Thursday’s Supreme Court decision in Romag Fasterners Inc. v. Fossil Inc. et al. that willfulness should not be an “inflexible precondition” for disgorgement of defendant’s profits in trademark cases has now become one of the relatively few cases from the highest Court that speaks to monetary awards in such cases. What will – or should – the impact of this decision be on companies, their counsel and their damages experts in approaching such cases? Obviously, for cases in those regional circuits (third through seventh and eleventh) that have historically been consistent with the Court’s decision, little or nothing will change. But what will the implications be for the circuits (first, second, eighth, ninth, tenth and DC) that have heretofore imposed willfulness as a necessary predicate to a disgorgement award? In many cases, the answer will still be “little or nothing.”
Justice Gorsuch, writing for the Court, significantly stated that willfulness is still an important factor for courts to consider when weighing an award of profits, and Justice Sotomayor criticized the majority opinion for remaining “agnostic” about whether profits can be granted in cases of “innocent infringement”. In this respect, it must be remembered that disgorgement is an equitable – rather than a compensatory – remedy, over which judges possess nearly full rein to increase, decrease or eliminate awards. As such, prudent parties will still address willfulness when presenting their case for or against disgorgement.
A more important question may be whether this decision will result in an increase in “low budget” (for the plaintiff) trademark cases in which the plaintiff simply foregoes the often-difficult burden of proving actual damages and presents claims for disgorgement only, now with no need to prove willfulness. In such cases, plaintiffs typically claim to be subject only to the light burden of calculating defendants’ sales. For the consequent questions of how defendant’s sales should be reduced to profits and whether and how those profits should be legitimately limited to those due to the infringement, federal courts remain divided between and even within circuits and no guidance has yet been determined at the Supreme Court level.