On February 26, 2025, the United States Supreme Court issued a unanimous decision in Dewberry Group, Inc. v. Dewberry Engineers Inc., vacating a $43 million disgorgement award and reinforcing the fundamental principle of corporate separateness in the context of the Lanham Act’s remedies provision. The ruling clarifies that in a trademark infringement suit, a prevailing plaintiff may recover only the profits of the named defendant, rejecting an expansive reading of the statute that would have permitted courts to aggregate the revenues of separately incorporated affiliates.
This decision builds upon the Supreme Court’s increasing textual rigor in corporate liability under federal trademark law. In our prior analysis, “Corporate Separateness on Trial: The Supreme Court’s Ruling in Dewberry Group v. Dewberry Engineers“, we examined the broader implications of the Court’s willingness to enforce corporate distinctions even in cases where economic reality suggests a more fluid relationship among affiliated entities. The Court’s latest opinion underscores that trademark remedies remain constrained by corporate formalities unless plaintiffs expressly invoke and substantiate theories such as veil-piercing.
The dispute in Dewberry arose from a long-running trademark conflict between Dewberry Engineers Inc., a national real estate development services firm that owns the registered trademark “Dewberry,” and Dewberry Group, Inc., a real estate investment and development company owned by John Dewberry. In prior litigation, the parties had reached a settlement governing Dewberry Group’s use of the name, but over a decade later, Dewberry Group rebranded and resumed using the “Dewberry” mark, prompting Dewberry Engineers to file a new suit for trademark infringement and breach of contract.
The district court ruled decisively in favor of Dewberry Engineers, finding that Dewberry Group’s trademark violations were “intentional, willful, and in bad faith.” In calculating the appropriate disgorgement remedy, however, the court adopted an expansive approach. Because Dewberry Group itself reported no profits—operating at a loss for decades while receiving financial support from its owner—the court determined that the affiliated entities, which owned the rental properties and derived substantial profits from Dewberry Group’s marketing and operational services, should be treated as part of the same economic enterprise. The court, therefore, attributed their combined profits to Dewberry Group, concluding that allowing the defendant to hide behind corporate formalities would undermine the equitable principles underlying the Lanham Act’s disgorgement remedy. The Fourth Circuit affirmed, reasoning that Dewberry Group and its affiliates functioned as a single enterprise and that disregarding the profits of the affiliated entities would permit the infringer to evade financial accountability.
The Supreme Court rejected this approach, holding that the Lanham Act’s plain text limits recoverable profits to those of the named defendant and does not authorize courts to aggregate the earnings of non-defendant affiliates absent a recognized legal basis such as veil-piercing. Writing for a unanimous Court, Justice Kagan emphasized that the term “defendant” carries its ordinary legal meaning—namely, the party against whom relief is sought—and that neither the text of § 1117(a) nor established principles of corporate law support disregarding formal distinctions between separately incorporated entities merely because they share ownership and operate in a coordinated fashion.
The Court’s ruling reaffirms longstanding principles of corporate separateness, which dictate that legally distinct entities maintain independent legal identities, even when they are closely affiliated. While courts may, in certain circumstances, disregard corporate formalities—for example, by piercing the corporate veil to prevent fraud or other abuses—the Supreme Court made clear that such doctrines must be affirmatively invoked and established by the plaintiff. Because Dewberry Engineers had not pursued a veil-piercing argument, the Court found no basis to attribute the profits of Dewberry Group’s affiliates to the defendant itself.
Notably, the Court did not resolve whether the just-sum provision of § 1117(a) could have been used to adjust a defendant’s reported profits to reflect economic reality, nor did it foreclose the possibility that courts may, in certain cases, look beyond a defendant’s tax returns or accounting records to ascertain its true financial gains. The opinion expressly left open the question of whether alternative methods of evaluating a defendant’s profits—such as considering whether an entity artificially depressed its earnings through below-market transactions with affiliates—might be permissible under different factual circumstances. Justice Sotomayor, in a concurring opinion, underscored that courts are not bound to accept a defendant’s own financial representations at face value and that principles of equity allow judges to consider the broader economic context in assessing a defendant’s gains. However, she agreed that the approach taken by the lower courts in this case had improperly disregarded corporate separateness, rather than using a permissible method of determining the defendant’s true financial benefit from infringement.
As we previously discussed in “Corporate Separateness on Trial: The Supreme Court’s Ruling in Dewberry Group v. Dewberry Engineers“, this case exemplifies the Court’s unwillingness to allow economic reality to override corporate formalities in the absence of established legal doctrines permitting such an approach. The Dewberry decision should serve as a cautionary note to plaintiffs seeking monetary remedies under the Lanham Act: if a company appears to be shifting profits to affiliated entities, those entities must either be named as defendants or plaintiffs must present a legally viable theory—such as veil-piercing—to justify their inclusion in a profits award.
Conversely, businesses operating within complex corporate structures should view this ruling as an affirmation that proper corporate separateness remains a formidable defense against expansive liability theories. While courts retain discretion in crafting equitable remedies, this discretion does not extend to disregarding corporate distinctions absent a clear legal basis. The Supreme Court’s decision ensures that a defendant’s liability is tied strictly to its own conduct, rather than that of legally distinct affiliates.
The case now returns to the lower courts, where it remains to be seen whether alternative theories—such as the just-sum provision or a more nuanced economic reality approach—might influence the final award calculation. As the litigation continues, brand owners and corporate entities alike should take note of the Court’s insistence on textual fidelity and corporate formalism as guiding principles in future disputes.
For further insights on how this ruling may impact your intellectual property strategy, please contact Zhu & Co., P.C.