For decades, companies have turned to federal courts to protect valuable business assets, such as trade secrets. Legal action has expanded over the years and recent trends have set the foundation for a continuing surge in federal trade secret litigation. From the makeup of certain famous fragrances and manufacturing processes to computer algorithms and customer lists, trade secrets often play a vital role in successful business operations, but exposure of these important assets to an unwanted party can be detrimental to a company, whether it be a small startup or a Fortune 500 company.

With the digitization of intellectual property and ongoing competition across industries—among other macro trends—companies are at elevated risk of trade secret theft. In addition, shifts in patent law, which have generally weakened that form of protection, may influence how companies protect these assets and pursue remedies. Given these conditions, businesses are increasingly engaging in legal proceedings specific to trade secrets.

Stout’s study of trade secret decisions

Following the enactment of the Defend Trade Secrets Act (“DTSA”) in 2016, Stout began an independent analysis of federal trade secret cases decided over the 29-year period from 1990 through the summer of 2019, studying the historical impact of these matters. Our initial searches found that over 10,000 cases with trade secret claims were filed during the period.

Using Lexis Advance’s Jury Verdicts and Settlements database, Stout identified 639 verdicts and settlements for cases including trade secret claims. For each of the 639 matters, we reviewed corresponding dockets in order to eliminate duplicate cases and those cases that did not truly relate to trade secret claims or counterclaims, resulting in 257 unique trade secret cases in the final study.

In our study of these 257 cases, we identified and tracked over 45 different characteristics across multiple informational categories of the lawsuit. These include items such as jurisdictional information, background of the parties, the nature of the trade secret(s) at issue, and related causes of action or counterclaims. Our research also captured information pertaining to the use of experts, settlements and judgments, damages and other awards, and post-trial results. In our full report, our research and results have been summarized to highlight notable observations and augment our ongoing monitoring of the trends in trade secret litigation.

Sample of findings

One informative element of this study is the nature of the trade secrets themselves. Unlike patent litigation, federal trade secret laws cover any type of information that constitutes a trade secret to a particular business, so long as it meets the requirements of independently derived value and reasonable efforts to maintain secrecy. For the purposes of our study, we focused on six classifications of trade secrets: business relationships, designs, method/process, products, financial information, and marketing information.

In 46% of the cases studied, multiple types of trade secrets were included as part of the allegedly misappropriated information. Business relationships represented the largest type of trade secret at issue, occurring in 37% of all cases studied. Following business relationships were trade secrets pertaining to designs at 35% and methods/processes at 34%. Often, the categories of financial information and business relationships overlap, resulting in matters in which customer lists, proprietary pricing, and other marketing and financial records are at issue in some combination.

Certain industries have experienced a higher degree of litigation pertaining to trade secrets than others. Our findings show that 26% of trade secret cases reviewed involved companies in the industrials sector. Other notable industries with high percentages of the overall caseload included the information technology, consumer discretionary, and healthcare sectors. The information technology, consumer discretionary, and healthcare sectors also experienced steep increases in the number of cases since 2000.

Our review of case filings found that plaintiffs often favored certain jurisdictions, with the Eastern District of Texas and the Northern District of Illinois being the most active district courts for trade secret decisions. Federal district courts in Texas alone were responsible for nearly 20% of trade secret case decisions. California, Illinois, Colorado, Florida, and Massachusetts rounded out the top 50%, each with between 6% and 9% of total cases.

A striking data point was the proportion of rulings in favor of plaintiffs. Of the cases that ultimately resulted in a verdict, plaintiffs received a favorable ruling 68% of the time, while defendants/counterclaimants received a favorable ruling in only 24% of cases, with split decisions occurring in the other 8%.

Damages in cases involving trade secrets totaled approximately $3 billion, with the five largest awards each being over $100 million. When reviewing the damage awards by state, a clear trend emerged between the number of cases adjudicated in a particular district or circuit and the average size of the awards. The study found that, with some exceptions, the districts with increased trade secret activity tended to have more moderate awards than those districts with less activity.

