Opposition Brief — Romag Fasteners, Inc., Petitioner v. Fossil Group, Inc., fka Fossil, Inc., et al.
Supreme Court briefMay 22, 2019
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No. 18-1233
In the Supreme Court of the United States
ROMAG FASTENERS, INC.,
Petitioner,
v.
FOSSIL, INC., ET AL.,
Respondents.
On Petition for a Writ of Certiorari to
the United States Court of Appeals
for the Federal Circuit
BRIEF FOR RESPONDENTS IN OPPOSITION
LAWRENCE BROCCHINI
Reavis Page Jump LLP
41 Madison Avenue
New York, NY 10010
(212) 763-4100
LAUREN S. ALBERT
The Law Offices of
Lauren S. Albert LLC
830 Third Avenue
New York, NY 10022
(212) 267-1300
JEFFREY E. DUPLER
Counsel of Record
Gibney, Anthony &
Flaherty LLP
665 Fifth Avenue
New York, NY 10022
(212) 688-5151
jdupler@gibney.com
Counsel for Respondents
i
QUESTIONS PRESENTED
Under the Lanham Act, an accounting of a defendant’s profits attributable to the infringement is
not automatic. Section 35 of the Act makes any such
award “subject to the principles of equity.” 15 U.S.C.
1117(a). In applying those principles, all courts assess the defendant’s intent to determine whether equitable disgorgement is justified. Some courts hold
that “the principles of equity” make willful infringement a prerequisite to disgorgement; other courts
consider willfulness an important factor in the equitable determination. In practice both standards result in willful infringers disgorging their profits; and
non-willful infringers not accounting for profits.
The question presented is:
Whether the Court should address the standard
for an accounting of a defendant’s profits even
though (a) regardless of the different formulations of
“principles of equity” invoked by lower courts, their
application in the overwhelming majority of cases results in an accounting being ordered when the infringement was willful and denied when it was not;
and (b) the trial court’s findings in this case bar petitioner from recovering respondents’ profits under either standard applied by the courts of appeals.
ii
RULE 29.6 STATEMENT
Fossil, Inc., which formally changed its name to
Fossil Group, Inc. as of May 2013, has no parent corporation; publicly held BlackRock, Inc. holds 10% or
more of its stock. Fossil Stores I, Inc. is a whollyowned subsidiary of publicly held Fossil Group, Inc.
Macy’s, Inc. has no parent corporation and no
publicly held corporation owns 10% or more of its
stock. Macy’s Retail Holdings, Inc. is a wholly-owned
subsidiary of Macy’s, Inc.
iii
TABLE OF CONTENTS
Page
QUESTIONS PRESENTED ....................................... i
RULE 29.6 STATEMENT .......................................... ii
TABLE OF AUTHORITIES....................................... v
COUNTER-STATEMENT
REGARDING JURISDICTION ................................. 1
STATEMENT ............................................................. 1
A. Legal Background ................................................. 3
B. The Parties ............................................................ 7
C. District Court Proceedings ................................... 7
D. The Federal Circuit’s Romag I Decision ............ 13
E. The Court’s GVR “For Further
Consideration In Light Of” SCA......................... 16
F. Post-GVR Proceedings ........................................ 17
REASONS FOR DENYING THE PETITION ......... 19
I. This Court Lacks Jurisdiction
To Address The Profits Disgorgement Issue ..... 19
II. The Question Presented Does Not Warrant Review...................................................................... 21
A. There Is No Meaningful Conflict Among
The Courts Of Appeals .................................. 24
iv
TABLE OF CONTENTS—continued
Page
B. This Case Is An Extremely Poor Vehicle
Because The District Court’s Factual Findings Bar An Equitable Accounting Of Defendant’s Profits Under Any Standard ............... 27
C. The Court Of Appeals’ Holding Is Correct .. 31
1. Section 1117(a)’s “Principles Of Equity”
Expressly Incorporated A Willfulness
Requirement .......................................... 31
2. The 1999 Amendment Did Not Alter The
Standard For An Accounting ................ 34
CONCLUSION ......................................................... 37
v
TABLE OF AUTHORITIES
Page(s)
Cases
ALPO Petfoods, Inc. v. Ralston Purina Co.,
913 F.2d 958 (D.C. Cir. 1990) ......................... 5, 24
Banjo Buddies, Inc. v. Renosky,
399 F.3d 168 (3d Cir. 2005) ......................... passim
Beebe v. Tolerton & Stetson Co.,
91 N.W. 905 (Iowa 1902)..................................... 32
Bishop v. Equinox Int’l Corp.,
154 F.3d 1220 (10th Cir. 1998) ....................... 5, 24
Champion Spark Plug Co. v. Sanders,
331 U.S. 125 (1947) ......................................... 4, 31
Contessa Food Prods. Inc. v. Lockpur Fish Processing Co. Ltd.,
123 F. App’x 747 (9th Cir. 2005)......................... 22
Dep’t of Banking, State of Neb. v. Pink,
317 U.S. 264 (1942) ............................................. 20
Dir. of Revenue of Mo. v. CoBank ACB,
531 U.S. 316 (2001) ............................................. 35
Dr. A. Reed Cushion Shoe Co. v. Frew,
158 F. 552 (W.D.N.Y. 1908) ................................ 32
FTC v. Minneapolis-Honeywell Regulator Co.,
344 U.S. 206 (1952) ............................................. 20
George Basch Co. v. Blue Coral, Inc.,
968 F.2d 1532 (2d Cir. 1992) ....................... passim
George T. Stagg Co. v. Taylor,
27 S.W. 247 (Ky. Ct. App. 1894) ......................... 32
Globe-Wernicke Co. v. Safe-Cabinet Co.,
144 N.E. 711 (Ohio 1924) .................................... 32
vi
TABLE OF AUTHORITIES—continued
Page(s)
Gucci Am., Inc. v. Daffy’s Inc.,
354 F.3d 228 (3d Cir. 2003) ................................ 25
Halo Elecs. v. Pulse Elecs., Inc.,
136 S. Ct. 1923 (2016) ................................... 33, 34
Hamer v. Neighborhood Housing Servs. of
Chi.,
138 S. Ct. 13, 21 (2017) ....................................... 19
Hamilton-Brown Shoe Co. v. Wolf Bros. & Co.,
240 U.S. 251 (1916) ....................................... 13, 31
Horlick’s Malted Milk Corp. v. Horluck’s, Inc.,
51 F.2d 357 (W.D. Wash. 1931) .......................... 32
Int’l Star Class Yacht Racing Ass’n v. Tommy
Hilfiger, Inc.,
80 F.3d 749 (2d Cir. 1996) .................................. 14
Inwood Labs., Inc. v. Ives Labs., Inc.,
456 U.S. 844 (1982) ............................................. 33
Kickapoo Dev. Corp. v. Kickapoo Orchard Co.,
285 N.W. 354 (Wis. 1939) ................................... 32
Kirtsaeng v. John Wiley & Sons, Inc.,
133 S. Ct. 1351 (2013) ......................................... 33
Liberty Oil Corp. v. Crowley, Milner & Co.,
258 N.W. 241 (Mich. 1935) ................................. 32
Lindy Pen Co. v. Bic Pen Corp.,
982 F.2d 1401 (9th Cir. 1993) ............................... 5
M2 Software Inc. v. Viacom Inc.,
223 F. App’x 653 (9th Cir. 2007)......................... 21
Major League Baseball Players Ass’n v. Garvey,
532 U.S. 1015 (2001) ........................................... 21
vii
TABLE OF AUTHORITIES—continued
Page(s)
McLean v. Fleming,
96 U.S. 245 (1877) ......................................... 13, 31
Mercer v. Theriot,
377 U.S. 152 (1964) ............................................. 21
Merck Eprova AG v. Gnosis S.p.A.,
760 F.3d 247 (2d Cir. 2014) ................................ 14
Minn. Pet Breeders, Inc. v. Schell & Kampeter,
Inc.,
41 F.3d 1242 (8th Cir. 1994) ........................... 5, 24
Mishawaka Rubber & Woolen Mfg. Co. v. S.S.
