In a unanimous ruling, the Supreme Court of the United States held in Romag Fasteners v. Fossil Group, Inc.,  that a trademark holder is not required to show that the infringer acted willfully to obtain lost profits. In particular, Justice Gorsuch stated that while other provisions of the Lanham Act require a showing of willfulness as a precondition for profits, the relevant section in this case “has never required such a showing” and that “reading words into the statute should be avoided, especially when they are included elsewhere in the very same statute.”

SCOTUS
Supreme Court of the United States

The Facts of the Case

Romag is a seller of magnetic fasteners for handbags. Fossil is a handbag designer and manufacturer. Both entered into an agreement in which Romag would supply its fasteners to Fossil for its handbags. However, Romag discovered that Fossil’s manufacturer in China was using counterfeit fasteners in the manufacturing of its handbags. Romag further determined that Fossil was doing little to prevent this practice from happening. Romag and Fossil were unable to come to an agreement. Consequently, Romag brought suit against Fossil for trademark infringement and misrepresenting that the fasteners came from Romag. At the conclusion of the trial, the jury found that Fossil infringed Romag’s rights, but did not do so willfully. Based on the lack of willfulness, the judge held that Romag was not entitled to collect damages for lost profits under the Second Circuit’s precedent. Romag appealed.

Section 35 of the Lanham Act (15 U.S.C. § 1117)

During the appeal, the Court analyzed 15 U.S.C. §1117(a) which states that trademark violations “under section 1125(a) or (d) of this title, or a willful violation under section 1125(c) of this title . . . [are] subject to the principles of equity, to recover (1) defendant’s profits.” From there, Justice Gorsuch blatantly states that “this language spells trouble for Fossil.” In particular, Justice Gorsuch explains that “the statutory language has never required a showing of willfulness to win a defendant’s profits” and that the “Lanham Act speaks often and expressly about mental states.” Furthermore, other sections of the statue take “considerable care” to establish specific mens rea standards to establish a defendant’s liability. The fact that the specific mens rea requirements were left out, coupled with the notion that Congress included the term “willful” elsewhere in the same provision reinforced the fact that courts do not “usually read into statutes words that aren’t there.”

Fossil’s Appeal to Policy

Fossil argued that “equity courts historically required a showing of willfulness before authorizing a profits remedy in trademark disputes.” Fossil further argued that the willfulness requirement “rises to the level of a ‘principal of equity’.” However, the Court reasoned that it is unlikely that “Congress meant ‘principals of equity’ to direct us to a narrow rule about profits remedy.”

The Court’s Analysis and Holding

The Court next takes a look back in history and finds that the record is “far from clear” on whether the law requires a showing of willfulness to obtain a profit remedy. While cases in the past may have concluded that the mens rea requirement was “an important consideration in awarding profits,” other authorities held to the contrary. These disagreements led the Court to determine that “[a]t the end of it all, the most we can say with certainty” is that mens rea was “an important consideration in awarding profits in pre-Lanham Act cases.” Ultimately, the Court held “A plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award.”

What’s Next?

In the end, Justice Gorsuch explained that “the place for reconciling competing and incommensurable policy goals . . . is before policymakers” and that the Supreme Court’s role is limited to “read[ing] and apply[ing] the law those policymakers have ordained.” While this case likely increases the financial value of a company’s trademark—especially when seeking lost profits for trademark infringement—it has yet to be seen what effect it will have on the broader industry as a whole.