MIAMI BUSINESS LITIGATION: CLAIMS FOR LOST PROFITS BASED ON UNINTENTIONAL TRADEMARK INFRINGEMENT

The judicial remedies for victims of trademark infringement vary depending upon the intentions of the infringer. A Florida business which has been victimized by a malicious counterfeiter can seek lost profits, treble damages, attorneys’ fees, and other remedies. By contrast, a company which accidentally violated trademark law has significantly less exposure. A recent United States Supreme Court precedent, in Romag Fasteners, Inc v. Fossil, Inc., 140 S. Ct. 1492 (2020), settled whether “lost profits” is an available remedy for unintentional trademark infringement. Peter Mavrick is a Miami business litigation lawyer. The Mavrick Law Firm represents clients in breach of contract litigation, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, and other legal disputes in federal and state courts and in arbitration.

The Lanham Act makes it unlawful for a party to sell goods which appear to originate from a trademark holder. Specifically,

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which– (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or […]

15 U.S.C. § 1125 (a)(1)(A).

To prevail on a federal claim of trademark infringement and unfair competition, a trademark owner “must show (1) that it had trademark rights in the mark or name at issue and (2) that the other party had adopted a mark or name that was the same, or confusingly similar to its mark, such that consumers were likely to confuse the two.” Suntree Techs., Inc. v. Ecosense Intern., Inc., 693 F.3d 1338 (11th Cir. 2012). “In determining whether a likelihood of confusion exists, the fact finder evaluates a number of elements including: the strength of the trade[mark], the similarity of [the marks], the similarity of the product[s], the similarity of retail outlets and purchasers, the similarity of advertising media used, the defendant’s intent, and actual confusion.” AmBrit, Inc. v. Kraft, Inc., 812 F.2d 1531 (11th Cir.1986)

The Lanham Act provides different remedies to victims of trademark infringement that depend on the mental state of the infringer. Generally, trademark infringers who purposefully violate a trademark are subject to greater penalties than those who only inadvertently violate a trademark. Whether a victim of trademark infringement can recover its attorneys’ fees depends on the infringer’s intentions. 15 U.S.C.A. § 1117(a) (“The court in exceptional cases may award reasonable attorney fees to the prevailing party”). “Exceptional cases” when attorneys’ fees should be awarded occur when “the infringing party acts in a ‘malicious, fraudulent, deliberate, or willful manner.’” Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188 (11th Cir. 2001). In addition, intentionally counterfeiting a trademark can cause an infringer to be subject to treble damages. 15 U.S.C. § 1117 (b)(1).

In Romag Fasteners, Inc v. Fossil, Inc., 140 S. Ct. 1492 (2020), the United States Supreme Court settled the question whether someone unintentionally selling goods which infringe on a trademark is potentially subject to a claim of lost profits under 15 U.S.C. § 1125(a). The plaintiff, a seller of magnetic snap fasteners, had a contract with the defendant, Fossil, for the plaintiff’s fasteners to be used in Fossil’s fashion products. The plaintiff discovered that Fossil’s manufacturing facilities in China were manufacturing the products with counterfeit fasteners without Fossil’s knowledge. Fossil, however, was not actually aware that the manufacturing facility was imitation fasteners that appeared to be the plaintiff’s product rather than purchasing authentic fasteners for the use in Fossil’s products lawfully.

The Romag plaintiff claimed that it should be able to collect its lost profits against Fossil, even though Fossil had been unaware it was selling infringing goods. Fossil claimed that it could not be liable because 15 U.S.C. § 1116(a) provides that lost profits can only be awarded “according to the principles of equity.” Fossil claimed that “equity,” as referred to in the statute, means that unintentional violators of trademark law under 15 U.S.C. § 1125(a) are not liable for “lost profits.” As asserted by Fossil, “equity courts historically required a showing of willfulness before authorizing a profits remedy in trademark disputes.”

The Supreme Court disagreed. Romag explains that the Lanham Act does not contain a reference to this rule. As there are several references to the state of mind in other sections, the absence of the rule in the text indicates that there is no requirement of willfulness before lost profits may be awarded. While the intention of infringer is not a threshold matter in determining whether lost profits should be awarded to victims of trademark infringement under 15 U.S.C. § 1116(a), a violator’s state of mind is still relevant. The Supreme Court explained that, “we do not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate.” The state of mind of an infringer is an important factor in determining whether to award lost profits, but the lack of intention on behalf of an infringer to violate trademark rights does not bar a plaintiff’s claim for lost profits.

Peter Mavrick is a Miami business litigation attorney. This article does not serve as a substitute for legal advice tailored to a particular situation.