Damage Dilemma: Conflicting Standards for Disgorging Trademark Infringer's Profits

The monetary remedies available for violations of the Lanham Act are set forth in Section 35 of the Lanham Act, 15 U.S.C. '1117(a), which provides in part:

When a violation of any right of the registrant of a mark registered in the Patent and Trademark Office, a violation under section 43(a) [15 USC '1125(a) or (d)], or a willful violation under section 43(c) [15 USC '1125(c)], shall have been established in any civil action arising under this Act, the plaintiff shall be entitled, subject to the provisions of sections 29 and 32 [15 USC ''1111, 1114], and 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. The court shall assess such profits and damages or cause the same to be assessed under its direction.

The 1999 Amendment replaced “or a violation under section 43(a)” with “a violation under section 43(a), or a willful violation under section 43(c).” Some courts have found the language straightforward, concluding that Congress intended to condition monetary awards for Section 43(c) violations (dilution), but not for Section 43(a) violations, on a showing of willfulness. The Third Circuit, in Banjo Buddies, Inc. v. Renosky, 399 F.3d 168 (3rd Cir. 2005), reasoned that Congress was aware that most courts had consistently required a showing of willfulness prior to disgorgement of an infringer's profits in Lanham Act cases despite the absence of the word “willful” in the statutory text prior to 1999. The Fifth Circuit further reasoned that by adding the word “willful” to the statute in 1999, but limiting it to Section 43(c) violations, Congress effectively superseded the unstated willfulness requirement that some courts had applied to Section 43(a).

Despite the plain language of the 1999 Amendment, there is still a continuing, long-standing conflict among the circuits. There is a three-way split in the Circuit Courts of Appeal as to whether proof of willfulness is a prerequisite to recovery of an infringer's profits under 15 U.S.C. '1117(a), eg, for a Section 43(a) violation. The Third, Fifth, Seventh and Eleventh Circuits do not require proof of willfulness in order to recover an infringer's profits.