Kresge Co.,
316 U.S. 203 (1942) ........................................... 4, 8
N.K. Fairbank Co. v. Windsor,
124 F. 200 (2d Cir. 1903) .................................... 32
Optimum Techs., Inc. v. Home Depot U.S.A.,
Inc.,
217 F. App’x 899 (11th Cir. 2007)....................... 25
P.E. Sharpless Co. v. Lawrence,
213 F. 423 (3d Cir. 1914) .................................... 32
Pebble Beach Co. v. Tour 18 I Ltd.,
155 F.3d 526 (5th Cir. 1998) ..................... 5, 25, 26
Quick Techs., Inc. v. Sage Grp. PLC,
313 F.3d 338 (5th Cir. 2002) ................... 24, 25, 28
Regis v. Jaynes,
77 N.E. 774 (Mass. 1906) .................................... 32
Roulo v. Russ Berrie & Co.,
886 F.2d 931 (7th Cir. 1989) ............................... 26
viii
TABLE OF AUTHORITIES—continued
Page(s)
Rubber & Celluloid Harness Trimming Co. v.
F.W. DeVoe & C.T. Reynolds Co.,
233 F.150 (D.N.J. 1916) ...................................... 32
Saxlehner v. Siegel-Cooper Co.,
179 U.S. 42 (1900) ......................................... 13, 31
SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC,
137 S. Ct. 954 (2017) ........................................... 16
SCA Hygiene Prods. Aktiebolag v. First Quality Baby Prods., LLC,
807 F.3d 1311 (Fed. Cir. 2015) ........................... 16
Seatrax, Inc. v. Sonbeck Int’l Inc.,
200 F.3d 358 (5th Cir. 2000) ............................... 25
SecuraComm Consulting, Inc. v. Securacom Inc.,
166 F.3d 182 (3d Cir. 1999) ............................ 5, 25
Stone Creek, Inc. v. Omnia Italian Design, Inc.,
875 F.3d 426 (9th Cir. 2017) ................... 23, 24, 35
Synergistic Int’l, LLC v. Korman,
470 F.3d 162 (4th Cir.2006) .................... 24, 28, 30
United Drug Co. v. Kovacs,
123 A. 654 (Pa. 1924) .......................................... 32
WesternGeco LLC v. ION Geophysical Corp.,
136 S. Ct. 2486 (2016) ........................................ 19
Whitman v. Am. Trucking Ass’ns, Inc.,
531 U.S. 457 (2001) ............................................. 35
Statutes
15 U.S.C.
§ 1114................................................................... 35
ix
TABLE OF AUTHORITIES—continued
Page(s)
§ 1114(1) ................................................................ 3
§ 1116(a) ................................................................ 4
§ 1117(a) ....................................................... passim
§ 1117(c)................................................................. 4
§ 1125(a) ....................................................... passim
§ 1125(c)........................................................ passim
§ 1125(c)(2) ............................................................ 6
§ 1125(c)(5) ............................................................ 6
28 U.S.C.
§ 2101(c)........................................................... 1, 19
Miscellaneous
Hearings on H.R. 102, H.R. 5461, and S. 895
Before the Subcomm. on Trade-Marks of the
House Comm. on Patents, 77th Cong., 1st
Sess. 228 (1941)................................................... 33
H.R. Rep. 106-250, 106th Cong., 1st Sess.
(1999) ..................................................................... 6
Judicial Business of the U.S. Courts,
https://www.uscourts.gov/statistics/table/c2/staistical-tables-federaljudiciary/2018/12/31 ............................................ 26
J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 30:62 (5th
ed.) (March 2019 Update) ................................... 23
J. Thomas McCarthy, Trademarks and Unfair
Competition § 25:3 (Sept. 2016 Update)............. 30
Matthew Sag, IP Litigation in U.S. District
Courts: 1994 to 2014, 101 Iowa L. Rev.
1067 (2016) .......................................................... 27
x
TABLE OF AUTHORITIES—continued
Page(s)
Restatement (First) of Torts § 747 Profits
(1938) ............................................................. 32, 33
Restatement (Third) of Unfair Competition §
37(1) (1995).......................................................... 14
Restatement (Third) of Unfair Competition
(Tent. Draft No. 3, 1991) § 37(2) cmt. f .............. 28
S. Rep. No. 79-1333 (1946) ....................................... 33
Trevor Little, Is the Trademark Litigation
Slump Over? 2018 Trends and Predictions,
World Trademark Review (May 9, 2018) ........... 27
BRIEF IN OPPOSITION
COUNTER-STATEMENT
REGARDING JURISDICTION
The Federal Circuit finally and fully adjudicated
the issue presented—whether petitioner was entitled
to an award of defendant’s profits—in its May 3,
2017 order expressly “reinstat[ing]” that court’s
March 31, 2016 decision and judgment “affirming the
district court’s judgment declining to award Fossil’s
[trademark] profits.” (Pet. App. 13a-15a). The court
of appeals limited its remand to the separate issue of
the laches determination’s effect on the patent damages award (id. at 14a). The court’s February 2019
order expressly rejected petitioner’s attempt to relitigate the profits issue (id. at 3a). Because petitioner failed to seek review by this Court within ninety
days of the entry of the May 2017 order that finally
determined the issue presented, the petition is outof-time. See 28 U.S.C. § 2101(c).
STATEMENT
The petition should be denied for multiple reasons in addition to the Court’s lack of jurisdiction.
First, no meaningful conflict exists.
Disgorgement of an infringer’s profits has never
been automatic. Rather, before and after passage of
the Lanham Act, the law made that extraordinary
and often draconian windfall remedy “subject to the
principles of equity.” The lower courts all agree that
equity requires scrutiny of a trademark infringer’s
intent in determining whether equitable disgorgement is permissible. Some courts hold that equity requires willful infringement before other equitable
2
factors are evaluated; others hold that willfulness is
important, but not a prerequisite. But these differing
standards in practice produce similar results: even
where willfulness is “important” but not a prerequisite, the overwhelming majority of decisions upholding defendant’s profits awards involve intentional,
willful misconduct. And “important factor” courts
almost never award profits absent willfulness.
Litigants’ behavior confirms this conclusion.
Trademark plaintiffs continue to file most trademark
cases in the Second and Ninth Circuits, both of
which require proof of willfulness. And the absence of
amicus support for the petition—even though associations representing trademark owners regularly file
briefs addressing questions they deem important—
confirms the lack of meaningful conflict and the unimportance of the issue presented.
Second, this case is a poor vehicle for addressing
the question presented. The jury found that Fossil
did not act willfully and the district court found that
the evidence at most could show negligence, not reckless disregard, willful blindness, or actual
knowledge. Those determinations, together with every other relevant “principle of equity,” would preclude an equitable accounting of Fossil’s profits to
Romag under any standard.
Romag’s inequitable acts—misrepresentations,
purposeful and prejudicial delay and unclean
hands—also preclude award of the equitable disgorgement remedy here. The district court specifically found that Romag inequitably delayed filing this
action until the holiday shopping season to inflict
maximum economic pressure on defendants—
including the inability to sell $4 million in merchan-
3
dise—in a failed effort to force defendants to settle on
terms favorable to Romag. It also found that Romag
mislead the district court in its TRO filing, preventing the district court from accurately applying the
governing legal standard.
Moreover, the remedies Romag did obtain were
substantial. It obtained powerful and costly (to Fossil) preliminary and permanent injunctive relief, a
remedy that courts have held satisfies the equities
where the infringement is non-willful. Romag also
recovered nearly double its actual damages of
$37,000, when the jury awarded it roughly $66,000
in patent royalties. Romag, however, rejected statutory damages up to $200,000 in favor of a hoped-for
massive windfall of all defendants’ handbag profits
exceeding $26 million. That is more than 700
times Romag’s actual loss. Principles of equity preclude just that kind of punitive windfall.
Third, the decision below was correct. The common law required willfulness for an award of an infringer’s profits. Section 1117(a)’s reference to “the
principles of equity”—which has remained unchanged
despite
subsequent
amendments—
incorporated that common-law rule. And, as the Federal Circuit correctly concluded, nothing in a 1999
technical, conforming amendment altered that
standard.
A. Legal Background.
Section 32 of the Lanham Act, 15 U.S.C. §
1114(1), makes infringement of a federally registered
trademark actionable. Section 43(a), 15 U.S.C. §
1125(a), creates a cause of action for false designation of origin.
4
The statute authorizes a range of possible remedies, including injunctions (see 15 U.S.C. § 1116(a));
statutory damages (id. § 1117(c)); actual damages
(id. § 1117(a)); defendant’s profits (ibid.); and reasonable attorneys’ fees (ibid.).
