Supreme Court Holds That Courts Must Respect Corporate Distinctions When Awarding Disgorgement Under The Lanham Act
Client Alert | February 26, 2025
Dewberry Group, Inc. v. Dewberry Engineers, Inc., No. 23-900 – Decided February 26, 2025
Today, the Supreme Court unanimously held that a court awarding disgorgement of the “defendant’s profits” under the Lanham Act cannot include the profits of the defendant’s non‑party corporate affiliates.
“[The Lanham Act] cannot justify ignoring the distinction between a corporate defendant (i.e., Dewberry Group) and its separately incorporated affiliates. By treating those entities as one and the same, the courts below approved an award including non-defendants’ profits—and thus went further than the Lanham Act permits.”
Justice Kagan, Writing for the Court
Background:
The Lanham Act authorizes a prevailing trademark plaintiff to recover, “subject to the principles of equity,” the “defendant’s profits,” as well as any damages the owner sustained and costs of the suit. 15 U.S.C. § 1117(a). If the court finds that “the amount of the recovery based on profits is either inadequate or excessive,” it “may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.” Id.
Dewberry Engineers sued the similarly named Dewberry Group for infringing on its registered “Dewberry” trademark. After the district court held Dewberry Group liable, it ordered Dewberry Group to disgorge nearly $43 million in profits earned by its affiliate companies, which are separate corporations and not parties to the suit. The Fourth Circuit affirmed in a divided decision, holding that, even though Dewberry Engineers did not try to pierce the corporate veil separating Dewberry Group from its legally distinct affiliates, the district court correctly treated Dewberry Group and the affiliates as a single corporate entity when calculating the profits from infringement.
Issue:
Can an award of “defendant’s profits” under the Lanham Act include profits earned by the defendant’s separate non-party corporate affiliates?
Court’s Holding:
Under the Lanham Act, a court may not overlook corporate separateness and treat the defendant and its affiliates as a single corporate entity when calculating the “defendant’s profits” from trademark infringement, absent a showing that veil-piercing is appropriate.
What It Means:
- The opinion underscores that corporate separateness is foundational and that Congress must speak clearly if it wishes to displace that rule. Because nothing in the text of the Lanham Act overcomes that principle, courts may not disregard corporate separateness when calculating a defendant’s profits, unless a traditional rationale for piercing the corporate veil applies.
- The Court also rejected the argument that the provision of the Lanham Act authorizing the court to “enter judgment for such sum as the court shall find to be just” if the amount of recovery based on profits is “inadequate or excessive” permits courts to reach “non‑defendants’ profits.”
- Although the opinion emphasizes the importance of corporate separateness, it left a number of questions to be resolved in future cases. It did not address, for instance, whether courts “can look behind a defendant’s tax or accounting records to consider ‘the economic realities of a transaction’ and identify the defendant’s ‘true financial gain.’”
Gibson Dunn represented winning party Dewberry Group
The Court’s opinion is available here.
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This alert was prepared by associates Patrick J. Fuster, Matt Aidan Getz, and Connor P. Mui.
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