Dewberry Group, Inc. v. Dewberry Engineers Inc.

Facts of the Case

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Dewberry Engineers and Dewberry Group are two businesses in the real estate development industry that both use the “Dewberry” name. In 2006, they confronted each other over their competing brands, leading to a lawsuit that was settled in 2007 with a confidential settlement agreement (CSA). The CSA allowed Dewberry Engineers to use its registered marks freely while strictly limiting Dewberry Group’s use of “Dewberry.” It prohibited Dewberry Group from challenging Dewberry Engineers’ federal trademark registrations and required Dewberry Group to abandon pending applications for the “Dewberry Capital” mark.

In 2017, Dewberry Group decided to rebrand, changing its name from “Dewberry Capital” to "Dewberry Group” and adopting several subbrands. Despite the CSA, Dewberry Group applied to register new “Dewberry” marks with the U.S. Patent and Trademark Office (USPTO) for real estate-related services. The USPTO rejected these applications due to likelihood of confusion with Dewberry Engineers’ marks. Dewberry Engineers sent cease-and-desist letters to Dewberry Group, claiming trademark infringement and breach of the CSA. Dewberry Group refused to abandon its applications, arguing that the CSA allowed its use of “Dewberry” marks other than “Dewberry Capital” for non-architectural services.

The district court ruled in favor of Dewberry Engineers and ordered Dewberry Group to pay almost $43 million in disgorged profits for infringing on Dewberry Engineers’ trademark. The district court also enjoined Dewberry Group from further violating its agreement with Dewberry Engineers and required Dewberry Group to pay Dewberry Engineers’ attorney fees. The U.S. Court of Appeals for the Fourth Circuit affirmed.

Questions

Does an award of the “defendant's profits” under the Lanham Act allow a court to require the defendant to disgorge profits earned by legally separate, non-party corporate affiliates?

Conclusions

The Lanham Act limits recovery of profits in trademark infringement cases to those earned by the named defendant, not its separately incorporated affiliates. Justice Elena Kagan authored the unanimous opinion of the Court.

The text of the Lanham Act authorizes recovery of the “defendant’s profits,” which refers only to profits of parties named in the lawsuit. This interpretation aligns with fundamental corporate law principles that treat separately incorporated organizations as distinct legal entities with separate rights and obligations, even when they share common ownership. While exceptions exist through corporate veil-piercing doctrines, Dewberry Engineers never pursued this legal pathway. Courts may not, as the lower courts here did, disregard corporate separateness and treat a party and its non-party affiliates as “a single corporate entity” when calculating the profit award.

Justice Sonia Sotomayor authored a concurring opinion.