The standards governing monetary remedies in
infringement and false designation actions are specified in Section 35(a), 15 U.S.C. § 1117(a). Prior to
1999, that provision stated that a plaintiff establishing a violation of either provision
shall be entitled * * * subject to the principles
of equity, to recover (1) defendant’s profits,
(2) any damages sustained by the plaintiff,
and (3) the costs of the action.
It specified that if a recovery based on profits “is either inadequate or excessive,” the court “may in its
discretion enter judgment for such sum as the court
shall find to be just, according to the circumstances
of the case.” Ibid. Also, such an award “shall constitute compensation and not a penalty.” Ibid.
An equitable accounting of a defendant’s profits
is not automatic. This Court explained—in a case
under the Lanham Act’s statutory predecessor, the
Trademark Act of 1905—“that an accounting will
[not] be ordered merely because there has been an
infringement.” Champion Spark Plug Co. v. Sanders,
331 U.S. 125, 131 (1947), discussing Mishawaka
Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316
U.S. 203 (1942). “[W]here an injunction will satisfy
the equities of the case,” an award of the defendant’s
profits has been denied. Ibid. In Champion, there
was “no showing of fraud or palming off” and “the
likelihood of damage to [the plaintiff] or profit to [the
defendants] due to any misrepresentation seem[ed]
5
slight”; the Court held that the grant of the injunction by itself therefore “satisf[ied] the equities of the
case.” Ibid.
All courts of appeals agree that under Section
1117(a)’s “principles of equity” the infringer’s intent
is at the minimum an important factor in determining disgorgement.
Some courts of appeals require a showing of willfulness before considering an accounting of defendant’s profits. See, e.g., George Basch Co. v. Blue Coral, Inc., 968 F.2d 1532, 1537, 1540 (2d Cir.), cert. denied, 506 U.S 991 (1992); SecuraComm Consulting,
Inc. v. Securacom Inc., 166 F.3d 182, 190 (3d Cir.
1999) (Alito, J.) (“a plaintiff must prove that an infringer acted willfully before the infringer’s profits
are recoverable”), overruled on other grounds, Banjo
Buddies, Inc. v. Renosky, 399 F.3d 168, 175 (3d Cir.
2005); Minn. Pet Breeders, Inc. v. Schell & Kampeter,
Inc., 41 F.3d 1242, 1247 (8th Cir. 1994) (profits
award possible only for “willful, deliberate infringement or deception”); Bishop v. Equinox Int’l Corp.,
154 F.3d 1220, 1223 (10th Cir. 1998); Lindy Pen Co.
v. Bic Pen Corp., 982 F.2d 1401, 1405 (9th Cir. 1993);
ALPO Petfoods, Inc. v. Ralston Purina Co., 913 F.2d
958, 961, 965, 969 (D.C. Cir. 1990) (Thomas, J.) (profits award “proper only in a case involving actions
that evince willfulness or bad faith, such as passing
off a product as another seller’s product”).
Other courts have concluded that “principles of
equity” made willfulness an important consideration,
but not a prerequisite. E.g., Pebble Beach Co. v. Tour
18 I Ltd., 155 F.3d 526, 554 (5th Cir. 1998).
In 1996, fifty years after enacting Section
1117(a), Congress amended another provision of the
6
Lanham Act to add a new cause of action for trademark dilution, specifying that a prevailing plaintiff
would be entitled only to injunctive relief unless a
defendant also “willfully intended to trade on the
owner’s reputation or to cause dilution of the famous
mark.” 15 U.S.C. § 1125(c)(2). A plaintiff that made
that showing would also “be entitled to the [monetary] remedies set forth in section 1117(a) * * * subject to the discretion of the court and the principles of
equity.” Id. § 1125(c)(5).
However, the 1996 amendment created uncertainty, because Congress failed to amend Section
1117(a) to reference the new dilution cause of action.
As Congress explained, it therefore amended the
statute again in 1999
[t]he language of the [1996 amendment] presented to the President for signing did not include
the necessary changes to [Section 1117(a)] * * *.
Therefore, in an attempt to clarify Congress’ intent and to avoid any confusion by courts trying
to interpret the statute, section three makes the
appropriate changes to [Section 1117(a)] * * * to
allow for * * * damages.
H.R. Rep. 106-250, 106th Cong., 1st Sess., at 6
(1999).
The 1999 amendment altered Section 1117(a) as
follows (added text in italics):
When a violation of any right of the registrant of a mark registered in the Patent and
Trademark Office, or a violation under section 1125(a), a violation under section
1125(a), or a willful violation under section
1125(c), of this title shall have been estab-
7
lished in any civil action arising under this
chapter, the plaintiff shall be entitled, * * *
subject to the principles of equity, to recover
(1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the
action.[1]
B. The Parties.
Romag owns a patent for a type of magnetic snap
fastener and the registered trademark ROMAG. Pet.
App. 64a. Romag’s snaps are manufactured in China
by Romag’s factory, Wing Yip, which sells them and
pays Romag a five-cent per snap royalty. Ibid.
Fossil sells consumer fashion accessories, including handbags, both directly and through retailers
such as Macy’s. Pet. App. 65a-66a. Fossil does not
manufacture the handbags it sells; it contracts with
third-parties—in this case Superior Leather Limited,
which manufactured the bags using components, including snaps, that it purchased. Pet. App. 66a.
C. District Court Proceedings.
Romag commenced this trademark and patent
action on November 22, 2010, three days before
1
The current version reads:
When a violation of any right of the registrant of a
mark registered in the Patent and Trademark Office,
a violation under section 1125(a) or (d) of this title, or
a willful violation under section 1125(c) of this title,
shall have been established in any civil action arising
under this chapter, the plaintiff shall be entitled, * * *
subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the
plaintiff, and (3) the costs of the action.
8
Thanksgiving. The district court granted a TRO on
November 30, 2010. Pet. App. 71a.
Romag sought injunctive relief and defendants’
profits, but not actual or statutory trademark damages. District Ct.’s Jury Charge, ECF No. 410, at 22;
Pet. 8. Romag sought an award of all defendants’
handbag profits—totaling approximately $26 million,
Plaintiff Exhibit. 263—which it wanted trebled, Romag Complaint, at 11.
1. Following trial, the jury found Fossil and Macy’s liable for patent infringement; determined that
neither willfully infringed; and awarded royalty
damages of roughly $66,000. Pet. App. 34a-35a.
On Romag’s trademark-related claims, the jury
found Fossil liable but again determined Fossil had
not willfully infringed. Based on a jury instruction
Fossil objected to—and conditionally cross-appealed
from—the jury made an advisory award of Fossil’s
profits. Pet. App. 34a, 58a-59a.
The jury determined that use of the Romag mark
“accounted for approximately 1% of Fossil’s profits on
the accused handbags.” Pet. App. 59; see Mishawaka
Rubber, 316 U.S. at 206 (“[t]he plaintiff * * * is not
entitled to profits demonstrably not attributable to
the unlawful use of his mark”). The district court upheld that determination. Id. at 50a-58a.
2. The district court held a bench trial with respect to Romag’s claims for equitable relief.
It held that Romag “had sufficient knowledge
* * * by June 2010 to bring suit,” Pet. App. 85a, but
unreasonably and inexcusably delayed filing:
Plaintiff carefully timed this suit to take advantage of the imminent holiday shopping
9
season to be able to exercise the most leverage over Defendants in an attempt to extract
a quick and profitable settlement, as it had
done twice before in the past three years.
Furthermore, Plaintiff, in filing for emergency relief, relied on misleading representations that obfuscated the months of delay,
where full disclosure would have undermined
its claim of irreparable harm.
Pet. App. 81a.
In support of this conclusion, the court found
that:
Romag had twice before—in November
2007 and 2009—“issu[ed] cease and desist letters and [sought] emergency relief
on the eve of Black Friday [the first shopping day after Thanksgiving], a time that
is an obvious pressure point for retailer
defendants.” Pet. App. 80a.2
Howard Reiter, Romag’s president, received an email from China in May 2010
alleging that Superior was using counterfeit snaps; contacted his IP counsel the
next day; had information in his files
showing that Superior manufactured
handbags for Fossil; and obtained Fossil
bags that his wife (the company’s general
counsel and petitioner’s co-counsel) and
The district court observed that although Romag’s president
claimed at trial “not to know what Black Friday was, he made
note of the holiday selling season in his own declaration in support of the TRO in this case.” Pet. App. 80a.
