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Damages

Not Secret and Not Used: Misappropriation Claim Dismissed

by Dexter Hamilton | Apr 17, 2025 | Trade Secrets

The US Court of Appeals for the Fifth Circuit upheld a district court’s grant of summary judgment in favor of the defendants, finding that the plaintiff failed to identify a trade secret and presented no evidence of its use or disclosure. DeWolff, Boberg & Associates, Inc. v. Justin Pethick and The Randall Powers Co., Case No. 24-10375 (5th Cir. Apr. 3, 2025) (Smith, Clement, Duncan, JJ.)

In 2018, Justin Pethick was a DeWolff, Boberg & Associates (DBA) employee. That year, DBA’s competitor, The Randall Powers Company (Powers), hired Pethick as regional vice president of sales. After Pethick began working at Powers, some prospective DBA clients hired Powers for consulting services. DBA sued Powers for trade secret misappropriation, asserting that Pethick stole its trade secrets and used them to poach clients. The district court granted summary judgment in favor of Powers and Pethick. DBA appealed.

The Fifth Circuit affirmed but on alternative grounds. To prevail on a misappropriation claim under Texas law (where the initial suit was brought), “a plaintiff must show that (1) a trade secret existed, (2) the trade secret was acquired through a breach of a confidential relationship or discovered by improper means, and (3) the defendant used the trade secret without authorization from the plaintiff.”

On appeal, Powers first argued that the information DBA claimed was trade secrets, such as contact information, meeting notes, and “confidential information related to business opportunities,” did not qualify as protectable trade secrets. DBA pointed to “large swathes of database information” without distinguishing what exactly was supposedly a trade secret. The Fifth Circuit found it was unclear as to what materials were trade secrets, noting that it had “no obligation to sift through the record in search of evidence to support a party’s opposition to summary judgment.” The Court held that summary judgment was justified on this basis.

The Fifth Circuit further held that, even assuming the information qualified as trade secrets, summary judgment was still warranted because there was no evidence that Powers and Pethick used the information. Although Pethick had requested a copy of a document that DBA claimed contained trade secrets prior to joining Powers, there was no evidence that he ever possessed it while at Powers. To the contrary, the forensic expert retained by DBA to remove its data from Pethick’s computer did not find the document. The Court concluded that DBA failed to demonstrate any use of an alleged trade secret.

When Is a Trade Secret Accessible? As Soon as It Can Be Reverse Engineered

by Jodi Benassi | Apr 10, 2025 | Trade Secrets

Although the US Court of Appeals for the Federal Circuit upheld a damages award for trade secret misappropriation and breach of a confidentiality agreement, it found that the district court erred in its determination of when the trade secret became publicly accessible for the purpose of applying a reverse engineering defense. The Federal Circuit also vacated and remanded the prejudgment interest award, finding that interest should not accrue on future sales. ams-OSRAM USA Inc. v. Renesas Elect. America, Inc., Case No. 22-2185 (Fed. Cir. Apr. 4, 2025) (Taranto, Schall, Chen, JJ.)

In 2008 ams sued Renesas for patent infringement, trade secret misappropriation, and breach of contract for using information that ams revealed in confidence. In 2015 a jury found for ams, and the district court entered judgment for trade secret misappropriation damages, but not for breach of contract. The district court determined that the breach award was duplicative of the misappropriation award. On appeal, in 2018 the Federal Circuit affirmed Renesas’ liability for misappropriation on a more limited basis than had been presented to the jury. The Court vacated the misappropriation award and remanded, instructing that disgorgement of profits damages should be decided by the judge, not the jury.

On remand, ams argued that it was entitled to “re-elect its remedy” and narrowed to the misappropriation and contract claims, which required the case to be retried. The new jury also found in favor of ams. The district judge then determined the monetary award for trade secret misappropriation, consisting of disgorgement of profits for one product and exemplary damages of double that sum. On ams’s breach of contract claim, the jury awarded a reasonable royalty on sales of products, other than the one subject to disgorgement damages. ams was also awarded prejudgment interest on both its misappropriation and contract claims, and attorneys’ fees on its breach of contract claim. Both parties appealed.

