The Supreme Court’s pending decision in Dewberry Group v. Dewberry Engineers is poised to clarify a critical issue in trademark law: whether a defendant can be required to disgorge profits earned by legally distinct corporate affiliates without piercing the corporate veil. At stake is the balance between enforcing trademark rights and preserving the long-standing principle of corporate separateness. The case tests the balance between trademark enforcement and corporate separateness, a foundational principle of corporate law. The ruling will affect how companies structure their operations, allocate profits, and manage trademark liability.
The central issue in this case is whether an award of the defendant’s profits under the Lanham Act can encompass the disgorgement of profits from legally separate, non-party corporate affiliates. Specifically, the Supreme Court is tasked with determining the extent to which a court’s equitable discretion under the Lanham Act permits the inclusion of profits earned by entities distinct from the direct infringer but related through corporate affiliation.
Facts and Procedural History
The dispute traces back to 2006, when Dewberry Engineers, a civil engineering and surveying firm, initiated legal action against Dewberry Capital Corporation (now Dewberry Group), a real estate development company for trademark infringement, leading to a confidential settlement agreement (CSA) in 2007. The CSA permitted Dewberry Engineers unrestricted use of its registered marks and imposed limitations on Dewberry Group’s use of the “Dewberry” name, particularly in specific geographic regions and service areas.
In 2017, Dewberry Group rebranded, adopting the name “Dewberry Group” and introducing sub-brands such as “Dewberry Living,” “Dewberry Office,” and “Studio Dewberry.” Dewberry Engineers contended that this rebranding violated the CSA and infringed upon its trademarks, leading to the current litigation. Consequently, in May 2020, Dewberry Engineers filed a lawsuit against Dewberry Group for breach of contract and trademark infringement.
The litigation commenced in the Eastern District of Virginia, where Dewberry Engineers alleged trademark infringement, unfair competition under the Lanham Act and Virginia law, and breach of the CSA. The district court granted summary judgment in favor of Dewberry Engineers, finding that Dewberry Group had willfully infringed upon the “Dewberry” mark and breached the CSA. The court awarded Dewberry Engineers nearly $43 million in disgorged profits, calculated based on the revenues of Dewberry Group and its affiliates.
Dewberry Group appealed to the Fourth Circuit, challenging the district court’s disgorgement award on the grounds that it improperly included the profits of legally separate corporate affiliates. A divided panel affirmed the ruling, holding that the award was justified under an equitable theory that treated Dewberry Group and its affiliates as a single corporate entity. This decision sparked controversy, as it disregarded traditional corporate separateness principles without invoking veil-piercing or alter ego doctrines. Dewberry Group subsequently petitioned for certiorari to the Supreme Court, which granted review to address the scope of profit disgorgement under the Lanham Act, particularly concerning the inclusion of profits from non-party affiliates.
Supreme Court Oral Argument and Key Issues
On December 11, 2024, the Supreme Court heard oral arguments for the case with justices intensely scrutinizing the Fourth Circuit’s approach to corporate separateness and disgorgement under the Lanham Act.
Dewberry Group argued that the $43 million disgorgement order was unlawful because it attributed the profits of separate corporate entities to Dewberry Group without a legal basis. Specifically, the Lanham Act limits disgorgement to a defendant’s own profits, and Dewberry Group itself had zero net profits from the alleged infringement. Dewberry Group contended that the Fourth Circuit erred by adopting a “single corporate entity” theory, which treated Dewberry Group and its affiliates as one business despite their distinct legal status. Dewberry Group warned that disregarding corporate separateness without applying recognized veil-piercing principles could destabilize long-standing business structures and expose companies to excessive liability.
Some justices were skeptical. Justice Clarence Thomas questioned whether Dewberry Group’s defense was overly “formalistic,” given that all the entities were owned by the same individual. He inquired whether the outcome would differ if the businesses were structured as a partnership rather than separate corporations. Justices Ketanji Brown Jackson and Sonia Sotomayor pressed Dewberry Group on whether a court could at least consider the affiliates’ profits as evidence of the defendant’s actual financial gain, even if those profits could not be directly disgorged. Dewberry Group conceded that courts may look beyond a defendant’s financial records to determine the true measure of profits but insisted that the affiliates’ profits were legally separate and could not be attributed to Dewberry Group under the Lanham Act.
The Court also heard arguments from the U.S. government, which supported vacating the Fourth Circuit’s ruling but suggested alternative ways a court might calculate a defendant’s financial benefit while maintaining corporate separateness. The government highlighted concerns that Dewberry Group’s structure may have obscured economic reality by keeping its profits artificially low while its affiliates benefited from the infringement. The government proposed that the lower courts should assess what Dewberry Group would have earned in an arm’s length transaction with unaffiliated entities and consider whether the defendant had intentionally diverted profits to shield them from disgorgement.
