Dewberry Group, Inc. v. Dewberry Engineers Inc. - Post-Decision SCOTUScast

On February 26, 2025, the U.S. Supreme Court issued their 9-0 opinion in Dewberry Group, Inc. v. Dewberry Engineers Inc. The Court held that in a trademark infringement suit under the Lanham Act the court, when awarding the "defendant’s profits" to the prevailing plaintiff, can award only profits ascribable to the "defendant" itself.

Please join us in discussing the decision and its future implications.
Featuring:

Prof. Jake Linford, Loula Fuller & Dan Myers Professor and Associate Dean for Research, Florida State University College of Law

Episode Transcript

Speaker 1 (00:02):
Welcome to scot Discast, a project of the Federalist Society
for Law and Public Policy Studies. Our contributors joined us
from around the country to bring you expert commentary on
US Supreme Court cases as they are argued and the
decisions are issued. The Federalist Society takes no position on
particular legal or public policy issues.

Speaker 2 (00:21):
All expressions are those of the speaker. Hello, and welcome
to scot Discast. I'm your host, Kyle hammernis On behalf
of the Faculty division of the Federalist Society. We are
here today to discuss Duberry Group Incorporated versus Duberry Engineers Incorporated,
which was decided by the Supreme Court in the nine

(00:44):
zero decision on February twenty sixth, twenty twenty five. It
is my honor to introduce our guests today, Professor Jake Lindford.
Professor Lindford is the Lula Fuller and Dan Meyers Professor
and Associate Dean for Research at the Florida State University
College of Law. He focuses a scholarship on trademarks, copyright

(01:05):
and contract law. He teaches Trademarks and Unfair Competition, Contracts, Copyright,
information privacy, and various IP and tech related seminars. His
scholarship empirically tests and theoretically reassesses key trademark and copyright doctrines,
and has been published in leading law reviews including the
Georgetown Law Review, New New Dame Law Review, and Minnesota

(01:26):
Law Review. And with that, I like to hand things
over to Professor Linford.

Speaker 3 (01:30):
Thank you, Kyle. I'm glad to be with you here today.
So you brought me here to chat about the Newberry case.
This is Dewberry Engineering versus Newberry Group, although I think
when it went to the Supreme Court the parties were
flipped because Newberry Group is the petitioner. All right, So
here's the thing. Both of these companies, Dewberry and Dewberry
not confusing at all. We'll call the plaintiff the party

(01:54):
claiming trademark infringement, will call him engineers as dubery engineers.
We'll call the defendant Newberry Group or group. There was
a settlement between those parties, initially where the group agreed
not to use trademarks in certain states that included the
term Newburry for real estate related goods and services. And

(02:15):
then the group broke that settlement started engaging in trademark infringement.
So a district court in Virginia concluded, and then we
get to the question of what's the remedy, and under
section thirty five A of the LANAMAC this is thirty
five Usc. Eleven seventeen A, the plaintiff can get defendants profits.

(02:37):
Now here's the problem for the plaintiff in this case,
and this is what went all the way to the
Supreme Court. The defendant group had a bunch of different
affiliated businesses that were organized into their own corporate entities,
so they would be engaged in owners basically owners of
different real estate interests using that Dewberry name. The central organization,

(03:05):
or the one that was sued with the defendant of
the case, would handle human resources, stuff, billing. All of
the entities Group and all of the affiliates were owned
by the same individual, John Duberry. But John Dewberry wasn't
a name plaintif either, So just group Group puts provide
services to these affiliates at a loss. The affiliates would

(03:25):
get revenue for people paying for real estate services, rental income, etc.
And each affiliate would keep its separate revenues and would
pay Group for the services Group provided. But paid less
than market value for those services, so group would lose money.
Each of the affiliates would make money. Eventually, as it

(03:47):
appears to me, the money was flowing back into John
Dewberry's pockets and John Duberry would make up the difference
the losses that group suffered from its own pockets. But
the problem for Engineer Engineering, our plaintiff under the statute,
is when they went to establish profits from Newberry Group,

