In a recent ruling, the United States Supreme Court issued a decision on the scope of profit recovery in trademark infringement cases. The case, Dewberry Group v. Dewberry Engineers, specifically addressed whether profits of related entities within a corporate group can be included when calculating a defendant’s profits. Justice Elena Kagan, writing for a unanimous court, concluded that only the profits of the named defendant could be awarded, rejecting the approach taken by the lower court.
Justice Kagan emphasized that the relevant statute clearly refers to “the defendant’s profits,” indicating that only the profits of the party against whom relief is sought in an action can be considered. In this instance, Dewberry Engineers had opted not to list the affiliates, which made profits, as defendants in its lawsuit. Thus, the profits of those affiliates could not be included in the profit calculation for the award. Kagan underscored the importance of respecting corporate identities, noting that federal statutes often incorporate state-law principles affirming the distinct legal identities of separately incorporated organizations.
While Dewberry Engineers attempted to present various arguments for a broader damages award, including allegations that the defendant may have diverted some earnings to affiliates, the court found these arguments were not adequately considered by the courts below. Kagan’s opinion highlighted that the court’s holding was limited, leaving room for the potential exploration of new arguments or theories, such as “piercing the corporate veil,” in the lower courts upon further proceedings.
The court’s narrow decision effectively limits financial recovery in trademark infringement cases to the profits of the specific named defendant unless a compelling reason, fully considered by the courts below, suggests otherwise. This outcome may serve more as a footnote in corporate law literature rather than in trademark law, as the court’s stance reflects a conventional understanding of corporate structures rather than offering new insights into trademark infringement recovery.
The full opinion by the court can be accessed here. For further details on the case, see the original article on SCOTUSblog.