Dewberry Group, Inc. v. Dewberry Engineers Inc.
The Supreme Court unanimously ruled that a court cannot lump together a trademark infringer's profits with those of its separately incorporated affiliates when those affiliates were never named as defendants in the lawsuit.
The decision resets a nearly $43 million damages award and sends the case back to the lower courts to calculate what the named defendant — a company that reported no profits of its own — actually owes.
How it got here: The trial court awarded nearly $43 million by treating the defendant and its affiliates as one entity; the Fourth Circuit affirmed in a divided decision; Dewberry Group asked the Supreme Court to review.
The Case in Depth
What happened
Two unrelated real-estate companies both used the word "Dewberry" in their names. Dewberry Engineers held the registered trademark and sued Dewberry Group for continuing to use the name after an earlier settlement. Dewberry Group operated at a loss for decades, but its roughly 30 separately incorporated property-owning affiliates — all owned by the same individual — earned tens of millions in profits from services the Group provided. The trial court treated all those companies as one and issued a nearly $43 million damages award.
The question before the Court
In a trademark lawsuit, can a court calculate the infringer's damages by adding together the profits of the named defendant and its separately incorporated sister companies — even though those affiliates were never named in the suit?
The Court's answer
No. The Lanham Act allows a winning plaintiff in a trademark case to recover the "defendant's profits," and the word "defendant" carries its ordinary legal meaning: the company actually named in the lawsuit. Here, Dewberry Engineers sued only Dewberry Group, not its separately incorporated affiliates. The affiliates' profits therefore cannot be counted as the "defendant's profits," no matter how closely connected the companies may be economically.
Basic corporate law reinforces this result: separately incorporated companies are legally distinct entities, even when they share the same owner. The one recognized exception — piercing the corporate veil to stop fraud — was never pursued by Dewberry Engineers. The lower courts' decision to simply treat all the affiliated companies as one entity for damages purposes went further than the Lanham Act permits, and the nearly $43 million award must be recalculated.
Curious how the Court got there? See the step-by-step legal reasoning →
Why it matters
Trademark owners who sue a company with a complex corporate structure — where profits flow to affiliated entities rather than to the named defendant — may recover far less unless they also name those affiliates as defendants or pursue other legal strategies. Companies defending infringement suits may point to this ruling to argue that only their own reported profits, not their corporate family's combined earnings, are on the table.
What changes now
The case goes back to the lower courts to calculate a new damages award using only Dewberry Group's own profits as the starting point. The Supreme Court deliberately left open three questions for the lower courts to address: whether the Lanham Act's just-sum provision could let courts consider affiliates' profits as evidence of the defendant's true financial gain; whether courts can look beyond tax returns to identify a defendant's real earnings without invoking that provision; and whether veil-piercing remains an option on remand.
What this does not decide
The ruling does not decide whether a court could use the Lanham Act's "just-sum provision" to consider affiliates' profits as evidence on remand, whether courts can look past a defendant's accounting records to find its true financial gain, or whether Dewberry Engineers can still pursue a veil-piercing theory. All three remain open on remand.
Concurrences and dissents
Concurrence — Justice Sotomayor
Justice Sotomayor joined the majority in full but wrote separately to caution that corporate separateness does not force courts to accept creative accounting designed to hide a defendant's true earnings. She described two scenarios — below-market intercompany fees that effectively shift revenues to affiliates, and cash infusions from a common owner that substitute for market-rate compensation — where courts might legitimately look beyond a defendant's books without improperly attributing an affiliate's profits to the defendant. She urged the lower courts on remand to engage with these possibilities.
How the Court got there
The legal reasoning, step by step
- The Court started with the plain text of the Lanham Act, which lets a winning plaintiff recover the 'defendant's profits.' Because the Act does not specially define 'defendant,' the Court applied the ordinary legal meaning: the party named in the lawsuit as liable. Dewberry Engineers sued only Dewberry Group, so only the Group qualifies as 'the defendant.'
- The Court then asked whether background principles of corporate law could expand that meaning. It has often read federal statutes to incorporate settled corporate-law rules. But the settled rule here cuts the other way — separately incorporated companies are legally distinct entities with their own rights and obligations, even when they share a common owner. So corporate law reinforced, rather than undermined, the plain-text reading.
- An exception called 'piercing the corporate veil' allows courts to disregard corporate separateness in select circumstances, particularly to prevent corporate formalities from shielding fraud. But Dewberry Engineers conceded it never made the legal showing required to pierce the veil, so that exception was unavailable.
- Dewberry Engineers argued alternatively that the Lanham Act's 'just-sum provision' — which lets a court adjust a profits award up or down if the initial figure seems inadequate or excessive — allowed the courts below to factor in the affiliates' profits as evidence of the defendant's 'true financial gain.' The Court rejected this argument not on its legal merits but on factual grounds: neither the trial court nor the Fourth Circuit actually invoked or applied the just-sum provision.
- The only calculation the lower courts performed was adding up all the affiliated companies' profits as if they were a single entity's profits — a straightforward disregard of corporate separateness. That approach exceeded what the Lanham Act allows, so the award had to be vacated.
Doctrinal impact
Cases affected by this decision
Reaffirms United States v. Bestfoods (524 U.S. 51)
Reaffirmed that corporate separateness is the default rule and veil-piercing is the narrow exception.