Romag Fasteners: IPO Departs From Other Amici in Urging SCOTUS to Require Willfulness to Award Trademark Profits

By IPWatchdog
September 23, 2019

“The plain language and legislative history of § 35(a) of the Lanham Act, codified at 15 U.S.C. § 1117(a), makes clear that willfulness is a prerequisite to recover profits for a violation of § 1125(a).” – Intellectual Property Owners Association amicus brief in Romag Fasteners

https://depositphotos.com/8432961/stock-photo-white-court-house-and-big.htmlThe Intellectual Property Owners Association (IPO) and four other associations have filed amicus briefs with the Supreme Court in the case of Romag Fasteners v. Fossil, Inc., Fossil Stores, I. Inc., Macy’s Inc, and Macy’s Retail Holdings, Inc. The case will examine whether lower courts have discretion under the Lanham Act with respect to how to award damages in trademark infringement cases, or whether courts are required to establish that the infringement was willful before awarding profits. While the American Bar Association (ABA), the International Trademark Association (INTA), the American Intellectual Property Law Association (AIPLA) and the Intellectual Property Law Association of Chicago (IPLAC) support adopting a more flexible approach that would not make willfulness a prerequisite to recover profits, IPO argues that the plain language of the statute necessitates such a requirement.

Romag Fasteners

In Romag Fasteners, an April 2014 jury verdict entered in the District of Connecticut found that Fossil had infringed Romag Fastener’s trademark and patent and falsely represented the source of its products as coming from Romag. While none of Fossil’s violations were found to be willful, the jury found that Fossil acted in “callous disregard” with respect to Romag’s trademark rights, leading to a damages award of $6.7 million in profits. However, a bench trial following the verdict led the district court to rescind the profits award as Romag didn’t show that Fossil’s infringement was willful. On appeal, the Federal Circuit affirmed based on the Second Circuit’s requirement of a showing of willfulness for awarding profits, although the case was remanded for a damages amount consistent with the Supreme Court’s holding in SCA Hygiene Products Aktiebolag v. First Quality Baby Products (2017). Romag again appealed to the Federal Circuit after an amended final judgment was entered by the district court in October 2018. The Federal Circuit found “no reason to relitigate” the Lanham Act profits issue, after which Romag filed its petition to the Supreme Court. Romag is asking the High Court to consider the following question:

Whether, under section 35 of the Lanham Act, 15 U.S.C. § 1117(a), willful infringement is a prerequisite for an award of an infringer’s profits for a violation of section 43(a), id. § 1125(a).

Willfulness is not required for a consideration of awarding trademark profits in six circuits: the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits. By contrast, six other circuits require a willfulness finding to award profits, including the First, Second, Eighth, Ninth, Tenth and D.C. Circuits.

IPO: Willfulness Requirement is Consistent with Statute and Principles of Equity

In its brief supporting neither party, IPO says:

The plain language and legislative history of § 35(a) of the Lanham Act, codified at 15 U.S.C. § 1117(a), makes clear that willfulness is a prerequisite to recover profits for a violation of § 1125(a). This is true even in light of the 1999 amendments to § 1117(a). Furthermore, a willfulness requirement is necessary to balance the equities in disgorgement of a defendant’s profits and to prevent a potential windfall judgment to the plaintiff. For these reasons, IPO respectfully requests that this Court resolve the conflict among the federal courts of appeals and find that willfulness is a prerequisite for recovering a defendant’s profits for a violation of § 1125(a).
The brief disagrees with the Third Circuit’s reasoning in Banjo Buddies, Inc. v. Renosky, 399 F.3d 168, 174–75 (3d Cir. 2005), which said that the addition of the word “willful” in 1999 to Section 117(a) “indicates that Congress intended to condition monetary awards for § 43(c) violations, but not § 43(a) violations, on a showing of willfulness.” The Third Circuit continued:
We presume Congress was aware that most courts had consistently required a showing of willfulness prior to disgorgement of an infringer’s profits in Lanham Act cases, despite the absence of the word “willful” in the statutory text prior to 1999…. By adding this word to the statute in 1999, but limiting it to § 43(c) violations, Congress effectively superseded the willfulness requirement as applied to § 43(a).
According to IPO’s brief, this reasoning is wrong. The brief explains:
Although statutory construction principles may sometimes require that the expression of one term implies the exclusion of others, such a canon assumes that the language was written and considered at the same time….. Here, however, because the dilution language was added decades after the original language, this rule of statutory construction should not be applied.

Congress’ intent was merely to  “’correct the mistaken omissions’ from the Lanham Act when the Dilution Act was passed,” the brief adds.

IPO also argues that a willfulness requirement is consistent with the principles of equity and will discourage “vexatious trademark litigation.”

“By bringing a trademark infringement suit threatening a defendant with having to turn over all of its profits, a less than scrupulous trademark owner could extract settlement payments well in excess of any harm actually suffered,” warns the brief.

ABA and Other Amici: Trademark Law Favors Flexibility

The ABA’s  amicus brief supports the petitioner, and argues that “nothing in 15 U.S.C. § 1117(a)—or anywhere else in the Lanham Act—requires proof of willful infringement to award a trademark infringer’s profits. That judicially created prerequisite conflicts with § 1117(a)’s plain language and its purpose.” The brief also explains that “absent congressional action, trademark law tends to favor flexible legal standards over bright-line rules.” It continues:

Across many substantive issues, this Court has held that the Lanham Act eschews rigid rules in favor of flexibility and discretion for courts. See, e.g., B & B Hardware, 135 S. Ct. at 1306 (issue preclusion: rejecting a “categorical” rule that would prevent decisions of the Trademark Trial and Appeal Board from having preclusive effect in court litigation, and holding instead that Board decisions “should be given preclusive effect on a caseby-case basis” (quotation omitted)); KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 121–23 (2004) (fair use: rejecting a bright-line rule that would require a defendant asserting fair use 13 under 15 U.S.C. § 1115(b)(4) to disprove consumer confusion, but holding that courts may consider the extent of likely confusion as “relevan[t]” in assessing fair use); Qualitex, 514 U.S. at 173 (functionality: holding that the Lanham Act “liberalized the law” on functionality and “left the courts free to reevaluate the preexisting legal precedent”); id. at 171 (acquired distinctiveness: explaining that the Act abolished the bright-line rule at common law prohibiting descriptive marks from ever becoming protectable marks (citing Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir. 1976) (Friendly, J.))).

“In 2017, the ABA House of Delegates adopted policy favoring interpretation of the Lanham Act in a way in which ‘proof of willfulness is not required…for a prevailing plaintiff to recover a defendant’s profits,’ but should be one of several factors that may be considered in fashioning a remedy in infringement cases,” said an ABA press release.

The briefs of INTA, AIPLA and IPLAC all support neither party and also urge taking a flexible approach to the topic. INTA argues that a more balanced approach will help to remedy the situation in which many trademark plaintiffs currently find themselves—namely, that it has become “increasingly difficult to secure adequate remedies, given the widely acknowledged difficulty of proving injury in trademark cases and increasing barriers to injunctive relief”—while at the same time avoiding “windfall awards or exaggerated risk.”

Romag Fasteners is set to be argued in the new term, but no date has yet been set for oral argument.

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Image ID: 8432961
Copyright: rukanoga 

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