The Lanham Act, enacted by Congress in 1946, provides several means of monetary recovery for trademark infringement: these include disgorgement of the defendant’s profits, the plaintiff’s costs in bringing the lawsuit, damages sustained by the plaintiff (“actual damages”), and attorney’s fees (“in exceptional cases”). 15 U.S.C. § 1117(a). A prevailing plaintiff is not, however, automatically entitled to an award of monetary damages. In practice, many plaintiffs are only awarded injunctive relief to prevent further infringement.
The Lanham Act gives the courts considerable discretion to determine an appropriate remedy for trademark infringement, and the courts have in turn issued rulings based largely on common law precedent within each circuit. Thus, courts in different circuits have developed similar, yet differing, positions on various issues related to trademark infringement—particularly concerning the award of money damages. Below is a brief outline of how trademark infringement damages are assessed today.
Disgorgement of Profits
In assessing a trademark infringer’s profits, a plaintiff must “prove defendant’s sales only; defendant must prove all elements of cost or deduction claimed.” 15 U.S.C. § 1117(a). Thus, although the statutory language of the Lanham Act makes clear that the plaintiff’s initial burden is to merely prove the defendant’s sales figures, it is silent on whether anything further is required for a plaintiff to actually recover monetary damages. As stated above, the courts have differing interpretations of the Lanham Act, which has resulted in circuit splits on recovery prerequisites.
In Romag Fasteners, Inc v. Fossil, Inc. (140 S. Ct. 1492, (2020)), the Supreme Court recently resolved one of the more significant circuit splits regarding money damages in trademark infringement lawsuits—effectively reducing a plaintiff’s burden in attempting to recover a defendant’s profits. In days past, depending on venue, a plaintiff would likely have to show that the defendant willfully infringed the plaintiff’s trademark. This burden was difficult to prove, however, and the Supreme Court decided that the statutory language provided by the Lanham Act did not necessitate a finding of willful infringement because although “a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate,” a finding of willfulness is not an “inflexible precondition” to such an award. This ruling gives plaintiffs more leeway in claiming an award of an infringing defendant’s profits, which in turn significantly raises the stakes in an infringement suit.
Recovery of Costs
Courts typically agree that a plaintiff’s recovery of costs should be limited to filing fees, printing and storage fees, witness fees, and court reporting fees (see 28 U.S.C. § 1920). Such an award is still discretionary and to be awarded “subject to the principles of equity[.]” 15 U.S.C. § 1117(a).
In assessing the damages sustained by a plaintiff as a result of a defendant’s infringement, “the court may enter judgment, according to the circumstances of the case, for any sum above the amount found as actual damages, not exceeding three times such amount. If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case. Such sum in either of the above circumstances shall constitute compensation and not a penalty.” 15 U.S.C. § 1117(a). A successful plaintiff can typically recover such actual damages by showing that the defendant’s infringement caused actual consumer confusion and that the plaintiff suffered some sort of economic loss (usually by proving lost profits, a loss of goodwill, or remedial advertising costs).
“The court in exceptional cases may award reasonable attorney fees to the prevailing party.” 15 U.S.C. § 1117(a). The Lanham Act does not define an “exceptional case,” but courts typically award a prevailing plaintiff its attorneys’ fees if the defendant’s conduct was malicious, willful, or fraudulent. Because an award of attorneys’ fees can significantly raise the stakes in a litigation, courts only award them in the most egregious or “exceptional” of circumstances.
The law will continue to change as legislation development gives way to court interpretation. Always engage an attorney skilled in trademark law before diving in to the complicated subject of trademark litigation—you may be surprised at what damages may (or may not) be available.
For more information on this article and this topic, contact Charles Wallace.