Justices Seek Middle Ground in Trademark Lost Profits Case - National Law Journal
by Scott Graham// National Law Jornal
by Scott Graham// National Law Jornal
The U.S. Supreme Court sounded ready Tuesday to loosen up what some intellectual property lawyers contend is a rigid rule requiring a threshold showing of willfulness to recover infringer’s profits for a trademark violation.
Hogan Lovells partner Neal Katyal argued that courts historically limited that severe remedy to willful infringement, and that Congress understood that when drawing up the Lanham Act in 1946.
But several justices pointed out during Tuesday’s arguments in Romag v. Fossil that “willfulness” doesn’t have a consistent definition and might not have always required a showing of actual knowledge of infringement.
“There are cases—not many, I grant you—where something less than willfulness was the basis for a recovery,” Justice Sonia Sotomayor told Katyal, who was arguing for Fossil Group Inc.
Willfulness is “a vague word, ambiguous word, sometimes covered what we would consider recklessness,” added Justice Brett Kavanaugh.
That led Justice Elena Kagan to explore a middle ground between Katyal and Williams & Connolly partner Lisa Blatt, who argued for Romag Fasteners Inc. that willfulness is just one of several equitable factors that judges and juries should weigh when considering an award of profits.
“I would think that there’s some kind of intermediate position,” Kagan said. “Willfulness might not be an absolute necessity but it certainly should be entitled to very significant weight.”
Romag sells magnetic snap fasteners used in wallets, handbags and other leather goods. It sued apparel maker Fossil and others for infringement. Romag contends that Fossil knew or had strong reasons to believe that its Chinese supplier was using counterfeit fasteners for its Fossil handbags.
Jurors found that Fossil acted with “callous disregard” of Romag’s IP rights and recommended an award of $6.7 million in Fossil profits to deter future infringement. But U.S. District Judge Janet Bond Arterton of the District of Connecticut declined to award infringer’s profits, because jurors also had found that Fossil did not infringe willfully. The Federal Circuit, applying Second Circuit law that says a finding of willfulness is prerequisite for an award of infringer’s profits, affirmed.
The circuits are evenly split on the issue, and so the Supreme Court took up the case.
Section 1117(a) of the Lanham Act states that when a trademark violation is found, “the plaintiff shall be entitled, subject to the provisions of sections 1111 and 1114 of this title, and subject to the principles of equity” to recover damages, profits and costs.
“The phrase ‘principles of equity’ signifies a multifactor analysis where no one factor is controlling,” Blatt argued Tuesday. While the cases aren’t plentiful, there are a few, including an 1883 Alabama district court case, that awarded profits for unintentional infringement. “Nothing wrong with Alabama. It counts as a case,” Blatt joked.
Justice Stephen Breyer focused on another provision of the statute, which says that if the court finds a profit award “inadequate or excessive, the court may in its discretion enter judgment for such sum as the court shall find to be just.”
“The court could give the plaintiff more money, couldn’t they, under that sentence?” Breyer asked.
Blatt said yes, but that under some circuits’ reading, they can’t reach that step unless first making a finding of willfulness.
Blatt struggled with a question from Justice Samuel Alito, who asked her to point to a single case where a court found that the willfulness prerequisite worked an injustice.
Katyal, meanwhile, claimed that Blatt was trying to “sweep both Congress’ words and two decades of history under the rug.”
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