The Federal Circuit issued its opinion in Romag Fasteners, Inc. v. Fossil, Inc. holding that, under Second Circuit law, a trademark owner can only recover profits of an infringer for willful infringement and that the equitable defense of laches applies to patent infringement actions.

Romag Fasteners, Inc. (“Romag”) owns U.S. Patent 5,722,126, a patent for magnetic snap fasteners.  Romag sells these fasteners under its registered trademark “ROMAG” but a licensed manufacturer, Wing Yip Metal Manufactory Accessories Ltd. (“Wing Yip”), manufactures them in China. Fossil, Inc. (“Fossil”), a fashion accessory brand and distributor, purchased Romag’s fasteners for use in its products. Pursuant to an agreement between Fossil and Romag, Fossil directed one of its authorized independent manufacturers, Superior Leather Limited (“Superior”), to purchase ROMAG fasteners from Wing Yip and incorporate them into Fossil handbags.  From 2008 to 2010, without informing Fossil, Superior purchased counterfeit “ROMAG” fasteners from an unlicensed manufacturer and incorporated them into Fossil handbags.  In 2010, Romag became aware that retailers were selling the Fossil handbags with counterfeit fasteners. Just days before the “Black Friday” shopping holiday in November 2010, Romag commenced an action against Fossil in federal district court asserting, inter alia, patent infringement and trademark infringement. A jury found Fossil liable for patent infringement and trademark infringement. The jury awarded Romag a reasonable royalty of only about $50,000 for the patent infringement, but for the trademark infringement, despite finding that Fossil’s infringement was not willful, made an advisory award of almost $6.8 million of Fossil’s profits.

The district court found that Romag unreasonably delayed in bringing suit to take advantage of the upcoming holiday sales season. Under the doctrine of laches, the district court reduced Romag’s reasonable royalty damages for patent infringement to exclude Fossil’s sales made during the period of unreasonable delay. Further, because the jury found that Fossil’s trademark infringement was not willful, the district court held that Romag was not entitled as a matter of law to any award of Fossil’s profits for trademark infringement. Romag appealed on both issues and, because of the patent issue, the Federal Circuit had jurisdiction.

Romag further argued that the district court erred in finding that profits are only available as damages for trademark infringement when the infringement is willful. The Lanham Act allows a trademark owner to recover damages, including an infringer’s profits, “subject to the principles of equity.” The Federal Circuit noted that the Third, Fourth, Fifth, and Sixth Circuits have found that the 1999 amendment to Section 35(a), by virtue of requiring willfulness in order to recover monetary damages for a dilution claim, no longer require such a showing in an infringement case. While acknowledging the circuit split on the issue, the Federal Circuit concluded that “the 1999 amendment to the Lanham Act left the law where it existed before 1999 – namely, it left a conflict among the courts of appeals as to whether willfulness was required for recovery of profits.

Keywords: Trademark, Trademark infringement, The Lanham Act, patent infringement.