On February 26, 2025, the U.S. Supreme Court ruled unanimously in favor of the petitioner in Dewberry Group Inc. v. Dewberry Engineers Inc., holding that a disgorgement of “defendant’s profits” under the Lanham Act may include only profits of the named defendant(s), but not profits of related parties or affiliates that were not sued.
What the Ruling Means
Equitable remedies available in Lanham Act cases, like disgorgement of a defendant’s profits, provide courts with some latitude to craft relief that is appropriate and just under the circumstances. The Supreme Court’s recent decision, however, recognizes an important limit on that discretion.
In Dewberry, the Supreme Court reversed the decision of the U.S. Court of Appeals for the Fourth Circuit, which had upheld an award of nearly $43 million comprised of profits earned not by the named defendant in the trademark infringement case, but rather by corporate affiliates of the defendant that were not themselves named as defendants.
Notwithstanding some indication that the defendant’s corporate structure was set up in a way that could minimize exposure of the named defendant, and the lower court’s attempt to reach an equitable result for the plaintiff, the Supreme Court decision prioritizes respect for the corporate form. As the Supreme Court notes, however, plaintiffs can best ensure greater recovery in like circumstances by naming corporate affiliates as defendants rather than attempting to rely on a court’s equitable power.
Background
Section 1117 of the Lanham Act (15 U.S.C. § 1117) provides that a prevailing plaintiff may, “subject to the principles of equity,” recover “defendant’s profits” (among other potential remedies). When deemed available to a plaintiff, the disgorgement remedy is a powerful one, because the Lanham Act only requires a plaintiff to prove the defendant’s sales of infringing products; the burden then shifts to the defendant to prove any costs or deductions from that amount. Separately, the so-called “just sum” provision of Section 1117 permits a court, “in its discretion,” to adjust a damages award to an amount it finds just if it concludes that a sum is “inadequate or excessive.”
The dispute in Dewberry began in 2006 when Dewberry Engineers sued Dewberry Group for trademark infringement. This initial lawsuit settled, and Dewberry Group agreed to certain limitations on its use of “Dewberry” going forward. In 2017, Dewberry Group rebranded and created multiple new brands with a “Dewberry” name, prompting Dewberry Engineers to bring a new lawsuit against Dewberry Group — but only Dewberry Group and not any of its affiliates using “Dewberry” branding — for breach of the settlement agreement and trademark infringement.
On summary judgment, the Eastern District of Virginia found that Dewberry Group engaged in willful infringement and awarded a disgorgement of profits.1 However, due to Dewberry Group’s corporate structure, it had no profits on the books; rather, its corporate affiliates technically realized the profits. Despite the fact that those affiliates were not named as defendants in the lawsuit, the district court reasoned that the “economic reality” of Dewberry Group’s relationship with its affiliates warranted disgorgement of those affiliates’ ill-gotten profits — $42.9 million in total — as part of the equitable remedy. To find otherwise, the court reasoned, would “undermine the equitable purposes of the Lanham Act’s disgorgement remedy by enabling the entire Dewberry Group enterprise to evade the financial consequences of its willful, bad faith infringement.”2
The Fourth Circuit affirmed, emphasizing that a grant of profit disgorgement is “‘subject to the principles of equity’ ... and is ultimately a matter of the court’s discretion.”3 To overturn the ruling, the court explained, would “run[] counter to Congress’s fundamental desire to give trademark registrants under the Lanham Act ‘the greatest protection that can be given them.’”4
Dewberry Group further appealed to the Supreme Court, arguing principally that there was no basis in the Lanham Act for judges to ignore corporate forms when awarding disgorgement. Dewberry Engineers defended the award under the “just-sum” provision, which it argued creates a two-step test whereby the district court first calculates “defendant’s profits” and, second, considers whether a different amount might better reflect the “defendant’s true financial gain” (including analysis of whether affiliates’ profits should be considered).
The Supreme Court’s Ruling
The Court, in a unanimous opinion by Justice Elena Kagan, vacated the damages award and remanded the case for a new award proceeding. The Court held that a disgorgement award in a trademark infringement suit under the Lanham Act permits a court to “award only profits ascribable to the ‘defendant’ itself.”5 Per the Court, the term “defendant,” not otherwise defined in the statute, bears its usual legal meaning: the party against whom relief or recovery is sought[.]”6 Moreover, treating affiliated companies as “a single corporate entity” would not be consistent with long-settled principles that separately incorporated organizations are “separate legal units.”7
Therefore, the Court perceived the plaintiff’s situation as a problem of its own making; Dewberry Engineers chose not to name Dewberry Group’s affiliates as defendants in the lawsuit, and the profits of the affiliates were properly excluded from the scope of the available remedy.
The Court declined to consider Dewberry Engineers’ argument that a district court may undertake a two-step process of assessing the “defendant’s profits” and subsequently considering whether a different figure that incorporates affiliates’ profits might be a more just award. This argument, the Court stated, could not be considered on appeal because it was inconsistent with what the lower court actually did — disregard the corporate form.8
Justice Sotomayor wrote a concurring opinion, joining the Court’s opinion in full but writing separately to emphasize that principles of corporate separateness do not “force courts to close their eyes to” practical business realities in trademark suits under the Lanham Act.9 The concurrence highlighted that the Court’s decision leaves room for lower courts to explore “look[ing] beyond a defendant’s books” when calculating Lanham Act disgorgement awards.10
Looking Ahead
Insofar as the lower courts’ decisions in Dewberry were something of a departure from jurisprudence respecting the corporate form, the Supreme Court’s decision can fairly be understood as reinforcing (or reinstating) a status quo.
From a trademark plaintiff’s perspective, the Court’s ruling should serve as a reminder to be careful and comprehensive when determining who to name as defendants, whether at the outset of the case or if seeking to amend as discovery unfolds. The Supreme Court’s perception of the Dewberry plaintiff’s problem as one of its own making that could have been avoided suggests that plaintiffs should err on the side of overinclusion of defendants to avoid waiving remedies. Affiliates of defendants in trademark disputes, on the other hand, can have more certainty that, if they are not named as defendants, their own accounts are less likely to be exposed by an equitable remedy.
Both the majority and concurring opinions, however, emphasize that the Court’s decision should not be read to prohibit district courts from relying on the “just-sum” provision of the Lanham Act to best craft disgorgement awards that reflect the “economic realities” of profits resulting from trademark infringement. Accordingly, the Dewberry decision is best understood as addressing this specific issue of corporate form, and does not prohibit courts from exercising equitable powers to try to ensure “just” results writ large.
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1 Dewberry Eng’rs, Inc. v. Dewberry Grp., Inc., No. 1:20-cv-00610, 2021 U.S. Dist. LEXIS 218628 (E.D. Va. Aug. 11, 2021).
2 Id. at *10.
3 Dewberry Eng’rs Inc. v. Dewberry Grp., Inc., 77 F.4th 265, 293 (4th Cir. 2023).
4 Id. (quoting Park ‘N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 193 (1985)).
5 See Dewberry Grp., Inc. v. Dewberry Eng’rs Inc., 604 U.S. __, 2025 WL 608108, (U.S. Feb. 26, 2025).
6 Id. at *3.
7 Id.
8 Id.
9 Id. at *6 (Sotomayor, J., concurring).
10 Id. (Sotomayor, J., concurring).
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