Supreme Court Upholds Corporate Separateness in Unanimous Dewberry Decision

In Dewberry Group, Inc. v. Dewberry Engineers, Inc.,[1] the Supreme Court unanimously held that the Lanham Act does not permit courts to disregard corporate identity when awarding damages for trademark infringement.

Section 35 of the Lanham Act allows a plaintiff to recover “‘the defendant’s profits’ deriving from a trademark violation” and grants the court discretion to assess such profits “according to the circumstances of the case.”[2] The remedy of disgorgement of profits aims to “prevent unjust enrichment and remove economic incentives out of trademark infringement.”[3] But whose profits can be disgorged after a court determines that disgorgement is an appropriate remedy?

In vacating the judgment of the lower court, the Court held that “the ‘defendant’s profits’ are the defendant’s profits, not its plus its affiliates’.” Op. at 5 (emphasis in original). “By treating those entities as one and the same, the courts below approved an award including non-defendants’ profits—and thus went further than the Lanham Act permits.” Id. at 7.

Dewberry Engineers and Dewberry Group are separate real estate development companies that both operate in Georgia, Virginia, Florida and South Carolina. After a lengthy trademark dispute including an earlier-settled lawsuit in 2006, the Eastern District of Virginia concluded that Dewberry Group willfully infringed on Dewberry Engineers’ registered mark and ordered an award of close to $43 million in disgorgement of profits.[4] But the profits were not Dewberry Group’s profits; Dewberry Group had no ascertainable profits to disgorge — it merely created infringing marketing materials and passed them on to its affiliates, who then made the profits. Although the affiliates were not defendants in the lawsuit and no attempt was made to pierce the corporate veil, the district court concluded that Dewberry Group and its affiliates operated under common ownership and treated them as a single corporation for damages purposes.

The Fourth Circuit Court of Appeals upheld this decision, noting that district courts have discretion when awarding disgorgement of profits and that admonishing a court for doing so “risks handing potential trademark infringers the blueprint for using corporate formalities to insulate their infringement from financial consequences.”[5] Judge A. Marvin Quattlebaum dissented, however, pointing out that there is no “loophole” that shields affiliates from the Lanham Act and “all Dewberry Engineers had to do was sue them.”[6]

The Supreme Court relied on the plain language of the Lanham Act, which refers to the “defendant’s profits” — not the profits of nonparty corporate affiliates.

Determining that the lower courts “were wrong to treat Dewberry Group and its affiliates as a single entity in calculating the ‘defendant’s profits,’” Justice Elena Kagan, writing for the unanimous court, noted that “Dewberry Group is the sole defendant here, and under that language only its own profits are recoverable.” Op. at 11. The Court dismissed arguments by Dewberry Group that the lower courts’ decisions could be reconciled using a later sentence in the same section of the statute: “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.” § 1117(a); Op. at 6. But, the Court observed, neither of the lower courts relied on this “just-sum” provision. Op. at 7.

The Court left three questions unaddressed, namely, the proper application of the just-sum provision, whether and when courts could look behind a defendant’s tax or accounting records to determine the defendant’s actual financial gain, and whether corporate veil-piercing is available under the Lanham Act damages provision.

Justice Sonia Sotomayor, concurring, identified several situations in which courts might take into account “economic realities,” including the anticipatory assignment of profit to affiliates and monies indirectly earned while balancing deficits caused by under-market rates to affiliates. Concurr. at 2-3.

While the Court’s unaddressed questions leave room for Dewberry Engineers to argue again for affiliate profits on remand, for practitioners the better practice is to include as defendants any affiliated infringers — particularly those housing the infringing profits.

The Court’s full opinion can be found here.

[1] Dewberry Grp., Inc. v. Dewberry Eng’rs, Inc., No. 23–900 at 3 (Feb. 26, 2025).

[2] 15 U.S.C. § 1117(a).

[3] Dewberry Eng’rs, Inc. v. Dewberry Grp., Inc., No. 1:20-cv-00610, 2022 WL 1439826, at *9 (E.D. Va. Mar. 2, 2022) (quoting Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 340 (5th Cir. 2008)).

[4] Dewberry Eng’rs, Inc. v. Dewberry Grp., Inc., No. 1:20-cv-00610, 2021 WL 5217016 (E.D. Va. Aug. 11, 2011); Dewberry Eng’rs, Inc. v. Dewberry Grp., Inc., No. 1:20-cv-00610, 2022 WL 1439826 (E.D. Va. Mar. 2, 2022).

[5] Dewberry Eng’rs, Inc. v. Dewberry Grp., Inc., 77 F.4th 265, 293 (4th Cir. 2023).

[6] Id. at 299 (Quattlebaum, J., dissenting).