2
10
sister bought suspecting they might have
counterfeit snaps. Pet. App. 68a-69a.
The court found “inexplicabl[e]” Reiter’s
testimony that—with all this occurring
“within one week”—he “drew no connection between his wife’s concerns regarding the Fossil bags and the email alleging
that Superior was purchasing counterfeit
snaps.” Pet. App. 79a. Reiter failed to investigate the information about counterfeiting then or during his July 2010 trip
to China, and he “offered no explanation”
for failing to do so. Ibid.
Also “not ring[ing] true” to the district
court was Reiter’s testimony that he “had
an epiphany in late October, the trigger
for which he could not recall, that led him
to finally make the connection between
the Fossil bags and the Superior invoices.” Pet. App. 79a-80a.
The district court determined that Romag’s purposeful delay economically prejudiced Fossil, compelling it to remove merchandize worth more than $4
million from stores; and “[i]f the TRO had been
sought and entered in May or June, when Romag
first had a basis for asserting its infringement
claims, Fossil’s inventory would have been much
smaller and half as valuable as its November inventory.” Pet. App. 81-82.
Because Romag failed to “offer[] any excuse for
its delay in this case, beyond Mr. Reiter’s discredited
claim that he had no idea of Fossil’s infringement
until October 2010,” the district court found laches
applied. Pet. App. 82a-83a.
11
The district court next sanctioned Romag for its
misleading and delayed TRO filings. Pet. App. 90a93a. It found Howard Reiter’s sworn declaration underlying Romag’s TRO application “misleading in
several respects.” Id. at 91a. “Its limited contents
conveyed the impression that Mr. Reiter had just
discovered the counterfeit ROMAG snaps [on a November visit to Macy’s] and only by mere happenstance” and “contrary to his sworn trial testimony
that he went to Macy’s * * * with the express purpose
of confirming his suspicions.” Ibid.
“More troubling,” the district court stated, was
“the absence in the declaration of any reference to
Mr. Reiter’s knowledge about this counterfeiting prior to his November shopping trip, particularly because he acknowledged at trial that by late October
he had strong suspicions” of counterfeit snaps in
Fossil bags. Pet. App. 91a.
Because a plaintiff’s delay in bringing suit vitiates the presumption of irreparable harm in a
trademark infringement action, “Romag’s sparse and
misleading representations deprived [the district
court] of the ability to accurately apply the appropriate standard in considering Romag’s request for
emergency injunctive relief.” Pet. App. 92a.
In addition, Romag delayed in bad faith its TRO
filing until the holiday shopping season:
Given Romag’s unmistakable pattern of relying on the pressure point of the holiday season when seeking to enforce its intellectual
property rights, it is evident that Romag intentionally sat on its rights between late May
2010 and late November 2010 to orchestrate
a strategic advantage and improperly obtain
12
emergency injunctive relief on a timetable of
its choosing, not on the irreparability of its
harm.
Pet. App. 93a.
Next, the district court denied Romag an accounting of defendants’ trademark profits, because
willful infringement was necessary for such an
award. Pet. App. 93a-102a. It also entered a permanent injunction against Fossil. Pet. App. 102a-104a.
3. Romag moved for a new trial on the willfulness
issue, arguing that the district court erred by refusing to include reckless conduct in its jury instructions defining willfulness. The district court denied
the motion, finding that Romag had waived the issue
because it “did not object to this instruction, and actually requested the charge given”; and that the instructions were correct. Pet. App. 42a-50a.
The district court further held that Romag would
not be entitled to a new trial in any event, because
“the evidence at trial at most could have supported a
finding that Fossil was negligent, not that it acted in
reckless disregard, with willful blindness, or with actual knowledge of Superior’s purchases of counterfeit
snaps.” Pet. App. 47a (footnote omitted).
The court found that “the evidence at trial established that”:
“Fossil paid full price for the snaps used
by Superior, that it had never been informed of any specific instances of Superior using counterfeit snaps, and that it
‘[d]idn’t believe that counterfeits were being used.’”
13
“There was no other evidence to support a
finding that Fossil knew or suspected
there was a risk that Superior was using
counterfeit snaps.”
“[A]bsent evidence of such suspicions,
Fossil’s failure to investigate Superior
more generally amounts to no more than
negligence by Fossil.”
Pet. App. 49a. Therefore, the district court concluded, “there was no evidence that Fossil acted recklessly, with willful blindness, or with actual knowledge
of a risk of counterfeit snaps.” Id. at 49a-50a.
D. The Federal Circuit’s Romag I Decision.
Romag appealed on two distinct issues: denial of
an award of defendants’ profits on the trademark
claim and reduction of patent damages based on Romag’s laches.
1. The court of appeals unanimously affirmed the
district court’s holding that willfulness is required
for an accounting of a defendant’s trademark profits.
Pet. App. 20a-33a.
It began by observing that this Court—in preLanham Act opinions applying the common law—
stated that an award of profits was not proper when
a defendant “acted in good faith,” was an “innocent
infringer,” or where there was a “want of fraudulent
intent.” Pet. App. 20a-21a (quoting Saxlehner v.
Siegel-Cooper Co., 179 U.S. 42, 42-43 (1900); Hamilton-Brown Shoe Co. v. Wolf Brothers & Co., 240 U.S.
251, 261 (1916); McLean v. Fleming, 96 U.S. 245, 257
(1877)). The court of appeals also cited the Restatement of Unfair Competition, which requires proof of
intentional wrongdoing—imposing liability for the
14
defendant’s profits resulting from trademark infringement “only if * * * the actor engaged in the
conduct with the intention of causing confusion or
deception.” Pet. App. 21a, citing Restatement (Third)
of Unfair Competition § 37(1) (1995).
The Federal Circuit noted the pre-1999 circuit
conflict on whether Section 1117(a)’s “principles of
equity” require willfulness. It then addressed Romag’s argument that the 1999 amendment—
clarifying that monetary recovery under Section
1117(a) was available for “a willful violation under
section 1125(c)”—eliminated any willfulness requirement for claims under Section 1125(a). Pet.
App. 21a-24a.
The Federal Circuit observed that applicable
Second Circuit trademark precedent required willfulness for an award of profits both before and after
the 1999 amendment. Pet. App. 21a-22a; 28a (citing
George Basch Co., 968 F.2d at 1540; Int’l Star Class
Yacht Racing Ass’n v. Tommy Hilfiger, U.S.A., Inc.,
80 F.3d 749, 753 (2d Cir. 1996), cert. denied, 531 U.S.
873 (2000); and Merck Eprova AG v. Gnosis S.p.A.,
760 F.3d 247 (2d Cir. 2014)).
The court of appeals found “nothing in the 1999
amendment” permitting it “to declare that the governing Second Circuit precedent is no longer good
law.” Pet. App. 28a-32a.
First, it found that “the limited purpose of the
1999 amendment was simply to correct an error in
the 1996 Dilution Act” relating to claims under Section 1125(c). Pet. App. 29a. Congress did not contemplate or intend “any change to the willfulness requirement for violations of § 1125(a).” Ibid. “Given
the alleged significance of the purported change, one
15
would have expected to see an acknowledgement or
discussion from Congress of the courts of appeals
cases in the relevant area if Congress had intended
to resolve the circuit conflict.” Id. at 30a.
Second, the source of the willfulness requirement
for awards of a defendant’s profits is the statutory
text “subject to principles of equity,” and Congress
did not change those words in 1999. By adding “willful violation under section 1125(c)” Congress could
not change the meaning of a preexisting statutory
term that it did not amend. Pet. App. 30a.
The court of appeals reasoned that the inserted
language “does not create a negative pregnant that
willfulness is always required in dilution cases but
never for infringement,” because “[t]he cases relied
on by Romag where a negative pregnant was inferred
involve statutory provisions enacted at the same
time.” Pet. App. 31a. “We do not think that Congressional intent can be inferred from an amendment
passed years after the fact to address a drafting error.” Ibid.