Recent patent cases may lead to more trade secret litigation

Recent decisions in the patent space have invalidated the patentability of certain types of subject matter as a means to protect corporate assets. These cases include Mayo Collaborative Services v. Prometheus Laboratories, Inc. (“Mayo”);The Association for Molecular Pathology v. Myriad Genetics (“Myriad”); and Alice Corporation Pty Ltd. v. CLS Bank International (“Alice”)

Mayo, Myriad, and Alice illustrate an evolution of patent law that may lead to a shift wherein companies opt to protect what were once patent-eligible materials via trade secret protection. Additionally, given the high invalidation rate of patents on Section 101 grounds, interested stakeholders have justifiable concerns regarding the future value of patents involving software and life sciences and the potential fallout of US investment in these important industries. Of course, trade secrets may not be the answer in all cases. If the subject matter is easy to reverse engineer, trade secrets could have little value. However, where secrecy can be maintained, trade secrets may be a useful and viable alternative.

Developing strategies for ensuring that software and processes remain protectable as trade secrets offers an alternative path to safeguarding innovations, which in turn may drive additional trade secret litigation as protection shifts from patents to trade secrets.

Summary of conclusions

Trade secret litigation has been on the rise for a number of years and will likely continue this upward trajectory. Three factors are particularly evident when considering this increase in activity:

(1) Litigation activity will continue to expand due to the DTSA. The DTSA not only provides business owners the opportunity to leverage stronger, more consistent rules of procedure, protections, and enhanced remedies, but the ability to seek remedies in federal court, state court, or both;

(2) Based on recent decisions in patent litigation, we expect more companies will opt to protect certain business assets through established trade secret practices as opposed to patenting; and

(3) Expanding workforce mobility, as well as technological advances and the digitization of information, are expected to continue to drive the increased trade secret-related litigation associated with labor and employment matters.

As a result of these factors, attorneys and industry experts alike must be increasingly mindful of the nuances impacting where a trade secret case is filed, the damage remedies available in that venue, and emerging precedents available to practitioners for determining damages.

This article originally appeared in the Spring/Summer 2020 issue of the Stout Journal. 

In a new editorial spread for Vogue Italia, Bella Hadid poses in front of a white wall and doorway in strappy DSquared2 sandals, a camouflage-meets-animal print jacket, and itty-bitty bikini briefs, with a single prop in hand – err mouth: a blue balloon. Fast forward a few days, and the wildly in-demand model fronted the ad campaign for French designer Jacquemus’ Spring/Summer 2020’s collection, which consists of a roomy white suit, lavender and sunny yellow knits, rectangular lucite sunglasses, and sure-to-sell ombre patent leather Le Chiquito bag. Aside from their 25-year old supermodel subject, the two sets of images have something else in common: they were both shot entirely by way of FaceTime. 

While models, designers, stylists, photographers, makeup artists, and all of the various essential assistants are shut-in at home thanks to the spread of the Coronavirus, fashion publishing and advertising has not stopped. Instead of calling it quits (temporarily), many fashion figures across the globe are looking to technology to help them churn out content and marketing materials during the COVID-19 shutdown.  

For Vogue Italia, for example, this meant that photographer Brianna Capozzi, stylist Haley Wollens, and supermodel Bella Hadid connected via FaceTime to shoot the new editorial. According to Vogue that process went a little something like this: “The day before the shoot, Capozzi and Wollens tested poses on FaceTime (as they normally would in person). Then, they called Hadid for a fitting [of the clothing to appear in the spread].” On the day of the shoot, “Bella [did] her hair and makeup,” her friend Lauren Perez helped with the lighting, and they all signed on Apple’s video-calling service to shoot the imagery. 

Capozzi said the shoot was fun, noting that “everyone’s opinions were considered” in creating and capturing the shots. In short: it sounds like the shoot was something of a collaborative effort, potentially more so than usual. 

