In , plaintiff had sold magnetic snap fasteners to defendant Fossil for many years before discovering that certain Fossil handbags contained counterfeit ROMAG snaps.² Unable to resolve the matter amicably, Romag sued Fossil for trademark infringement. After trial, the jury determined that Fossil had acted in “callous disregard” of Romag’s trademark rights but did not find that Fossil had acted willfully.³ Applying Second Circuit precedent, the district court ruled that Romag was not entitled to recover Fossil’s profits absent a finding of willfulness.⁴ On appeal, the Federal Circuit agreed.⁵ Seeking to resolve a split among the circuits as to the willfulness requirement, the Supreme Court reviewed the language of the Lanham Act section governing remedies for trademark infringement, which states in pertinent part that “[w]hen a violation . . . shall have been established . . ., the plaintiff shall be entitled . . ., subject to the principles of equity, to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action.”⁶ The court observed that the language of the statute did not include any willfulness requirement as a prerequisite to recovery of profits for trademark infringement. Further, given that the Lanham Act “speaks often and expressly” and with “considerable care” about mental states, the court said it was telling that the Act did not include a willfulness standard in the relevant provision.⁷ Under the circumstances, the court rejected any “inflexible precondition” of willfulness for a recovery of defendant’s profits, though it did not doubt that under traditional “principles of equity” imbued in the Lanham Act’s remedies provision, a trademark defendant’s mental state would continue to be a “highly important consideration” in determining whether a profits award is appropriate.

The First Circuit’s Approach to Recovery of Defendant’s Profits

So where does leave the First Circuit with regard to recovery of defendant’s profits for trademark infringement? The First Circuit recognizes three justifications for awarding defendant’s profits: (1) as a rough measure of the harm to plaintiff; (2) as a means to protect the plaintiff by deterring a willful infringer from further infringement; or (3) as a device to avoid unjust enrichment of the defendant.⁸ Generally speaking, willfulness — the “conscious awareness of wrongdoing by the defendant or at least conduct objectively reckless measured against standards of reasonable behavior”⁹ — has played an outsized role in First Circuit jurisprudence as to recovery of defendant’s profits. For example, the court in noted that the circuit’s cases — except for cases involving direct competition — “usually require willfulness” as a condition precedent to allow recovery of defendant’s profits.¹⁰ The first theory of recovery — profits as a rough measure of harm to plaintiff — is a proxy for trademark damages in cases where the trademark owner cannot prove actual damages attributable to the infringement.¹¹ An award of profits under this theory requires that the products at issue are directly competitive, such that a sale by the infringer under the infringed mark is “almost automatically a lost sale by the plaintiff.”¹² Just as damages in trademark infringement cases can be awarded without reference to scienter,¹³ the First Circuit does not require a finding of willfulness under the damages proxy.¹⁴ Thus, would not appear to change the landscape where profits are sought as an analog to damages. An alternative theory of recovery of defendant’s profits — deterrence — is rarely invoked in the First Circuit and should not be the primary reason for an accounting of profits given that deterrence is primarily served by awards of attorneys’ fees.¹⁵ The First Circuit has acknowledged that in cases of at least some direct competition , “some role may exist for deterrence in an award of an accounting of profits”¹⁶ so as to discourage future misconduct by the defendant.¹⁷ After , it would seem that such “black letter” fealty to willfulness under the deterrence theory is inapposite. Thus, the First Circuit may need to entertain a broader “totality of the circumstances” approach in fashioning an appropriate Lanham Act remedy under the deterrence theory, including perhaps the discouraging of some lesser behavior such as negligence or gross negligence. For example, the district court in refused to disgorge defendant’s profits after finding that defendant’s absence of diligent inquiry prior to use of plaintiff’s mark was not equivalent to willfulness.¹⁸ After , First Circuit courts should be willing to at least entertain claims for defendant’s profits under a deterrence theory to discourage culpable behavior that does not rise to the level of willfulness if the balance of equities demands it. Finally, the unjust enrichment theory of recovery of defendant’s profits has also been limited to cases of willful infringement in the First Circuit.¹⁹ eliminates any such threshold requirement. The unjust enrichment theory is premised on a trademark and its goodwill as a property right.²⁰ Thus, the award is not based on direct competition or provable loss but on the fact that the defendant has unjustly gained because of the goodwill the plaintiff has built up in the mark.²¹ In short, “the infringer has reaped where it has not sown.”²² As the theory is focused on the unjust benefit derived by the defendant, it would seem that the First Circuit’s reliance on a defendant’s willfulness as a threshold consideration was inappropriate even before .²³ After all, as suggested by the Seventh Circuit, “[a]s between the ‘innocent’ infringer who seeks to get off scot-free, and the innocent infringed . . . the stronger equity is with the innocent infringed.”²⁴ After , willfulness should no longer be a strict obstacle to recovery of defendant’s profits under this theory. Instead, look for First Circuit courts to apply a more expansive consideration of the equities that includes consideration of the defendant’s misconduct as a factor in the balance, such as set forth in the Restatement (Third) of Unfair Competition: (a) the degree of certainty that the actor benefitted from the unlawful conduct; (b) the relative adequacy to the plaintiff of other remedies, including an award of damages; (c) the interests of the public in depriving the actor of unjust gains and discouraging unlawful conduct; (d) the role of the actor in bringing about the infringement or deceptive marketing (e) any unreasonable delay by the plaintiff in bringing suit or otherwise asserting its rights; and (f) any related misconduct on the part of the plaintiff.²⁵

Conclusion

The First Circuit’s consistent reliance on defendant’s willfulness as a prerequisite to an accounting of defendant’s profits (except in cases of direct competition) has long acted as a rigid barrier to a more robust consideration of the equities in fashioning appropriate remedies for trademark infringement under the Lanham Act. After , we can expect the First Circuit to join the Third, Fourth, Fifth, Sixth, Seventh, and Eleventh Circuits in adopting a more holistic balance of the equities approach moving forward without the stringent, inflexible reliance on willfulness or bad faith as a gateway to equitable recovery. Of course, as noted in , the infringer’s intent will remain an important consideration, just not the for an award of profits that it has been in the First Circuit.