Willfulness Out of the Way: Will Fashion Trademark Litigation Soar?

*** The writing does not, and is not intended to, constitute legal advice by any means***

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Last February, I wrote a blogpost for Fordham Intellectual Property, Media & Entertainment Journal (By the way, feel free to browse the IPLJ blog!!!) about the Romag case, which was then pending in the Supreme Court. The Supreme Court confronted the question of whether a finding of willfulness is required for awarding profits as a remedy. Below is my IPLJ blogpost in its entirety, and I want you to take some time to read it.

Enforcing one’s intellectual property rights inevitably entails seeking monetary damages in case of a violation. If you are a global player in the fashion industry, the stakes can be higher. Depending on the ruling of a pending U.S. Supreme Court case, a trademark infringer would be able to keep nearly seven million dollars of ill-gotten gains in its pocket. See Romag Fasteners, Inc. v. Fossil, Inc., No. 18-1233 (U.S. filed Mar. 22, 2019). The Supreme Court is set to decide whether a finding of willfulness is required in awarding profits as a remedy. The ruling will hopefully resolve the circuit split on the issue. As of now, in the Second, Eighth, Ninth, Tenth, and D.C. Circuits, a showing of willfulness is a prerequisite for disgorgement. See George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1540 (2d Cir. 1992); see also ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d 958, 968 (D.C. Cir. 1990) and Bishop v. Equinox Int’l Corp., 154 F.3d 1220, 1223 (10th Cir. 1998). Romag contends that because of this circuit split, a visible possibility of differential legal treatment of similarly situated parties exists “depending on where they file suit.” Brief for Petitioner at 1, Romag Fasteners, Inc. v. Fossil, Inc., No. 18-1233 (U.S. Sep. 13, 2019).

The factual background of this case is relatively straightforward. Romag Fasteners, Inc. (“Romag”) is a seller of magnetic snap fasteners for fashion accessories. Fossil, Inc. (“Fossil”), a global fashion accessory brand, outsources its production to overseas manufacturers. In 2010, it came to Romag’s attention that some of the foreign-manufactured Fossil products used counterfeited fasteners bearing the Romag mark. Romag sued Fossil for trademark infringement, and the jury awarded Romag 6.8 million dollars in profits aside from other statutory damages because Fossil acted in callous disregard of Romag’s trademark rights. See Romag Fasteners, Inc. v. Fossil, Inc., 29 F. Supp. 3d 85, 112 (D. Conn. 2014). However, the district court judge vacated the awarding of profits on the basis that a finding of willfulness has not be shown, and the Federal Circuit affirmed the decision. See Romag Fasteners, Inc. v. Fossil, Inc., 817 F.3d 782, 784 (Fed. Cir. 2016).

To resolve the circuit split, the Supreme Court will interpret the language of Section 35 of the Lanham Act (15. U.S.C. § 1117(a)) to determine whether willful infringement is a prerequisite for an award of an infringer’s profits for a violation of Section 43(a). Romag notes in its brief that circuits that do not read into the statute the willfulness requirement are of the position that the word “willful” covers only Section 1125(c)-type violations (which singularly applies to a “famous mark”), and that, under rules of equity, a finding of willfulness serves as a factor in awarding of profits. Brief for Petitioner at 23, Romag Fasteners, Inc. v. Fossil, Inc., No. 18-1233 (U.S. Sep. 13, 2019).

During the oral argument, some of the justices, however, seemed to approach the issue more from a policy- and justice-oriented standpoint. Justice Breyer asked the Fossil attorney whether she thinks “terrible cases” might happen if the Supreme Court does not read willfulness out of the statute. See Unofficial Transcript of the Oral Argument of Romag Fasteners, Inc. v. Fossil, Inc., Oyez (last visited Feb. 7, 2020). Justice Alito also asked the attorney to cite a single case in which a requiring of willfulness was “very unjust.” Indeed, those two justices evinced a palpable worry that awarding a disgorgement remedy to an accidental infringer who did not possess a culpable mind might lead to overly harsh results. As with any other Supreme Court case, predicting an outcome is an educated guess at best. However, one thing is clear. If the Supreme Court decides to follow the Second Circuit approach, trademark owners will face a hard time enforcing the rights they have earned over time in the market.

The Supreme Court issued its much-anticipated ruling last week, pronouncing that willfulness is not a requirement for awarding profits. In the majority opinion, Justice Gorsuch took note that, in other parts of the Act, Congress expressly inserted a mens rea (a fancy term for a culpable mind) language. Its absence in Section 43(a) speaks to the congressional intent that willfulness cannot be a bar to a profits remedy. Trademark lawsuits in the fashion industry is not uncommon. In its trademark law blog, Foley Hoag LLP details ongoing prominent fashion trademark litigation of this year. The list goes on. Just a few days ago, Chrome Hearts filed a lawsuit against a fast fashion company for trademark infringement. With willfulness out of the way, will we see more fashion trademark cases being argued in court?

In theory, proving intent is extremely difficult. Direct evidence is rare unless an infringer makes a confession. Why would one do that? Then, gathering circumstantial evidence necessitates discovery, but the cost associated with it can turn out to be quite prohibitive. Practical considerations might weigh in, too. In this difficult time, cash-strapped fashion brands might not pursue litigation to save time and energy that can otherwise be channeled into more productive projects. Or they might decide to go forward if the lost profits to be collected from the judgment can cover the cost. Some fashion brands have a deep interest in protecting their valuable marks no matter what. So only time will tell what the new legal landscape will look like.