This digitally-centric effort is not limited to Hadid’s Vogue Italia editorial and extends to her Jacquemus campaign – which Vogue says was “captured by photographer Pierre-Ange Carlotti and creative-directed by its designer Simon Porte Jacquemus” – and a growing number of other editorials, including a recent spread in Vogue’s American publication. With the obvious roadblocks to traditional photoshoots that are currently in play, and considering how COVID-19 practices may play out after business goes back-to-normal, FaceTime photoshoots are being poised as the future of fashion photography, at least for the foreseeable future. Not only does this stand to change how fashion imagery is created, it raises some interesting questions from a legal point of view, namely, about authorship and ownership. 

In terms of copyright law, the exclusive rights in a work – including the right to reproduce, display, and sell a work, etc. – are bestowed upon the “author” of the creative work, as the Copyright Act states that a work is fixed in a tangible medium of expression, a prerequisite to copyright protection, “when it [is] embodied in a copy or phonorecord, by or under the authority of the author.” When it comes to photos, the “author” is the photographer (at least initially), no matter who appears in the photo. In other words, rights are not granted on the basis of an individual simply being the subject of a photo. 

This well-established fact has given rise to some pushback in recent years, in particular. As paparazzi-filed copyright infringement lawsuits have flood court dockets on both coasts of the U.S., the question of authorship – and thus, ownership – has proven to be an interesting one. 

As counsel for Bella Hadid’s older sister (and fellow major-model) Gigi Hadid argued in one such suit filed against her, because “Ms. Hadid posed for the [paparazzi photographer] and thus, herself contributed many of the [creative] elements” in the photo, namely, her “pose, expression, [and] clothing,” she should be considered an “author” of the photo and have rights in it. (That case was ultimately dismissed after it was revealed that the plaintiff failed to receive a copyright registration in the photo prior to filing suit, as required by law). 

Images from Jacquemus’ Spring/Summer 2020 campaign

The joint authorship argument is not entirely unheard of. It came up, to a certain extent, in Gillespie v. AST Sportswear when the U.S. District Court for the Southern District of New York held in 2001 that it would be possible for a jury to find that the subject of a photo is the “joint author of photographs where [he/she] contributed to ‘clothing’ and ‘poses’ of models.” Several years earlier, in 1992, the Second Circuit held in the Rogers v. Koons case that “elements of originality in a photograph may include the posing the subjects, lighting, angle, selection of film and camera, evoking the desired expression, and almost any other variant involved,” some of which could be contributed by the individual subject(s). And co-authoriship issues were also raised and examined by the Ninth Circuit in Garcia v. Google.

The rise of FaceTime and Zoom-orchestrated photo shoots comes about against this existing background of rising co-authorship arguments, and on Friday, University of New Hampshire School of Law professor Alexandra J. Roberts posed the question: “If the photographer can only direct a shoot remotely, (e.g. cannot physically adjust anything in the frame), does the model play a greater role in the collaboration and thus, merit co-author status in the expressive works created?” 

Roberts notes that “certain variables change the analysis,” but “if [the parties are not using] a fancy remote-controllable webcam setup, then the photographer may control when to click [and capture the photo], but may be unable to manipulate the camera for angles,” for example. This could mean that the model might take on a more collaborative – and creative – role than she maybe otherwise would, which could create a greater level of authorship on the part of the subject, and thereby, entitle her to the same rights of authorship as the photographer.

In instances when the model actually takes the photo (and presumably, creatively contributes by way of other elements), some say the situation closely mirrors the famous “monkey selfie” copyright case. PETA, which filed the suit on behalf of Naruto, the monkey that snapped the photos, asserted copyright ownership in the images. Based on the fact that the photos were taken with his camera, counsel for photographer David Slater argued that he and his company, Wildlife Personalities Ltd., were the copyright holders of the photos. 

Here, of course, “the subject of the photo,” who is a human and not an animal, “is legally capable of amassing copyright rights [if she] contributes creatively to the work,” says John Simpson, a copyright attorney and the founder of Shift Law. Although, Simpson cautions, “You’d want to put something [that recognizes that co-authorship agreement] in writing.”

Others note that the considerations at hand go well beyond such practical elements. Jeremy S. Goldman, a partner at Frankfurt Kurnit Klein & Selz PC, who focuses on intellectual property, states that “joint authorship requires objective manifestations of a shared intent [between the parties] to be co-authors.”

