Under the Lanham Act, a trademark owner can recover damages (i.e., the owners lost sales because of infringement), but also is entitled to disgorgement of the infringer’s profits from the infringement. But typically (at least in the Ninth Circuit), if damages are awarded, the plaintiff recovers damages only for lost sales (which are very hard to prove) or a reasonable royalty for the infringing use. This is because the Ninth Circuit, like six other circuits, required a finding of “willfulness” in order to recover the defendant’s actual profits from the infringement. Six other circuits did not require such a finding of willfulness to recover the defendant’s actual profits. With the decision today in Romag Fasteners, Inc. v. Fossil Group, Inc., the Supreme Court ended that debate – a trademark holder does not need to prove willfulness to recover the infringer’s profits.
The underlying dispute involved a contract allowing respondent Fossil (who makes fashion accessories) to use petitioner Romag’s magnetic snap fasteners on handbags and other products, along with the ROMAG trademark. Romag discovered that Fossil was using counterfeit magnetic snaps, and ultimately sued Fossil. The case proceeded to trial, and the jury found that Fossil acted with “callous disregard” of Romag’s marks. The jury ordered Fossil to disgorge $6.7 million in profits earned as a result of its infringement. However, the district court judge reversed that profit award after the verdict as there was no finding of actual “willfulness.”
The Supreme Court has now made clear that there is no need for a trademark plaintiff to show “willful” infringement to recover the defendant’s profits earned as a result of the infringement. As a result, trademarks will be more valuable, and infringement more expensive. If you’re thinking about launching a new brand, working with your trademark attorney beforehand will become even more important, as the potential price of infringement has now gone up.