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Willful Infringement Not Required for Disgorgement of Profits

June 9, 2020 | Intellectual Property

When you think about trademark infringement, you most like think of the “go to” test of likelihood of confusion. While likelihood of confusion is indeed the most common theory of infringement found under the federal Lanham Act (and state laws) governing trademarks, claims also exist for dilution by blurring, dilution by tarnishment, false advertising, etc. The focus of this blog post is false advertising, a less-often used portion of the federal Lanham Act.

The Lanham Act provides for causes of action and recovery of damages based on false or misleading advertisements. These claims can be pursued by a competitor of the person or entity engaging in such practices. Damages include disgorgement of profits, monetary damages suffered by the plaintiff, and attorneys’ fees.

The elements required to prove false advertising are as follows:

  • A false or misleading statement;
  • Made in connection with commercial advertising or promotion;
  • That was material;
  • That was made in interstate commerce; and
  • Damaged or is likely to damage the plaintiff.

Previously, circuit courts split on whether or not a plaintiff needed to plead and prove willfulness on the part of the defendant in order to be entitled to disgorgement of profits (whether under a claim for false advertising or other claim for infringement found under the Lanham Act). However, a recent Supreme Court case entitled Romag Fasteners, Inc. v. Fossil, Inc. clarified the Lanham Act by ruling that willfulness by the defendant is not a prerequisite for a plaintiff to be entitled to disgorgement of profits.

In Romag, the parties had a contract for Fossil to use Romag’s metal fasteners in Fossil’s leather goods. Romag found out that Fossil was using counterfeit metal fasteners not produced by Romag and brought a lawsuit seeking disgorgement of profits. The district court and the reviewing Federal Circuit ruled that Romag was not entitled to disgorgement of profits absent a showing of wilfullness. The Supreme Court rejected this argument and again held that willfulness by the defendant is not a prerequisite for a plaintiff to be entitled to disgorgement of profits.

The lesson to take away from this case is to be sure your commercial advertisements and promotions are accurate and truthful or you could face significant claims for damages – even if your inaccurate statements were not made willfully.