In a unanimous decision this week, the U.S. Supreme Court vacated a $43 million trademark infringement award, ruling that Lanham Act plaintiffs cannot recover profits from affiliate defendants if not named in the case. The decision in Dewberry Group v. Dewberry Engineers No. 23-900, follows a trademark dispute between Dewberry Group, Inc. and Dewberry Engineers, Inc., where a Virginia federal court ordered Dewberry Group and its affiliates to pay nearly $43 million in profits, a ruling affirmed by the Fourth Circuit. Dewberry Group challenged the $47 million judgment, arguing that its business was not profitable and that only its affiliates, had generated profits. Plaintiff (Dewberry Engineers) argued that disgorging profits from Dewberry Group’s affiliates was justified under the “just-sum” provision of the Lanham Act but or under corporate veil-piercing principles, however those arguments were not addressed by the Court as they were not raised below.
This ruling is important as plaintiffs in future trademark disputes are likely to consider naming multiple defendants when it is uncertain who holds the profits from the alleged infringement, and leaves open the question of how the Court may have ruled on other vicarious-liability arguments, including as to contributory infringement.
