Key Takeaways
- A plaintiff prevailing in a trademark infringement suit is often entitled to an award of the “defendant’s profits.” 15 U.S.C. §1117(a).
- Last week, in Dewberry Group, Inc. v. Dewberry Engineers Inc., the Supreme Court held that a court may only award profits ascribable to the named defendant itself, and not the profits of a defendant’s affiliates.
- Plaintiffs suing for trademark infringement should consider (i) which entities among the infringer’s affiliates hold the profits and (ii) what facts plaintiffs can allege to bring an affiliated entity’s profits into play.
- The Dewberry decision may cause plaintiffs to include multiple defendants when it is unclear who holds the profits from the infringement.
On February 26, 2025, the Supreme Court issued a unanimous decision in the trademark infringement case Dewberry Group, Inc. v. Dewberry Engineers Inc., No. 23–900, 604 U. S. __. The Court vacated a nearly $43 million award on the grounds that under Section 35 of the Lanham Act, which provides that a plaintiff can recover a “defendant’s profits,” a plaintiff may only recover profits of the defendant itself, not of its unrelated corporate affiliates.
Dewberry Engineers sued Dewberry Group for trademark infringement. It prevailed on the merits of its claim, and a Virginia federal court ordered Dewberry Group and its affiliates to pay $42.9 million in profits plus $3.7 million in legal fees. The Fourth Circuit affirmed. The lower courts awarded Dewberry Engineers the profits of Dewberry Group’s affiliates after finding that Dewberry Group itself, the only named defendant, had no money.1
Dewberry Group—a corporate entity that provides financial, legal, operational, and marketing services to affiliated leasing companies—argued that it was not profitable and should not have to pay the award as it did not own or lease commercial properties itself. Its affiliates are separately incorporated companies which own the rent-producing properties. All the companies are owned by the founder John Dewberry. The lower courts awarded the profits of those affiliates to reflect the “economic reality” and thereby treated the named defendant and its affiliates as a single corporate entity. The Supreme Court held that the lower courts were wrong to do so.
In its petition to the Supreme Court, Dewberry Engineers argued that the “just sum” provision of the Lanham Act supported the award. The “just sum” provision can apply when recovery of a defendant’s profits is either inadequate or excessive.2 In those cases, the court can arrive at an award that better reflects a defendant’s true financial gain. The Supreme Court, however, did not address this provision because the lower courts had not invoked it in awarding the profits. Thus, the Court expressed “no view” on the just sum provision.
The Supreme Court rejected the lower courts’ treatment of Dewberry Group and its affiliates as a “single corporate entity.” This approach disregarded “corporate formalities” and the principal of corporate separateness.3 Doing so caused the lower courts to approve an award “including non-defendants’ profits—and thus went further than the Lanham Act permits.” The Court concluded: “Dewberry Group is the sole defendant here, and under that language only its own profits are recoverable.”
The Court remanded the case after vacating the profits award, noting that it was leaving “a number of questions unaddressed,” including whether Dewberry Engineers could seek to pierce the corporate veil of the defendant and whether it could pursue the “just sum” theory on remand.
While the Court’s decision leaves many questions unanswered, it leaves room to argue various theories for seeking an award of an infringer’s profits.4 The ruling may also lead to more defendants being named in trademark infringement suits.
Please contact the Coblentz Intellectual Property team with any questions.
[1] As the Court writes after a sentence explaining the background facts: “If that sentence is confusing—too darn many Dewberrys—it is also a good illustration of why trademarks exist: to prevent consumers from being confused about which company is providing a product or service.”
[2] “If the court shall find that the amount of the recovery based on profits is either inadequate or excessive the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.” 15 U.S.C. §1117(a).
[3] As the Court noted, the entities in this case were affiliated “by virtue of having a common owner” but nonetheless were separately incorporated organizations and therefore separate legal units. While a court may in some circumstances “pierce the corporate veil,” especially to prevent corporate formalities from shielding fraudulent conduct, Dewberry Engineers in this case did not attempt to do so.
[4] Justice Sotomayor’s concurrence provides more of a roadmap for seeking profits of affiliates. She writes, “principles of corporate separateness do not blind courts to economic realities. Nor do they force courts to accept clever accounting, including efforts to obscure a defendant’s true financial gain through arrangements with affiliates.” She provides scenarios in which courts may consider accounting arrangements between a defendant and its affiliates in calculating the “defendant’s profits.”