Third, the “willful violation” language serves two
important purpose s wholly unrelated to Section
1125(a) claims. Because damages (not profits) are
available in trademark infringement cases without
proof of willfulness—but Congress wanted to limit all
monetary remedies, including damages, in dilution
claims to cases of willful misconduct—the language
was necessary to distinguish between the two types
of claims. And “even with respect to awards of profits
in dilution cases, the addition of ‘willful violation’
was necessary to establish a uniform rule” to prevent
courts from applying their infringement-related
precedents to award profits in dilution cases without
willfulness. Pet. App. 31a-32a.
16
The appellate court therefore found no basis for
“depart[ing] from Second Circuit precedent requiring
willfulness for the recovery of profits in infringement
cases.” Pet. App. 32a.
2. The court of appeals in Romag I also affirmed
the application of laches to reduce patent damages
based on its prior decision in SCA Hygiene Products
Aktiebolag v. First Quality Baby Products, LLC, 807
F.3d 1311, 1321 (Fed. Cir. 2015) (en banc), vacated in
part by, 137 S. Ct. 954 (2017). Pet. App. 19a-20a.
E. The Court’s GVR “For Further Consideration In Light Of” SCA.
Romag petitioned for certiorari on the issues of
trademark profits and patent laches. After the Court
decided SCA, holding that laches does not limit patent damages within the statute of limitations, it
granted the certiorari petition, vacated Romag I and
remanded “for further consideration in light of” SCA.
Romag Fasteners, Inc. v. Fossil, Inc., 137 S. Ct. 1373
((2017) (mem).
On the limited scope of the patent laches remand
under SCA, Romag acknowledged the separateness
of the profits and laches issues, stating that the
trademark profits issue arose under a different statute; was “entirely separate and independent from the
patent question,” and, thus, SCA “has no bearing” on
it; and that a laches remand would “not affect the
remainder of the [Romag I] judgment, rejecting an
award of defendants’ profits for trademark infringement because Romag failed to establish Fossil willfully infringed.” March 21, 2017, Petitioner’s Supplemental Brief, 2-3, Case No. 16-202.
17
F. Post-GVR Proceedings.
1. In response to this Court’s GVR order, the
Federal Circuit on May 3, 2017, issued its Romag II
order. Pet. App. 13a-15a.
First, the appellate court recognized that this
Court’s GVR order limited the remand to the laches
issue decided in SCA and, therefore, did not affect
other aspects of its earlier Romag I opinion. Pet.
App. 14a. The Federal Circuit therefore expressly reinstated Romag I’s affirmance of the district court’s
denial of an accounting of Fossil’s trademark profits
to Romag:
(4) We hereby reinstate those aspects of our earlier decision and judgment set forth in sections
II-III of our earlier opinion, [Romag I], affirming
the district court’s judgment declining to award
Fossil’s profits [under the Lanham Act], which
were not affected by the Supreme Court’s order.
Pet. App. 15a.
Romag did not file a petition for certiorari seeking
review of Romag II within 90 days of entry of the
Federal Circuit’s judgment.
2. The court of appeals’ laches remand narrowly
directed the district court “to correct the damages
judgment amount consistent with the Supreme
Court’s opinion.” Pet. App. 14a.
On remand, Romag acknowledged that Romag II
reaffirmed and reinstated the Romag I trademark
profits decision and bound the district court. Joint
Status Report, Dkt. 536, dated October 11, 2017, at
14. Nonetheless, trying to revive its right to seek review of the trademark profits issue, Romag urged the
18
district court to go outside the mandate. It began by
explaining that “Romag raise[d] this issue again in
order to preserve it for another expected petition for
certiorari” on the trademark profits issue. Ibid.
Then, “Romag request[ed] that the [district c]ourt’s
decision on remand clearly and explicitly preserve
that issue for ultimate review by the Supreme Court.”
Ibid. (emphasis added). Fossil objected, id. at 14-16,
and the district court rejected Romag’s invitation to
violate the court of appeals’ mandate, November 8,
2017 Scheduling Order, Dkt. 538 at 1 (declining
briefing on profits).
The parties stipulated to the amount of patent
damages and the form of judgment. The October 15,
2018 Second Amended Final Judgment reflecting the
stipulated patent damages amount expressly
acknowledges that it addresses only recalculation of
patent damages, and it confirms that Romag II reinstated the Romag I decision and judgment declining
to award Fossil’s profits. Pet. App. 5a-7a.
Romag filed a notice of appeal, but it did not appeal from any issue decided on remand. Rather, Romag sought review again of the trademark profits
determination.
Because the affirmed and reaffirmed trademark
profits decision was not the subject of remand, Fossil
moved to dismiss Romag’s attempted re-appeal. The
court of appeals agreed, precluding Romag from challenging “the district court’s trademark profits determination, and in particular its assertion that George
Basch no longer remains good law after the 1999
Amendments.” Pet. App. 3a. The Federal Circuit
acknowledged that briefing on an issue affirmed and
reaffirmed was “improper and unnecessary,” particularly because it “did not direct any further proceed-
19
ings on this issue, and the district court took no further action.” Ibid. Thereafter, it summarily affirmed
the district court’s remand proceedings, which did
not include the issue of trademark profits.
REASONS FOR DENYING THE PETITION
I. This Court Lacks Jurisdiction To Address
The Profits Disgorgement Issue.
The Court has jurisdiction to review the Federal
Circuit’s February 2019 order, but the Federal Circuit itself made clear that the profits disgorgement
issue presented for review was excluded from that
order. Rather, that issue was finally determined in
the court of appeals’ May 3, 2017 order—which the
Federal Circuit itself characterized as “reinstat[ing]
those aspects of our earlier decision and judgment
* * * affirming the district court’s judgment declining
to award Fossil’s profits, which were not affected by
the Supreme Court’s order.” Pet. App. 15a.
Congress limited this Court’s certiorari jurisdiction to petitions filed within 90 days of entry of
judgment for which a petitioner seeks review. 28
U.S.C. § 2101(c). The Court has repeatedly held that
this filing period for civil cases is jurisdictional and
mandatory. See Hamer v. Neighborhood Housing
Servs. of Chi., 138 S. Ct. 13, 21 (2017).
Here, the certiorari petition was not filed within
90 days of the May 2017 order. The Court therefore
lacks jurisdiction to address the profits disgorgement
issue.3
Romag could have petitioned for review of the reinstated Romag II decision within the 90-day statutory time period. See
WesternGeco LLC v. ION Geophysical Corp., 136 S. Ct. 2486
(2016) (mem.) (during post-GVR remand, granting petition for
3
20
Romag cannot overcome this fatal jurisdictional
flaw by citing the post-Romag II district court laches
remand proceeding; or seeking review of the February 2019 Federal Circuit order. The court of appeals
in May 2017 made clear that further proceedings in
the district court and the court of appeals had nothing to do with the trademark profits issue.
Under the Court’s precedent, the fact that the
post-GVR remand resulted in entry of a new judgment on patent damages, but did not address trademark profits, did not reset the time for Romag to
seek review. See FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 211-12 (1952) (It is only if
the lower court “changes matters of substance or resolves a genuine ambiguity in a judgment previously
rendered [that] the period within which an appeal
must be taken or petition for certiorari begins to run
anew.”); accord Dep’t of Banking, State of Neb. v.
Pink, 317 U.S. 264, 267-68 (1942) (denying jurisdiction where subsequent order did not alter rights, and
thus, did not toll 90-day period). “The test is a practical one. The question is whether the lower court, in
its second order, has disturbed or revised legal rights
and obligations which, by its prior judgment, had
been plainly and properly settled with finality.”
Minneapolis-Honeywell at 212.
As Romag itself acknowledged and the court of
appeals made abundantly clear, the Federal Circuit’s
May 2017 order “reinstat[ing]” that court’s earlier
“decision and judgment” (Pet. App. 15a) fully and finally determined the parties’ trademark profit
review of separate issue the court of appeals reinstated). Romag
concedes that it could have sought review, see Romag’s Opposition to Motion to Dismiss, Fed. Cir. Case No 18-2417, Dkt. 30 at
13 (December 21, 2018); inexplicably, it choose not to do so.
21
rights. The post-GVR remand to the district court
was limited to the wholly-unrelated patent laches issue. Consistent with the limited remand mandate,
neither the court of appeals nor the district court
acted to “disturb” or “revise legal rights and obligations” which had been “plainly and properly settled
with finality” by the Federal Circuit’s May 2017 order. And, of course, the February 2019 order dismissing Romag’s attempted re-appeal on the profits issue
did not disturb or revise the parties’ rights. Rather,
the court of appeals expressly refused to address the
issue that had been finally determined in its May
2017 order.
