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In Romag Fasteners, Inc. v. Fossil, Inc. (No. 18-1233, April 23, 2020) the United States Supreme Court held that willfulness is not a prerequisite for damages in a trademark infringement case.
United States Intellectual Property
In Romag Fasteners, Inc. v. Fossil, Inc. (No. 18-1233, April 23, 2020) the United States Supreme Court held that willfulness is not a prerequisite for damages in a trademark infringement case. We now have two cases in which the Court has opined on the proper measure of damages for intellectual property (IP) infringement: Romag for trademark infringement and Halo Elects., Inc. v. Pulse Elects. Inc., 136 S. Ct. 1923 (2015) for patent infringement. A review of these cases shows that the Court has established a flexible and subjective approach for awarding damages in both trademark and patent infringement cases. Although the Court has not yet opined on the standard for determining copyright infringement damages, the statutory scheme suggests that the standard is similarly flexible and subjective.
In Romag, the Court rejected a hard-and-fast rule that a court cannot award damages for trademark infringement under 17 U.S.C. 1125(a) unless the court finds that the infringement was willful. The Court explained that while many sections of the Lanham Act do include a mens rea requirement, section 1125(a) does not.
The relevant statutory language provides:
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 . 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. 15 U.S.C. §1117(a).
The Court, parsing this statute, explained that willfulness must be shown for a violation of section 1125(c) (i.e., dilution claims), but not for violations under section 1125(a) (i.e., trademark infringement claims) or 1125(d) (i.e., cyberpiracy claims). The Court acknowledged that a defendant's state of mind is "a highly important consideration in determining whether an award of profits is appropriate." But the law does not insist on a showing of willfulness before an award may be made.
Patent infringement damages are awarded in an amount "adequate to compensate for the infringement, but in no event less than a reasonable royalty for the use made of the invention by the infringer." Further, a court "may increase the damages up to three times the amount found or assessed." 35 U.S.C. § 284. In Halo, the Court focused on the second sentence recited above, which allows for treble damages in some, unspecified cases.
The Federal Circuit had established a rigid two-part test that a case must pass before the court can award treble damages: First, the patent owner must show that the infringer "acted despite an objectively high likelihood that its actions constituted infringement," and second, the patent owner must show that the risk of infringement "was either known or so obvious that it should have been known to the accused infringer." The Supreme Court rejected this test, finding that it was incorrectly objective. The correct test, said the Court, is subjective and depends on the "particular circumstances of each case in deciding whether to award damages and in what amount." Enhanced damages are a punishment for the infringer and "such punishment should generally be reserved for egregious cases typified by willful misconduct." But no hard-and-fast rule exists for enhanced damages.
The Court has not considered the proper standard for awarding damages, whether compensatory or punitive, for copyright infringement. (But see Feltner v. Columbia Pictures Television, Inc., 523 US 340 (1998), where the Court found that a copyright infringer has a Seventh Amendment right to a jury trial when statutory damages and willfulness are in question.) Under the Copyright Act, a copyright owner may collect either (1) the copyright owner's damages and any additional monies for the infringer's profits due to use of copyrighted material, or (2) statutory damages between $750 and $30,000 for each act of infringement. The Act expressly discusses willful infringement, allowing the court, "in its discretion," to increase statutory damages to not more than $150,000 when the "infringement was committed willfully," and to decrease damages to not less than $200 when the "infringer was not aware and had no reason to believe that his or her acts constituted an infringement of copyright." 17 U.S.C. § 504.
No single standard for finding willfulness has emerged for copyright infringement, although many cases rely on and cite to Nimmer on Copyrights §14.04. (Nimmer, David, Matthew Bender Elite Products.) Based on a review of relevant cases, Nimmer concludes that willfulness requires that the infringer had knowledge that his behavior constituted copyright infringement. The case law on willfulness is varied, and the Copyright Act includes the term "in its discretion," which implies a subjective and flexible approach to damages.
Courts have developed rubrics to follow when assessing damages for copyright infringement. The Second Circuit, for example, has enumerated a list of factors that a court should consider in deciding on damages (note that not all of the factors are directed to the presence or lack of willfulness):
See, e.g., Elsevier Inc. v. Stew Yee Chew, 2019 U.S. Dist. LEXIS 196, at 17 (S.D.N.Y. Jan. 2, 2019), citing Bryant v. Media Right Prods., Inc., 603 F.3d 135, 143-44 (2d Cir. 2010).
With its decision in Romag, the U.S. Supreme Court has reinforced its previous holding that damages in IP cases should be assessed flexibly, and should be left to the discretion of the court. Since no two infringements are the same, no two infringements must of necessity have the same measure of damages.
Originally published 28 April, 2020
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