(04:09):
the group didn't have any profits. They were able to
show losses and no profits. Now it's obvious what's going
on here. Structurally, there's money coming in for trademark infringement
to the individual affiliates. That's ending up in John Newberry's pockets.
But the question is what can you do about that?
Because we have a principle under corporate law you can

(04:32):
divide a business into a separate corporate entity and shareholders
of that corporate entity can't be individually sued generally speaking
for misbehavior of the corporateentity, and that might very well
pertain to tort liability. There's a famous case that most
Corporations class covers. Most corporations classes cover a case called Wolkowski,

(04:55):
and in Wolkowski, the problem is somebody's taxi cab hits
a pedestrian injured, and the pedestrian ensues, and the cab
company has basically divided every two or three cabs into
their own corporation. So there's a bunch of money that's
ostensibly owned by one owner, or at least that's the
claim of our injured tor plaintiff. But he can only

(05:17):
get at the money that's in the pockets of these
two cab companies or their insurance value, and it's not
enough to coverage losses. And he tries to get at
that money, and the court in New York tells him, what,
you can't unless you can pierce the corporate veil, unless
you can kind of get behind this corporate structure. The
whole point of a corporate structure is to create kind
of these individual entities that have their own individual liability,

(05:40):
and we allow them to kind of gather in resources,
gathering capital by allowing shareholders to buy in, provide money,
take profits back out without necessarily taking the liability because
of the company. So we have corporate structure on the
one hand and trademark ll on the other hand, kind
of bumping up against each other and this trademark statute
says that the plan if can get defendants profits, but

(06:02):
Newberry Group doesn't have any profits. So what do we do?
The District Court is persuaded that it can reasonably assess
the actual reality on the ground, which is to say, obviously,
these affiliates are making income, they are trademark infringers, and
we can take the profits not only of Group, but

(06:24):
also of the affiliates. Now, Group didn't. What you can
do as the defendant in a case like this is
you can enter into the record expenses profits that are
not attributable to the trademark infringement, etc. And you can
get a discount against the net profits or the gross profits.
Group doesn't do that because of course, group's trying to

(06:45):
argue that you can't get at the affiliates or we
shouldn't be able to get at the affiliates. So what
we have is the court, the District Court basically applying
a twenty percent discount across the board. So the damages
award effectively gives engineers are plaintiffs eighty percent of the
profits from the relative period for each of the affiliates.

(07:07):
Dwbury Group appeals Fourth Circuit affirms the District Court and
affirms the district Court's approach to damages, effectively saying, look,
disgorgement of profits is an equitable remedy, and we're not
going to require it. Was not necessary, I guess the
Fourth Circuit says to require piercing the corporate veil. The

(07:30):
district court can consider the rend renew of the entities
under common ownership, calculate the true financial gain from the
infringing activities, and that equitable power. The scope of equitable
discretion of a district court is broad enough to look
reasonably at what's going on. And this isn't a crazy
way to see the world. Let me give you an example.

(07:52):
So imagine I've decided i want to go into the
soda business, and I've decided that my winning move is
to imitate the trademark of a big player in the
soda industry here, Coca Cola, And so I'm gonna launch
a coke. I'm gonna call it coke Ford. You know
that's the last part of my last name. I'm gonna
have Coke Ford. I'm gonna have coke for zero, I'm

(08:14):
gonna have diet coke for it. I'm gonna have Vanilla
Coke for it, I'm gonna have Cherry Coke for it.
And I'm gonna divide my sales of coke into a
separate corporation. I'm gonna have one corporate entity that just
sells coke for another corporate entity that just sells coke
for zero, another corporate entity that just sells diet coke
for it. I'm gonna take all the losses to my

(08:34):
central organization, another corporate entity. We'll call it Cokefort Company,
and I'm gonna leave all the profits with the individualities.
You and I both know exactly what I'm doing here,
and that there's revenue as the sole shareholder of Coke
Ford and Coke Ford zero and Diet Coke for those money,
that money is gonna be all the way back in

