Recovering a trademark owner’s lost profits due to infringement has always been difficult. Typically, the court requires some level of malice/intentionality on the side of the trademark infringer in order for the trademark owner to recover lost profits. Showing malice or intent is a challenge because you need to show the infringer’s state of mind. How do you do that? Without a “smoking gun” email saying, “I know I infringed, but I don’t care, and I’m going to keep on infringing,” it’s almost impossible to prove.  Only once in my legal career did I have that type of blatant admission from the other party. And yeah, we won that case… 

But that could soon change.

On April 21, 2020, the US Supreme Court ruled that the Lanham Act enables a trademark owner to recover profits from a trademark infringer without necessarily proving willfulness. This update to the interpretation of Section 43 (a) of the Lanham Act changes the landscape of trademark infringement law considerably. However, no cases have been tried using this update… so far.

The Lanham Act

The Lanham Act – passed in 1946 – is the primary federal trademark statute of law in the United States. The Act prohibits trademark infringement, trademark dilution, false advertising, and also provides remedies for acts of counterfeiting. It allows for an award of damages for these violations, but varies widely in interpretation across the different Federal Circuits. Generally speaking, the Act does not provide for a specific amount of statutory damages (outside of cases involving outright counterfeiting). Instead, it provides for a range of damages which vary depending on the conduct of the infringer and the totality of facts presented in the case.

The application of lost profits in trademark cases is inherently subjective. Until this recent ruling it relied entirely on intent and the deliberate actions of the infringer, a very abstract inquiry involving ascertaining the state of mind of the infringer. 

To put a set statutory damage amount into trademark infringement law could be considered heavy-handed for an underlying legal issue that’s already a gray area. 

How do we account for trademark infringement? In copyright infringement law there are statutory damages, but it’s relatively easy to account for how many copies of the copyrighted work were made. 

In the trademark world, you may not be able to count how many times the infringer used the mark. Maybe they put the mark on every single product, but didn’t sell all the products. Maybe the infringer is just advertising online – how many people saw the trademark in that case? Hard to prove. What about social media use of the brand that didn’t necessarily result in a sale? It’s a rabbit hole.

Litigation Strategies 

Clients always want to sue a trademark infringer for money damages. Typically, I tell my clients the most important thing is to stop the trademark infringer from using the mark and stop the brand confusion that is diluting the value of their own product and associated branding. We want to stop letting consumers get confused as to the source of the goods so that my client can start selling all of the products that they should rightfully be selling, rather than the infringer.

That injunctive relief is the most potent part of trademark law.

From an affirmative standpoint, this new interpretation of Section 43 (a) of the Lanham Act certainly shakes-up the equation. As a plaintiff, it’s easier to show that you are entitled to their profits, and it lets us up the rhetoric a little bit in how we, as lawyers, can assert the case in a cease and desist letter, or the language we can use in the complaint. 

If we are defending the trademark infringer, we will need to counsel our client so they understand that they can’t just rebrand and expect the case to go away. This new interpretation might encourage plaintiffs to push trademark infringement cases a little further for a settlement.

We have been very focused on stopping the use of a trademark, and not so focused on any type of past damages in the settlement negotiation. Now, that will change because we have a heavier hammer to hold over the defendant. 

Related: Beyoncé, Blue Ivy, and the Kardashians: The (Big) Business of Trademarks

Why Change the Law?

This Supreme Court ruling on 43 (a) was decided in April 2020, so it has not been litigated yet. It will be interesting to see how the district courts use this ruling to determine damages, what is still available for trial, and what the statutory damages numbers are going to be. 

The change is driven by the fact that different circuit courts around the country applied a different standard of the Lanham Act in their rulings. The Supreme Court did not look at these differing interpretations as a massively important trademark issue, they clarified the Act because of the widely varying interpretation of it.

That’s one of the jobs of the Supreme Court – to resolve laws that are being interpreted differently around the country to make them more consistent. It was simply administerial work by the Supreme Court to resolve varying opinions. 

Since we have not yet seen judgments based on this new update, we will have to wait and see how it’s applied in trademark infringement cases. 

I am excited to bring you an update once we can see how the law is interpreted and used in a real-world case. It could make a serious change to trademark infringement litigation.

Drop us a message to find out how we can help you reclaim your IP.

Related: USPTO Updates Trademark Filing Requirements – But Will Spam Stop?