Under federal trademark law, a winning trademark owner can seek a defendant’s profits from infringing use of the trademark. But just who is the “defendant” whose profits can be reached? Is it the corporate affiliate of the named defendant? What if the defendant uses creative corporate structuring to shield members of the group from the consequences of infringement?
In a recent case in which Dewberry Engineers was the undisputed owner of the DEWBERRY mark, the named corporate defendant, Dewberry Group, was found to have willfully infringed Dewberry Engineers’ rights in the trademark. Disgorgement of a defendant’s profits is one possible measure of damages in trademark cases; Dewberry Group, however, had no actual profits that could be used to satisfy the judgment. Rather, Dewberry Group operated through a series of affiliates that made millions of dollars from infringing the DEWBERRY mark. Recognizing that Dewberry Group had used this corporate structure to shield its actual profits from the infringement, the trial court awarded Dewberry Engineers the profits of the affiliates of Dewberry Group. On appeal, the US Supreme Court was asked to decide whether damages awards in federal trademark cases can include the affiliates’ profits in place of the named-defendant’s profits.
The Supreme Court held that federal trademark law allows an award of only defendant’s profits, and that means the named defendants only. But that is not the end of the story. The Court also speculated that an affiliate’s profits may still be considered part of the damages award in the appropriate circumstances, particularly if there is proof of behavior such as fraud that warrants disregarding the usual separation between a corporation and its owner(s) or that the defendant benefited from its affiliates’ infringement such that the profits are actually attributable to the named defendant itself. The feuding Dewberrys will now return to the trial court for further proceedings to answer these questions.
For trademark owners, the lesson of Dewberry is to name as defendants all affiliates in the corporate family that are suspected of involvement in the infringement. This could mean more extensive pre-filing diligence about defendants’ businesses as well as additional discovery and analysis of damages during litigation. In light of the Court’s ruling and another recent case making it more difficult to reach foreign infringers, trademark owners will need to be ever more diligent about discovering and naming each infringer in the corporate chain whose activities relate to US sales. Accordingly, trademark owners must break down an infringer’s complete corporate enterprise and, as always, follow the money. On the other side of this issue, it is clear that creative use of the corporate form is not a get-out-of-jail-free card. Clever accounting or anything that might look like a fraudulent transfer is likely to cause defendants to endure much more discovery and may increase their overall exposure.
The case is Dewberry Group, Inc. v. Dewberry Engineers, Inc, No. 23-900 (2025).
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