Whose profits are available under 1117(a) when seeking “Defendant’s Profits” for trademark infringement?

On February 26, 2025, the Supreme Court delivered a unanimous decision in the case of Dewberry Group, Inc. v. Dewberry Engineers Inc. In vacating the award of nearly $43 million to plaintiff Dewberry Group, the Supreme Court held that “defendant” under 15 U.S.C. §1117(a) is limited to named defendants in the lawsuit. Thus, the profits of the affiliates of defendants, who unquestionably profited from the named defendants’ bad acts, were unable to be part of the statutory disgorgement.

Background of the Case

The dispute centers around two real-estate companies, Dewberry Engineers Inc. and Dewberry Group, Inc., both using the “Dewberry” name. Dewberry Engineers, which owns the trademark for “Dewberry,” sued Dewberry Group for trademark infringement under the Lanham Act. The conflict arose after Dewberry Group violated a previous settlement agreement by using the “Dewberry” name in its marketing materials.

Lower Court Decisions

The District Court found Dewberry Group liable for willful trademark infringement and awarded nearly $43 million in profits. This calculation included the profits of Dewberry Group’s affiliates, treating them as a single corporate entity. The Court of Appeals affirmed this decision, emphasizing the economic reality of the relationship between Dewberry Group and its affiliates.

Supreme Court’s Ruling

The Supreme Court, however, vacated the lower court’s decision, clarifying that under the Lanham Act, only the profits of the named defendant (Dewberry Group) could be awarded, not those of its affiliates. The Court emphasized the importance of respecting corporate separateness unless there is a valid reason to pierce the corporate veil.

Key Takeaways

Defendant’s Profits: The term “defendant” in “defendant’s profits” under §1117(a) of the Lanham Act refers strictly to the party(ies) named in the lawsuit. Therefore, only the profits of a named defendant, not its related entities, are recoverable under the “defendant’s profits” provision of §1117(a).
Corporate Separateness: The decision reinforces the principle that separately incorporated entities are distinct legal units with their own rights and obligations. This principle holds even if the entities are affiliated.
Economic Realities: Justice Sotomayor, in her concurring opinion, highlighted that courts should consider economic realities and not be misled by creative accounting. However, this must be done within the framework of respecting corporate separateness.

Implications for Trademark Law

Carefully consider named defendants: Dewberry underscores the necessity for plaintiffs to carefully consider which entities to name as defendants in their lawsuits.
Ensure Use of Corporate Structures: Dewberry highlights the challenges of holding parent companies accountable for the actions of their affiliates without piercing the corporate veil.
Just-sum as a possible way to recover from affiliated companies, without piercing the corporate veil? The Supreme Court notably “expressed no view” on whether the just-sum provision of §1117(a) (“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.”) could have supported the award given. Rather, the Supreme Court noted that the trial court did not rely upon the just-sum provision. When seeking damages against a clever corporate structure, perhaps one should consider attempting to recover under the just-sum provision of 1117(a).

The full decision is available here: Dewberry Group v. Dewberry Engineers.

If you need assistance in a trademark dispute, please contact the author of this post, Fabian Nehrbass, Patent Attorney, or one of our other attorneys.