This is the first installment in a series exploring the damages available for intellectual property (“IP”) claims. Understanding damages is essential for two reasons: it highlights the potential rewards of building a robust IP portfolio, and it offers a benchmark for assessing risk when facing an IP claim. In this article, the authors examine damages in trademark cases.

Trademark Infringement

Trademark infringement under the Lanham Act,¹ which is the controlling trademark law in the United States, occurs when an unauthorized use of a mark causes a likelihood of confusion among consumers regarding the source of the products or services. The act addresses not just direct infringement but also counterfeiting, false advertising, and even issues of trademark dilution under the Trademark Dilution Revision Act (“TDRA”) for famous marks well-known to the public.

Trademark Damages

Once a court has determined that a trademark has been infringed, the next step is to determine how to award damages to a plaintiff. The Lanham Act sets out three methods of determining damages for a successful plaintiff: (1) disgorgement of the infringer’s profits, (2) actual damages, and (3) costs of the action. Treble damages can be assessed when a defendant intentionally infringed the plaintiff’s mark. Also, in certain instances of counterfeit marks, statutory damages are available at the plaintiff’s request.

Courts have a great deal of discretion when it comes to applying the above methods and determining how much to award in damages. Nonetheless, courts have developed equitable methods in an effort to balance compensating a successful plaintiff for losses while simultaneously avoiding windfalls.

Disgorgement of Profits

Disgorgement of profits is when a successful plaintiff is awarded the defendant’s profits that are the result of the defendant’s infringement. Courts recognize three theories under which they may order disgorgement of the defendant’s profits: unjust enrichment, compensation, and deterrence.

In determining whether a disgorgement award is proper, a court must balance equitable factors. These include (1) the degree of certainty that the defendant benefited from the unlawful conduct, (2) the availability and adequacy of other remedies, (3) the role of a particular defendant in effectuating the infringement, (4) any delay by the plaintiff, and (5) the plaintiff’s clean (or unclean) hands.

The plaintiff has the burden of proving the amount of the defendant’s revenue that came from the infringing actions. Once a plaintiff establishes the dollar amount, it becomes the defendant’s burden to prove any costs or applicable deductions.

Actual Damages

For a court to award actual damages, a plaintiff must demonstrate with a degree of specificity the amount of profits lost on account of the defendant’s infringement. Courts have held that an award of actual damages under the Lanham Act must be based on a tangible evidentiary showing of loss, not sheer speculation that a plaintiff suffered a financial loss.

Actual damages can be ascertained by an examination of a plaintiff’s financials, specifically focusing on the plaintiff’s lost profits, loss of goodwill, corrective costs (costs taken to correct consumer confusion), and reasonable royalties (money that the plaintiff would have earned if the parties had contracted for the defendant to sell goods with the plaintiff’s mark).

Reasonable royalties are not expressly provided for in the Lanham Act, and they will usually not be awarded unless there is a sufficient basis on which to calculate them, often in the form of evidence of a prior licensing agreement.

Costs of the Action: Attorney Fees

The Lanham Act grants courts discretion to award reasonable attorney fees in “exceptional cases.”² Historically, such exceptional cases typically involve infringing acts that are willful, deliberate, fraudulent, or malicious. While the amount awarded under this method is discretionary, a judge must only award reasonable fees; unreasonable fees, such as those that provide plaintiffs windfalls, are not permissible under the law.

Treble Damages

The Lanham Act also paves the way for additional damages in a situation where a defendant willfully infringed upon the mark.³ If a plaintiff can establish the deliberate and intentional nature of the infringement, then the court must award punitive damages totaling up to three times the defendant’s disgorged profits or the plaintiff’s actual damages, whichever is greater.

Statutory Damages

In a case involving counterfeit marks, the Lanham Act allows for a plaintiff, at any time before final judgment by the trial court, to elect to recover between $1,000 and $200,000 per counterfeit mark per type of good sold.⁴ The judge will ultimately determine what that amount is on a case-by-case basis. If the counterfeit mark was willful, the maximum recovery per counterfeit mark increases to $2 million.

Summation

Ultimately, the Lanham Act grants judges relatively significant discretion for awarding damages in trademark cases, enabling them to balance compensation, deterrence, and fairness based on the nature and severity of the infringement.

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Please tune in next month for part two of our series, in which we will discuss patent damages.

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Michael Fuccile is a summer associate in the New York office.

©2025. Published in Business Law Today by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

1. 15 U.S.C. §§ 1051–1127.

2. Id. § 1117(a).

3. Id. § 1117(b).

4. d. § 1117(c).