As for what such intent looks like, Dale Cendali and J. Michael Keyes assert in their work, Copyright Litigation Strategies, that “the expressions of intent that may give rise to a finding of joint ownership are most easily discovered by assessing the various tasks that are required to create the final product.” For instance, “In the clothing-advertising context, the relevant tasks that may express intent include selecting the models, clothing, poses, lighting, the type of camera and film, camera settings, and angles used to produce the final image.” 

But even then, Goldman is skeptical of whether such co-authorship intent is present when it comes to the FaceTime-centric scenarios at hand, as he states, “If we are talking about a professional photographer, [it] seems very unlikely that he/she would intend to share authorship with the model.” And to date, there has not been any evidence that co-authorship agreements are creeping into major-models’ contracts with the likes of Vogue and co. in connection with these collective work-for-home projects in the already-very-collaborative field of fashion photography.

Ultimately, he says that “courts have made clear that creative contributions, no matter how important, are not enough to establish joint authorship when you cannot show control and intent.” With that in mind, “the fact that the model plays a bigger role in posing, setting up the shoot, etc., does not [necessarily] change things [in terms of authorship], particularly provided that the photographer has the final call and may never have intended to share authorship with the model.”

In terms of how significantly the rise of FaceTime photoshoots stands to impact the law in this area, Goldman says, “The law of authorship and copyright in a photograph has been the same since the Supreme Court considered these questions [in Burrow-Giles Lithographic Co. v. Sarony] back in 1884, particularly with its reference to the Nottage case from 1883. In my opinion, the fact that photographer and model are remote does not change anything.”

Chrome Hearts is not letting the coronavirus stand in the way of its enforcement efforts. The Los Angeles-based brand has filed a new lawsuit accusing a fast fashion streetwear brand of offering up a cut-and-paste replica of one of its hot-selling styles of jeans. To be exact, counsel for Chrome Hearts alleges in the newly-filed suit that MNML LOS ANGELES is on the hook for adorning its jeans with one of Chrome Hearts’ “most iconic and well recognized trademarks” in an effort to confuse consumers as to the source of its allegedly infringing wares. 

According to the trademark infringement and unfair competition complaint that it filed in a California federal court on Wednesday, Chrome Hearts sets the stage by asserting that its “cross” trademark – which it began using in the late 1980s – has become synonymous with its brand. Since setting up shop in 1988, Chrome Hearts says that it has “devoted substantial time, effort, and money to designing, developing, advertising, promoting, and marketing its products, and spends on average over $1 million per year on advertising, promoting, and marketing [its] brand.”

As a result, it “has sold over a billion dollars’ worth of clothing, all bearing one or more of [its] trademarks,” and those very marks, including the “cross” mark, “have achieved widespread acceptance and recognition amongst the consuming public” throughout the U.S. and internationally. 

Against the background, and given the brand’s adoption by an array of big-name celebrities ranging from Madonna, Rihanna and Cher to Tom Brady, David Beckham, and Lenny Kravitz, Chrome Hearts argues that MNML “knew or reasonably should have known of the wrongful [nature of its] acts and behavior” that it was engaging in when it began manufacturing and selling jeans bearing Chrome Hearts’ federally registered “cross” mark. Despite having such “a non-delegable duty to prevent such acts and behavior,” Chrome Hearts alleges that MNML offered for sale products that bear “identical or confusingly similar reproductions of one or more Chrome Hearts marks … in total disregard of [its] rights to control its intellectual property.” 

In doing so, Chrome Hearts claims that 4-year old MNML deliberately sought to “confuse the public as to the source of [its] goods or services,” and to “reap the benefit of Chrome Hearts’ goodwill associated with the Chrome Hearts trademarks.” In other words, Chrome Hearts argues that by using a nearly exact version of its “cross” trademark (i.e., any word, name, symbol, or design (including logos, colors, sounds, product configurations, etc.) used to identify and distinguish the goods of one brand from those of another), MNML is likely to confuse consumers into believing that Chrome Hearts is in some way connected with or endorsed the products when it has not.

