Thursday, March 31, 2016

Federal Circuit Approves Reduction of Damages Due to Laches in Romag v. Fossil

In other news today, the Federal Circuit in Romag Fasteners, Inc. v. Fossil, Inc.  affirmed a judgment of patent and trademark infringement against Fossil and other defendants, as well as the district court's judgment reducing the amount of the patent award due to laches and refusing to allow the disgorgement of the defendants' profits as a remedy for non-willful trademark infringement.  According to the opinion (authored by Judge Dyk, joined by Judges Wallach and Hughes), the patent in suit is "U.S. Patent No. 5,777,126 (“the ’126 patent”) on magnetic snap fasteners, which Romag sells under its registered trademark, ROMAG."  Following a finding of liability, the jury awarded "a reasonable royalty of $51,052.14" for the patent infringement, and for the trademark infringement "an advisory award of $90,759.36 of Fossil’s profits under an unjust enrichment theory, and $6,704,046.00 of Fossil’s profits under a deterrence theory," even though it also found that the infringement was not willful (pp. 3-4).  The district court thereafter concluded that "Romag’s delay in bringing suit until just before 'Black Friday' constituted laches, and reduced the jury’s reasonable royalty award for patent infringement by 18% to exclude sales made during the period of delay. . . . The district court also held as a matter of law that, because Fossil’s trademark infringement was not willful, Romag was not entitled to an award of Fossil’s profits" (p.4).

On appeal, the court first rejects Romag's argument that damages cannot be reduced under the equitable doctrine of laches, citing its recent en banc decision in SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC to that effect (p.5).  (For previous discussion of SCA Hygiene Products on this blog, see here.)  Second, the court holds that willfulness remains a prerequisite for awards of infringer's profits under the Second Circuit's interpretation of the Lanham Act (the federal trademark and unfair competition statute), though it notes that there is a circuit split on this issue (pp. 5-17).  I'm inclined to think this is right as a matter of policy, and would note only that this is an important issue of federal trademark law; and that at some point it might be useful either for Congress to clarify the law in this regard or for the Supreme Court to resolve the circuit split.  For further discussion, see, e.g., Barton Beebe, Thomas F. Cotter, Mark A. Lemley, Peter S. Menell & Robert P. Merges, Trademarks, Unfair Competition, and Business Torts 295-99, 511 (Aspen Publishers 2011) (second edition coming soon!)   Of course, when it comes to U.S. patent law, disgorgement of profits is off limits except in design patent cases, and the Supreme Court will be addressing the matter as it relates to design patents later this year in Apple v. Samsung (see here).

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