Dewberry Group: Structuring the Firm to Avoid Trademark Liability

by Dennis Crouch

The U.S. Supreme Court has granted certiorari in Dewberry Group, Inc. v. Dewberry Engineers Inc., a trademark damages case focused on how corporate separateness principles apply to disgorgement remedies under the Lanham Act, 15 U.S.C. § 1117(a). The Fourth Circuit’s decision affirmed a $43 million disgorgement award against petitioner Dewberry Group (DG) for trademark infringement, an amount that included profits earned by DG’s “legally separate” corporate affiliates. Apparently, the affiliates were “single-purpose entities,” also privately owned by John Dewberry, whose sole function was to own commercial properties serviced by DG.

Pierce the Veil: In its literal sense, a veil is a delicate fabric that separates the visible from the concealed, a barrier that can be easily lifted or parted. However, the phrase has a history of extending beyond the material world, with a veil often serving as a boundary between the physical and spiritual realms in our universe. Many of us go through life, only occasionally glimpsing beyond this veil into the hidden spiritual dimensions that, according to story tellers, lie alongside our own. In the corporate world, the veil of corporate personhood serves to shield the owners from personal liability, creating a legal fiction that separates the actions of the company from those of its shareholders. This veil of protection is not impenetrable, however, and can be pierced by the courts in cases of serious misconduct or wrongdoing, exposing the owners to personal responsibility. Although the truth of owner identity may already be known, piercing the corporate veil removes the protection against responsibility  by attempting to holding accountable those who would misuse its protections. But, the legal doctrine of corporate separateness is quite strong and I might venture that it is easier to pierce the veil of our spiritual realms than the corporate analogue.


DG argues that the Fourth Circuit erred by disregarding well-established corporate separateness principles and this Court’s precedent requiring “veil piercing” to hold one entity liable for the acts of another.   The parties filed competing questions presented:

Petitioner: Whether an award of the “defendant’s profits” under the Lanham Act, 15 U.S.C. § 1117(a), can include an order for the defendant to disgorge the distinct profits of legally separate non-party corporate affiliates.

Respondent: Whether a district court’s discretion under the Lanham Act permits using the financial statements of “non-arms’ length” affiliates to adjust a disgorgement award against a trademark infringer, and only that infringer, when the infringer has claimed $0 in profits.

As the Patent Act does for design patent infringement, the Lanham Act allows for disgorgement of profits as a remedy for trademark infringement.  The statute is clear that the award must be “subject to the principles of equity” although it also permits the court “in its discretion [to] enter judgment for such sum as the court shall find to be just, according to the circumstances of the case.” 15 U.S.C. § 1117(a)

Merits briefing will continue throughout the summer.

In some ways, the briefs are a bit hard to reconcile because – at times – it seems that DG and Dewberry Engineers are working with two different sets of facts.   But, here is my rough understanding: DG and Dewberry Engineers provide similar real-estate development services in overlapping geographic areas. Dewberry was founded decades earlier, and owns two federally registered trademarks for the name ‘Dewberry.'”  DG and Dewberry Engineers had previously litigated trademark infringement claims against each other back in the 2006-2007. That litigation ended with a settlement agreement that allowed DG to use only the “Dewberry Capital” mark, and only for certain services in certain geographic areas.  Despite the agreement, DG began using “Dewberry Capital” for prohibited services, in prohibited areas, and without a required logo. DG then rebranded to “Dewberry Group” and several other “Dewberry” marks, all of which were prohibited by the agreement. By that time, the DG had a new general counsel who was not aware of the prior litigation, but DG’s leader John Dewberry was clearly aware.  DG also applied to register the new “Dewberry” marks, which were rejected by the USPTO as confusingly similar to Dewberry Engineers’ marks. Dewberry Engineers also sent DG multiple cease-and-desist letters demanding compliance with the CSA, which DG ignored as it pressed forward with the rebranding.  The district court found after a bench trial that DG engaged in “willful, bad faith infringement” following numerous “red flags,” and its “pattern of claiming ignorance” was not credible.  The Fourth Circuit affirmed, agreeing that “Dewberry Group pervasively breached the [agreement] over Dewberry Engineers’ objection, in contravention of its General Counsel’s false assurances, and in the face of multiple red flags.”