More than that, Chrome Hearts argues that by “misappropriating the Chrome Hearts trademark [in order] to capitalize on Chrome Hearts’ goodwill for [its] own pecuniary gain,” MNML is “diluting the distinctive quality of the Chrome Hearts mark and decreasing the capacity of such marks to identify and distinguish Chrome Hearts’ products and has caused a likelihood of harm to Chrome Hearts’ business reputation.”

With such “willful and deliberate” acts in mind, Chrome Hearts sets forth claims of trademark infringement, false designation of origin, and unfair competition, and seeks monetary damages, as well as “temporary, preliminary and permanent” injunctive relief to bar MNMLfrom continuing to “manufacture, import, advertise, market, promote, supply, distribute, offer for sale, or sell” products that infringe its trademarks. 

MNML’s jeans (left) & Chrome Hearts’ jeans (right)

It is worth noting that unlike copyright and patent protections, which have originality and novelty requirements, respectively, trademark law has no such prerequisite, which bodes well for Chrome Hearts and its not-entirely-novel cross logo. Instead of novelty, the test for establishing trademark rights centers on whether the mark, itself, acts as an identifier of a single source of goods in connection with the classes of goods/services in which it is used on. This is why Apple, for example, maintains rights in its common name for use in connection with tech products and retail services, among other things. The Cupertino-based tech titan did not invent the word “Apple,” but was the first to use it consistently in commerce on tech-related products and services, so much so that consumers link its name when used on computer, for example, with a single source (the Steve Jobs-founded brand), and that gives rise to trademark rights.

Chrome Hearts, if faced with pushback from MNML, could make a similar argument in connection with its Celtic-inspired cross. (Trademark use versus decorative use will also likely be a sticking point for MNML’s counsel).

“Cheaply Produced, Lower Quality Products”

This is hardly MNML’s first brush with allegations of infringement in its role in the “anything-goes world of Instagram fast-fashion,” as GQ characterized it back in 2017. MNML is part of a crop of brands that have “gotten popular by flipping the hottest current trends into instantly-available items,” per GQ. For MNML, in particular, this means “sending [its] factories examples of pieces to reproduce from popular brands like Fear of God and Saint Laurent.” 

Its penchant for looking to others for “inspiration” has resulted in it being called out on social media for allegedly copying the original creations of budding young brands, such as Who Decides War, the label of former Virgil Abloh collaborator Ev Bravado, and Rhude, as well as those of Rick Owns and Hedi Slimane’s Dior Homme. And in more than one instance, such alleged infringement has landed MNML in court, albeit without much successful on the part of the allegedly aggrieved.

In 2017, for instance, counsel for Fear of God and its founder Jerry Lorenzo sent a cease and desist letter to MNML, accusing the brand of ripping off its “distressed ankle zip jeans, and signature bomber jacket and track pants,” among “numerous other designs that appear to be near-identical imitations of Mr. Lorenzo’s well-known designs, down to the smallest details” as part of an “intentional copying” scheme to sell “cheaply produced and lower quality products,” Lorenzo’s counsel asserted in the latter.

The parties did not manage to settle their differences out of court, at least not initially, and instead, MNML’s corporate entity, Third Estate LLC filed a declaratory judgment action, asking a California federal court to formally declare that Fear of God “lacks any cognizable trade dress and/or other intellectual property rights in certain apparel features [at issue],” and even if Fear of God does have trade dress or other rights in the designs, “that MNML has not infringed on [those rights] and has not engaged in false designation of origin.” Specifically, MNML argued that the “apparel features” that Fear of God was claiming rights in “are functional (i.e., holes and zippers in jeans, and waistbands and pockets in track pants) and/or have been in the public domain for decades.”

In short: in filing a declaratory judgment suit, MNML – whose founder Matthew Fields “admits that his designs do more than just pay homage,” and “sometimes feels guilty about replicating the work of popular, trendsetting brands,” according to GQ – called Fear of God’s (potential) bluff in claiming that it has enforceable legal rights in various elements of the garments at play, a move that notorious footwear copycat Steve Madden has become famous for when it is commonly threatened with litigation. (Forever 21 also famously filed a declaratory judgment suit against Gucci after the Italian design house threatened it with infringement litigation over its use of striped blue-red-blue and green-red-green designs).

