Willful Infringement Required to Recover Profits for Trademark Infringement

The Court of Appeals for the Federal Circuit held that plaintiff could not recover defendant’s profits garnered from its trademark infringement because the jury found no willful infringement by defendant.  In Romag Fasteners, Inc. v. Fossil, Inc., No.14-1856 (Fed. Cir. 2016) (Available Here), the Federal Circuit appeals court ruled on both patent and trademark issues. The Appeals Court held Romag could not recover Fossil’s profits for trademark infringement because the jury found Fossil was not willful and regarding the patent, affirmed the district court’s reduction of fees for patent damages because of Romag’s laches.

Romag Fasteners, Inc. (“Romag”) owns U.S. Patent 5,777,126 on magnetic snap fasteners, which Romag sells under its trademark, ROMAG.  Romag sued defendant Fossil and Fossil’s retailers alleging patent and trademark infringement.  A jury awarded Romag $50,000 as a reasonably royalty for the patent infringement and $6.8 million for the trademark infringement despite the fact that the jury found no willful infringement.  The district court reduced the patent damages because of Romag’s delay in brining suit (a laches defense) and held as a matter of law that Romag could not recover Fossil’s profits for trademark infringement because the jury found Fossil did not act in a willful manner.  The Federal Circuit affirmed the district court’s rulings.

Fossil had entered into an agreement with Romag to use the Romag fasteners on its products, which products are manufactured by authorized third parties.  Fossil instructed its authorized manufacturer to use ROMAG fasteners, however, the manufacturer used counterfeit fasteners for a period of time.  Romag discovered the infringement in 2010, but did not sue until November 23, 2010 (three days before Black Friday), when it moved for a temporary restraining order and preliminary injunction.

Romag contended that the district court erred in holding that a trademark owner must prove that the infringer acted willfully to recover the infringing defendant’s profits.  The Federal Circuit found that there was nothing in the 1999 Trademark Act amendment that allows a departure from Second Circuit precedent requiring willfulness for the recovery of profits in infringement cases.  Willfulness was reaffirmed in the Second Circuit in Merck Eprova AG v. Gnosis S.p.A.,760 F.3d 247, 252 (2d Cir. 2014), where the court stated that a finding of defendant’s willful deceptiveness is a prerequisite for awarding profits.  The Federal Circuit follows the law of the regional appeals court on non-patent related issues.

Romag also argued that laches cannot be invoked as a defense to patent infringement, relying on Petrella v. Metro-Goldwyn-Mayer, Inc., which held that laches cannot be invoked as a defense against copyright infringement.  However, the Federal Circuit held that laches remains a defense to legal relief in a patent infringement case because Congress codified a laches defense in 35 U.S.C. § 282(b)(1).  Therefore, the Federal Circuit found that the district court did not err in holding that Fossil could bring a laches defense to a patent infringement claim.

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