Romag’s authorities do not support a contrary
conclusion. None of Romag’s cases involve the express reinstatement by a court of appeals of its prior
decision and judgment, and thereby expressly excluding the issue from remand. To the contrary, each
involved remand proceedings—unlike here—where
the rights of the parties on a particular point continued to be adjudicated and remained in flux. See Mercer v. Theriot, 377 U.S. 152 (1964) (allowing certiorari where the parties’ rights under a judgment were
not fully and finally adjudicated in the first decision);
Major League Baseball Players Ass’n v. Garvey, 532
U.S. 1015 (2001) (same where outcome of the arbitration proceeding remained in flux during remand).
II. The Question Presented Does Not Warrant
Review.
The Court has several times, including most recently in this case, denied review of the question presented here regarding the role of willfulness in
claims for an accounting of defendant’s profits in
trademark infringement actions. See, e.g., M2 Software Inc. v. Viacom Inc., 223 F. App’x 653 (9th Cir.),
22
cert. denied, 552 U.S. 1038 (2007); Contessa Food
Prods. Inc. v. Lockpur Fish Processing Co. Ltd., 123
F. App’x 747 (9th Cir. 2005), cert. denied, sub. nom.
Contessa Premium Foods, Inc. v. Berdex Seafood,
Inc., 546 U.S. 957 (2005).
The Court should reach the same conclusion
here. First, there is no meaningful conflict among the
courts of appeals. Although the lower courts apply
different formulations of the standard for ordering
an accounting of an infringer’s profits, all agree that
the presence or absence of willful infringement is, at
minimum, an “important” factor. In the overwhelming majority of cases decided by courts applying the
latter test, willfulness is present when an accounting
of profits is ordered.
The lack of practical importance is confirmed by
the actions of trademark owners, who can exercise
considerable discretion in choosing where to sue. If
the difference in standards had real-world consequences, one would expect to see a large number of
cases filed in the circuits holding that willful misconduct is important, but not required. That has not
occurred. To the contrary, most cases are filed in the
Second and Ninth Circuits, both of which require
willfulness.
Second, this case is a poor vehicle, because the
legal standard urged by petitioner will not change
the result. The district court found “the evidence at
trial at most could have supported a finding that
Fossil was negligent, not that it acted in reckless disregard, with willful blindness, or with actual
knowledge of Superior’s purchases of counterfeit
snaps.” Pet. App. 47a (footnote omitted). And the district court found that Romag had engaged in misconduct warranting the application of laches and an
23
award of sanctions. “[T]he principles of equity” (15
U.S.C. § 1117(a)) do not permit an accounting of profits in those circumstances.
These deep flaws likely explain the absence of
even a single amicus brief in support of either this
petition or Romag’s initial petition. Strong trade associations protect the interests of IP owners, appearing frequently as amici before the Court. Their absence speaks volumes about the lack of practical importance of the issue and the problems with this case
as a vehicle for addressing it.
Finally, the court of appeals’ determination is
correct. Its analysis in Romag I of the effect of the
1999 amendment is the first comprehensive assessment by any court. See J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 30:62
(5th ed.) (March 2019 Update) (agreeing with the
Romag I decision and noting analytical shortcomings
of contrary decisions).
Indeed, the only court of appeals to address the
issue since the Federal Circuit’s ruling on the profits
disgorgement issue—the Ninth Circuit—agreed with
the Federal Circuit that willfulness remains a prerequisite under the principles of equity to an accounting of defendant’s profits. Stone Creek, Inc. v.
Omnia Italian Design, Inc., 875 F.3d 426, 439-42
(9th Cir. 2017), cert. denied 138 S. Ct. 1984 (2018)
(noting that circuits that had ruled the other way
failed to “look [] at the back story of the remedies
provision”; and finding that history “illuminating”).
Continued percolation may well eliminate the court
of appeals’ differing standards.
24
A. There Is No Meaningful Conflict Among
The Courts Of Appeals.
Whether the infringement was committed willfully or in bad faith is an important factor in every
circuit’s application of Section 1117(a)’s “principles of
equity” to decide whether an accounting of an infringer’s profits is warranted. The only difference is
the weight accorded to the willfulness factor—and
that difference has little real-world significance because willful misconduct is present in the overwhelming majority of cases in which the courts of
appeals permit recovery of the defendant’s profits.
Some courts hold that bad faith must be present
before an infringer’s profits may be awarded. E.g.,
George Basch Co., 968 F.2d at 1537 (Second Circuit;
“a finding of defendant’s willful deceptiveness is a
prerequisite for awarding profits”); ALPO, 913 F.2d
at 961, 965, 969 (D.C. Cir.); Minn. Pet Breeders, 41
F.3d at 1247 (Eighth Cir.); Stone Creek, Inc., 875
F.3d at 442 (Ninth Circuit); Bishop, 154 F.3d at 1223
(Tenth Cir.).
Others hold that bad faith is an “important” factor to consider. E.g., Synergistic Int’l, LLC v. Korman, 470 F.3d 162, 175 (4th Cir. 2006) (agreeing
with “the Third and Fifth Circuits” that “willfulness
is a proper and important factor”); Quick Techs., Inc.
v. Sage Group PLC, 313 F.3d 338, 349, 350 (5th Cir.
2002), cert. denied, 540 U.S. 814 (2003) (concluding
“[i]t is obvious from our cases that willful infringement is an important factor which must be considered”); Banjo Buddies, 399 F.3d at 171 (“[w]e hold
that willfulness [sic] is an important equitable factor”).
25
The difference in formulations has little practical
importance. Every court views willfulness at least as
an important factor, and the differences between
them result in minimal inter-circuit variation in outcomes—in the overwhelming majority of cases in
which an accounting is ordered, willfulness is present.
Indeed, the cases cited by Romag to demonstrate
the circuit conflict (Pet. 13, 14) confirm
that accountings are regularly denied in circuits applying the “important factor” formulation when willful infringement is not proven. See, e.g., Quick
Techs., 313 F.3d at 343, 350 (jury found no willfulness; court of appeals held that jury instruction requiring willfulness was error, but went on to uphold
denial of profits under multi-factor test); Optimum
Techs., Inc. v. Home Depot U.S.A., Inc., 217 F. App’x
899, 903 (11th Cir. 2007) (finding Home Depot’s actions not willful,” and that the “district court did not
abuse its discretion in finding an accounting of Home
Depot’s profits was not an appropriate remedy”); see
also Gucci Am., Inc. v. Daffy’s Inc., 354 F.3d 228,
231, 241-43 (3d Cir. 2003) (in case involving nonwillful infringement decided prior to adoption of multi-factor test in Banjo Buddies, analyzing profits entitlement under both SecuraComm’s willfulness requirement and Quick Technologies’ multi-factor approach and finding denial of profits proper under
both standards); Seatrax, Inc. v. Sonbeck Int’l Inc.,
200 F.3d 358, 372 & n.9 (5th Cir. 2000) (applying factors; affirming district court denial of accounting
where jury found no willful infringement; and stating that court’s independent research does not “reveal[] any cases from this circuit where an accounting of profits has been awarded without a finding of
willfulness”); Pebble Beach, 155 F.3d at 555 (articu-
26
lating factors and affirming denial of accounting
where there was no palming off and implicitly finding that infringement was not willful).
Similarly, in circuits not requiring willfulness,
egregious, bad faith infringers will, subject to consideration of other equitable factors, be made to account
for profits attributable to their infringement. See
Banjo Buddies, 399 F.3d at 176 (affirming accounting of profits where infringer “palmed off” trademarked product); Roulo v. Russ Berrie & Co., 886
F.2d 931, 941 (7th Cir. 1989) (“Given the evidence of
intentional imitation and the substantial similarity
between the two card lines,” district court properly
instructed the jury that an award of profits would be
appropriate).
The difference among the circuits is not only insignificant, but Romag also fails to support its claim
that the circuit divergence arises persistently. Romag cites several cases in support of that contention.
Pet. 18-19. Most of those opinions, however, simply
refer to an accounting of profits without addressing
the issue raised here. Regardless, Romag’s roughly
15 cases equal less than one-half of one percent of
the roughly 3,000 trade-mark cases filed annually.
