By Jeffrey M. Kaden, Marc P. Misthal
A recent, unanimous Supreme Court decision has apparently made it easier for a trademark owner to recover an infringer’s profits in a trademark infringement action. The decision could have a wide-ranging impact, putting far more emphasis on an alleged infringer’s intent when adopting a mark, and, consequently, increasing the importance of clearing a mark before beginning to use it.
By way of background, Romag Fasteners sued Fossil for trademark infringement when it learned that Chinese factories hired by Fossil to make products were using counterfeit Romag fasteners and that Fossil was doing little to prevent it (Fossil and Romag had previously entered into a license agreement allowing Fossil to use Romag’s fasteners, so Fossil was aware of Romag’s rights). Following a trial, a jury found that Fossil had infringed Romag’s rights, but did not find that it had acted willfully. Because of that finding, the trial court refused to award to Romag the profits that Fossil had earned due to its infringing activities, pointing out that an award of profits was unavailable without a finding that the infringement was willful.
Romag appealed the case up to the Supreme Court, and the Supreme Court reversed. In doing so, the Supreme Court found that nothing in the text of the Trademark Act required a finding of willfulness before awarding an infringer’s profits. Nevertheless, the Supreme Court acknowledged that “[w]ithout question, a defendant’s state of mind may have a bearing on what relief a plaintiff should receive. An innocent trademark violator often stands in very different shoes than an intentional one,” and later observed that
[g]iven these traditional principles, we do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate. But acknowledging that much is a far cry from insisting on [willfulness as an]…inflexible precondition to recovery.
So while the Supreme Court found that profits could be awarded without a finding of willfulness, it also recognized that an alleged infringer’s intent is highly relevant with regard to whether an award of profits to the trademark owner should be made. The Supreme Court’s decision was very narrow, however, and did not provide any meaningful guidance on what role intent should play in an award of profits to the trademark owner.
The Supreme Court’s decision clearly instructs trial courts to place a renewed emphasis on intent, which has always had a role in an infringement case. Consequently, for future trademark cases, it becomes even more important for trademark owners to show an intent to infringe, and for alleged infringers to show that they lacked such an intent.
The Supreme Court’s decision also means that if a mark is adopted and then alleged to be infringing, resolving the infringement claim prior to litigation may become far more difficult, with trademark owners more likely to press for a resolution that includes financial compensation as well as injunctive relief; in the past, stopping the use of the accused mark would often be sufficient to settle a dispute.
If nothing else, the Supreme Court’s decision increases the importance of trademark searching. This is because a trademark search could be used at trial to demonstrate the absence of an intent to infringe or, in pre-litigation disputes, to resist demands for financial compensation. Clients are often reluctant to incur the expense of conducting a trademark search before adopting a mark, but now, more than ever, that may be a case of being “penny wise and pound foolish”.
Experienced trademark counsel can and should conduct a thorough trademark search and provide an opinion on the use of the mark well before a mark is adopted and litigation erupts. Since such a search can presumably be used to show that there was no intent to infringe, the work of trademark counsel in this regard can prove to be invaluable to the business of the client.