“It’s like erasing our name off the homework assignment, putting yours on it and saying you did the work,” Lorenzo said of MNML’s wares at the time.

MNML’s case against Fear of God would ultimately settle out of court, with the parties entering into a confidential agreement, and MNML moving to dismiss its claims with prejudice, meaning that it cannot file suit against Fear of God again on the very same basis again in the future. However, while MNML is limited in terms of how it can retaliate against Fear of God going forward, that does not mean that others, such as Chrome Hearts, cannot take on the alleged copycat for infringement.

And in fact, it appears that unlike Fear of God – which lacked copyright protections in its clothing (as garment designs are rarely protected in their entirety by way of copyright law due to their useful nature and copyright’s unwillingness to grant legal monopolies on useful articles) and was forced to rely on unregistered trade dress claims in its fight against MNML, rights that tend to be difficult for most brands to establish – Chrome Hearts has a markedly stronger stance here, as MNML did not merely rip off its jeans to make a less-than-$100 version, it replicated Chrome Hearts’ federally registered logo, thereby, giving rise to claims of trademark infringement.

A rep for MNML did not respond to a request for comment.

UPDATED (July 21, 2020): On the heels of Chrome Hearts filing a notice of settlement and joint request to stay all dates with the court on July 20, Judge Philip Gutierrez of the U.S. District Court for the Central District of California ordered that “all proceedings, if any, [be] vacated and the action [be] dismissed without prejudice.” In its filing, Chrome Hearts alerted the court that the parties had “reached a settlement in principle” and that the terms of the settlement, which will presumably remain confidential, will be finalized, and a Stipulation of Dismissal of this action filed within thirty days.” In the meantime, it does appear as though the contested jeans have been removed from MNML’s e-commerce site.

*The case is Chrome Hearts LLC v. MNML Los Angeles LLC, 2:20-cv-03683 (C.D.Cal.)

In July, in an antitrust hearing on Capitol Hill, Amazon “took punches on a range of political and policy issues,” along with fellow digital behemoths Apple, Google owner Alphabet, and Facebook, the Wall Street Journal stated at the time. The $1 trillion dollar e-commerce titan that is Amazon has, after all, been accused of using its mighty powerful platform to bolster its private-label business. More than that, though, the Jeff Bezos-founded giant has questioned about the extent of its use of third-party sellers’ data in furtherance of its quest to build-out its own label. 

During that hearing in Washington, DC this summer, Amazon’s associate general counsel Nate Sutton told the House of Representatives Antitrust Subcommittee that Amazon “does not use individual seller data directly to compete” with businesses on the company’s platform. Now, that statement seems to be coming back to haunt Amazon, as the WSJ reported on Thursday that interviews with former employees and a current one employee revealed that Amazon “executives had access to data containing proprietary information that they used to research bestselling items they might want to compete against, including on individual sellers on Amazon’s website.” 

“We knew we shouldn’t,” said one former employee who accessed the data and described a pattern of using it to launch and benefit Amazon products, told the WSJ. “But at the same time, we are making Amazon branded products, and we want them to sell.”

The WSJ’s investigation centers on “a bestselling car-trunk organizer sold by a third-party vendor,” which Amazon employees “accessed documents and data about,” including “total sales, how much the vendor paid Amazon for marketing and shipping, and how much Amazon made on each sale.” According to the Journal, “Amazon’s private-label arm later introduced its own car-trunk organizers.”

But presumably, such a pattern could span across the more than 45 brands that Amazon current boasts – from its Amazon Basics collection to the buzzy skincare brand Belei that it launched in 2019 – and some at the expense of merchants selling similar products on its site. This is part of the equation that that legal minds (including this site) have pointed to in recent years in regards to potential claims of antitrust involving Amazon, particularly as the giant has continued to build troves of data on third-party products and sales, which it can use to “hone its own competitive pricing strategy, gain information about consumers to make its own marketing more effective, and give its own goods an advantage.” 