See Judicial Business of the U.S. Courts,
https://www.uscourts.gov/statistics/table/c2/statistical-tables-federal-judiciary/2018/12//31
(2,934 and 3,221 trademark cases filed respectively
in 2017 and 2018).
The actions of trademark plaintiffs weigh heavily
against Romag’s claim of importance. They have not
shied away from circuits—like the Second and
Ninth—requiring willfulness. Those venues remain
27
the most popular.4 If the standard applied was truly
determinative, plaintiffs would seek out circuits with
the perceived lowest hurdle to recovery. They have
not done so, because in practice the presence or absence of willfulness yields the same result in any circuit.
B. This Case Is An Extremely Poor Vehicle
Because The District Court’s Factual
Findings Bar An Accounting Of Defendant’s Profits Under Any Legal Standard.
A ruling in Romag’s favor on the legal issue presented will not change the outcome. The district
court’s factual findings preclude an award of profits
under the standard Romag supports. That makes
this case a poor vehicle for resolving the question—
the Court instead should await a case in which the
legal standard might affect the outcome.
4 For example, from 1994 to 2014, the federal district courts in
California (14,602 filings) and New York (8,594) consistently
ranked as plaintiffs’ most popular trademark venues, regularly
outstripping filings in venues without the willfulness requirement, such as Florida (5,549), Texas (4,088), Illinois (3,644),
Pennsylvania (2,223), and New Jersey (2,614). Matthew Sag, IP
Litigation in U.S. District Courts: 1994 to 2014, 101 Iowa L.
Rev. 1067, 1108 app. B tbl.8 (2016). Most recently, in the ten
most active districts for trademark filings in 2017 and 2018,
where a total of 2,621 cases were filed, 58% of the cases were
filed within districts in the Second and Ninth Circuits, both of
which require willfulness, and the balance were filed within circuits holding willfulness as an important factor. Trevor Little,
Is the Trademark Litigation Slump Over? 2018 Trends and
Predictions, World Trademark Review (May 9, 2018),
https://www.worldtrademarkreview.com/enforcement-andlitigation/trademark-litigation-slump-over-2018-trends-andpredictions.
28
Under the legal standard that Romag prefers,
the question of willfulness does not vanish from the
scene. Rather, “willful infringement is an important
factor which must be considered.” Quick Techs., 313
F.3d at 349, 350.
Courts canvass a variety of factors, including:
(1) whether the defendant had the intent to
confuse or deceive, which “addresses
whether there has been a willful infringement on the trademark rights of the plaintiff, or whether the defendant has acted in
bad faith”;
(2) whether sales have been diverted;
(3) the adequacy of other remedies;
(4) any unreasonable delay by the plaintiff in
asserting his rights;
(5) the public interest in making the misconduct unprofitable; and
(6) whether the case involves palming off.
Synergistic, 470 F.3d at 175 (citing Quick Techs., 313
F.3d at 349); accord Banjo Buddies, 399 F.3d at 175;
see also George Basch, 968 F.2d at 1540 (citing the
following factors from the Restatement (Third) of Unfair Competition (Tent. Draft No. 3, 1991) § 37(2)
cmt. f.: “(1) the degree of certainty that the defendant
benefited from the unlawful conduct; (2) [the] availability and adequacy of other remedies; (3) the role of
a particular defendant in effectuating the infringement; (4) plaintiff’s laches; and (5) plaintiff’s unclean
hands”).
29
Here, analysis of these factors based on the district court’s uncontested findings leaves no doubt
that Romag could not receive a profits award.
Fossil was not willful. The district court—like
the jury that found no willful infringement—
expressly found that “the evidence at trial at most
could have supported a finding that Fossil was negligent, not that it acted in reckless disregard, with
willful blindness, or with actual knowledge of Superior’s purchases of counterfeit snaps.” Pet. App. 47a
(footnote omitted).
Fossil did not divert sales. Fossil and Romag
are not competitors, and no sales were diverted from
Romag to Fossil.
Other remedies were available and adequate, and an accounting would be an inequitable windfall. Fossil, a non-willful infringer, was
subject to an injunction from the inception of the
case, a powerful remedy with strong deterrent effect.
The preliminary relief that Romag obtained through
the injunction rendered millions of dollars of Fossil
inventory worthless and eliminated Fossil’s holiday
handbag sales. In addition, Romag has been awarded
a 9¢ per-snap reasonable royalty, nearly doubling the
5¢ per-snap royalty it normally earned, and Romag
elected not to seek statutory trademark damages.
The injunction and more than $66,000 royalty payment are more than sufficient remedies for Fossil’s
non-willful and non-beneficial infringement.
Romag’s purposeful and prejudicial delay
strongly supports denying an accounting. The
district court found that (1) Romag unreasonably delayed filing this action to gain a tactical settlement
advantage; and (2) Romag’s conduct cost Fossil mil-
30
lions of dollars in lost inventory and lost profits.
These findings strongly support denying Romag an
equitable accounting of Fossil’s profits.
The public interest strongly favors Fossil.
This factor “addresses the balance that a court
should strike between a plaintiff’s right to be compensated for the defendant’s trademark infringement
activities, and the statutory right of the defendant to
not be assessed a penalty.” Synergistic, 470 F.3d at
176. Here, Romag was more than compensated for its
5¢ per-snap royalty, and it did not seek statutory
damages, which might have provided additional
compensation for Fossil’s non-willful infringement.
Conversely, an award of Fossil’s profits would be a
windfall far beyond any notion of compensation, and
would punish Fossil, particularly in light of (a) the
district court’s finding that Fossil did not know about
or benefit from the infringement, and (b) the undisputed fact that Romag’s snap mark did not drive
Fossil’s handbag profits—demonstrated by the jury’s
allocation of only 1% of Fossil’s profits.
Fossil Did Not Palm Off. “Palming off” means
use of the trademark by a “defendant subjectively
and knowingly intended to confuse buyers.” J.
Thomas McCarthy, Trademarks and Unfair Competition § 25:3 (Sept. 2016 Update). Fossil’s use was
unknowing, without intent to confuse, and, as the jury’s attribution of only 1% of Fossil’s profits to the infringement shows, did not confuse buyers.
Romag’s unclean hands preclude an equitable accounting. The Restatement and George
Basch Co. factors also require consideration of a
plaintiff’s unclean hands. The district court’s findings that Romag acted in bad faith, engaged in sanctionable delaying tactics, and proffered a misleading
31
declaration strongly militate against Romag and its
claim for an equitable profits award.
In sum, every factor weighs heavily against an
award of profits—so Romag would not obtain such an
award even under its preferred legal test.
C. The Court Of Appeals’ Holding Is Correct.
Willfulness is a prerequisite to an award of the
defendant’s profits in a trademark infringement action.
1. Section 1117(a)’s “Principles Of Equity” Expressly Incorporated A Willfulness Requirement.
Proof of willfulness was required at common law.
The Court, in Saxlehner, held that “an injunction
should issue against [three trademark infringers],
but that, as [one defendant] appears to have acted in
good faith, and the sales of the other[] [defendants]
were small, they should not be required to account
for gains and profits.” 179 U.S. at 42-43. By contrast,
the Court affirmed an accounting of the infringer’s
profits where the “defendant [did] not stand as an
innocent infringer.” Hamilton-Brown Shoe Co. v.
Wolf Bros. & Co., 240 U.S. 251, 261 (1916); see also
McLean, 96 U.S. at 257 (explaining that an accounting is “constantly refused * * * in case[s] of acquiescence or want of fraudulent intent”) (citing cases);
Champion Spark Plug, 331 U.S. at 131-32 (holding
in a case under the Trade-Mark Act of 1905 that an
injunction satisfied the equities in that case, as there
had been no “fraud or palming off”).
Numerous pre-Lanham Act lower court decisions
likewise restricted the equitable accounting reme-
32
dy—the common-law mechanism for awarding defendant’s profits—to cases in which willful infringement had been established.5 Synthesizing this authority, the 1938 Restatement authorized an award of
profits “if, but only if, (a) [a defendant] engaged in
his conduct with the purpose of securing the benefit of
the reputation in the market of the other.” Restate-
See, e.g., N.K. Fairbank Co. v. Windsor, 124 F. 200, 202 (2d
Cir. 1903) (“in all cases where there has been recovery [of profits], intentional fraud has been found”); P.E. Sharpless Co. v.
