The Price of Recklessness: Disgorgement of Profits in a Post-Romag World

• Author: Josh Escovedo, Zack Thompson
• Pages: 52-55

Published in Landslide® magazine, Volume 13, Number 3, a publication of the ABA Section of Intellectual Property Law (ABA-IPL), ©2020 by the American Bar Association. Reproduced with permission. All rights reserved.

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Meeting of the Minds

The Price of Recklessness: Disgorgement

of Prots in a Post-Romag World

By Josh Escovedo and Zack Thompson

by writing contracts to control the risk

as much as possible. Considering the

importance of Chinese manufactur-

ing to global trade, the Chinese legal

system and its evolving trademark

enforcement system will likely cause

companies to get creative.

Summary of the Supreme Court’s

Opinions

In Romag, the Court examined whether

a plaintiff in a trademark infringement

action is required to show that a defen-

dant willfully infringed the plaintiff’s

trademark to obtain a prots award.

The issue arose from a dispute between

Romag, a manufacturer of magnetic

snap fasteners for leather goods, and

Fossil, a designer and distributor of

a wide range of fashion accessories.2

Long ago, those parties entered into

an agreement permitting Fossil to use

Romag’s fasteners on Fossil’s handbags

and other products. All was well until

Romag discovered that the Chinese

factories where Fossil’s products were

being manufactured were using coun-

terfeit Romag fasteners, and that Fossil

had not instituted protocols to prevent

such conduct. When settlement discus-

sions proved fruitless, Romag sued.

After trial, the jury found that Fos-

sil had acted “in callous disregard” of

Romag’s intellectual property rights.3

However, because the district court also

found that Fossil had not acted will-

fully, the district court refused Romag’s

The U.S. Supreme Court issued

numerous landmark decisions in

2020, among those—for trademark

scholars and practitioners—Romag Fas-

teners, Inc. v. Fossil, Inc.1 The Court, with

Justice Gorsuch delivering the majority

opinion, held that a plaintiff in a trade-

mark infringement suit is not required to

show that a defendant willfully infringed

the plaintiff’s trademark as a precondition

to a prots award. But Justice Gorsuch’s

opinion and Justice Alito’s and Justice

Sotomayor’s concurrences were clear that

mental state is still a highly important con-

sideration in determining whether to award

prots. To that end, even with the Romag

decision clarifying that willfulness is not a

precondition for a prots award in a trade-

mark infringement suit, the lower courts

are likely to still require plaintiffs to prove

that defendants had high levels of culpabil-

ity before awarding prots for trademark

infringement. Practitioners should expect

that juries will nd that defendants who

knew of infringement or were reckless

concerning the possibility of such conduct

deserve to lose their prots.

Romag solidies the threat posed to

companies that rely on third-party man-

ufacturers. By allowing a prots award

when infringement is perpetrated with

a mental state less than willfulness, this

decision incentivizes companies using

Chinese and other foreign manufac-

turers to innovate in order to mitigate

these risks, either by strengthening sup-

ply chain oversight or (more likely)

Josh Escovedo is a shareholder at Weintraub Tobin. He specializes in intellectual property and real property litigation. He can be reached

at jescovedo@weintraub.com. Zack Thompson is an associate at Weintraub Tobin in Sacramento, California. He specializes in labor and

employment litigation and has litigated trade secret and trademark cases. He can be reached at zthompson@weintraub.com.

request for a prots award. The district

court indicated that it was bound by

Second Circuit precedent that requires

proof of willfulness as a prerequisite to

a prots award. The matter was even-

tually appealed to the Federal Circuit,

which afrmed the district court’s rul-

ing. But not all of the circuit courts were

in agreement with the Second Circuit

precedent, the precedent followed by the

district court and afrmed by the Federal

Circuit, so the Supreme Court granted

certiorari to resolve the circuit split.

At the Supreme Court, Romag

argued that requiring willfulness for

a prots award “outs the plain text

of section 35(a) and undermines the

broader policies of the Lanham Act,”

and is a “serious misinterpretation of

federal law” that should not be allowed

to stand.4 Fossil argued that the Federal

Circuit’s decision below was correct, on

the grounds that common law, and prin-

ciples of equity, required willfulness for

a prots award.5

The Supreme Court rst looked to

the section of the Lanham Act govern-

ing remedies for trademark violations,

15 U.S.C. § 1117(a), which says:

When a violation of any right of the

registrant of a mark registered in the

Patent and Trademark Ofce, a vio-

lation under section 1125(a) or (d) of

this title, or a willful violation under

section 1125(c) of this title, shall have

been established . . . , the plaintiff shall

Making a Connection between Young IP Attorneys

and Those Who Want to Share Their Experience

“Meeting of the Minds” is a recurring feature of Landslide® magazine. It includes articles authored by young lawyers

in conjunction with experienced attorneys, who participate as mentors in the planning and writing process. Landslide is

proud to provide the opportunity for young lawyers and law students to learn from attorneys in IP practice areas and to get

published in our prominent legal magazine. The end product is a collaboration for which both authors share attribution.