Justices' Ax of Trademark Award Provides 'Relief,' Not Clarity

The United States Supreme Court’s (SCOTUS) decision to vacate a $43 million trademark award answered a sought-after question about corporate separateness and intentionally left the fate of the underlying case undecided along with broader questions about trademark law.

SCOTUS unanimously found that the lower courts did not justify granting Dewberry Engineers Inc. a trademark infringement award based on the profits of Dewberry Group Inc.’s non-defendant affiliates. They cited that the “defendant’s profits” must come from named defendants, while also outlining various paths by which Dewberry Engineers could recouped the damages on firmer ground. 

Justice Sonia Sotomayor said corporate separateness doesn’t “blind courts to economic realities.” She added that the courts could likely use cash infusions and below-market-value services as evidence to calculate defendant profits had a defendant maintained an “arm’s length relationship” with affiliates.

Finnegan partner Mark Sommers told Bloomberg Law that Sotomayor’s roadmap was ‘the most interesting aspect of the court’s ruling,’ pointing to her writing corporate separateness doesn’t “force courts to accept clever accounting” to obscure gains.

“Courts must be attentive to the practical business realities for our nation’s trademark laws to function,” he said.

He added, “It’s not always immediately clear where profits are going, and adding a party prematurely could lead to dismissal. The decision might prompt judges to allow even more latitude to amend a complaint, already a low bar,” he said.

“If this happens in the future, it would be prudent to make that motion to amend. Now that there’s a Supreme Court precedent, judges might be more likely to give more time.”

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