Lawrence, 213 F. 423, 428 (3d Cir. 1914) (awarding profits
where unfair competition was “willful and fraudulent”); Horlick’s Malted Milk Corp. v. Horluck’s, Inc., 51 F.2d 357, 359
(W.D. Wash. 1931) (requiring “willful fraud”), aff’d in part on
other grounds, 59 F.2d 13 (9th Cir. 1932); Rubber & Celluloid
Harness Trimming Co. v. F.W. DeVoe & C.T. Reynolds Co., 233
F.150, 160 (D.N.J. 1916) (same); Dr. A. Reed Cushion Shoe Co.
v. Frew, 158 F. 552, 556 (W.D.N.Y. 1908) (accounting rests on
defendant’s intentional fraud and plaintiff’s loss of business),
rev’d on other grounds and affirmed on denial of accounting,
162 F. 887 (2d Cir. 1908); Kickapoo Dev. Corp. v. Kickapoo Orchard Co., 285 N.W. 354, 359-60 (Wis. 1939) (recovery of profits
allowed where mark was intentionally simulated); Liberty Oil
Corp. v. Crowley, Milner & Co., 258 N.W. 241 (Mich. 1935)
(denying accounting where sales made without knowledge of
plaintiffs’ rights); Globe-Wernicke Co. v. Safe-Cabinet Co., 144
N.E. 711, 713 (Ohio 1924) (citing “many authorities” limiting
accounting to deliberate and willful infringement); United Drug
Co. v. Kovacs, 123 A. 654, 655 (Pa. 1924) (holding defendants liable for their profits, but stating that “[a] different question
would arise if its imitation had been an innocent one); Regis v.
Jaynes, 77 N.E. 774, 776 (Mass. 1906) (but finding “weight of
modern authority” denies accounting for use of mark “merely
accidental or without an actual wrongful intent to defraud”);
Beebe v. Tolerton & Stetson Co., 91 N.W. 905 (Iowa 1902) (accounting requires bad faith); George T. Stagg Co. v. Taylor, 27
S.W. 247, 247 (Ky. Ct. App. 1894) (reversing profits award absent fraudulent intent”).
5
33
ment (First) of Torts § 747 Profits (1938) (emphasis
added).
When the Lanham Act was adopted in 1946, it
specified that a plaintiff could—“subject to the principles of equity”—recover “defendant’s profits.” 15
U.S.C. § 1117(a). Congress plainly, and expressly, incorporated the pre-existing common law rule into the
Lanham Act. Indeed, the inclusion within Section
1117(a) of the reference to “the principles of equity”
was expressly intended to make clear that the legislation preserved the common law “principles of equity in respect of allowances of and defenses to an accounting of profits.” Hearings on H.R. 102, H.R.
5461, and S. 895 Before the Subcomm. on TradeMarks of the House Comm. on Patents, 77th Cong.,
1st Sess. 228 (1941) (testimony of Prof. Milton Handler).
That is consistent with the Lanham Act’s purpose, which was “to codify and unify the common law
of unfair competition and trademark protection.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 861
n.2 (1982) (White, J., concurring) (citing S. Rep. No.
79-1333 (1946)); see also Kirtsaeng v. John Wiley &
Sons, Inc., 133 S. Ct. 1351, 1363 (2013) (“when a
statute covers an issue previously governed by the
common law, we must presume that Congress intended to retain the substance of the common law”)
(internal quotation marks omitted).
The Court’s decision in Halo Electronics v. Pulse
Electronics, Inc., 136 S. Ct. 1923 (2016), confirms
that conclusion. Although Patent Act Section 284
contains “no precise rule or formula” for enhancing
damages in patent infringement actions, Halo directs
that a court’s “discretion should be exercised in light
of the considerations” underlying the grant of that
34
discretion; namely, more than two centuries of case
law establishing a bright-line requirement of willful
infringement as a prerequisite to enhancing damages. 136 S. Ct. at 1932 (internal citation omitted).
Here, it is even clearer that Section 1117(a)’s
“principles of equity” must be informed by the common law rules that preceded it. It plainly required
proof of willfulness to permit an accounting.6
2. The 1999 Amendment Did Not Alter
The Standard For An Accounting.
Romag argued below that this history is irrelevant because the 1999 amendment supposedly abrogated any willfulness requirement that existed prior
to that date. That argument—rejected by both the
Federal and Ninth Circuits—fails for multiple reasons.
First, Congress in 1999 did not amend, reenact,
or alter in any way the statutory text that is the
source of the willfulness requirement—the portion of
Section 1117(a) stating that the plaintiff’s “entitle[ment]” to the specified monetary remedies, including “defendant’s profits,” is “subject to the principles of equity.” Congress’s addition of the word
“willful” in another clause of the provision could not
alter the meaning of words enacted 53 years earlier.
Second, the statutory context makes clear that
“the limited purpose of the 1999 amendment was
simply to correct an error in the 1996 Dilution Act”
relating to claims under Section 1125(c), which could
Romag’s claim that willfulness is “atextual” (Pet. 4) is belied
by the text’s express incorporation of “the principles of equity,”
which provides a clear textual basis for the willfulness requirement.
6
35
prevent dilution plaintiffs from obtaining the monetary remedy that Congress granted in 1996. Pet.
App. 29a. Congress did not contemplate or intend
“any change to the willfulness requirement for violations of § 1125(a).” Pet. App. 29a.
In particular, Congress did not even acknowledge
the pre-1999 willfulness standards for trademark infringement claims adopted by the courts of appeals,
let alone indicate any intention to address that issue.
“Given the alleged significance of the purported
change, one would have expected to see an acknowledgement or discussion from Congress of the courts
of appeals cases in the relevant area if Congress had
intended to resolve the circuit conflict.” Pet. App.
30a; accord Dir. of Revenue of Mo. v. CoBank ACB,
531 U.S. 316, 323 (2001) (“[I]t would be surprising,
indeed, if Congress * * * made a radical—but entirely
implicit—change * * * [with a] ‘technical and conforming amendment[].’”) (internal citation omitted);
Whitman v. Am. Trucking Ass’ns, Inc., 531 U.S. 457,
468 (2001) (Congress does not “hide elephants in
mouseholes.”).
Third, as the court of appeals explained, the inserted language “does not create a negative pregnant
that willfulness is always required in dilution cases
but never for infringement,” because “the cases relied
on by Romag where a negative pregnant was inferred
involve statutory provisions enacted at the same
time.” Pet. App. 31a; accord Stone Creek, 875 F.3d at
442. “We do not think that Congressional intent [regarding the meaning of ‘principles of equity’] can be
inferred from an amendment passed years after the
fact to address a drafting error.” Id. at 31a.
Moreover, the “willful violation” language serves
two important purposes unrelated to Section 1114
36
and Section 1125(a) claims. Because damages (as opposed to profits) are available in trademark infringement cases without proof of willfulness—but
Congress wanted to limit all monetary remedies for
dilution claims, including damages, to cases of willful
misconduct—the language was necessary to distinguish between the two types of claims. And “even
with respect to awards of profits in dilution cases,
the addition of ‘willful violation’ was necessary to establish a uniform rule,” because courts otherwise
might apply their precedents in the infringement
context to hold that awards of profits without proof of
willfulness were permissible in dilution cases. Pet.
App. 31a-32a.
In sum, the court below correctly held that the
1999 amendment has no effect on the standard for an
accounting of defendant’s profits in Section 1125(a)
trademark infringement actions. Under the governing common law standard, adopted in the Lanham
Act, willfulness is a prerequisite to such an award of
profits.
37
CONCLUSION
The petition for a writ of certiorari should be denied.
Respectfully submitted.
LAWRENCE BROCCHINI
Reavis Page Jump LLP
41 Madison Avenue
New York, NY 10010
(212) 763-4100
LAUREN S. ALBERT
The Law Offices of
Lauren S. Albert, LLC
830 Third Avenue
New York, NY 10022
(212) 267-1300
JEFFREY E. DUPLER
Counsel of Record
Gibney, Anthony & Flaherty LLP
665 Fifth Avenue
New York, NY 10022
(212) 688-5151
jdupler@gibney.com
Counsel for Respondents
MAY 2019
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.