On January 14, 2020, the Supreme Court heard oral argument in Romag Fasteners, Inc. v. Fossil Inc., et al., in which the Court is poised to resolve a circuit split on whether willfulness is a Prerequisite to award a trademark infringer's profits.
Counsel for Romag framed the issue by negating defendant's chief textual argument, i.e. that the phrase "subject to principles of equity" in 15 U.S.C. § 1117(a) does not import a willfulness requirement for disgorgement of an infringer's profits. Yet Counsel also focused on Romag's own textual argument, based on the 1999 Amendments to the Lanham Act, i.e. that Congress' decision to use "willful" to modify 1125(c) dilution claims, but not 1125(a) infringement claims, evidences Congress' intent to eschew a willfulness requirement in the latter.
To address Romag's textual argument, Fossil's counsel claimed that 1125(a) and (c) were treated differently because "the 1999 amendment did something unique. It was newfangled. It introduced a new cause of action, trademark dilution, one which had no historical analogue." This explanation was not discussed further but seems questionable in view of longstanding state dilution law claims (which might have offered a historical analogue). Also, such claims seem no less analogous to fraud claims (on which Fossil relies) than trademark infringement claims.
Justice Sotomayor questioned Romag's counsel on whether "equity" (alluding to "principles of equity" in Section 1117(a)) could ever support an award of profits for "good faith" infringement, or infringement absent "a more culpable state of mind." In reply, Romag's counsel claimed other equitable factors—(1) lack of other relief to adequately compensate the plaintiff, and (2) the notion that you cannot keep profits from unlawful conduct—could support profits awards, even absent willfulness. Romag's counsel also cited pre- and post-Lanham Act cases where courts awarded profits for innocent infringements, i.e., the Mishawaka, Oakes, and Prest-O-Lite cases.
Despite Romag's counsel's discussion of precedent for profit awards absent willfulness, counsel for Fossil insisted that "[e]very single case that's given profits awards in two centuries has required willfulness." In addressing the apparent conflict in each counsel's assertions, Justice Ginsburg noted that among the various cases cited a lack of "uniform agreement on what 'willful' means" (e.g. whether willful conduct includes recklessness). Justice Ginsberg's observation undercuts Fossil's claim to a nearly 200-year-long tradition in which a willfulness requirement for awarding profits was consistently applied. Despite these inconsistencies in the case law, counsel for Fossil maintained that the cases always required at least subjective knowledge of the ongoing infringement, and that here the trial court only found Fossil negligent.
While much argument focused on "principles of equity" and "willfulness" in Section 1117(a), Justice Breyer instead focused on a later phrase in that section: "If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case." Justice Breyer questioned both counsel on whether this phrase did not reserve enough judicial discretion to address any unfairness that might result from a willfulness requirement to award profits. Of course, counsel for Fossil agreed wholeheartedly, and counsel for Romag had difficulty explaining why this provision would not adequately address the unfair cases (if any) where a willfulness requirement would bar a recovery of profits.
Stark disagreement between counsel over the cases and what they say led to what approached an issue of credibility before the Court, leading Romag's counsel to state in reply that "I didn't go to a fancy law school, but I'm very confident in my representation of the case law." Counsel went on to illustrate how the early common law on which Fossil relies "was a mess and it wasn't that clear." This included Romag's counsel's explanation that the same common law sources that said profits awards required willfulness also said that damages awards required willfulness, and the latter is certainly not the state of the law under the Lanham Act.
Justice Ginsburg closed on a light note, stating "Ms. Blatt -- Texas is a fine law school."
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