Dewberry Group, Inc. v. Dewberry Engineers Inc.

Background

Two unrelated real-estate companies used the name “Dewberry.” One company owns a registered trademark in the name and sued a competitor that provided services to many separately incorporated, owner-controlled property affiliates. The competitor (the sole defendant) reported losses while its affiliates showed substantial rental profits. The district court treated the competitor and its affiliates as one entity and awarded nearly $43 million in profits to the trademark owner; an appeals panel affirmed.

Reasoning

The Court considered whether the Lanham Act’s phrase “defendant’s profits” includes the earnings of separately incorporated affiliates. It held that “defendant” means the party named in the suit and that corporate separateness must be respected. Because the trademark owner did not seek veil-piercing and the lower courts did not rely on the Lanham Act’s later “just-sum” sentence, combining non-party affiliates’ profits exceeded what the statute permits. The Supreme Court vacated the award and remanded for a new profits proceeding.

Real world impact

The decision limits automatic disgorgement of affiliates’ profits and requires plaintiffs and courts to reassess remedies. Plaintiffs seeking profit recovery must rely on the named defendant’s recoverable earnings, add affiliates as defendants, prove veil-piercing, or pursue other authorized routes. The ruling is not a final ruling on liability or on how courts may use accounting evidence; those questions were left to the lower courts on remand.

Dissents or concurrances

Justice Sotomayor concurred and emphasized that respecting corporate form does not prevent courts from probing arrangements that shift profits to affiliates; she described ways courts might account for below-market transfers or owner infusions when calculating a defendant’s true gain.