by Dennis Crouch
In a unanimous decision released today, the Supreme Court has vacated a $43 million trademark infringement award against Dewberry Group, potentially creating a roadmap for corporate structuring to minimize trademark liability. Dewberry Group, Inc. v. Dewberry Engineers Inc., 604 U.S. ___ (2025). Justice Kagan, writing for the Court, held that when awarding the “defendant’s profits” under the Lanham Act, courts can only include profits “properly ascribable to the defendant itself” – not those of its legally separate, non-party corporate affiliates. While the decision reinforces traditional corporate law principles, it raises serious concerns about the practical enforcement of trademark rights in an era when establishing multiple corporate entities is increasingly simple and commonplace. 23-900_Dewberry Decision.
Mythological trickster figures such as the Coyote or Loki operate at the boundaries of justice — and are known for exploiting gaps between rules and reality in ways that allow for both ambiguity and transformation. Writing in Carl Jung’s posthumous book, Joseph Henderson gave a harsh rendition of the trickster: “he [the trickster] is cruel, cynical, and unfeeling.” Man and his Symbols (1964). I see Dewberry as a trickster opinion – not necessarily good or bad – but one that creates a tension between legal formalism and practical reality, inviting clever structuring that follows the letter of the law while potentially undermining its purpose. There is always a reckoning after the trickster acts as we come to grips with the gap between what the law says and what justice requires. For example, the opinion here may ultimately prompt legislative reconsideration of how trademark remedies function in the modern corporate landscape.
The Corporate Shell Game in Action
This case reveals a sophisticated corporate arrangement that effectively shielded profits from trademark liability. Dewberry Group, owned by developer John Dewberry, provided services exclusively to approximately 30 separately incorporated affiliate companies also wholly owned by John Dewberry. Each affiliate owned a different piece of commercial property, while Dewberry Group provided the services needed to generate rental income.
The critical feature of this arrangement: Dewberry Group charged below-market rates for these services and reported operating at a loss for decades, surviving only through cash infusions from John Dewberry himself. Meanwhile, the affiliates – also owned by Dewberry – recorded substantial profits.
The trademark dispute arose with an entirely separate company, Dewberry Engineers, that owned registered trademark rights in the word “Dewberry.” Dewberry Engineers is unrelated to John Dewberry’s business empire and had been providing real estate development services for commercial entities across the country.
Dewberry Group was found to have engaged in what the district court characterized as “intentional, willful, and in bad faith” trademark infringement of Dewberry Engineers’ marks. Despite clear findings of willful infringement, the corporate arrangement meant that Dewberry Group itself had no profits to disgorge – those profits were all held by the affiliated companies.
The Fourth Circuit’s Concern: A Blueprint for Evasion
The district court, recognizing this situation, treated Dewberry Group and its affiliates “as a single corporate entity” to reflect the “economic reality” of their relationship, resulting in a $43 million disgorgement award. Dewberry Engineers Inc. v. Dewberry Grp., Inc., No. 1:20-cv-921, 2022 WL 1439826 (E.D. Va. Mar. 2, 2022). The Fourth Circuit affirmed, expressing concern that respecting corporate formalities in such circumstances would create a “blueprint for using corporate formalities to insulate their infringement from financial consequences.” Dewberry Engineers Inc. v. Dewberry Grp., Inc., 77 F.4th 265 (4th Cir. 2023). The Supreme Court granted certiorari on a simple question:
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.
As is common at the petitions stage, the respondent Dewberry Engineers recharacterized the question:
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.
The Court’s Textual Analysis: Corporate Separateness Prevails
Justice Kagan’s opinion focused squarely on statutory interpretation and traditional corporate law principles. The Court held that the Lanham Act’s provision for recovery of the “defendant’s profits” refers only to profits earned by the named defendant – not its affiliates.
“The term ‘defendant’ bears its usual legal meaning,” Justice Kagan wrote. “A ‘defendant’ is ‘the party against whom relief or recovery is sought in an action or suit.’ So here the defendant is the entity named in Dewberry Engineers’ complaint as liable for infringing the ‘Dewberry’ trademark. And that entity is Dewberry Group alone.” (quoting Black’s Law Dictionary 541 (3d ed. 1933)).
