"unknown Unknowns" and "known Unknowns": Untethered Trademark Monetary Remedies After Tma Enactment and Romag

• Publication year: 2022
• Author: Robert W. Payne

"UNKNOWN UNKNOWNS" AND "KNOWN UNKNOWNS": UNTETHERED TRADEMARK MONETARY REMEDIES AFTER TMA ENACTMENT AND ROMAG

Robert W. Payne

Payne IP Law

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In 2002, Secretary of Defense Donald Rumsfeld infamously ruminated on the possible link between Saddam Hussein's Iraq and international terrorist groups:

Reports that say that something hasn't happened are always interesting to me, because as we know, there are known knowns; there are things we know we know. We also know there are known unknowns. That is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.¹ [Boldface added.]

What called this to mind were the two recent, signal developments in trademark law: The Romag decision² by the Supreme Court in 2020 and the implementation of the Trademark Modernization Act (TMA), beginning just before 2022.³

• As a result of the TMA enactment, we know that a statutory presumption of irreparable injury initially applies for injunctive relief. The "unknown unknown" however is the impact of the presumption on awards of actual damages. No one talks about this or recognizes it as an issue. If irreparable injury is now initially presumed for injunctions, should it not be presumed for damages as well? If so, does a plaintiff still have an initial burden of production of evidence to show causation of injury?
• As a result of the Court's decision, we face a "known unknown." We know that willfulness is no longer a requirement for awarding wrongful profits by the trial court. We don't know what standard should replace it.

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These two principles—willfulness for profits, causation for damages—have been the leading factors limiting monetary recovery in past trademark cases. They tethered awards to elements plaintiffs often could not prove.

Now what?

ROMAG AND TMA

In 2006, the Supreme Court held that a patent plaintiff must prove irreparable harm to get injunctive relief. While that case, eBay, Inc. v. MercExchange,⁴ was a patent infringement case, its holding spread to trademark cases in some federal courts, but not all. As a result, plaintiffs carefully considered whether they could bring suit in a forum that still applied the presumption, despite eBay, as application of the presumption substantially increased the likelihood of early injunctive relief.

The TMA resolved this split among the courts. The TMA amends the Trademark Act to clarify that a rebuttable presumption of irreparable harm applies upon a finding of infringement in the permanent injunction context, or upon a finding of likelihood of success on the merits in the context of preliminary injunctive relief.

A plaintiff seeking any such injunction shall be entitled to a rebuttable presumption of irreparable harm upon a finding of a violation identified in this subsection in the case of a motion for a permanent injunction or upon a finding of likelihood of success on the merits for a violation identified in this subsection in the case of a motion for a preliminary injunction or temporary restraining order.

15 U.S.C. § 1116(a)).

Until 2020, a longstanding requirement in many circuits restricted a court's equitable discretion to award wrongful profits in trademark cases. A finding of willfulness was required.⁵ In Romag Fasteners Inc. v. Fossil Inc. et al., the Supreme Court held that a showing of a defendant's willfulness is not a prerequisite for recovering an infringer's profits for trademark infringement under the Lanham Act.⁶ The standard going forward was not set out.

ACTUAL DAMAGES—THE UNKNOWN UNKNOWN

The law of monetary recovery for trademark infringement starts with 15 U.S.C. § 1117(a). The statute makes clear that "damages" means "actual damages." It is distinct from "profits," which means the infringer's wrongful profits. Put in different terms, "actual damages" is generally understood to be a remedy afforded by damages at law; wrongful profits are generally permitted only through applying equitable principles.⁷ The statute does not express a standard of proof for assessing actual damages but does address the initial burden of production in the case of wrongful profits (proof of the amount of defendant's sales).

Despite the pronouncement by statute, and partially because of it, the law in this area continues to plague trademark plaintiffs. While finding trademark infringement only requires proof of likely confusion, awarding actual damages requires some proof of causation of injury. The dilemma facing trademark plaintiffs seeking actual damages arises from the first phase of a two-phase analysis. While the fact of incurring injury to some extent must be clearly shown, the amount need not be proved with the same degree of certainty, so long as the court makes a reasonable approximation.⁸ Proof of that first phase, that some injury occurred from defendant's actions, usually translates into a requirement of proof of some actual confusion. While not required expressly in all circuits, the obvious logic is that harm can only result if at least some consumers were confused as to association of goods.

On these rocks numerous trademark cases founder.⁹ According to a report of the House Judiciary Committee on the TMA, "'[A] significant majority of successful trademark cases...deny an award of damages.... [I]t is not only possible but common to win your case and still not be awarded money,'

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leaving injunctive relief as some plaintiffs' only recourse."¹⁰

With enactment of the TMA, the question of proof of some actual injury to satisfy that first phase in damages analysis assumes center stage. Irreparable injury is now rebuttably presumed by statutory edict for injunction purposes. The inevitable question is therefore whether that provision establishes a rebuttable presumption of irreparable harm only for injunction purposes but not for damages purposes.

So, if a rebuttable presumption establishes that irreparable injury results from infringement, doesn't logic demand that we also rebuttably presume that an act of infringement causes harm for damages purposes? Doesn't "irreparable injury" inherently include "non-irreparable" injury, insofar as...