Amazon has largely downplayed the success of its private labels, telling the WSJ that sales tied to its in-house brands “account for 1 percent of its $158 billion in annual retail sales, not counting Amazon’s devices such as its Echo speakers, Kindle e-readers and Ring doorbell cameras.” This mirrors the sentiment of a sweeping 2019 study from Marketplace Pulse, which analyzed 23,142 products launched by Amazon under more than 406 different private label brands, and determined that “Amazon-owned private label brands are not nearly as successful as many paint them to be.” 

The Seattle-based giant also notes that it is a common business strategy for grocery chains, drugstores and other retailers to make and sell their own products to compete with brand names. Virtually no other company has access to the amount of consumer data that Amazon does, though, given that a whopping 39% of all U.S. online shopping occurs on Amazon.

Nonetheless, its model has caught the eye of regulators in the U.S. and beyond. This past summer, right around the time that Amazon was making the trip to D.C., European Union authorities initiated a formal antitrust investigation into Amazon, with the European Commission – an EU institution tasked with proposing legislation, implementing decisions, upholding the EU treaties and managing the day-to-day business of the 28 member state bloc  – probing the company to determine whether its use of sensitive data from independent sellers on its massive third-party marketplace runs afoul of the EU’s competition rules.

The European Commission’s probe – which will also look into the role of data in the selection of the companies included in Amazon’s so-called “Buy Box,” the prized button on each Amazon product page that enables customers to add a product, including non-Amazon-created products, to their cart or make an instant purchase – came on the heels of a larger discussion about what the New York Times described last year as Amazon’s practice of  “optimizing word-search algorithms, analyzing competitors’ sales data, [and] using its customer-review networks to steer shoppers away from its competitors and toward its in-house brands.

More recently, it was revealed that various domestic agencies and lawmaker, including the Justice Department, Federal Trade Commission and Congress, also are investigating large technology companies, including Amazon, on antitrust matters. 

In a written statement in response to the WSJ report, Amazon said, “Like other retailers, we look at sales and store data to provide our customers with the best possible experience. However, we strictly prohibit our employees from using nonpublic, seller-specific data to determine which private label products to launch.”

A federal court of appeals handed down the wrong decision in a case centering on trademark infringement damages, the Supreme Court held on Thursday. In issuing its decision in the closely watched Romag Fasteners Inc. v. Fossil Inc. case, the nation’s highest court sided with Romag, holding that the manufacturer of magnetic snaps, clasps, fasteners, and other closures does not need to show that Fossil willfully infringed its trademark in order to recover the brand’s profits as part of a damages award. 

“A plaintiff in a trademark infringement suit is not required to show that a defendant willfully infringed the plaintiff’s trademark as a precondition to a profits award,” Justice Neil Gorsuch wrote, on behalf of the unanimous panel of nine justices, in his decision in the case, which has been slated as standing to resolve a  multi-circuit split among federal appeals courts across the U.S. when it comes to whether a showing of willful infringement is required for a plaintiff to make a play for an infringer’s profits.

The case, which went before the Supreme Court in January, with counsels for the Romag and Fossil arguing their sides, got its start in 2010 when Romag sued Fossil – and Macy’s – alleging that the American apparel company was using counterfeit fasteners on its purses, handbags, and wallets. Orange, Connecticut-based Romag alleged that while Fossil was, in fact, a client of its patent-protected magnetic closures, it had switched from an approved supplier to an unapproved one, and certain Fossil handbags sold in the U.S., thereafter, were found to contain counterfeit Romag snaps.

Given the existence of a longstanding arrangement between the two parties in connection with which Fossil agreed to use Romag closures for its products, when Fossil switched suppliers to one that was offering up the fake closures, Romag alleged that its client “knowingly adopted and used the Romag mark without [its] consent.” By using fake Romag closures for its accessories, Fossil not only ran afoul of its patents for the little metal components, but since the copycat parts bore the “ROMAG” trademark, the apparel co. was violating the tenets of trademark law, as well.

