When Can Brand Owners Demand 'Show Me the Money'?

When enacted, ' 35 of the Lanham Act provided for a prevailing plaintiff to obtain monetary damages including the defendant's profits and any damages sustained by the plaintiff “subject to the principles of equity.” 15 U.S.C. ' 1117(a) (1947). Over the years, application of the principles of equity led most Circuit Courts to incorporate into ' 35 a requirement that a plaintiff must show either bad faith or actual confusion before entitlement to an award of profits. See, e.g., George Basch Co., Inc. v. Blue Coral, Inc., 968 F.2d 1532 (2d Cir. 1992) (“Under section 35(a) of the Lanham Act, plaintiff must prove that a trademark or trade dress infringer acted with willful deception before the infringer's profits are recoverable by way of an accounting, whether the rationale is that the infringer was unjustly enriched, that plaintiff sustained damages from the infringement, or that accounting is necessary to deter a willful infringer from doing so again.”); Rolex Watch USA, Inc. v. Meece, 158 F.3d 816 (5th Cir. 1998) (holding that a seller of watches did not engage in deliberate trademark infringement, so the court did not err in refusing to award profits and attorney's fees to the plaintiff); Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400 (9th Cir. 1993) (“Competitor's infringement of pen manufacturer's 'Auditor's' mark was not willful, so that manufacturer was not entitled to accounting of competitor's profits.”). Indeed, the Restatement (Third) of Unfair Competition goes further and directs that the defendant should only have to disgorge its profits when it acted in bad faith or fraudulently, because “award[ing] an accounting of profits when the defendant deliberately but in good faith used a mark with knowledge of the plaintiff's prior use ' can chill lawful behavior.” Restatement (Third) of Unfair Competition ' 37 cmt. e (1995).