Willfulness Not Required o Recover Profits from Trademark Infringement

Tuesday, January 14, 2020

In this case, the Supreme Court made it clear that Willfulness is not a required element in order to recover profits from a Trademark Infringement case. This one is kind of a no brainer - I am surprised that it took the SC to get involved to clear this up. Basically the bulk of the SC language is a smack down on other courts reading language into the statute that did not exist to begin with. Really a case about statute interpretation as it applies to Trademarks.

TAGS:Trademark, Wilfullness, Principles of Equity, Trademark Dilution, Principle,

Key Ideas From Case

Plaintiff Not Required to Show Willfulness

A plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiffs trademark as a precondition to a profits award. The Lanham Act provision governing remedies for trademark violations, §1117(a), makes a showing of willfulness a precondition to a profits award in a suit under §1125(c) for trademark dilution, but §1125(a) has never required such a showing. Reading words into a statute should be avoided, especially when they are included elsewhere in the very same statute. That absence seems all the more telling here, where the Act speaks often, expressly, and with considerable care about mental states.

Supreme Court Rejects theory Requiring Willfulness To Recover Profits During Trademark Infringement

Pointing to §1117(a)s language indicating that a violation under§1125(a) can trigger an award of the defendants profits subject to theprinciples of equity, Fossil argues that equity courts historically required a showing of willfulness before authorizing a profits remedy in trademark disputes. But this suggestion relies on the curious assumption that Congress intended to incorporate a willfulness requirement here obliquely while it prescribed mens rea conditions expressly else where throughout the Act. Nor is it likely that Congress meant to direct principles of equity-a term more naturally suggesting fundamental rules that apply more systematically across claims and practiceareas-to a narrow rule about a profits remedy within trademark law.Even crediting Fossils assumption, all that can be said with certaintyis that Pre-Lanham Act case law supports the ordinary principle that a defendants mental state is relevant to assigning an appropriate remedy. The place for reconciling the competing and incommensurablepolicy goals advanced by the parties is before policymakers.

Many Remedies Available For Trademark Infringement

When it comes to remedies for trademark infringement,the Lanham Act authorizes many. A district court may award a winning plaintiff injunctive relief, damages, or thedefendants ill-gotten profits.

State of Mind Key to Damages for Trademark Infringement

Without question, a defendants state of mind may have a bearing on what relief a plaintiff should receive. An innocent trademark violator often stands in very different shoes than an intentional one.But some circuits have gone further. These courts hold a plaintiff can win a profits remedy, in particular, only aftershowing the defendant willfully infringed its trademark. The question before us is whether that categorical rule canbe reconciled with the statutes plain language.

The question comes to us in a case involving handbagfasteners. Romag sells magnetic snap fasteners for use inleather goods. Fossil designs, markets, and distributes awide range of fashion accessories. Years ago, the pairsigned an agreement allowing Fossil to use Romags fasteners in Fossils handbags and other products. Initially, bothsides seemed content with the arrangement. But in time Romag discovered that the factories Fossil hired in China to make its products were using counterfeit Romag fasten-ers-and that Fossil was doing little to guard against the practice. Unable to resolve its concerns amicably, Romag sued. The company alleged that Fossil had infringed its trademark and falsely represented that its fasteners camefrom Romag. After trial, a jury agreed with Romag, and found that Fossil had acted in callous disregard of Romags rights. At the same time, however, the jury rejectedRomags accusation that Fossil had acted willfully, as that term was defined by the district court.

Willfulness Discussed

Where does Fossils proposed willfulness rule come from? The relevant section of the Lanham Act governing remediesfor trademark violations, §35, 60 Stat. 439-440, as amended, 15 U. S. C. §1117(a), says this:

When a violation of any right of the registrant of amark registered in the Patent and Trademark Office, aviolation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shallhave been established . . . , the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114of this title, and subject to the principles of equity, to recover (1) defendants profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.

Immediately, this language spells trouble for Fossil and the circuit precedent on which it relies. The statute does make a showing of willfulness a precondition to a profits award when the plaintiff proceeds under §1125(c). That section, added to the Lanham Act some years after its initial adoption, creates a cause of action for trademark dilution-conduct that lessens the association consumers have with a trademark. But Romag alleged and proved aviolation of §1125(a), a provision establishing a cause of action for the false or misleading use of trademarks. And in cases like that, the statutory language has never required ashowing of willfulness to win a defendants profits. Yes, the law tells us that a profits award is subject to limitations found in §§1111 and 1114. But no one suggests those cross-referenced sections contain the rule Fossil seeks. Nor does this Court usually read into statutes words that arent there. Its a temptation we are doubly careful to avoid when Congress has (as here) included the term in question elsewhere in the very same statutory provision.

Mental State Requirements

The Lanham Act speaks often and expressly about mental states. Section 1117(b) requirescourts to treble profits or damages and award attorneys fees when a defendant engages in certain acts intentionally and with specified knowledge. Section 1117(c) increases the cap on statutory damages from $200,000 to $2,000,000 for certain willful violations. Section 1118 permits courts to order the infringing items be destroyed if a plaintiff provesany violation of §1125(a) or a willful violation of §1125(c). Section 1114 makes certain innocent infringers subject onlyto injunctions. Elsewhere, the statute specifies certain mens rea standards needed to establish liability, before even getting to the question of remedies. See, e.g.,§§1125(d)(1)(A)(i), (B)(i) (prohibiting certain conduct only ifundertaken with bad faith intent and listing nine factorsrelevant to ascertaining bad faith intent). Without doubt, the Lanham Act exhibits considerable care with mens rea standards. The absence of any such standard in the provision before us, thus, seems all the more telling.

Mental State is Important BUT DOES NOT Prohibit Recovery

At the end of it all, the most we can say with certainty isthis. Mens rea figured as an important consideration inawarding profits in pre-Lanham Act cases. This reflects the ordinary, transsubstantive principle that a defendants mental state is relevant to assigning an appropriate remedy. That principle arises not only in equity, but acrossmany legal contexts. See, e.g., Smith v. Wade, 461 U. S. 30, 38-51 (1983) (42 U. S. C. §1983); Morissette v. United States, 342 U. S. 246, 250-263 (1952) (criminal law); Wooden-Ware Co. v. United States, 106 U. S. 432, 434-435 (1882) (common law trespass). Its a principle reflected inthe Lanham Acts text, too, which permits greater statutory damages for certain willful violations than for otherviolations. 15 U. S. C. §1117(c). And it is a principle longreflected in equity practice where district courts have often considered a defendants mental state, among other factors,when exercising their discretion in choosing a fitting remedy. See, e.g., L. P. Larson, Jr., Co. v. Wm. Wrigley, Jr., Co., 277 U. S. 97, 99-100 (1928); Lander v. Lujan, 888 F. 2d 153, 155-156 (CADC 1989); United States v. Klimek, 952 F. Supp. 1100, 1117 (ED Pa. 1997). Given these traditional principles, we do not doubt that a trademark defendantsmental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances.