actual damages since the trademark owner has to show that they suffered a direct injury as a result of the trademark infringement.[27] This is easier said than done, especially since oftentimes the harm is not really tangible or clear.[28]

By process of elimination, the only viable option for trademark owners is to recover profits from the infringer. If the Supreme Court decides that willfulness is a requirement, it might discourage trademark owners from suing trademark infringers due to the costs of litigation.[29] Yes, the owner can get an injunction to stop the infringer from using the mark at issue, but that only addresses the future. It doesn’t address the harm that the trademark owner has already suffered.[30] And if they can’t recover any monetary damages, along with the expensive cost of litigation, it might not be worth the fight. However, Fossil is concerned if the Supreme Court determines that willfulness is not a requirement, there is a high risk that trademark infringers will have to hand over substantially more money for profits than they would for actual damages, leading to a large windfall in favor of trademark owners.[31] Regardless of how the case plays out, this decision is a momentous one so make sure to keep an eye out for the Supreme Court’s decision.

[1] Bill Donohue, Justices Unsure What’s Needed for Trademark Profits, Law360 (Jan. 14, 2020, 7:35 PM), https://www.law360.com/articles/1234339/justices-unsure-what-s-needed-for-trademark-profits.

[2] Kyle Jahner, Battle Over Trademark Profit Awards to Play Out at Supreme Court, Bloomberg Law (Jan. 9, 2020, 6:31 AM), https://news.bloomberglaw.com/ip-law/battle-over-trademark-profit-awards-to-play-out-at-supreme-court.

[3] Bill Donohue, 3 Trademark Cases to Watch in 2020, Law360 (Jan. 1, 2020, 12:04 PM), https://www.law360.com/articles/1228380/3-trademark-cases-to-watch-in-2020.

[4] Romag Fasteners v. Fossil, 29 F. Supp. 3d 85, 92 (D. Conn. 2014).

[5] Id.

[6] Id. at 91-92.

[7] Id. at 92-93.

[8] Romag Fasteners, Inc. v. Fossil, Inc., Oyez, https://www.oyez.org/cases/2019/18-1233 (last visited Feb. 16, 2020); Ira S. Sacks & Evelina Gentry, Supreme Court Will Decide When Trademark Infringers May Be Ordered to Forfeit Profits, Akerman (July 3, 2019), https://www.akerman.com/en/perspectives/ip-supreme-court-will-decide-when-trademark-infringers-may-be-ordered-to-forfeit-profits.html.

[9] R. David Donoghue, Romag Fasteners v. Fossil, American Bar Association (Feb. 25, 2020), https://www.americanbar.org/groups/public_education/publications/preview_home/volume/47/issue-4/article-4/; Jacqueline Lesser, Who is Holding the Bag: How Will the Supreme Court Resolve the Circuit Split on Recovery of Profits in Trademark Cases?, JD Supra (Jan. 2, 2020), https://www.jdsupra.com/legalnews/who-is-holding-the-bag-how-will-the-16403/.

[10] Romag Fasteners, Inc. v. Fossil, Inc., Oyez, https://www.oyez.org/cases/2019/18-1233 (last visited Feb. 16, 2020).

[11] United States Court of Appeals for the Second Circuit, Ballotpedia, https://ballotpedia.org/United_States_Court_of_Appeals_for_the_Second_Circuit (last visited Feb. 16, 2020).

[12] Romag Fasteners, Inc. v. Fossil, Inc., Oyez, https://www.oyez.org/cases/2019/18-1233 (last visited Feb. 16, 2020).

[13] Romag Fasteners v. Fossil, ballotpedia, https://ballotpedia.org/Romag_Fasteners_v._Fossil (last visited Feb. 16, 2020).

[14] Romag Fasteners, Inc. v. Fossil, Inc., Cornell Law School Legal Information Institute, https://www.law.cornell.edu/supct/cert/18-1233 (last visited March 10, 2020).

[15] Id.

[16] Romag Fasteners v. Fossil, ballotpedia, https://ballotpedia.org/Romag_Fasteners_v._Fossil (last visited Feb. 16, 2020); Ken Dort & Tore DeBella, High Court TM Profit Award Standard May Be Coming, Law360 (Sept. 27, 2019, 12:46 PM), https://www.law360.com/articles/1200484/high-court-tm-profit-award-standard-may-be-coming-.

[17] Ben Clark, Trademark Profit Awards At High Court Crossroads, Law360 (Jan. 16, 2020, 9:14 AM), https://www.law360.com/articles/1232615/trademark-profit-awards-at-high-court-crossroads.

[18] Link to specific section of Latham Act: https://www.law.cornell.edu/uscode/text/15/1117

[19] Jay McDaniel, Understanding Damages in a Trademark Infringement Lawsuit, Medium (Jan. 2, 2017), https://medium.com/@mcdaniel_law/understanding-damages-in-a-trademark-infringement-lawsuit-fb3af5623077.

[20] 15 U.S.C. § 1117(a) (2018); Ben Clark, Trademark Profit Awards At High Court Crossroads, Law360 (Jan. 16, 2020, 9:14 AM), https://www.law360.com/articles/1232615/trademark-profit-awards-at-high-court-crossroads.

[21] Ben Clark, Trademark Profit Awards At High Court Crossroads, Law360 (Jan. 16, 2020, 9:14 AM), https://www.law360.com/articles/1232615/trademark-profit-awards-at-high-court-crossroads.

[22] Samuel V. Eichner, Is Willfulness a Prerequisite to Trademark Damages? SCOTUS Hears Oral Argument, Finnegan (Jan. 23, 2020), https://www.finnegan.com/en/insights/blogs/incontestable/is-willfulness-a-prerequisite-to-trademark-damages-scotus-hears-oral-argument.html.

[23] Link to specific section of Latham Act: https://www.law.cornell.edu/uscode/text/15/1117

[24] 15 U.S.C. § 1117(a) (2018).

[25] Jay McDaniel, Understanding Damages in a Trademark Infringement Lawsuit, Medium (Jan. 2, 2017), https://medium.com/@mcdaniel_law/understanding-damages-in-a-trademark-infringement-lawsuit-fb3af5623077.

[26] 15 U.S.C. § 1117(a) (2018).

[27] Bill Donohue, 3 Trademark Cases to Watch in 2020, Law360 (Jan. 1, 2020, 12:04 PM), https://www.law360.com/articles/1228380/3-trademark-cases-to-watch-in-2020; Trademark Remedies, Dunner Law (Mar. 10, 2010), http://dunnerlaw.com/trademark-remedies/ (last visited Feb. 17, 2020).

[28] Bill Donohue, 3 Trademark Cases to Watch in 2020, Law360 (Jan. 1, 2020, 12:04 PM), https://www.law360.com/articles/1228380/3-trademark-cases-to-watch-in-2020.

[29] Bill Donohue, 3 Trademark Cases to Watch in 2020, Law360 (Jan. 1, 2020, 12:04 PM), https://www.law360.com/articles/1228380/3-trademark-cases-to-watch-in-2020.

[30] Trademark Remedies, Dunner Law (Mar. 10, 2010), http://dunnerlaw.com/trademark-remedies/ (last visited Feb. 17, 2020).

[31] Bill Donohue, Fossil Urges Justices to Avoid ‘Windfall’ Trademark Fines, Law360 (Dec. 3, 2019, 12:31 PM), https://www.law360.com/articles/1224778.