When the Supreme Court opens its new session on Oct. 7, one of the cases it will determine, Romag Fasteners, Inc. v. Fossil, Inc., et al. Case No. 2018-2417, is expected to resolve a stark difference among circuits over when a trademark owner is entitled to disgorgement of an infringer’s profits due to an infringing use of a mark.
As a quasi property right, trademarks have long held the status of a distant relation in the intellectual property family. Litigants have the right to claim disgorgement of profits for violations of copyright, patent and trade secret rights, but the availability of the same remedy to trademark litigants has been curtailed by many courts based on the equitable nature of the Lanham Act.
Section 35(a) of the Lanham Act authorizes monetary relief in the form of awards of infringers’ profits, damages and costs “[w]hen a violation of any right of the registrant of a mark [under section 1114], … , a violation under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title, shall have been established.” 15 U.S.C. § 1117(a) (emphasis added). However, such awards are “subject to the principles of equity.”
The First, Eighth, Ninth, Tenth, and District of Columbia Circuit courts have interpreted the statute’s “subject to the principles of equity” language to require that a litigant prove infringement under Section 1125(a) was willful prior to allowing disgorgement of profits. Awards of actual damages, because such damages are difficult to prove, are not subject to the willfulness requirement. By contrast, the Third, Fourth, Fifth, Seventh, and Eleventh circuits treat an infringer’s intent as merely one factor in an equitable decision to award disgorgement of profits.
The arguments center on the plain statutory language of Section 1117 and related Lanham Act provisions, which set forth circumstances under which willfulness is required to find certain violations or award relief. The absence of such language in Section 1117(a), petitioners (and amicus curiae American Bar Association) argue, demonstrates congressional intent not to condition disgorgement on a finding of willfulness. The Supreme Court’s preference for deciding questions based on statutory construction will likely make this argument appealing to the Court.
The Supreme Court’s decision will likely have a trickle-down effect in other areas. Some courts, including in the Ninth Circuit, have held that disgorgement of profits is not available at all in reverse confusion cases where the senior user of the mark is less known than the infringer’s mark, because there is no intent to exploit the goodwill of the senior user. In such cases, where actual damages are already difficult to prove, a trademark owner is left with the prospect of expensive litigation that will lead to injunctive relief at best, offering little deterrence to infringement under a reverse confusion scenario. If the willfulness requirement is removed, claimants relying on a reverse confusion theory will have an opportunity to argue that disgorgement of profits should be available in such circumstances.
On August 29, 2019, the Director of the USPTO notified the Trademark Public Advisory Committee (TPAC) of the Office’s intent to set or adjust trademark related fees and submitted a preliminary trademark fee proposal for comment. There are multiple timelines for public debate and comment on the proposed new fees, with a tentative implementation date of August 2020. While most proposed fee changes are relatively modest ($25 – $75 for new electronic filings, per class; $125 for Section 8&15 declarations, per class), many remain unchanged (such as Section 8&9 renewals). Nonetheless, the additional costs could be significant for companies with large portfolios. We will continue to keep you apprised of developments in this area including the exact date for implementation of the new fee schedule if/when the new fees are approved.
On July 23, 2019, the Federal Circuit departed from its utility patent-focused docket to deliver a precedential opinion relating to design patents in Auto. Body Parts Ass’n v. Ford Global Techns., LLC. At issue were the validity and enforceability of design patents on automotive repair and replacement parts. The case arose from a filing by the Automotive Body Parts Association (ABPA) in the Eastern District of Michigan seeking declaratory judgment of invalidity and enforceability of two design patents relating to the hood and vehicle headlamp of the Ford F-150. The ABPA moved for summary judgment, but the District Court entered judgment sua sponte in favor of Ford. The case was taken up on appeal.
I. Introduction
In two opinions issued in the past few weeks, the Federal Circuit has shaken up two requirements of the reissue statute that most practitioners don’t think about much. 35 USC 251(a) authorizes reissue of a patent “for the invention disclosed in the original patent.” 35 USC 251(c) provides that “[t]he provisions of this title relating to applications for patent shall be applicable to applications for reissue of a patent,” which includes the written description requirement of 35 USC 112(a). The “conventional” wisdom up to now has held that these requirements are more or less synonymous (and not considered arduous). Now, we aren’t so sure.
The language of the patent damages statute, 35 U.S.C. § 284, appears straightforward – “[u]pon finding for the claimant the court shall award the claimant damages adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer” (emphasis added). The common reasonable royalty calculation multiplies a royalty base by a royalty rate to yield a damages award. While the math seems simple, determination of a reasonable royalty in the context of devices that have hundreds, perhaps thousands, of components and functionalities is an endeavor ripe for chicanery. See Grain Processing Corp. v. Am. Maize–Products Co., 185 F.3d 1341, 1350 (Fed. Cir. 1999) (“To prevent the hypothetical from lapsing into pure speculation, [the] court requires sound economic proof of the nature of the market and likely outcomes with infringement factored out of the economic picture.”).
Legislative Exclusions of Software (21st Century Cures Act)