In a victory for plaintiffs bringing Lanham Act claims to protect their trademarks, the Supreme Court held on April 23, 2020, that a plaintiff is not required to show that the defendant “willfully” infringed its trademark in order to recover the defendant’s ill-gotten profits under the Act. The ruling favors Lanham Act false advertising plaintiffs as well.

In Romag Fasteners, Inc. v. Fossil, Inc., 140 S. Ct. 1492 (2020), Romag and Fossil signed an agreement allowing Fossil to use Romag’s fasteners in Fossil’s handbags and other products. Romag later discovered that the production factories Fossil hired in China were using counterfeit Romag fasteners while Fossil did little to stop them. Romag alleged that Fossil infringed on Romag’s trademark rights and falsely represented that Fossil’s fasteners came from Romag. The jury agreed and found that Fossil had acted “in callous disregard” of Romag’s rights. However, the jury also found that Fossil did not act willfully. Relying on Second Circuit precedent requiring a plaintiff seeking profits to prove that the defendant’s infringement was willful, the district court ruled that Romag could not recover Fossil’s profits. After the Federal Circuit affirmed, the Supreme Court agreed to resolve the circuit split on this issue.

Writing for an eight-justice majority, Justice Gorsuch explained that the Lanham Act’s express language in 15 U.S.C. § 1117(a) does not comport with the Second Circuit’s bright line rule. While the Lanham Act expressly makes willfulness a prerequisite to recovering profits for trademark dilution under 15 U.S.C. § 1125(c), the statute does not contain any such requirement for violations of 15 U.S.C. § 1125(a) — the provision addressing trademark infringement, of which Romag proved a violation. The Court also stressed the fact that the Lanham Act “speaks often and expressly about mental states.” Elsewhere throughout the Act, the defendant’s state of mind is an express element, including: intent and knowledge in Section 1117(b) for trebling damages; willfulness in Section 1117(c) for increasing the statutory damages cap; willfulness in Section 1118 for the destruction of infringing goods based on trademark dilution; and bad faith intent to establish a violation of Section 1125(d) for cyberpiracy.

Fossil argued that the willfulness requirement comes from Section 1117(a)’s language stating that profits awards are “subject to the principles of equity” because equity courts historically required willfulness for profits awards in trademark cases. The Court disagreed, interpreting “principles of equity” in Section 1117(a) as referring to “fundamental rules that apply more systematically across claims and practice areas,” as opposed to a narrow remedies rule in trademark law. The Court also found it was “far from clear whether trademark law historically required a showing of willfulness before allowing a profits remedy,” citing cases and treatises applying disparate approaches. Thus, while acknowledging that a defendant’s mental state was and is a “highly important consideration in determining whether an award of profits is appropriate,” the Court held that this did not support an inflexible requirement of willfulness.

False advertising claims under the Lanham Act also fall under 15 U.S.C. § 1125(a). Consequently, the Supreme Court’s interpretation of this section — and its lack of a willfulness prerequisite for recovery of lost profits — will apply to Lanham Act false advertising plaintiffs as well. Even if a defendant did not willfully engage in false advertising, a plaintiff may still recover the defendant’s profits. And when proving profits, the plaintiff need only provide the defendant’s sales; “it is the defendant who bears the burden of establishing what sales were not due to the conduct alleged to have violated the Lanham Act.” Rexall Sundown, Inc. v. Perrigo Co., 707 F. Supp. 2d 357, 360 (E.D.N.Y. 2010). Accordingly, while Lanham Act plaintiffs in many jurisdictions previously had to get past a “willfulness” hurdle before obtaining a chance to recover the defendant’s profits, that is no longer the case. Now, plaintiffs can take discovery on the defendant’s profits and argue at trial why such profits should be awarded if they prevail — regardless of whether the defendant’s conduct was willful — while the defendant must justify why the profits it earned are not attributable to its advertising. But despite the Court’s ruling, the defendant’s mental state will be relevant to the Court’s consideration of “principles of equity” and will remain an important consideration for courts regarding the appropriateness of such a profits award.