In its petition for certiorari, DG argued that the Fourth Circuit’s decision conflicts with United States v. Bestfoods, 524 U.S. 51 (1998), which established a presumption that corporate separateness applies to federal statutes unless clearly displaced. DG argues that nothing in the Lanham Act overcomes this presumption, and therefore veil piercing should have been required to disgorge the profits of DG’s affiliates. The Fourth Circuit decision here splits from the Ninth and Eleventh Circuits, which have required veil piercing to impose liability on affiliates for Lanham Act violations in U-Haul Int’l, Inc. v. Jartran, Inc., 793 F.2d 1034 (9th Cir. 1986), and Edmondson v. Velvet Lifestyles, LLC, 43 F.4th 1153 (11th Cir. 2022).

In an amicus brief supporting DG, Notre Dame law professors Samuel Bray and Paul Miller argue that the Fourth Circuit embraced an excessively broad view of equitable principles that contravenes this Court’s precedents. They contend that a statutory reference to equity, like that in 15 U.S.C. § 1117(a), should be interpreted to incorporate only traditional equitable remedies and their customary limitations, not a freewheeling discretion to fashion new remedies. The professors argue that equity has never allowed courts to ignore corporate separateness based on a case-specific balancing of the equities.

In its brief in opposition, respondent Dewberry Engineers defends the Fourth Circuit’s decision as a proper application of the discretion expressly granted by 15 U.S.C. § 1117(a). That provision allows a court to award such disgorgement sum “as the court shall find to be just” if it finds that a recovery based solely on the “defendant’s profits” would be “inadequate.” Dewberry Engineers contends that the Fourth Circuit faithfully applied this language to approximate DG’s “true financial gain,” not to impose liability on or order payment by DG’s affiliates.


3 thoughts on “Dewberry Group: Structuring the Firm to Avoid Trademark Liability

  1. 2

    Nearly every large corporation has created subsidiaries to avoid IP liability. Here, it appears intentional trademark infringement occurred with reliance on the corporate shell game to avoid any liability for intentional trademark infringement. If the IP system is to have any integrity at all in the US then the corporate veil must be pierced in the case of intentional infringement. Otherwise, IP law will have no meaning and will never be enforced opening the door to a flood of IP infringers both foreign and domestic. With the ease of obtaining corporate protection with an LLC yet no corporate tax consequences, there is a definite need to be able to pierce the corporate veil besides crime or fraud.

    The Roberts court consistently rules in favor of corporations makes the outcome interesting since holding this individual corporation liable will ensure the IP assets of the rest of the corporation. Jump ball!

  2. 1

    Could this piercing the corporate veil issue for infringment recoveries from these 100% personally owned subsidiaries been avoided by having originally joined their owner John Dewberry personally as co-defendent in the TM infringement suit?

    1. 1.1

      The could have joined the affiliates. From the Fourth Circuit opinion:

      “According to Dewberry Group, it does not actually provide infringing services to third parties for a profit. Instead, it produces infringing branding for its affiliates, who in turn generate profits using that branding on their lease, loan, and other promotional materials.”

      Dewberry Engineers Inc. v. Dewberry Grp., Inc., 77 F.4th 265, 290 (4th Cir. 2023), cert. granted sub nom. DEWBERRY GROUP, INC. v. DEWBERRY ENGINEERS INC., No. 23-900, 2024 WL 3089540 (U.S. June 24, 2024)

      If the affiliates used infringing materials to promote their own businesses, then they have infringed the trademark and should be subject to disgorgement.

      There is another body of law that the corporate veil does not shield an individual who actually participates in a tort. This is a common law rule, but its often applied to individual officers and managers of infringing companies (trademark cases for sure, but I believe also patent and copyright cases). Arguably, it could apply to a company like Dewberry if it was involved in its affiliates’ infringement.

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