In a recent decision by the U.S. Supreme Court, the Court highlighted the importance of naming the correct defendant(s) in trademark infringement cases.1 Under the federal statute governing trademarks, the Lanham Act, a prevailing plaintiff in a trademark infringement suit may be entitled to an award of the "defendant's profits." In the Dewberry opinion, the Supreme Court determined whether a district court may total the profits of a named corporate defendant with those of separately incorporated affiliates not parties to the suit, and concluded that it may not.
In this case, the defendant Dewberry Group provided business, administrative, marketing and legal services for 30 affiliate companies. Each of the affiliate companies owns commercial property for lease, generating millions in profit. In its role in providing business services to the 30 affiliate companies, the defendant Dewberry Group operated at a loss each year.
Through Dewberry Group's marketing efforts emphasizing the "Dewberry" name for each of its 30 affiliates, Dewberry Group was held liable for trademark infringement of the plaintiff's "Dewberry" mark. Even though Dewberry Group operated at a lost and had no profits, the district court determined that the "defendant's profits" could include the profits of non-party affiliates, under the reasoning that Dewberry Group should not be able to evade the financial consequences of its actions via its affiliates' profits just because it operated at a loss.
In a unanimous decision, the Supreme Court vacated the district court's decision, reasoning that the plaintiff chose not to add Dewberry Group's 30 affiliates as co-defendants, and therefore the affiliates' profits are not the "defendant's profits" disgorgable under the Lanham Act. Importantly, the Court offered no opinion on piercing the corporate veil, which was not pursued by the plaintiff in this case.
How might this case affect trademark owners' enforcement strategy? If a trademark owner faces infringement by an entity that operates with affiliates, it may be necessary to include each of the affiliates as defendants in the trademark infringement lawsuit. At a minimum, once discovery shows that a defendant's infringing conduct may be financially benefitting an affiliated nonparty, plaintiffs would be wise to consider adding such affiliated non-party as a defendant. Otherwise, plaintiffs may miss out on those profits resulting from a defendant's infringement.
Footnote
1. The case is Dewberry Group, Inc. v. Dewberry Engineers Inc., 145 S. Ct. 681, 604 U.S. ---- (2025).
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