The Court emphasized that background principles of corporate law reinforce this interpretation. Agency for Int’l Development v. Alliance for Open Society Int’l Inc., 591 U.S. 430 (2020). Justice Kagan reiterated that “separately incorporated organizations are separate legal units with distinct legal rights and obligations” – even when they share a common owner.
Practical Implications: A New Era of Due Diligence
This decision will likely necessitate heightened due diligence in trademark transactions and enforcement actions. Although already a smart practice, trademark holders will need to how they:
- Research and understand corporate structures before initiating infringement actions;
- Name all potentially liable entities as defendants, and be ready to amend to add defendants as needed;
- Draft licensing agreements that capture all related corporate entities;
- Develop evidence sufficient for veil-piercing claims;
- Pay closer attention to corporate guarantees in trademark transactions
The practical challenge is substantial: Most trademark holders lack insight into potential infringers’ internal corporate structures, making it difficult to identify all relevant entities before filing suit. This difficulty is exemplified by the ongoing legal battles surrounding the Corporate Transparency Act (CTA), which mandates the disclosure of beneficial ownership information. Many businesses have resisted the CTA’s reporting requirements, arguing that compliance is unduly burdensome and intrusive — especially in situations like this where a single owner has created dozens of separate legal entities. The legal challenges and temporary injunctions against the CTA illustrate just how difficult it can be to pierce the corporate veil, even when transparency is the law’s explicit goal.
Justice Sotomayor’s Concurrence: A Partial Roadmap Forward
The Kagan opinion was unanimous, but Justice Sotomayor also filed a solo concurrence — attempting to offer some hope for trademark holders facing such corporate structures. She emphasized that “principles of corporate separateness do not blind courts to economic realities” or “force courts to accept clever accounting.”
Her concurrence outlined two scenarios where courts might legitimately consider affiliate relationships, both of which apply to the Dewberry situation:
- When a company charges below-market rates to an affiliate for infringing services, effectively assigning earnings to the affiliate in advance
- When a company indirectly receives compensation for infringing services through cash infusions from a common owner
Drawing on tax law concepts regarding “anticipatory assignment,” Justice Sotomayor noted that “equity demands ‘the wrongdoer should not profit by his own wrong'” (quoting Liu v. SEC, 591 U.S. 71, 80 (2020)). This provides some potential pathways for trademark holders, but these approaches require significantly more evidence and legal argumentation than simply treating affiliated entities as one. And, the concurring opinion still requires courts to focus on the named defendant’s actual profits, even when considering creative accounting schemes.
Note that on remand, it is unclear whether Dewberry Engineering preserved these arguments below.
Questions Left Open: Potential Avenues on Remand
In its briefing to the Court, Dewberry Engineers attempted to defend the award by invoking the Lanham Act’s “just-sum provision.” That provision provides the district court with substantial latitude in awarding profits:
If the court shall find that the amount of the recovery based on profits is either inadequate or excessive[,] the court may in its discretion enter judgment for such sum as the court shall find to be just, according to the circumstances.
15 U.S.C. §1117(a). In its decision, the court refused to rule on this issue since it did not serve as the basis of either lower court opinion. Instead, both courts had treated Dewberry Group and its affiliates as a single entity when calculating “defendant’s profits” – an approach that impermissibly “disregards ‘corporate formalities'” and violates “the ‘principle[] of corporate separateness.'”
As this suggests, the Supreme Court attempted a narrow ruling — holding simply that courts cannot simply treat legally separate entities as a single entity when calculating a “defendant’s profits” under the Lanham Act. As with any narrow ruling, the Court left several important questions unanswered, which could provide alternative pathways for Dewberry Engineers to recover on remand. Beyond the just-sum argument, the remand courts may consider looking for accounting of “true financial gain” and considering whether it would be appropriate to pierce the corporate veil. Of course, either of these would be heavy lift given the strong presumption of independent personhood of individual corporate entities.
As with all trickster tales, Dewberry‘s ultimate legacy may lie not in the immediate outcome of this particular case, but in whether others will move to take advantage of the gap between corporate formalism and substantive justice that the decision reveals.