U.S. Supreme Court Reinforces Corporate Separateness in Trademark Disputes

“[After Dewberry,] failing to identify and sue the right entities at the start of litigation could leave plaintiffs with a legally sound judgment that is practically unenforceable.”

In Dewberry Group, Inc. v. Dewberry Engineers Inc., the U.S. Supreme Court issued a unanimous ruling emphasizing the importance of corporate separateness in calculating damages for trademark infringement. The decision, which vacated a $43 million profit disgorgement award, has significant implications for corporate liability and the limits of profit recovery under the Lanham Act.

Dewberry Engineers, the plaintiff and holder of the “Dewberry” trademark, sued a competing real estate management venture, Dewberry Group for trademark infringement and unfair competition under the Lanham Act, as well as breach of contract under state law. Dewberry Grp., Inc. v. Dewberry Eng’rs Inc., No. 23-900, 604 U.S. —-, 2025 WL 608108, at *2 (U.S. Feb. 26, 2025). The dispute stemmed from the defendant’s unauthorized use of the trademarked name in marketing its real estate services, despite a prior settlement agreement restricting its use of the mark.

The U.S. District Court for the Eastern District of Virginia found the defendant violated the Lanham Act, concluding that its infringement was “intentional, willful, and in bad faith.” However, the sole named defendant in the case was Dewberry Group, which reported no profits and only survived through cash infusions by the owner of both the defendant and its affiliates. The district court attempted to work around this by treating the defendant and its affiliates, which own the income-generating properties but were not named as defendants, as a single corporate entity and aggregated their profits for purposes of awarding “defendant’s profits” as contemplated by the remedies provision of the Lanham Act found in 15 U.S.C. § 1117(a) (“Section 1117(a)”).

The district court calculated nearly $43 million in damages, including the profits from separately incorporated affiliates. It justified this approach by reasoning that the affiliates benefited from the infringement and were functionally part of a single enterprise. A divided U.S. Court of Appeals for the Fourth Circuit panel affirmed, citing the “economic reality” of the defendant’s operations as justification for treating the defendant and its non-party affiliates as a single corporate entity for purposes of calculating damages.

The U.S. Supreme Court reversed, unanimously holding that an award of “defendant’s profits” under Section 1117(a) is limited to the profits of a named defendant, and thus does not include legally distinct non-party affiliates. Since the term “defendant” is not defined in the Lanham Act, the Court ascribed the term’s usual legal meaning: the party against whom relief or recovery is sought. In this case, it was the Dewberry Group.