Justices’ Ax of Trademark Award Provides ‘Relief,’ Not Clarity

The Supreme Court’s opinion axing a $43 million trademark award answered a narrow question about corporate separateness and intentionally left the fate of the underlying case undecided along with broader questions about trademark law.

Lower courts failed to justify granting Dewberry Engineers Inc. a trademark infringement award based on profits of Dewberry Group Inc.'s non-defendant affiliates, according to the justices’ unanimous opinion Wednesday. The court held “defendant’s profits” must come from named defendants, but also outlined various paths by which Dewberry Engineers could have recouped—and still might—the damages on firmer ground.

The result assuaged concerns from legal scholars and legal groups who filed briefs arguing upholding the award would destabilize bedrock corporate separateness law and lead to uncertainty about liability that could’ve harmed the economy.

“If this had gone the other way, it would have been just headline news everywhere,” intellectual property attorney William W. Stroever of Cole Schotz PC said. “Companies would be scrambling to redo agreements. Relief is the emotion that describes it the best.”

But the high court didn’t explore the bounds of a Lanham Act provision allowing courts to award “such sum as the court shall find to be just.” Some amici told the high court the provision was bound by standard limits on equitable remedies and can’t reach non-defendant profits, but the justices declined to expound any guidelines to consider on remand.

“There’s much needed guidance on how a court can adjust a disgorgement award,” IP attorney Megan K. Bannigan of Debevoise & Plimpton LLP said. “This decision follows many of the court’s recent IP decisions, where we see the question presented as narrowly as possible and the court leaves a lot of open questions.”

Justice Elena Kagan’s opinion and Justice Sonia Sotomayor’s concurrence laid out clear options for Dewberry Engineers on remand. But Bannigan and other attorneys said it’s possible the plaintiff already waived some of the arguments—despite the court declining to say either way.

“The Supreme Court really feels for the plaintiff here,” Stroever said, noting that Sotomayor also said corporate separateness doesn’t “blind courts to economic realities.”

Her “whole concurrence is ‘check out these other two theories you can pursue,’” he said.

‘Practical Business Realities’

Construction-services firm Dewberry Engineers sued property manager Dewberry Group in 2020 in the US District Court for the Eastern District of Virginia. It said the company owned by former Georgia Tech quarterback John Dewberry violated a 2007 settlement agreement restraining its use of “Dewberry Capital” when it rebranded in 2017.

The court found Dewberry Group liable, setting up a damages bench trial. Because Dewberry Group reports no profits from its work managing the commercial properties owned by affiliated companies, the district court used affiliates’ profits to calculate the $43 million award. The Fourth Circuit affirmed.

The justices found that reasoning insufficient and remanded. Dewberry Engineers failed to join the affiliates as defendants, and didn’t attempt to “pierce the corporate veil” to show the entities were functionally indistinguishable, Kagan said. She also noted the courts didn’t incorporate the Lanham Act’s “just-sum” provision into its analysis.

The high court explicitly declined to express a view on the just-sum provision and sidestepped the Justice Department’s assertion courts can look behind tax and accounting records to consider “the economic realities of a transaction” to identify “true financial gain.”

Sotomayor elaborated, saying courts could likely use cash infusions and below-market-value services as evidence to calculate defendant profits had a defendant maintained an “arm’s length relationship” with affiliates.

IP attorney Mark Sommers of Finnegan Henderson Farabow Garrett & Dunner LLP called Sotomayor’s roadmap the most interesting aspect of the court’s ruling, pointing to her writing corporate separateness doesn’t “force courts to accept clever accounting” to obscure gains.

“Courts must be attentive to the practical business realities for our nation’s trademark laws to function,” he said.

Lessons Learned

The case will have a new district judge on remand, as Judge Liam O’Grady, who made the original award, retired in 2023.

But the high court leaving arguments open in its opinion doesn’t automatically mean they’re available on remand, IP attorney John L. Strand of Wolf Greenfield & Sacks PC said.

“You still have to make the argument,” Strand said. “It doesn’t mean they’re going to do something without a party having asked for it.”

Stroever agreed, and said that might negatively impact Dewberry Engineers.

“It wouldn’t surprise me if their luck runs out” on some of the arguments after the courts “bailed them out” the first time around, he said.

He also predicted the court won’t allow arguments that require re-opening the factual record, as piercing the veil likely would. But he said he doubts the court will find the just-sum argument to be waived because it was referenced at trial and cited at the Fourth Circuit.

If Dewberry Engineers can raise it, there’s little precedent regarding the provision’s bounds, though there is substantial case law regarding the limitations of equity in other contexts, Strand said.

“A court’s equity is not unbounded,” Strand said. But “the court has a lot of discretion.”

Attorneys might name as defendants all parties that made money off infringement more often in future complaints, Strand said. Even if affiliates hadn’t used the Dewberry name, he said, contributory and induced infringement theories could apply.

The “easiest way to avoid this” would’ve been to add all the affiliates, Stroever said. “Sometimes attorneys get locked into a theory and a fact pattern early on.”

But Sommers said it’s not always immediately clear where profits are going, and adding a party prematurely could lead to dismissal. The decision might prompt judges to allow even more latitude to amend a complaint, already a low bar, he said.

“If this happens in the future, it would be prudent to make that motion to amend,” Sommers said. “Now that there’s a Supreme Court precedent, judges might be more likely to give more time.”

The case is: Dewberry Group Inc. v. Dewberry Engineers Inc., U.S., Docket No. 23-900, vacated and remanded 2/26/25.