Addressing whether willfulness is a prerequisite to an award of a trademark infringer’s profits, the US Court of Appeals for the Federal Circuit affirmed the district court’s decision that absent a finding of willful infringement, the plaintiff was not entitled to an award of the defendant’s profits earned from sales of infringing products. Romag Fasteners, Inc. v. Fossil, Inc., et al., Case Nos. 14-1856; -1857 (Fed. Cir., Mar. 31, 2016) (Dyk, J).
Romag sells magnetic snap fasteners under its ROMAG registered trademark. Fossil sells handbags and small leather goods that are made by its authorized manufacturers and include ROMAG fasteners through an agreement with Romag. When Romag discovered that one of Fossil’s authorized manufacturers had used counterfeit ROMAG fasteners in its products, Romag sued Fossil for trademark infringement, false designation of origin and related state law claims.
After a seven-day trial, a jury found that Fossil had not willfully infringed the ROMAG trademark, but nevertheless made an advisory award of almost $7 million of Fossil’s profits. The district court held that Romag was not entitled to an award of Fossil’s profits because the infringement was not willful. Romag appealed.
On appeal, the Federal Circuit reviewed the history of Lanham Act § 35(a) and the split among the circuits regarding whether proof of willfulness is necessary for an award of an infringer’s profits. Prior to the 1999 amendments to the Lanham Act, several courts of appeal (the Second Circuit in George Basch v. Blue Coral, Inc., along with the Third, 10th and District of Columbia Circuits) held that willfulness was required to recover an infringer’s profits, while others (the Fifth, Sixth, Seventh and 11th Circuits) held that willfulness was not a prerequisite to such an award. The 1999 amendments to the Lanham Act added language to make the monetary remedies of § 1117(a) available only for “willful” trademark dilution under § 1125(c). Since the 1999 amendments, several courts of appeal (the First, Ninth and 10th Circuits) have held that willfulness remains a requirement for an award of profits for trademark infringement under § 1117(a), while others (the Third, Fourth, Fifth and Sixth Circuits) have found that the amendments show that Congress intended to remove any willfulness requirement for an award of profits for trademarkinfringement.
In light of the 1999 amendments, Romag argued that willfulness was not a requirement in the Second Circuit for an award of Fossil’s profits. The Federal Circuit was not persuaded, reasoning that nothing in the 1999 amendments upset the Second Circuit’s 1992 Basch decision. The Federal Circuit found that neither the plain text nor the legislative history of the amendments demonstrated that Congress intended to change the willfulness requirement for an award of damages under § 1117(a), let alone address the split among the circuits on this issue. The Federal Circuit found further support in the Second Circuit’s 2014 decision in Merck Eprova AG v. Gnosis S.p.A. (IP Update, Vol. 17, No. 8), which restated the Second Circuit’s rule that willfulness is a prerequisite for awarding profits.
Practice Note: The split among the circuits concerning the willfulness requirement persists. Plaintiffs in trademark cases must be aware of these differences when choosing where to file in order to maximize their potential recovery, and defendants must be aware of these differences when considering case strategy, including whether to attempt to transfer venue and the potential for settlement. All litigants should bear in mind that even in circuits where willfulness is not a requirement for an award of an infringer’s profits, willfulness remains an important factor that courts will consider in making such an award.