The
Section 35(a) of the federal Lanham Trademark Act, 15 U.S.C. §1117(a) allows a court to award a plaintiff the infringer's profits "subject to the principles of equity." Some courts read this to mean profits were allowed only "where the infringement is willfully calculated to exploit the advantage of an established mark" or "where the defendant is attempting to gain the value of an established name of another," as the
Romag accused Fossil of infringing its trademarks for snap fasteners used in handbags. A
But in its opinion by Justice
Rather, the Court held, a court must only be guided by principles of equity when considering an award of profits - although it did note that a trademark defendant's mental state is a "highly important consideration in determining whether an award of profits is appropriate."
In a concurring opinion, Justice
What does this mean for cases going forward? Defendants will no longer be able to get courts to dismiss claims for profits before trial simply because there is no proof that they sought to trade on the recognition of the plaintiff's brand.
Instead, litigants will have to focus on a variety of other circumstances bearing on whether a profits award is fair. For example, if the trademark owner lacks brand awareness and has made negligible sales in the region where the defendant sold the infringing products, defendant probably didn't profit from the infringement. In such a case, awarding profits would be an unfair windfall for the plaintiff and an inequitable result.
This will make it more important than ever for litigants to have a sound economic analysis of profits as part of their proof in trademark cases, with a focus on whether the defendant's profits can be traced to the infringement.
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