(08:55):
my pocket. And to the extent I'm making up the
difference from my core entity for each of the affiliates
in the services I provide, that's probably the money coming
from the affiliates going back to the court. And so
if we're willing to look at the reality on the ground,
the result from the district court, result from the Court
of Appeals doesn't seem crazy. The problem is we've got

(09:18):
corporate law, and we've got this commitment to treating individual
corporate entities as individual and insulating them from one another
with regards to liability. And so that's the case that
goes up up to the Supreme Court. The District Court says,
effectively or sorry that the defendant here group says, the

(09:39):
question before the court, the question that the court should
answer is whether this award of defendant profit defendants profits
can include disgorging the distinct profits of legally separate, non
party corporate affiliates. In other words, really focusing on the
corporate structure and how we tend to teach these to
treat these things in the corporate law. Of course, Native says,

(10:00):
the question is really does the district court have discretion?
It's that equitable discretion to use financial statements of non
arms length affiliates. In other words, these things are all
tied pretty closely, your honors, to adjust the disgorgement award
in favor of counting up the profits where the infringer

(10:20):
has claimed zero dollars of profits. So the pointiff's hopeful
structure of the question was all about the economic realities.
And like you said, the Supreme Court decided nine zero,
and they decide nine zero in favor of Newbury Group
in favor of the petitioner the defendant the loser below
saying when the statute says defendants profits, we really do

(10:43):
mean defendants profits. And if the only defendant who against
whom a claim was brought is this defendant with zero profits,
well the district Court can't just assume or conclude based
on its view of the economic realities without some sort
of analysis that it can get to the affiliates. That's

(11:06):
the simple hold there. Now that might sound dispositive against Engineers,
it's not necessarily. Engineers has some options on remand potentially
the court actually hints at what might be a proper approach. Now,
the statute I mentioned it gives the plaintiff access to
defendants profits as a measure damages. It also says, and

(11:28):
Engineers are plaintiff wanted to argue that the District Court
and the Court of Appeals effectively applied this provision. It
also says that if the court shall find the amount
of recovery based on profits is either inadequate or excessive,
the court may, in its discretion and are judgment for
a sum, such as the Court shall find just according

(11:48):
to the circumstances of the case. In other words, if
the damage's award is too low, or if the damage's
award is too high based on profits, the court can
adjust and has some equitable discretion to adjust. Now, the
District Court does not say it's relying on this just
some provision and doesn't make any analysis of the adjustments

(12:10):
of making because of the just some provision. It just says,
I'm looking past this corporate screen and I'm counting the
damages of each of the affiliates. And here's what the
court says that hints at the potential proper approach. Maybe
this works for Dwburry Engineers on remand ideally it could
work for another plaintiff in a similar situation. The District

(12:33):
Court did not rely on the just some provision or
suggest it was departing up from defendants reported profits to
reflect the company's true gains. And perhaps if it had,
it seems to be the hint of the court that
might have been sufficient to get us past, to get
past this question of corporate structure. Now, Dewberry Engineers our

(12:58):
planet below did not include. They didn't sue John Doberry directly.
They didn't sue any of the affiliates directly. Had they
done so, they avoid this problem. They also didn't try
another move, which is potential, which the Supreme Court said, Look,
we're not ruling on this move either. There are a
couple of ways you can get behind the corporate entity.

