Justices Consider How Far to Go in ‘Dewberry’ Trademark Case

The US Supreme Court appears primed to remand a $43 million trademark case on narrow grounds and spurn the parties’ push for broader clarity on questions of equity, damages, and corporate separateness following oral argument Wednesday.

Dewberry Group Inc. told the justices the Fourth Circuit wrongly based the award against it on profits of parties not named in the suit—affiliated companies also owned by Atlanta real estate developer John Dewberry that are legally separate entities. It argued the award for infringing Dewberry Engineers’ trademark violated bedock law of corporate separateness.

The justices Wednesday appeared uninterested in a broad ruling ruling clarifying principles of equity—which reach beyond trademark law—as some attorneys had predicted they could when they agreed to hear the case.

Some justices expressed interest in a short opinion remanding the case to let lower courts sort it out. But the US Justice Department urged them to offer more clarity in the process, and the parties each sought total victory rather than remanded proceedings. Multiple justices asked how far they should go to explain “corporate separateness” and clarify limits of the Lanham Act’s allowance for a court to award a “sum” it finds “just.”

“The biggest question is to what extent the Court will discuss the bounds of the ‘just sums’ provision in cases like this in order to provide guidance to the lower courts,” Evan Everist of Dorsey & Whitney LLP said in an email.

Everist added that four justices—Chief Justice John G. Roberts and Justices Amy Coney Barrett, Samuel A. Alito and Clarence Thomas—seemed “skeptical about the Court’s ability to salvage the award under the ‘just sums’ provision.”

The dispute stemmed from the 2017 decision of Dewberry Capital Corp.—already restrained by a 2007 trademark settlement with Dewberry Engineers—to rebrand as Dewberry Group. Dewberry Engineers won a bench trial, and the Fourth Circuit affirmed, saying Dewberry Group ignored several “red flags” as it rebranded. The appeals court held the Lanham Act language allowing for disgorgement of profits “subject to the principles of equity” justified an award based entirely on the profits of Dewberry Group affiliates.

While the high court could clarify the bounds of the Lanham Act, illuminate paths to non-party profits, or venture more broadly into corporate separateness law, shortfalls in the Fourth Circuit opinion and possibly waived arguments are likely to cause it to choose a narrower path, intellectual property attorney Sharon Urias of Greenspoon Marder LLP said.

“My initial takeaway was that this may not have as wide-reaching implications as people fear it will because of the unique posture of this case,” she said.

Ways to Skin a Cat

In one exchange, Alito balked at the government’s suggestion that dipping into affiliate profits can be considered “when that is justified by the economic realities.”

“That seems awfully open ended,” he said.

Nicholas S. Crown, an assistant to the solicitor general, said he “would tweak it a little bit” by saying the US doesn’t advocate “going beyond the profits or the actual economic gain of the defendant.”

Justice Neil M. Gorsuch noted the various ways Dewberry Engineers’ attorney, Elbert Lin of Hunton Andrews Kurth LLP, argued a non-party’s profits could be considered. But he said it might not matter in this case.

“There are many ways to skin the cat,” Gorsuch said. “But, as I understand it, the Fourth Circuit below did none of those things.”

Justice Ketanji Brown Jackson asked why, if profits from affiliated companies were central to the case, the court didn’t pierce the corporate veil—a legal act to disregard the separation of two entities. Thomas suggested Dewberry Engineers’ case relied on a piercing of the corporate veil “to some extent.”

But Dewberry Engineers “disavowed any claim of veil-piercing,” Dewberry Group attorney Thomas G. Hungar of Gibson, Dunn & Crutcher LLP said. “There are recognized principles and rules that govern” when corporate separateness will be disregarded, he said, and none apply to the case.

Crown and Lin told the court horizontal setups, like Dewberry Group’s, might not fit traditional veil-piercing doctrine designed to address parent-subsidiary relationships.

‘Makes No Sesne’

The justices expressed some degree of sympathy for the plaintiffs Dewberry Engineers.

It “makes no sense to me” why an owner putting money into a defendant to cover operating losses can’t be treated as the defendant’s profits, Justice Sonia Sotomayor said.

Hungar said that argument was never made, to which Sotomayor said “that’s an issue of remand” at the lower court’s discretion.

Attempting to preserve the verdict, Lin pointed out the Fourth Circuit said it didn’t see the district court as treating the affiliates and Dewberry Group as the same entity, but considered “the revenue of entities under common ownership” in “calculating Dewberry Group’s true financial gain.” But Gorsuch pushed back.

“I think what Mr. Hungar would say to you is: ‘That’s a nice little snippet, but there’s no work there,’” Gorsuch said. “Some work has to be done under some equitable theory. And we don’t have any evidence that the Fourth Circuit did that in this case.”

By and large, the justices didn’t seem persuaded that there was a compelling reason to find the Lanham Act allows for disgorgement of related companies’ profits, IP attorney David Bell of Haynes Boone said in an email. The parties didn’t make broad public policy arguments for their preferred rulings either, he added.

“Reactions and questions from the Court, in turn, indicated that the Court is unlikely to issue an opinion with broad sweeping implications,” Bell said. “I expect it will be narrow in scope and not clearly answer whether the profits of related entities to a defendant may always be considered in a Lanham Act damages award.”

The case is Dewberry Group Inc. v. Dewberry Engineers Inc., U.S., No. 23-900, oral argument 12/11/24.