Trade Secret Accessibility and Reverse Engineering

The district court ruled that ams’s trade secrets became accessible in January 2006 when Renesas successfully reverse engineered the trade secret embodied in ams’s product. The district court determined that the relevant inquiry for accessibility is what the misappropriator actually did rather than what the misappropriator or other parties could have done. Renesas argued that the trade secret first became accessible when it could have reverse engineered the trade secret in February 2005.

The Federal Circuit agreed with Renesas, explaining that the district court’s ruling was inconsistent with Texas law. Under Texas law, information that is generally known or readily available by independent investigation does not qualify as a trade secret. Citing Fifth Circuit precedent, the Federal Circuit emphasized that the public is free to discover and exploit trade secrets through reverse engineering of products in the public domain. The Court found that Renesas could have accessed ams’s trade secrets through proper and straightforward means by February 2005. While acknowledging that the trade secret may not have been immediately apparent through casual inspection, the Court pointed out that reverse engineering is a common [...]

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Impermissible Convoyed Sales Wash Away Damages Award

by Christian Tatum | Apr 3, 2025 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court’s finding of infringement but vacated its damages award because the award improperly included auxiliary products lacking any functional relationship to the infringed patent claim. Wash World Inc. v. Belanger Inc., Case No. 2023-1841 (Fed. Cir. Mar. 24, 2025) (Stark, Lourie, Prost, JJ.)

Belanger owns a patent related to a spray-type car wash system. A competitor, Wash World, filed for a declaratory judgment that its car wash system did not infringe the patent.

A jury returned a general verdict of infringement and awarded Belanger $9.8 million in lost profit damages. Wash World moved for judgment as a matter of law of noni nfringement based on the positions it previously raised and challenged the damages award. Wash World argued that Belanger failed to prove entitlement to lost profits for convoyed sales. The district court rejected Wash World’s arguments. Wash World appealed, challenging the district court’s constructions of three claim terms that Wash World argued were dispositive to noninfringement and the damages award for improperly including nearly $2.6 million in ineligible convoyed sales.

The Federal Circuit concluded that for two of the three claim terms, the constructions Wash World argued for on appeal were materially different from the constructions it urged the district court to adopt. The Federal Circuit emphasized that while a party is not confined to the precise wording of the constructions it advances at the district court, it must still present essentially the same dispute on appeal. Finding no exceptional circumstances, the Court deemed Wash World’s appellate positions on the two claims to be forfeited. As to the remaining term, the Court found that while Wash World had preserved the issue for appeal, the district court’s interpretation was correct.

On the issue of remittitur, the Federal Circuit first found that Wash World had properly preserved the issue for appeal and that even if it had not, exceptional circumstances would justify reaching the merits. The Court stated that it could discern the precise damages the jury awarded based on convoyed sales, and that the requirements for lost profits on such sales were plainly not satisfied.

The Federal Circuit explained that entitlement to lost profits for convoyed sales exists only where the unpatented products (e.g., dryers sold together with a patented car wash system) and the patented product together constitute a “functional unit,” like parts of a complete machine. The Court found that no evidence in the record could support such a finding and that damages awarded for sales of the unpatented products were thus improper. The Court further rejected Belanger’s argument that the jury’s return of a general verdict insulated the award from further scrutiny. The Court noted that based on the evidence presented, it was overwhelmingly likely that the jury’s verdict included the impermissible damages for convoyed sales. Therefore, the Federal Circuit instructed the district court on remand to remit $2.6 million in damages corresponding to sales of the unpatented components.

What’s Shaking? Not an Interlocutory Appellate Decision on Damages

by Tessa Kroll | Jan 30, 2025 | Trade Secrets

The US Court of Appeals for the Fifth Circuit dismissed and remanded a district court certified interlocutory appeal concerning the standard for calculating a reasonable royalty under the Defend Trade Secrets Act (DTSA). The Court explained that the rate instruction issued by the district court was erroneous because the parties had not yet gone to trial and the plaintiff had not yet proven liability. Therefore, the issue of damages might never arise. Silverthorne Seismic, L.L.C. v. Sterling Seismic Servs., Ltd., Case No. 24-20006 (5th Cir. Jan. 3, 2025) (Smith, Clement, Higginson, JJ.) (Higginson, J., dissenting).