(13:22):
One of them we call piercing the corporate veil. Another
way to phrase this is we think that the individual
corporations are all alter egos for one another, or there
are agents from another. In other words, they are closely connected.
And in both cases we ask questions that are like
the questions we've been talking about here right. In the

(13:44):
alter ego case, generally, a plaintiff has to prove that
there's a parent company that dominates and controls the subsidiary
to the extent that the subsidiary is just doing business
for the parent, and that they don't really exist as
separate legal entities, and there will be an justice or
a wrong to the plaintiff that will happen if we
don't pierce today. Right and factors that we might consider

(14:07):
in cases like this, well, is one corporation adequately capitalized?
Is there an overlap in ownership or personnel. Are there
sharing common office space? Is the business discretion? How much
business discretion does the allegedly dominant corporation have. Are they
engaging in arms link transactions with one another? Are they

(14:30):
too close? Does the corporation treat the independent as a
profit center? Are they paying each other's debts, etc? And
what I think had you applied this standard in the
way it could reasonably be applied, I think you'd reach it.
Now there's a problem for engineering, which is to say,
in many jurisdictions, courts are very skeptical of veil piercing,

(14:55):
although there are veil piercing cases that have been successful,
and these are the sorts of questions we ask in
a successful veil percent case. So the Supreme Court says,
you know, veil piercing is potentially an option. We're not
ruling on it one way or another. We're not ruling
on whether Doberry engineers on remand could argue for this
just some application and use that as a justification. There

(15:17):
is a potential forfeiture problem. They didn't do it below.
Potentially they didn't preserve that argument below, and therefore the
district court can't reach it again. There is also future
in the future for similarly situated plaintiffs, the option of
you know, you impleade all of the various you bring

(15:38):
in all the various defendants on the individual corporations. Now
that's more costly. In a case of trademark infringement. You
can sometimes under this same statutory provision, get attorney's costs
and fees. If you can get costs, you might be
able to pick up the additional revenues for having to
sue the multiple entities. But you're not guaranteed costs. And

(16:00):
Supreme Court's jurisprudence on this point requires a case that
is an unusual or outstanding case. And whether this would
amount to that sort of outstanding I should say exceptional
case is a life question. Justice Sodomar had a concurrence,
and her concurrence effectively it concedes the point that the

(16:25):
district court's analysis was too shallow, but the trademark law
should allow for looking at the reality of the situation.
And that was more or less the argument by the government.
The government was invited to brief the case, and the
government's brief effectively said the same thing. We want to
take seriously. The actual structure of the entity. Courts are

(16:47):
not required to take whatever accounting tricks or tax structures
that a defendant presents as the reality of the situation
when deciding a case like this, and therefore we can
look at those realities. But the government did argue for
remand in this case because the district court hadn't been

(17:09):
hadn't worked through the analysis. And so what we'll see
on remand is what what the district court thinks it's
remitted is as far as working through this analysis and
potentially granting damages under the just SU provision or potentially
inviting engineers to engage in the veil piercing that it
didn't think it had to engage in, or argue that

(17:30):
it didn't have to engage in the first time.

Speaker 2 (17:34):
Right, Well, you know, thank you for going over the case.
I'm really priding a great detailed overview. You mentioned that
that engineers could have brought in all of the affiliates
plausibly plausibly, yes, would that still work if those affiliates

(17:54):
weren't violating trademark, like if they if they instead of
being as you were saying, you know, Cokeford and Cherry
Cokeford and all that it was. You know, I just
pick another name that it doesn't have coke, right, that
doesn't have coke in it. Would that then be a
problem because they're not then violating the trademark. How can

(18:20):
then you get to them in that way, because then
you may not even have standing against them. Yes.

Speaker 3 (18:25):
Now, my understanding of the of this case is that
each of the affiliates for which profits were counted, we're
using the DeBerry mark. But you're absolutely right, this is
this is one of the difficulties. If you're not using
the Dewberry mark, then those affiliates shouldn't be brought in
unless they're using a mark that's similar enough but different.

(18:47):
And at that point you've got some messes here where
it may be plenty of A, B and C are
using more or less the exact mark, or sorry, Defendants A,
B and C are using the exact mark. Defendants E
and F aren't, but potentially close enough. The analysis would
be different. Defendant G isn't using the market all right,

(19:09):
and we should treat those different things as different. This
is one of the points that was raised in the brief.
On my brief with Professors Baty and Schuster. One of
the difficulties. It might be the case that say, for example,
you know the core entity is engaged in willful infringement.
That's what was determined by the district court. Now, are

(19:30):
each of the affiliates engaged in willful infringement? I'm not
sure there's another person there. If we can say each
of the affiliates is run by John Dewberry, then perhaps yes.
If we can't say that each of the affiliates is
run directly by John Newberry, then you may not have
that same willfulness, and that would change potentially the calculation

(19:51):
will willful defendants are sometimes on the hook for more
damages under the statute.

