On February 26, 2025, the U.S. Supreme Court issued a unanimous decision in Dewberry Group, Inc. v. Dewberry Engineers Inc., which clarified the scope of profit disgorgement in a trademark infringement action under the federal Lanham Act. The Court held that a prevailing plaintiff in a trademark infringement lawsuit may only recover the profits of a named defendant, not those of any affiliated companies not named as a party to the lawsuit.

Background

Dewberry Engineers Inc., a Virginia-based company, provides engineering, surveying, and real estate development services throughout the southeastern United States under the “Dewberry” name. Dewberry Engineers owns a federal trademark registration for the DEWBERRY mark. Dewberry Group, Inc., a Georgia-based real estate development company, provides various services used to generate rental income from commercial properties owned by separately incorporated affiliates and also operates under the “Dewberry” name. 

In 2006, Dewberry Engineers successfully sued Dewberry Group for trademark infringement, which led to a settlement agreement between the parties. Later, in 2020, Dewberry Engineers again sued Dewberry Group for trademark infringement, unfair competition, and breach of contract, alleging that Dewberry Group’s continued use of the “Dewberry” name violated their trademark rights and the parties’ settlement agreement.

The district court ruled in favor of Dewberry Engineers, awarding nearly $43 million in profits. This amount included profits from Dewberry Group’s affiliated companies, even though these affiliates were not named as defendants in the lawsuit. The Fourth Circuit Court of Appeals upheld the award, effectively treating Dewberry Group and its affiliates as a single corporate entity.

Plaintiff’s Remedies Under the Lanham Act

Under the Lanham Act, a prevailing plaintiff in a trademark infringement action is often entitled to an award of the “defendant’s profits” as part of its remedies. Other remedies may include any damages sustained by the plaintiff and the costs of the lawsuit. 15 U.S.C. § 1117(a). 

Supreme Court’s Opinion

In a unanimous opinion written by Justice Kagan, the U.S. Supreme Court vacated the district court’s $43 million award and remanded the case back to the lower courts for a new award proceeding. The Court held that the term “defendant’s profits” refers solely to the profits properly ascribable to the defendant named in the action, which in this case means Dewberry Group, Inc., and not any of its affiliated companies. The Supreme Court emphasized the principle of “corporate separateness,” which treats separately incorporated companies as separate legal entities with distinct rights and obligations, even if they are affiliated. 

In a concurring opinion, Justice Sotomayor emphasized that the principles of corporate separateness do not require a court to shield its eyes to the economic or practical realities in calculating a defendant’s profits, nor should it force a court to accept “clever accounting” meant to obscure a defendant’s true financial gain through arrangements with its affiliates. Justice Sotomayor suggested that there may be situations where courts should consider the accounting arrangement between a defendant and its affiliates when calculating a defendant’s profits, such as where a defendant assigns a portion of its revenue to an affiliate in advance.

Practical Implications

The ruling in Dewberry reinforces the importance of naming all relevant parties as defendants in trademark infringement actions. This may include affiliated corporate entities that have realized a portion of the profits attributed to the alleged infringement, even if such entities were not directly engaged in the infringing use of the trademark. Otherwise, the plaintiff’s remedies under the Lanham Act may be limited to the profits of the named defendant(s) in the lawsuit. 

If you have questions about the Dewberry decision or other trademark issues, contact Lauren Byrne today.