As the Supreme Court’s term kicked off in October, trademark practitioners look forward to the Court deciding one trademark case during the 2024–25 term: Dewberry Group, Inc. dewberry Engineers, Inc. The Court will decide whether an award of the "defendant’s profits” under the Lanham Act can include an order for the defendant to disgorge the distinct profits of legally separate, non-party corporate affiliates.
Background:
Both parties use the DEWBERRY mark in connection with commercial real estate development services. Plaintiff Dewberry Engineers, Inc. sued Dewberry Group, Inc. (formerly Dewberry Capitalcorp.) for trademark infringement under the Lanham Act. The parties settled the case in 2007 and entered into an agreement permitting Dewberry Group to use its then-existing name DEWBERRY CAPITAL, but not the mark DEWBERRY alone. When Dewberry Group changed its name from Dewberry Capital to Dewberry Group in 2019, the dispute resurfaced, and subsequent litigation ensued. Dewberry Engineers sued Dewberry Group for breach of contract and trademark infringement. The Eastern District of Virginia entered summary judgment in favor of Dewberry Engineers and awarded Dewberry Engineers approximately $43 million of Dewberry Group’s profits, which included profits of Dewberry Group’s affiliated entities which were not named as defendants. Interestingly, evidence showed that Dewberry Group itself reaped no profits connected to the infringement.
On appeal by Dewberry Group, the Fourth Circuit affirmed the district court’s award, noting that while Dewberry Group did not receive the revenues from the infringement directly, it still benefited from its activity with its affiliates. The Fourt Circuit opined that the district court’s order properly took into account principles of equity.
The Supreme Court granted Dewberry Group’s petition for certiorari and will decide whether an award of "defendant’s profits” under the Lanham Act, 15 U.S.C. § 1117(a), allows a court to require the defendant to disgorge profits earned by legally separate, non-party corporate affiliates. The International Trademark Association’s (“INTA”) amicus brief supported neither party but urged the Court to clarify that the profits of a defendant’s affiliates may not be considered under the Lanham Act’s disgorgement remedy unless there has been veil piercing or the affiliated entities were parties to the lawsuit.
Implications:
The decision will likely have an impact on courts’ discretion in awarding disgorgement of an infringer’s profits. However, the case has potential to affect not only trademark law, but other areas of the law as well, as other statutes besides the Lanham Act use "principles of equity” to guide a court’s decision in determining remedies. Some argue that the case could allow plaintiffs to rely on third-parties’ revenues and profits to embark on “fishing expeditions” and use the threat of disgorgement as leverage. Moreover, isolating infringement risk and liability for companies with corporate structures involving multiple affiliated entities will become increasingly difficult.
Dewberry Group, Inc. v. Dewberry Engineers, Inc. is set for oral argument on December 11,2024.