In 2014, following a trial in the U.S. District Court for the District of Connecticut, a jury found that Fossil had infringed Romag’s trademark and patents, and awarded Romag damages to the tune of $156,000 in profits “to prevent unjust enrichment” and a whopping $6.7 million – the amount of profits that Fossil made in connection with the sale of products bearing the infringing closures – “to deter future trademark infringement.”

While the jury had found that Fossil had acted with “callous disregard” for Romag’s trademark rights, it failed to find that Fossil’s violations were willful. As such, the district court refused to award Romag that full damages award, stating that “a finding of willfulness remains a requirement for an award of defendants’ profits in this Circuit.”

Unsatisfied with the lower court’s decision, Romag appealed to the U.S. District Court for the Federal Circuit, which agreed with the district court in its assertion that the U.S. Court of Appeals for the Second Circuit – the court with appellate jurisdiction for the District of Connecticut – requires a showing of willfulness in order for an award of profits.

With yet another loss in hand, Romag sought Supreme Court review of the case, and asked the highest court in the U.S. to consider whether the Lanham Act – the federal statute governing trademark law – requires a showing of willful infringement for a plaintiff to be awarded an infringer’s profits. Romag argues that the $6.7 million jury award should stand, as the jury’s finding of “gross negligence” is sufficient to constitute infringement — even without establishing willfulness.

In its decision on Thursday, the court held that “when it comes to remedies for trademark infringement, the Lanham Act authorizes many,” stating that “a district court may award a winning plaintiff injunctive relief, damages, or the defendant’s ill-gotten profits.” The court continued on, asserting that “without question, a defendant’s state of mind may have a bearing on what relief a plaintiff should receive,” with “an innocent trademark violator often stand[ing] in very different shoes than an intentional one.” Having said that, the court notes that “some circuits … hold a plaintiff can win a profits remedy, in particular, only after showing the defendant willfully infringed its trademark.” The court ultimately asserts that while it does “not doubt that a trademark defendant’s mental state is a highly important consideration in determining whether an award of profits is appropriate,” such an “inflexible precondition to recovery” cannot be “reconciled with the statute’s plain language.”

In short: while “the Lanham Act provision governing remedies for trademark violations, §1117(a), makes a showing of willfulness a precondition to a profits award in a suit … for trademark dilution,” the Lanham Act “has never required such a showing” for an infringement cause of action.

Reflecting on the significance of the case, Jonah Knobler, a partner at Patterson Belknap Webb & Tyler LLP, says that “the number of cases in which Romag will change the ultimate result seems fairly small.” Under the Supreme Court’s standard, “District courts now have the discretion to consider an award of profits [without a showing of willfulness]. However, the lack of willfulness would still be a ‘highly important’ consideration in determining whether to authorize such an award.”

More generally, Knobler says the decision “continues a significant trend of the last 15 years or so, [in which] the Supreme Court has repeatedly granted cert to erase longstanding lower-court precedent in the intellectual property context that imposes categorical rules regarding remedies. ”

“This trend began with 2006’s eBay v. MercExchange, LLC, where the Court overturned the rule that a successful patent plaintiff is presumptively entitled to an injunction. It continued with 2014’s Octane Fitness, LLC v. ICON Health & Fitness, Inc., in which the court undid the rule requiring a showing of bad faith for an award of attorney’s fees in patent cases, and again gathered steam in 2016, when Halo Electronics, Inc. v. Pulse Electronics, Inc. struck down the Federal Circuit’s rigid test for awarding enhanced damages under the Patent Act, and when Kirtsaeng v. John Wiley & Sons rejected a rigid rule about when a copyright plaintiff is entitled to attorney’s fees.”

Viewed in that broader context, Knobler argues that “the Romag holding is no surprise: the current Supreme Court consistently opposes rigid or categorical rules regarding the availability of relief in IP cases, even where lower courts have long hewed to such rules. This decision continues that trend.”

*The case is ROMAG FASTENERS, INC., v. FOSSIL, INC., ET AL., 18–1233 (U.S.).