Dewberry Engineers countered that the courts below had not actually disregarded corporate separateness but had properly determined that Dewberry Group alone generated the infringing profits, even if those revenues were recorded in the affiliates’ accounts. Dewberry Engineers emphasized that the court had found Dewberry Group controlled the revenues, managed the branding, and made strategic decisions about how profits were allocated. Justices Neil Gorsuch and Amy Coney Barrett, however, expressed skepticism about whether the Fourth Circuit had engaged in the proper analysis or simply assumed that all revenues generated through infringing activities belonged to Dewberry Group.
The justices also debated the Lanham Act’s “just sum” provision, which allows courts to enter judgment for a sum deemed just when the standard calculation of profits is inadequate. Justice Elena Kagan questioned whether this provision granted courts broad discretion to adjust disgorgement awards, while Justice Samuel Alito expressed concerns that such flexibility might lead to open-ended judicial discretion inconsistent with the statute’s limitations.
Implications for Businesses and Trademark Enforcement
The Supreme Court’s upcoming ruling has the potential to reshape how trademark infringement remedies are applied, particularly in cases involving complex corporate structures. If the Court upholds the Fourth Circuit’s decision, businesses operating through multiple affiliates may face increased liability, as courts could treat them as a “single economic enterprise” and allow disgorgement of profits from legally distinct entities without piercing the corporate veil. This would prompt companies to reassess corporate structures, strengthen internal branding agreements, and ensure clear financial separation among affiliates to mitigate risk. Greater scrutiny of intra-company transactions could also impact industries reliant on shared brand identity, such as hospitality, real estate, franchising, and portfolio companies.
Conversely, a decision in favor of Dewberry Group would reinforce the principle of corporate separateness, emphasizing that profits generated by legally distinct affiliates cannot be attributed to a defendant without clear evidence of direct financial benefit or intent to circumvent liability. This outcome would align with existing case law which hold courts must respect corporate formalities unless Congress explicitly states otherwise. Ruling in Dewberry Group’s favor could also limit the use of equitable remedies under the Lanham Act, requiring plaintiffs to establish a more direct link between an infringer’s conduct and its financial gains.
Beyond the immediate dispute, the case raises broader concerns about how courts assess the true economic impact of trademark infringement in an era of complex corporate ownership structure. The government’s position—that courts should have flexibility in considering evidence of diverted profits or disguised economic benefits—suggests a growing judicial willingness to scrutinize financial realities beyond a defendant’s own books. If the Supreme Court acknowledges this principle while still affirming corporate separateness, it may set a precedent for alternative methods of calculating financial remedies, such as using evidence of below-market transactions or strategic profit allocations to affiliates.
Additionally, the Court’s interpretation of the “just sum” provision in the Lanham Act could have long-term effects on how courts balance damages with equitable considerations. If the Court endorses a broad reading of the provision, lower courts may feel empowered to adjust disgorgement awards in cases where traditional profit calculations do not fully capture the economic effects of infringement. However, a narrow reading could constrain judicial discretion, reinforcing a more rigid, formulaic approach to trademark remedies.
The case’s outcome will shape how plaintiffs pursue trademark claims, potentially making litigation more complex or prompting higher settlement demands if equitable remedies are broadened. If the Court upholds the Fourth Circuit’s ruling, plaintiffs may be more inclined to target corporate groups rather than individual entities, arguing for a broader reach in disgorgement awards. This could lead to more extensive discovery demands, requiring businesses to disclose financial relationships across affiliates, and longer, costlier litigation as courts examine corporate structures in greater detail. Conversely, if the Court reinforces corporate separateness, plaintiffs may need to name multiple defendants from the outset, increasing the procedural burden of proving liability for each entity rather than relying on post-judgment remedies. The decision could also influence settlement dynamics, with defendants facing greater uncertainty over financial exposure being more likely to resolve disputes early, while plaintiffs may leverage expanded disgorgement theories to push for higher settlement amounts.
The Supreme Court’s decision will set a precedent for how courts assess disgorgement in trademark disputes involving affiliated corporate entities. The Supreme Court’s ruling will determine whether financial liability can extend beyond the named defendant to legally distinct affiliates, shaping the scope of equitable remedies under the Lanham Act. Its decision will guide how businesses structure their operations to manage trademark risks and how courts evaluate corporate separateness in infringement cases.