Partner
Here’s What Happened:
Dewberry Engineers Inc. (“D. Engineers”) is a real estate development company. Dewberry Group Inc. (“D. Group”) is a competitor of D. Engineers. D. Group provides services for rental properties. The properties are owned by separate corporate affiliates of D. Group. D. Group operated at a loss for most years and was only propped up by infusions of capital from D. Group’s primary shareholder.
D. Engineers sued D. Group for trademark infringement. D. Engineers won and obtained a $43 million award representing a disgorgement of D. Group’s profits. However, in calculating the profits, the trial court included the real estate profits from all of D. Group’s affiliates even though they were not named defendants.
D. Group appealed. A divided Court of Appeals affirmed the award.
On appeal to the U.S. Supreme Court, Justice Kagan wrote the opinion for a unanimous Court.
D. Group argued that since the affiliates were not defendants, their profits should not have been used to calculate D. Group’s profits. The Court agreed. A court can award only a defendant’s profits. The term “defendant” bears the usual legal meaning, namely, the party against whom relief or recovery is sought. D. Engineers obviously did not add the affiliates as defendants. D. Engineers admitted that it made no attempt to pierce the corporate veils of the affiliates so they could be considered alter egos of D. Group. D. Engineers argued that trademark law gives courts discretion to enter a judgment in excess of the defendant’s profits that reflects the defendant’s true financial gain. This is called a “just sum” provision. But the trial court did not use the “just sum” provision. It lumped the profits from all of the affiliates into D. Group’s profits.
The Supreme Court held that the courts below were wrong to treat D. Group and its affiliates as a single entity to calculate D. Group’s profits. The Court vacated the judgment and remanded the case for further proceedings.
WHY YOU SHOULD KNOW THIS: It’s hard to tell which side will win this war in the end. Normally, a party has to bring an argument up in the trial court to preserve it for appeal. D. Engineering did not bring up either the alter ego theory or the “just sum” theory. The Supreme Court’s remand order is pretty broad. So the trial court may have the discretion to allow D. Engineering to bring up these two arguments for the first time on remand.
Cited Authority: Dewberry Grp., Inc. v. Dewberry Eng'rs Inc., -- US --, 2025 WL 608108 (U.S. Feb. 26, 2025)