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Supreme Court Limits Scope Of Damages Awards In A Trademark Infringement Action
03/11/2025On February 26, 2025, the Supreme Court of the United States issued a unanimous decision limiting the Lanham Act’s scope of damages in a trademark infringement action.
The case involves a trademark dispute between two real-estate companies—Dewberry Group, Inc. (“Dewberry Group”) and Dewberry Engineers Inc. (“Dewberry Engineers”)—who both have the word “Dewberry” in their names. Both companies provide real-estate services in the Southeast, although the details of their services differ. Dewberry Engineers own a registered trademark in the word “Dewberry,” and sued Dewberry Group for trademark infringement under the Lanham Act. Dewberry Engineers had originally sued Dewberry Group in 2007, and the parties reached a settlement limiting Dewberry Group’s use of the term “Dewberry.” However, about ten years later, Dewberry Group began using “Dewberry” in its promotional materials, and Dewberry Engineers sued again, this time for both trademark infringement and unfair competition under the Lanham Act, as well as for breach of contract under state law.
The District Court for the Eastern District of Virginia found Dewberry Group liable for trademark infringement and awarded nearly $43 million to Dewberry Engineers due to Dewberry Group’s willful infringement. The Court of Appeals of the Fourth Circuit later affirmed the District Court’s decision.
The issue in dispute on appeal to the Supreme Court is the District Court’s profits award to remedy the infringement. The sole named defendant is Dewberry Group, but it reports no profits. The district court treated Dewberry Group and its affiliates as a single corporate entity for the purpose of calculating the profits, explaining that the profits from the infringing activities showed up on the affiliates’ books. A divided panel of the Court of Appeals for the Fourth Circuit affirmed the District Court's decision, agreeing with the approach of treating Dewberry Group and its affiliates as a single corporate entity to reflect the “economic reality” of their relationship.
The Supreme Court unanimously vacated the decision of the Court of Appeals and remanded the case for further proceedings.
When authorizing a profits award for trademark infringement, the Lanham Act allows a prevailing plaintiff to recover the “defendant's profits,” yet the term “defendant” is not specifically defined. The Supreme Court construed the term "defendant" to refer to the party named in the lawsuit, which is Dewberry Group, alone. Dewberry Engineers chose not to name Dewberry Group’s affiliates in the suit, and therefore, are not entitled to their profits.
In support of its decision, the Supreme Court emphasized the principle of corporate separateness, stating that separately incorporated entities are distinct legal units with their own rights and obligations. A court may pierce the corporate veil in select circumstances; however, the Dewberry Engineers did not attempt to show any circumstances that would justify piercing the corporate veil.
