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.