US Supreme Court Resolves Major Dispute in Trademark Law: Willfulness No Longer Required for an Award of Infringer’s Profits as Damages
For many years, there has been a dispute in the federal courts about what level of culpability by a trademark infringer was required to support an award of the infringer’s profits as damages. The courts in the Second, Eighth, Ninth, and Tenth Circuits required that a trademark owner show that the infringement was “willful” before the infringer’s profits earned from the infringement could be awarded as damages. In contrast, the law in the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits was that the infringer’s willfulness could be considered in deciding whether to award profits as damages, but that willfulness was not a requirement for an award of profits.
On April 23, 2020, the United States Supreme Court issued its decision in Romag Fasterners, Inc. v. Fossil, Inc. by which it resolved the dispute among the circuits and held that willfulness is not a precondition to recovering a trademark infringer’s profits as damages. Critically, the Court did not completely discount the role of the infringer’s culpability in the damages analysis – the Court expressly stated that “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate.”
The Supreme Court’s opinion in Romag can be found here: Romag Fasteners, Inc. v. Fossil, Inc., 590 U.S. __, No. 18 – 1233 (April 23, 2020).
It usually is the case in trademark infringement cases that it is difficult to prove the profits lost by the trademark owner as a result of an infringement. Consequently, prior to Romag, it often was difficult for a trademark owner to obtain damages in cases where the infringer did not act willfully.
While recovering profits-based damages in trademark infringement cases may continue to be challenging given the Supreme Court’s instruction that the infringer’s “mental state” still is an important consideration in the damages calculation, the Romag decision has removed a significant legal hurdle to an award of such damages. It will be interesting to see how the Romag decision affects the settlement value of trademark infringement cases and whether the decision results in an increase in the number of infringement actions filed since the cases now may have more value.
Bullseye! Court Holds That Suspended Corporation Can Sue For Trademark Infringement As An Unincorporated Association
In its recent opinion in Southern California Darts Association v. Zaffina (Case No. 13-55780), the Ninth Circuit Court of Appeals held that a business entity that had its corporate powers suspended by the State of California nevertheless could sue for infringement of its trademarks.
For forty years or more, the plaintiff has promoted the competitive play of the game of darts and has coordinated league play of this game. For a time, beginning in the 1960s, members of the plaintiff formed and ran a corporation named “Southern California Darts Association, Inc.” The corporate powers of the original corporation were suspended by the State of California in 1977, apparently for nonpayment of the corporate franchise tax. Thereafter, the plaintiff continued to use a number of trademarks including its full name (“Southern California Darts Association”); the acronym “SCDA”; the nickname “SoCal Darts”; and a logo featuring the organization’s full name and a dart board.
A main issue in Zaffina was whether the plaintiff had capacity to sue because its corporate powers had been suspended in 1977. Under California law, a delinquent corporation whose powers have been suspended may not bring suit and may not defend a legal action.
However, in Zaffina, the Ninth Circuit held that the suspension of the original corporation’s powers does not necessarily extinguish the plaintiff’s capacity to pursue federal trademark claims in federal court. To reach this conclusion, the Ninth Circuit relied on Rule 17(b)(3)(A) of the Federal Rules of Civil Procedure, which states that a “partnership or other unincorporated association” that lacks the capacity to sue under the law of the state in which the court is located “may sue or be sued in its common name to enforce a substantive right existing under the United States Constitution or laws.” Because the plaintiff was pursuing a federal trademark infringement claim in federal court, it had the capacity to sue.
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