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Battle Over Trademark Profit Awards to Play Out at Supreme Court

Jan. 9, 2020, 11:31 AM

A company that makes watch fasteners will try to persuade the U.S. Supreme Court to revive a $6.7 million jury award against Fossil Inc., arguing that negligence is enough to award profits in trademark infringement cases.

The justices’ decision in the case, brought by Romag Fasteners Inc., will impact trademark owners’ ability to secure substantial awards when not suing a direct competitor. That could influence litigation decisions, such as when to sue or whether to settle, because proving damages or intent can be difficult, trademark attorneys say.

Six circuits don’t require a showing of willfulness to award profits to noncompetitors, though they consider intent as a factor, but six circuits explicitly require it. Direct competitors can generally get profits as an estimate of damages in cases where there’s not a willfulness finding.

Trademark and intellectual property groups also are divided over whether a trademark owner can win profits from a noncompetitor that didn’t willfully infringe a mark. Four of six groups that filed friend-of-the-court briefs in Romag Fasteners Inc. v. Fossil, Inc. said the law doesn’t include a bright-line requirement of intent for a trademark infringer to relinquish profits.

But a pair of intellectual property professors and an intellectual property group said willfulness should remain the standard to demand infringers forfeit their profits. Oral argument is scheduled for Jan. 14.

Award as Deterrent

Romag sued Fossil in 2010, claiming the accessory maker switched from an approved supplier of its patented fasteners to a counterfeiter. The U.S. District Court for the District of Connecticut found Fossil and Macy’s Inc. liable for trademark and patent infringement in 2014.

The jury awarded Romag $156,000 for patent infringement and unjust enrichment, and $6.7 million from Fossil’s profits to “deter future trademark infringement.” But the trial judge reversed the profits portion because the jury didn’t find willfulness, which the U.S. Court of Appeals for the Second Circuit requires for an award of profits to non-competitors. The Federal Circuit agreed.

Federal trademark law, the Lanham Act, doesn’t explicitly require willfulness. It instead says awards are “subject to the principles of equity.”

The “equitable remedy” of disgorged profits has required intent, both as a general rule and in trademark cases, for centuries, the law professors backing Fossil said in their brief. The Lanham Act incorporated that tradition and wouldn’t have overturned it by mere implication, they argued. The Intellectual Property Owners Association, without picking a side in the case, also argued requiring willfulness was consistent with the law.

The American Bar Association, backing Romag, argued the best reading of “principles of equity” would be a reference to traditional, flexible equitable principles. The rigid rule Fossil proposes “conflicts with how trademark law usually operates” and would rob courts of discretion “with no real benefit,” the ABA said. It added that Supreme Court had allowed for profit awards without intent before 1946, when the Lanham Act was enacted, and only a few pre-Lanham Act lower court decisions cited by Fossil had applied a strict requirement.

The American Intellectual Property Association, the International Trademark Association and the International Property Law Association of Chicago agreed with the ABA that there shouldn’t be a bright-line rule requiring intent. The AIPLA said a categorical willfulness requirement is “antithetical” to the law’s “principles of equity” language and harms the goals of trademark law.

The case is Romag Fasteners, Inc. v. Fossil, Inc., U.S., No. 18-1233, oral arguments 1/14/20

To contact the reporter on this story: Kyle Jahner in Washington at kjahner@bloomberglaw.com

To contact the editors responsible for this story: Rebecca Baker at rbaker@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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