Speaker 2 (19:58):
Right, I guess a little bit more broad than my
specific example. What do you see as the real consequences?
Just kind of broad thirty thousand foot view on trademark
law after this case.

Speaker 3 (20:13):
So there's a danger, and the government brief hit on this,
and our brief hit on this. There's a danger that
if you ignore the realities on the ground, you are
insulating firms that shouldn't be insulated. From my ability, Lots
of firms structure things exactly the way that Dewberry did,

(20:33):
exactly the way that my cope for it, example, would
which is to say, you've got a bunch of affiliate organizations,
perhaps separate entities, but benefiting from the use of the trademark,
and the value the profit derived from the trademark may
very well spill over beyond the bounds of a singular
corporate entity, and being too formalistic about corporate entities potentially

(20:58):
undercounts the harm that Congress, the mechanism Congress gives us
to count this harm, which is the defense profits. On
the other hand, if you are persuaded, like lots of
folks are, that one of the keys to American success
is the corporate structure and the ability of corporate entities
to bringing capital by insulating those who who buy into

(21:22):
the corporation from direct liability. Being too casual about how
we pierce those corporate those corporate barriers can have effects
that run beyond trademark law and are potentially distortive of
a kind of a foundational element of the American economic system.

(21:43):
So I think plaintive situated like Newberry are going to
have to think more carefully, are probably going to have
to do more due diligence. It's going to increase litigation
costs on them to some extent, to make sure we
don't have a situation, to make sure they're not facing
a situation. We're a defendant as kind of structured its

(22:04):
revenues in such a way that you can't get at
the profits. Because frankly, you can get profits or you
can get plaintiff's damages. It's much easier to count profits.
It's much harder to count damages. Damages are rarely granted
in trademark cases, other than in places where you've got
like a counterfeiting claim or some other multiplier statutory damage
for will, for infringement, etc. Injunctions are the most likely

(22:30):
remedy for a plaintiff, and then disgorgement of profits much
more likely that damages, So plaintiffs are going to have
to figure out a way to account for this. Now,
this may be a rare case, and if it's a
sufficiently rare case, it won't make much difference at all.
I suspect that there will be careful and clever attorneys

(22:51):
who will read these cases and see a loophole and
then advise their clients who might be flying close to
a son. In Greek metaphor terms with regard to trademark infringement. Well,
let's insulate the core business from potential infringement of subsidiary
businesses and see if we can structure this in a

(23:12):
way that we can take a Newberry Group style advantage
that might save some damages on the back end.

Speaker 2 (23:21):
Well, I, well, thank you so much for really just
proviting a great, great summary of this case and its
potential consequences, and really thank you so much for joining us.

Speaker 3 (23:30):
Well, thank you, Kyle, really appreciate it.

Speaker 2 (23:33):
Thank you for listening to this episode of SCO Discust.

Speaker 1 (23:37):
Discust is the project of the Federalist Society, a not
for profit educational organization of conservative and libertarian law students,
law professors, and lawyers, ounded upon the principles that the
state exists to preserve freedom, that the separation of governmental
power is essential to our constitution, and that it is
emphatically the province and duty of the judiciary to say

(23:57):
what the law is, not what it should be. Don't
forget to subscribe to our podcast series. Include Scotscasts and
Practice Group podcasts on iTunes or Google Play. For an
archive of past podcasts, as well as audio and video
of past Federalist Society events, please Visit our website at
fedsoc dot org slash multimedia. That's f E d s

(24:19):
OC dot org slash multimedia.

Speaker 3 (24:27):
This has been a FEDSOC audio production