Supreme Court’s Dewberry Decision: Navigating Profit Recovery in Trademark Infringement Cases

Can a defendant’s affiliates’ profits be considered when awarding the “defendant’s” profits to the prevailing plaintiff in a trademark infringement suit under the Lanham Act, § 1117(a)? In Dewberry Group, Inc. v Dewberry Engineers Inc., 604 U.S. ___ (2025), the Supreme Court unanimously held that a plaintiff can recover only those profits from the defendant(s) actually named in the lawsuit. In its opinion, the Court affirmed the distinct and separate character as between corporate identities, clarifying that disgorged profits may be recovered only from the named defendants.

Background

Dewberry Engineers, Inc. (“Dewberry Engineers”) owns a registered trademark for “Dewberry” in connection with the real-estate development services it provides to commercial entities. Dewberry Group, Inc. (“the Group”) also operates a commercial real estate business, and was found in the case to have profited from its trademark infringement of the “Dewberry” trademark.

For nearly 20 years, Dewberry Engineers sought to defend its trademark rights against the Group. After an infringement suit led to a settlement agreement that the Group ultimately reneged on, Dewberry Engineers brought a second infringement suit in which it decisively prevailed. The district court found, and the Fourth Circuit affirmed, that the Group’s trademark violations were “intentional, willful, and in bad faith.”

Though the Lanham Act provides that Dewberry Engineers were entitled to the “defendant’s profits,” the accounting arrangement between the Group and its affiliate entities made it so the defendant Group operated at a loss for decades, with little to no profits to collect. The affiliate entities, rather than the Group, owned the commercial properties that generated tens of millions of dollars in profits. The money went directly into the affiliates’ books and the Group remained financially solvent by charging the affiliates below-market rates and accepting occasional cash infusions from the individual owner. To reflect this economic reality, both the district court and Fourth Circuit treated the Group and its affiliates as a “single corporate entity” for the purposes of calculating and producing an award of nearly $43 million to Dewberry Engineers. The Group appealed this award, and the Supreme Court granted certiorari.

Only the Named Defendant’s Profits May Be Targeted

In a unanimous decision authored by Justice Kagan, the Supreme Court reversed and remanded the case back to the district court to recalculate Dewberry Engineers’ damage award. The Lanham Act provides that a plaintiff may recover “the defendant’s” profits. Because “defendant” is not specially defined, the Court held the term must be understood by its usual legal meaning, namely, the party against whom relief or recovery is sought in an action or suit. Corporate law views separately incorporated organizations as separate legal units with distinct legal rights and obligations. This holds true even if these separately incorporated entities have a common owner, as with the Group and its affiliates.

The Court acknowledged ways in which plaintiffs could reach beyond the profits of the named defendant, such as making a showing of need for “piercing the corporate veil,” which imputes personal liability to a company’s shareholders or owners based on their misconduct, or utilizing the Lanham Act’s “just sum” provision, which allows a court to use its discretion to adjust a damages award found to be either inadequate or excessive.

However, Dewberry Engineers never made a request to pierce the corporate veil. Additionally, the “just sum” provision requires courts to engage in a two-step process: first assessing and determining a different monetary amount reflected the “defendant’s true financial gain,” then considering other relevant evidence (such as the profits of affiliated entities) to calculate a profits award. Here, both the district court and the Fourth Circuit engaged in only the first step, treating both the Group and its affiliates as a single corporate entity for their damages calculation.

The Supreme Court held that the Lanham Act does not permit courts to disregard distinct corporate entities when awarding damages for trademark infringement, vacated the $43 million damages award, and remanded the case to the district court.

What Next?

The Court’s opinion is narrow. It leaves the door open for similarly situated plaintiffs to seek corporate veil piercing to reach beyond a corporate defendant’s profits and for courts to engage in the requisite two-step process of the “just sum” provision of the Lanham Act.

Justice Sotomayor concurred, suggesting additional ways in which a court could calculate a “defendant’s profits,” including considering a company’s arrangement to charge below-market rates to its affiliates as an advanced assignment of profit-sharing, or considering evidence of a company indirectly receiving compensation for infringing services through related corporate entities.

Implications for Future

The Court’s ruling emphasizes the importance of anticipating damages award disputes at the outset of a lawsuit. If a defendant’s reported profits appear to be inadequate to remedy the harm suffered, trademark plaintiffs should be prepared to proceed on theories that properly account for the economic realities of both the infringer and applicable corporate laws. Plaintiffs should take special care not to assume affiliation or relation will always by itself be enough to target profits from any entity not named in the lawsuit.