By: Candace R. Arrington, Phillips Nizer LLP Associate
“The question comes to us in a case involving handbag fasteners,” writes Justice Gorsuch in the introduction to the recent Supreme Court ruling in Romag Fasteners Inc. v. Fossil Inc. et al.
On April 23, 2020, the Supreme Court resolved a long-standing split in opinion among federal circuit courts of appeal as to whether a finding of willfulness in a trademark infringement case is a prerequisite to an award of profits. Simply put, the Court concluded that proof that a mark was infringed — even if the infringer’s conduct was inadvertent — is sufficient for the trademark owner to collect the profits earned from the infringing conduct.
Romag produces magnetic snap fasteners commonly found on purses and leather goods. Fossil makes a vast array of fashion accessories, ranging from handbags to watches. Years prior, Romag and Fossil entered into a licensing agreement for the use of Romag’s fasteners on Fossil handbags. Subsequently, Romag discovered third-party companies making Fossil products were using counterfeit Romag fasteners – and Fossil did nothing to prevent the use of the counterfeits. Romag sued Fossil for trademark infringement under the Lanham Act, 15 USC §1125(a) for false designation and won. Following Second Circuit precedent, the federal District Court of Connecticut refused to award Romag with Fossil’s profits because, although Fossil was held to have infringed, the court did not find that it did so willfully. Romag appealed to the United States Court of Appeals for the Federal Circuit, which affirmed the District Court’s ruling. The Supreme Court reversed the Federal Circuit, declaring that willful trademark infringement was not required for profit disgorgement.
In its decision, the Supreme Court said that it was strictly relying on the plain language of the Lanham Act. The Lanham Act speaks explicitly about the required mental states of liable actors in a number of its provisions but not in §1125(a).
Justice Gorsuch, in writing the unanimous decision, noted that he does not want to “read into statutes words that aren’t there,” reasoning that Congress did not mistakenly omit a willful requirement for a profit award under Lanham §1125(a) after repeatedly specifying such a test in other provisions of the Lanham Act.
The most popular hot take on the Romag ruling is that it will lead to a spike in lawsuits. Some commentators and law practitioners have expressed concerns that the Supreme Court did not provide a “bright line rule” as to the method by which to award damages. For now, it remains uncertain whether the decision will increase profit awards because each legal determination is still very fact dependent.
It is easy to see how the ruling could lead to an increase in fashion disputes, especially those against parties identified as counterfeiters. Hopefully, the threat of heightened damage awards will serve as deterrence to future infringements.