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Supreme Court to Decide on Controversial Trademark Law That Could Impact Damage Payments

The Supreme Court is set to hear a case that could set a new precedent when it comes to awarding cash damages in trademark infringement cases.

During its January 2020 sitting, the Supreme Court has announced that it will hear oral arguments for Romag Fasteners Inc. v. Fossil Inc. et al. In 2014, Fossil Inc. and Macy’s were named in a lawsuit brought forth by Romag Fasteners, a former supplier of magnetic snaps and other closures for apparel and accessories, which alleged that the brand and its distributors continued to profit off of the Romag Fastener name and design after the supply agreement between the parties expired. The plaintiff was able to convince the court that Fossil Inc. had moved to an unapproved supplier which had then knowingly produced counterfeit Romag Fastener products.

A jury trial in the U.S. District Court of Columbia awarded Romag Fasteners damages to be paid by Fossil Inc., including $156,000 in profits from the counterfeit fasteners and another $6.7 million to deter the brands from committing future trademark infringements.

However, the jury was also unable to find that “willfulness” had played a role in the defendant’s infringement (a requirement for the court to actually award the damages to the plaintiff) despite a “callous disregard” for the trademark rights of Romag Fasteners. The supplier appealed the case to the U.S. Court of Appeals for the Second Circuit but it agreed with the lower court’s opinion.

Not satisfied with receiving affirmation of wrongdoing without a commensurate payout, Romag took the case all the way to the Supreme Court. In January, the supplier’s legal team will argue that trademark law, specifically the Lanham Act—a 1946 statute that most trademark law is based on—should be interpreted to allow the awarding of cash damages regardless of “willfulness.”

“This case presents an important, recurring, and outcome-determinative question of federal trademark law that has sharply divided the courts of appeals six to six,” Romag Fastener’s legal team explained in a brief filed in March. “The Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits make an infringer’s profits available under section 35 [of the Lanham Act] without requiring a threshold showing of willfulness; the infringer’s intent is merely one factor among many in fashioning an equitable remedy.”

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However, as Romag’s lawyers wrote, the other six U.S. District Courts take the opposite approach, allowing no damages to be awarded without clearing the “hurdle” of showing willful infringement.

In its opposing brief, Fossil Inc.’s legal team argued that the case was both unnecessary for the Supreme Court to hear and not viable for the creation of a new precedent.

“First, no meaningful conflict exists,” Fossil Inc. wrote. “Disgorgement of an infringer’s profits has never been automatic. Rather, before and after passage of the Lanham Act, the law made that extraordinary and often draconian windfall remedy ‘subject to the principles of equity.’ The lower courts all agree that equity requires scrutiny of a trademark infringer’s intent in determining whether equitable disgorgement is permissible.”

Regardless of which side ends up winning the Court’s favor, the case is likely to have serious implications for the trademark law. In June, intellectual property attorney, Peter J. Toren, told Bloomberg Law that trademark cases like this are rarely accepted by the Court and that the six-to-six split between the District Courts was something the Court was interested in addressing.

“Which of those conflicting standards applies has serious practical and policy implications,” Romag Fastener’s complaint explained. “Because a plaintiff’s actual damages are often difficult to measure, an award of an infringer’s profits is often the only meaningful monetary relief that trademark owners can secure for infringement. This case illustrates the point. Because [Romag Fasteners] could not prove its actual damages, it recovered absolutely nothing from Fossil’s infringement.”

The Supreme Court last took a look at trademark law in March, ruling that the rights of trademark licensees to continue using licensed logos and labels are protected even after the holder of the license goes bankrupt.