SCOTUS Upholds Corporate Separateness in Dewberry Trademark Ruling
Creators: name: Hrga, Isabella
Publisher: name: American University
Year: 2025

description: On February 26, 2025, the United States Supreme Court overturned a $43 million trademark infringement award in Dewberry Group, Inc. v. Dewberry Engineers Inc., ruling that the profits from separately incorporated affiliates could not be considered under the profit provisions of the Lanham Act. [1] In this unanimous decision, the Court reversed and remanded the ruling of the District Court, reinforcing the key principle of corporate law: that legally distinct entities cannot be treated as the same for the sake of increased litigation damages. [2] <br>Under 15 U.S.C. § 1117(a) of the Lanham Act of 1946, a prevailing plaintiff in a trademark infringement lawsuit is allowed to recover damages, including the defendant's profits. The law also states that the courts may provide a plaintiff with a “just sum” as a form of compensation, but only within the bounds of what is attributable to the defendant's actions. [3]. In Dewberry, the central issue was whether or not profits from affiliated companies could be considered when determining this “just” recovery, despite these entities not being explicitly named as defendants. <br>This legal dispute began in 2006, when the engineering firm, Dewberry Engineers, sued the rental management company, Dewberry Group, for trademark infringement over the use of the “Dewberry” name, resulting in a settlement reached in 2007 [4]. However, in 2017, the Dewberry Group began to offer new services under names such as “Dewberry Living” or “Study Dewberry”, leading Dewberry Engineers to sue again, alleging trademark infringement under the Lanham Act and for violating the terms of their settlement [5]. <br>The U.S. District Court ruled in favor of Dewberry Engineers in 2021. However, the Dewberry group was not profitable, surviving off of below-market service fees paid by their affiliates and cash bailouts from owner, John Dewberry. As a result, the District Court treated the group and its affiliates as a “single corporate entity”, justifying the $43 million award to reflect the “economic reality” of the situation [6]. The Court of Appeals affirmed the amount awarded by the lower court. <br>In an appeal before the Supreme Court, the petitioner, Dewberry Group, argued that the $43 million award was a misapplication of the Lanham Act because it included the profits from legally separate entities. [7] They contended that treating the group and its affiliates as a single company improperly expanded the scope of unjust enrichment under the law. <br>The respondent, Dewberry Engineers, did not contest those points, but rather focused on the latter provision of the act if “the amount of the recovery based on profits is either inadequate or excessive”, the Court may find work to reach a judgment of a “just sum” [8]. In their view, the inclusion of the affiliate’s profits was essential to fully compensate for trademark infringement and urged the Court to adopt the “economic reality” approach of the lower courts. [9] In the majority opinion written by Justice Kagan, the Court held that the Lanham Act limits profit awards to those earned solely by the defendant, not the defendant and its affiliated entities, rejecting the lower courts’ use of an “economic reality approach” [10]. In addition, she emphasized that by including the Dewberry Group and its affiliates in the just sum, they “disregard ‘corporate formalities’ – and likewise the “principle [] of corporate separateness” [11]. <br>In her concurrence, Justice Sotomayor agreed with the outcome but clarified that the Court did not specify how the profits should be reached in the lower court’s reevaluation. She proposed that plaintiffs could still recover profits by piercing the corporate veil, considering the owner's personal assets, or establishing joint liability. Her opinion leaves open legitimate paths to recovery within the established framework of the Lanham Act. [12] The Court’s ruling appropriately reinforces that equitable solutions under the Lanham Act must operate within the statute’s clear boundaries. By rejecting the “economic reality” approach, the Court maintained predictability in corporate law and upheld the principle of corporate separateness as an important legal distinction. Giving courts the jurisdiction to collapse corporate structures without establishing reasons of veil-piercing or joint liability presents the risk of destabilizing foundational legal protections. <br>Moving forward, Dewberry sets a clear precedent that plaintiffs must be precise in identifying defendants in order to build a strong legal basis to collect profits from corporate affiliates. This ruling leaves room for courts to incorporate affiliate profits though means, such as viel-piercing, when properly supported. This strikes a strong balance between preventing “unjust enrichment” and maintaining the separation of business entities.<br><br><b>Sources:</b>Blake Brittain, U.S. Supreme Court Overturns $43 Mln Award in Dewberry Trademark Case, Reuters (Feb. 26, 2025), https://www.reuters.com/legal/government/us-supreme-court-overturns-43-mln-award-dewberry-trademark-case-2025-02-26/.15 U.S.C. § 1117(a), https://www.law.cornell.edu/uscode/text/15/1117.Dewberry Grp., Inc. v. Dewberry Eng’rs Inc., No. 23-900 (U.S. Feb. 26, 2025), https://www.supremecourt.gov/opinions/24pdf/23-900_19m1.pdf.Supreme Court Issues Unanimous Decision in Dewberry Group v. Dewberry Engineers, AIPLA (Feb. 27, 2025), https://www.aipla.org/detail/news/2025/02/27/supreme-court-issues-unanimous-decision-in-dewberry-group-v.-dewberry-engineers.Supra note 1.Supra note 3.Tara J. Goldstein, Equitable Principles and Trademark Remedies; Redefining the "Principles of Equity," 52 Preview U.S. Sup. Ct. Cas. 1002 (2024), https://heinonline.org/HOL/P?h=hein.journals/prvw52&amp;i=106.Trademark Statutes, U.S. Patent &amp; Trademark Office, https://www.uspto.gov/sites/default/files/trademarks/law/Trademark_Statutes.pdf.Supra note 7.Supra note 4.Supra note 3.Supra note 3.