In a rare unanimous opinion from the Supreme Court, the Justices on April 23rd held that proving an infringer’s willful intent to infringe is not required for obtaining the infringer’s profits resulting from the infringement. In Romag Fastener, Inc. v. Fossil Group, Inc., the Court held that while the defendant’s “mental state” is relevant to the inquiry as to whether profits should be awarded, one does not have to prove that the defendant actually intended to infringe, an issue that was not clear prior to this decision. The case involved a claim by a fastener company under contract with Fossil that Fossil and its Chinese manufacturers were using counterfeit Romaq fasteners in making Fossil branded leather products.
An important insight here is that if a party under contract breaches that contract and the breach also results in trademark infringement, that is, engaging in the unauthorized use of a trademark, there are claims for breach of contract and trademark infringement, which gives you entry into federal court. And that’s true whether or not the trademark is registered (although it’s always best to have a registration for a myriad of reasons). When negotiating a contract for manufacturing, distributing or selling or reselling branded product, or licensing the brand, it’s important to provide for remedies for both breach and infringement in the final paperwork. Remedies could include doing an accounting and being paid the other party’s profits. And now that the Supreme Court has held that one doesn’t have to prove intentional infringement, contractual provisions containing this remedy should hold up under attack. Negotiating and papering such contracts is in our sweet spot.