Dewberry Group v. Dewberry Engineers — Trademark Profits Award Is Limited to the Named Defendant’s Own Profits

Background

Dewberry Engineers, an established engineering services firm, sued Dewberry Group — a real estate development company — for trademark infringement based on the similar names. Dewberry Group prevailed in the market by providing development and management services for properties owned by a network of separately incorporated affiliates. Critically, Dewberry Group itself was consistently unprofitable over the years, earning only management fees that were set below market rates; the actual profits from the real estate operations flowed to the affiliated entities owned by the same individual, John Dewberry.

After prevailing on liability, Dewberry Engineers sought disgorgement of profits. The district court awarded profits by aggregating the revenues of Dewberry Group and all of its affiliated entities — treating the entire enterprise as a single profit center. The award amounted to approximately $43 million. The Fourth Circuit affirmed, reasoning that equity permitted looking through to the affiliates’ profits.

The Court’s Holding

Justice Kagan, writing for a unanimous Court, reversed. The Lanham Act allows recovery of the “defendant’s profits” — and the word “defendant’s” means the named defendant’s, not its affiliated entities’. Dewberry Engineers sued Dewberry Group, not its affiliates. Those affiliates were legally separate corporate entities that were not parties to the litigation, had not been found liable, and had not been shown to be alter egos of Dewberry Group.

Courts may not simply add up affiliated entities’ profits and award them as if they were the defendant’s just because the defendant is part of a corporate family. The Court left open whether affiliates could be treated as defendants if they were alter egos of the named defendant or if they were separately shown to have participated in the infringement — but neither showing had been made here. The case was remanded for further proceedings.

Key Takeaways

• A Lanham Act profits award covers only the named defendant’s own profits — not the profits of affiliated or related entities that are not parties to the case.
• To reach affiliate profits, the plaintiff must either name the affiliates as defendants and prove their liability, or establish that they are alter egos of the named defendant.
• Corporate structuring that separates operations (and profits) into affiliated entities can affect the size of a trademark profits award — though it is not a license to infringe.
• Plaintiffs in trademark cases should carefully consider which entities to name as defendants if they want to capture the full scope of an infringer’s economic activity.

Why It Matters

The Dewberry decision matters for any trademark dispute involving a defendant that operates through a network of related entities — a common corporate structure in real estate, franchising, private equity, and many other industries. By limiting the profits award to the named defendant’s own profits, the Court protects the principle of corporate separateness and ensures that trademark plaintiffs cannot reach into the pockets of non-party entities without establishing those entities’ liability.

For plaintiffs, the lesson is strategic: identify and name all potentially liable entities as defendants at the outset, including affiliates that benefit from the infringing activity. For defendants, the case suggests that maintaining genuine corporate separateness between entities can provide some protection against massive profits awards, even if it cannot insulate the enterprise from liability altogether.