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Fossil Magnetic Fastener Suit Clarifies 1999 Lanham Amendment

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By Jonathan R. Tung, Esq. on April 04, 2016 6:58 AM

Most of you are probably not aware that the magnetic fasteners that you have on your bags are all part of a controversial intellectual property case that was just decided. Romag, the patent holder of those magnetic button fasteners successfully brought a suit against Fossil and other companies for selling counterfeits of its fasteners in Fossil bags. But "real" and "fake" can assume different meanings when dealing with certain foreign countries. The company one, but just not as much as it hoped.

The case reaffirms the rules that laches is still a viable defense in IP suits, and that damages awards can be reduced for wanting of willful disregard for trademark rights.

Fakes out of China

Romag, Inc., is a button, fastener and closure company operating out of Connecticut. It holds a patent for a certain magnetic faster design. Fossil, as readers know, is a maker, distributor and name brand of several retail bags, shoes, watches, wallets, etc. In 2002, Fossil and Romag executed a contract to have Fossil bags use Romag fasteners. Fossil instructed its manufacturers to purchase Romag fasteners from certain licensed manufacturers of the Romag fasteners one which included Wing Yip, founded in HongKong but also operating in China.

It didn't take long before fake Romag fasteners mysteriously found their way into genuine Fossil handbags. Romag sued Fossil in 2010 for patent infringement, trade-mark infringement, false designation of origin, unfair competition and UTPA violations. The case moved swiftly and the jury found for Romag in a big way: $50 mil for patent infringement, $90 mil for unjust enrichment, and about $7 mil as an additional slap on the wrist. The jury had found that the facts supported "callous disregard" for Romag's trademark rights but stopped short of finding that Fossil was willful in their actions. Because of that, Romag was not entitled to Fossil's profits.

Laches

Fossil had alleged laches because even though Romag new of the accrual of a cause of action, Romag waited until days before Black Friday to file a suit. this move would actually serve to reduce Romag's award by 18 percent. In the opinion of the Federal Circuit, "Congress codified a laches defense in 35 U.S.C. sec. 282 (b)(1)." See: SCA Hygiene Prods. v. First Quality.

1999 Amendment to Lanham Act

Romag wanted more blood and believed the lower court erred in holding that the trademark owner must prove willfulness before taking recovery of the infringer's profits.

The Federal Circuit applied Second Circuit Law, "whose law governs here." In the view of the Federal Circuit, applicable law demanded that the plaintiff prove willfulness in violating trademark rights before profits can be recovered. But Romag thought that the law had since changed since the Lanham Act first passed.

Romag pointed to an interesting 1999 Amendment to the Lanham Act that appeared at first blush to apply to the case at hand. When the circuit looked at it, it did note that several circuits had bought the notion that that the 1999 caused some rift between the circuits, but refused to take the view that the 1999 amendment was anything more than a Congressional clean-up to clarify actual intent of the Act.

Omissions, Not Anything More

The Second Circuit had reiterated time and time again that "defendant's willful deceptiveness is a prerequisite for awarding profits," and that nothing in the language of the 1999 amendment "permit[ted]" the Federal Circuit to declare that pre-1999 precedent was no longer good law. "Rather, the legislative history indicates only that Congress sought to correct the mistaken omissions, from the text of 15 U.S.C. section 1117(a) and 1118, of willful violations of section 1125(c). Id. In short, there is no indication that Congress in 1999 intended to make a change in the law of trademark infringement as opposed to dilution."

Patent holders? Remember to look for willfulness when going for the jugular.

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