Thursday, April 23, 2020

U.S. Supreme Court: Willfulness Is Not Required for an Award of Profits for Trademark Infringement

Here is a link to the opinion in Romag Fasteners, Inc. v. Fossil Group, Inc., the latest in a series of ill-considered Supreme Court I.P. opinions opting for (what I can only guess will be) some sort of amorphous totality of the circumstances test.  Justice Gorsuch wrote the opinion, joined by all of the justices except Justice Sotomayor, who concurs separately (see below).  Justice Alito, joined by Justices Breyer and Kagan, joins the majority opinion but also concurs separately.  

The whole thing, including the two concurrences, comes to just 12 pages, and is yet another misguided, purportedly textualist opinion that relies on Black's Law Dictionary while ignoring the relevant underlying policies.  To be sure, the opinion does concede that "it is a principle long reflected in equity practice where district courts have often considered a defendant’s mental state, among other factors, when exercising their discretion in choosing a fitting remedy," and that "given 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."  It concludes, however:
But acknowledging that much is a far cry from insisting on the inflexible precondition to recovery Fossil advances.
With little to work with in the statute’s language, structure, and history, Fossil ultimately rests on an appeal to policy. The company tells us that stouter restraints on profits awards are needed to deter “baseless” trademark suits. Meanwhile, Romag insists that its reading of the statute will promote greater respect for trademarks in the “modern global economy.” As these things go, amici amplify both sides’ policy arguments. Maybe, too, each side has a point. But the place for reconciling competing and incommensurable policy goals like these is before policymakers.This Court’s limited role is to read and apply the law those policymakers have ordained, and here our task is clear.
Right.  The Court's task is so "clear" that this issue has divided the lower courts and ultimately made its way to the Supreme Court.  It's all just a matter of reading the statute.

To say I am disgusted would be an understatement.

Of course, just four years ago the Court reaffirmed in Halo v. Pulse that enhanced damages for patent infringement are available only for "willful," "egregious" misconduct; and yet the text of section 284 of the Patent Act says nothing about willfulness or any other state of mind.  Concededly, the majority noted that this was the long-standing practice of the courts prior to the 1952 codification, and assumed that Congress legislated against that backdrop.  In the present case, the majority views the pre-Lanham Act caselaw are being more ambiguous on this point.  If you think through the logic of Halo, though, courts must have developed the willfulness criterion on their own at some point, for it to have formed the backdrop against which Congress legislated in 1952.  My point is that this modern emphasis on text, text, text, which is hardly limited to the IP realm, has long seemed to me to be completely ahistorical and--let's not mince words--ultimately politically motivated.
The concurring opinion by Justice Alito, at least, hedges a bit, stating that "The relevant authorities, particularly pre-Lanham Act caselaw, show that willfulness is a highly important consideration in awarding profits under §1117(a), but not an absolute precondition. I would so hold and concur on that ground."

Justice Sotomayor's opinion, concurring in the judgment only, highlights what I fear could be the impact of the majority's opinion going forward.  She writes:
I agree that 15 U. S. C. §1117(a) does not impose a “willfulness” prerequisite for awarding profits in trademark infringement actions. Courts of equity, however, defined “willfulness” to encompass a range of culpable mental states—including the equivalent of recklessness, but excluding “good faith” or negligence. See 5 McCarthy on Trademarks and Unfair Competition §30:62 (5th ed. 2019) (explaining that “willfulness” ranged from fraudulent and knowing to reckless and indifferent behavior) . . . .
The majority suggests that courts of equity were just as likely to award profits for such “willful” infringement as they were for “innocent” infringement. . . . But that does not reflect the weight of authority, which indicates that profits were hardly, if ever, awarded for innocent infringement. . . . Nor would doing so seem to be consistent with longstanding equitable principles which, after all, seek to deprive only wrongdoers of their gains from misconduct. . . . Thus, a district court’s award of profits for innocent or good-faith trademark infringement would not be consonant with the “principles of equity” referenced in §1117(a) and reflected in the cases the majority cites. . . .
Because the majority is agnostic about awarding profits for both “willful” and innocent infringement as those terms have been understood, I concur in the judgment only.
Update (4-24-2020):  Professor Pam Samuelson has an excellent post on Patently-O this morning, which notes that the majority opinion characterizes disgorgement of the infringer's profits as an equitable remedy.  Her post also cites to her forthcoming article, coauthored with Mark Gergen and John Golden, on disgorgement in IP cases, which I highly recommend.  IP Watchdog has two posts on the Romag decision (here and here), expressing a variety of views. 

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