On February 26, 2025, the U.S. Supreme Court ruled in Dewberry Group, Inc. v. Dewberry Engineers Inc. that the Lanham Act’s trademark-infringement remedy of disgorgement of the defendant’s profits is limited to the profits of a named defendant only, and does not extend to affiliated entities who may also have profited from the defendant’s infringing conduct.
BACKGROUND
The Lanham Act provides prevailing plaintiffs with the opportunity to recover the “defendant’s profits” deriving from a trademark violation.[1] This is known as the disgorgement remedy.[2] When it is available, a plaintiff only needs to prove that the defendant profited from infringing upon the plaintiff’s trademark. From there, the burden shifts to the defendant to prove any costs. Then, the Court disgorges the defendant’s profits and gives them to the plaintiff.
In this case, there were two unrelated corporations that had similar names: Dewberry Engineers (“the Engineers”) and Dewberry Group (“the Group”).[3] Both operate as real-estate companies.[4] The Engineers have a registered trademark on the word “Dewberry”, which gives it “certain exclusive rights to use the ‘Dewberry’ name in offering real-estate services.”[5] The Group provides services to many affiliate entities for the properties that those affiliates own.[6] This system is designed to ensure that only the affiliates’ books reflect the income earned.[7] Meanwhile, the Group operates at a loss.[8]
The success of the Group’s affiliates stems in part from the Group violating the Engineers’ trademark rights to the name “Dewberry.”[9] In 2007, the Engineers sought to defend their trademark through an infringement suit.[10] This lawsuit resulted in a settlement in which the Group agreed to limits its use of the word “Dewberry.”[11] However, the Group later breached this agreement.[12] This prompted the Engineers to sue the Group again.[13]
The District Court ruled in favor of the Engineers.[14] However, there was an issue with awarding damages because the Group was the only named defendant.[15] As a reminder, the Group does not report any profits, so there were no profits to disgorge from them.[16] To remedy this issue, the District Court “decided to treat Dewberry Group and its affiliates ‘as a single corporate entity’ for purposes of calculating a profits award.”[17] This resulted in an award of nearly $43 million.[18] The Court of Appeals affirmed.[19]
The Group appealed to the Supreme Court, arguing that there was no basis for the lower courts to ignore the corporate structure when awarding disgorgement.
THE SUPREME COURT’S RULING
The Supreme Court unanimously decided that it was wrong to award the Engineers the profits of the entities affiliated with the Group.[20] Justice Kagan explained that the statutory text “offer[ed] no support” for the lower courts approach.[21] Under the Lanham Act, successful plaintiffs, like the Engineers, were only “entitled” to “recover [the] defendant's profits.”[22] According to the Court, defendant means the “the party against whom relief or recovery is sought in an action or suit.”[23] Stated differently, defendant is limited to whoever is listed as the defendant in the complaint. Accordingly, the Engineers were not entitled to any profits from the affiliate entities because the affiliates were not named as defendants.[24]
The Court further explained that the traditional principles of corporate law support this understanding.[25] Corporate law explains that “separately incorporated organizations are separate legal units with distinct legal rights and obligations.”[26] This traditional understanding can be overcome through piercing the corporate veil, but the Engineers never attempted to show the need for veil-piercing.[27]
The Court declined to consider the Engineers’ argument that the award of the affiliates’ profits was justified under the just-sum provision of the statute.[28] Under that provision, the Engineers argued that courts can conduct a two-step process of first assessing the “defendant’s profits” and then deciding whether a different figure that incorporates affiliates’ profits might be a more just award.[29] This argument was dismissed because it was inconsistent with what the lower courts actually did.[30]
WHAT THE RULING MEANS
The Court’s decision simply reaffirms traditional corporate law principles and is narrowly focused. It did not address whether the just-sum provision would alter the outcome or even consider how veil-piercing could have applied.[31] Instead, the Court left that to the lower courts. The Court only ruled that the lower courts wrongly treated the Group and its affiliates as a single entity when calculating the defendant’s profits.[32]
From the perspective of a plaintiff in a trademark suit, Dewberry seems to suggest that plaintiffs should err on the side of overinclusion to avoid forfeiting potential remedies. Conversely, defendants’ affiliates can take comfort in knowing that if they are not named, their books are less likely to be exposed through disgorgement.
For more information about this ruling, please reach out to Nathan Clark or another member of our Intellectual Property Section at www.clinewilliams.com.
1 15 U.S.C. § 1117(a).
2 See Dewberry Grp., Inc. v. Dewberry Eng’rs Inc., 604 U.S. __, 2025 WL 608108, at *3 (U.S. Feb. 26, 2025).
3 Id. at *2.
4 Id.
5 Id.
6 Id.
7 Id.
8 Id.
9 Id.
10 Id.
11 Id.
12 Id.
13 Id.
14 Id.
15 Id. at *3.
16 Id. at *2.
17 Id. at *3 (quoting Dewberry Eng’rs Inc. v. Dewberry Grp., Inc., 2022 WL 1439826, *10 (ED Va., Mar. 2, 2022)).
18 Id.
19 Id. (citing Dewberry Eng’rs Inc. v. Dewberry Grp., Inc., 77 F.4th 265, 293 (4th Cir. 2023)).
20 Id. at *3–4.
21 Id. at *3.
22 Id. (quoting 15 U.S.C. § 1117(a)).
23 Id. (quoting Black’s Law Dictionary 541 (3d ed. 1933)).
24 Id.
25 Id.
26 Id. (quoting Agency for Int'l Development v. Alliance for Open Society Int'l Inc., 591 U.S. 430, 435, (2020)).
27 Id.
28 Id. at *4.
29 Id.
30 Id.
31 Id.
32 Id. at *5.
