SCOTUS: Defendant’s Profits Exclude Non-Party Affiliates

On February 26, 2025, the Supreme Court unanimously held that courts can only award profits of the named defendant in a trademark infringement action and profits of the defendant’s affiliates are not recoverable if the affiliates are not named as defendants. Dewberry Group, Inc. v. Dewberry Engineers Inc., 604 U.S. ___ (2025). As detailed below, the Court’s decision has important practical ramifications for parties both prosecuting and defending against trademark infringement claims. 

What is the Law on Recovering Profits in a Trademark Infringement Case?

There are many state laws that cover trademark infringement, but when it comes to federally registered trademarks, the Lanham Act generally governs. The Lanham Act is a federal law covering trademark registration and protection and provides the legal grounds to sue for infringement of a registered trademark, among other things. The Lanham Act also provides, among other things, for a prevailing plaintiff in a trademark infringement action to recover “defendant’s profits” derived from improper or unauthorized use of a federally registered trademark. This disgorgement of defendant’s profits is designed to prevent the defendant from financially benefiting from their wrongful conduct and to serve as a deterrent to future trademark violations.

What Happened?

Dewberry Engineers Inc. (“Dewberry Engineers”) owns a federal trademark registration for the word DEWBERRY. In 2006, it asserted that the Dewberry Group, Inc.’s (“Dewberry Group”) use of the “Dewberry” mark in connection with certain real-estate services violated its trademark rights. That case settled in 2007, which limited Dewberry Group’s use of the mark. The dispute resurfaced in 2017 when the Dewberry Group rebranded and began using DEWBERRY in connection with its corporate affiliates, which led to Dewberry Engineers filing a second lawsuit against the Dewberry Group in 2020, again asserting trademark infringement under the federal Lanham Act.

The U.S. District Court for the Eastern District of Virginia ruled in favor of Dewberry Engineers and awarded disgorgement of Dewberry Group’s profits, including the profits of Dewberry Group’s corporate affiliates, in the amount of $43 million. The District Court’s decision was affirmed by the Fourth Circuit.

The Supreme Court granted certiorari to address whether a defendant’s corporate affiliates’ profits could be recovered as “defendant’s profits” under 15 U.S.C. § 1117(a) of the Lanham Act when the corporate affiliates are not named parties to the case.

The Supreme Court’s Decision

The Supreme Court vacated the Fourth Circuit’s decision and held that the lower courts were incorrect in treating Dewberry Group and its corporate affiliates as a single entity in calculating the “defendant’s profits” under 15 U.S.C. § 1117(a) because Dewberry Group’s separately incorporated affiliates were not named as defendants in the case.

In coming to this holding, the Court explained that § 1117(a) provides for recovery of “[the] defendant’s profits” and that the term “defendant” is to be understood in its usual legal meaning—the party against whom relief is sought. The Court further explained that Dewberry Engineers chose to list only the entity Dewberry Group as the defendant in its complaint, and it is that entity alone who is liable for infringing the “Dewberry” trademark. As a result, the Court held that the affiliates’ profits are not the “defendant’s profits” as ordinarily understood, but rather, only profits directly ascribable to the defendant itself are the “defendant’s profits” that may be awarded to the prevailing plaintiff in a trademark infringement case.

The Court noted that the “just-sum” provision in 15 U.S.C. § 1117(a), which allows courts to enter a judgment for such sum as the court shall find just, also did not justify including the affiliates’ profits because no analysis was conducted to support the $43 million award. Instead, the profits of the affiliates were simply added together and both Dewberry and its affiliates were treated as a single corporate entity. The Court emphasized that separately incorporated entities have distinct legal rights and obligations. By calculating the “defendant’s profits” based on the combined profits of Dewberry Group and its corporate affiliates, the lower courts approved an award that included non-defendants’ profits, which is improper and outside of what the Lanham Act permits. As a result, the Court reversed the Fourth Circuit’s ruling and vacated the $43 million award.

Why Does This Matter?

Because the recovery of a defendant’s profits is limited to only the named defendants in a trademark infringement action, it may be necessary to name other additional defendants in trademark infringement cases. This is especially true when the corporate structure of an infringing company makes it unclear which entity is profiting from the infringement. As a defensive strategy, if your corporate structure is diverse, you may benefit when a Plaintiff names only one of the affiliated entities. Alternatively, as an offensive strategy, we encourage due diligence into corporate affiliates when filing suit in federal court for trademark infringement.

The attorneys in Lewis Rice’s Trademark Practice Group combine technical experience with business pragmatism to achieve our client’s desired objectives. If you have questions about this case and the implications for your business, please contact a Lewis Rice trademark attorney.