In a unanimous decision, the U.S. Supreme Court in Dewberry Group, Inc. v. Dewberry Engineers Inc., No. 23-900 (Feb. 26, 2025), clarified the scope of profit disgorgement under the Lanham Act. The Court held that only the profits of the named defendant, not those of its non-party affiliates, are subject to disgorgement in trademark infringement cases.
The dispute between Dewberry Engineers Inc. and Dewberry Group, Inc. centers on the use of the “Dewberry” name in real estate development services. In 2007, both parties reached a settlement allowing limited use of the name. However, Dewberry Group’s 2017 rebranding, which introduced sub-brands like “Dewberry Living” and “Dewberry Office,” led Dewberry Engineers to file a lawsuit in 2020, alleging trademark infringement and breach of the prior agreement.
The District Court found in favor of Dewberry Engineers, awarding nearly $43 million in profits. Notably, this amount included profits from Dewberry Group’s affiliates, which were not named as defendants. The Fourth Circuit Court of Appeals affirmed this decision, prompting Dewberry Group to seek relief from the Supreme Court.
Justice Elena Kagan, writing for the Court, emphasized that under the Lanham Act (15 U.S.C. §1117(a)), a prevailing plaintiff may recover the “defendant’s profits” derived from trademark infringement. The term “defendant” refers specifically to the party against whom relief is sought. In this case, Dewberry Engineers chose not to sue Dewberry Group’s affiliates; therefore, the Court found the profits of these non-party entities cannot be subject to disgorgement.
The Court also addressed the principles of corporate separateness, noting that affiliated companies, even with common ownership, are distinct legal entities. While courts may, in certain circumstances, “pierce the corporate veil” to hold affiliates liable, such actions require a specific showing, which Dewberry Engineers did not make in this case.
This ruling reinforces the importance of corporate formalities and the distinct legal identities of affiliated entities. For plaintiffs in trademark infringement cases, it underscores the necessity of naming all relevant parties as defendants to pursue disgorgement of profits effectively. Additionally, businesses operating through complex corporate structures should ensure adherence to corporate separateness to protect affiliated entities from unintended liability.
By limiting profit disgorgement to the named defendant’s earnings, the Supreme Court’s decision provides clarity on the application of the Lanham Act’s remedies and affirms the respect for corporate boundaries in trademark disputes.