Silverthorne licensed seismic data to Casillas Petroleum Resource Partners II, LLC, an oil and gas exploration company. Under this arrangement, Silverthorne provided data to Sterling, a seismic data processer, which processed the data and sent it to Casillas. Because Sterling’s data processing required more data than what Casillas had paid for, Sterling was only permitted to forward the data that Casillas had licensed. However, Sterling sent Casillas unlicensed data, which Casillas allegedly showed to potential investors.

Silverthorne sued Sterling for trade secret misappropriation under the DTSA and sought reasonable royalties for Sterling’s improper disclosure. Shortly before trial, the district court issued an order adopting the Fifth Circuit’s definition of “reasonable royalty” in University Computing (1974), which, in this case, would have required Silverthorne to prove what the parties “would have agreed to for . . . use [of] the alleged trade secret.” University Computing predates the DTSA, which provides for reasonable royalties for “disclosure or use of a trade secret.” Silverthorne appealed the order, noting that it would not be able to prove what Sterling would have agreed to pay to use the data, since Sterling was a data processor and not an end user. The district court certified the following question for appeal:

[W]hether a plaintiff is entitled to prove reasonable royalty damages under the DTSA using willing buyer(s) detached from the parties to the litigation when willing buyers (here, oil and gas exploration companies) exist for plaintiff’s alleged trade secret (here, seismic data), but the defendant and comparable entities (here, seismic processors) do not buy or license that trade secret.

An administrative panel of the Fifth Circuit granted leave to appeal.

Majority Opinion

The Fifth Circuit dismissed the appeal as not involving a controlling question of law. The Court explained that interlocutory appeals are only permitted where an order involves a controlling question of law, the resolution of which would materially and immediately affect the outcome of litigation in the district court. The Fifth Circuit emphasized that a question is not controlling just because the answer would complicate a litigant’s ability to make its case or because the answer could save the parties from a post-judgment appeal. Applying these principles, the Court reasoned that damages issues generally do not control a case until the plaintiff establishes liability, unless the damages issue would be dispositive. Because Silverthorne had not yet established liability and was not barred from proving damages under the district court’s definition [...]

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Lager Than Life: $56 Million Verdict in Beer Trademark Dispute Still on Tap

by Amol Parikh | Jan 16, 2025 | Trademarks

The US Court of Appeals for the Ninth Circuit upheld a $56 million trial verdict in a trademark dispute, finding that the evidence supported the jury’s conclusion that a beer company’s rebranding of one its beers infringed a competitor’s trademark. Stone Brewing Co., LLC v. Molson Coors Beverage Company USA LLC, Case No. 23-3142 (9th Cir. Dec. 30, 2024) (Graber, Friedland, Bumatay, JJ.) (nonprecedential).

Stone Brewing sued Molson Coors in 2018 alleging that Molson changed its packaging of Keystone Light to emphasize the word “stone” in its “Own the Stone” marketing campaign, and that this change infringed Stone Brewing’s trademarks and caused consumer confusion. Molson raised a variety of defenses, all of which were rejected. A jury found infringement and ultimately awarded Stone Brewing $56 million. Molson appealed.

Molson argued that the district court erred in finding that the four-year laches clock did not bar Stone Brewing’s Lanham Act claims. The Ninth Circuit found that the laches clock began running in 2017 when Molson launched the “Own the Stone” campaign, to which all of Stone Brewing’s claims related. The Court noted that prior to 2017, Molson never referred to Keystone as anything other than Keystone in its packaging, marketing, or advertising materials, and specifically never broke up the product name “Keystone” and used the term “Stones” to refer to the number of beers in a case (“30 stones”) or as a catch phrase (e.g., “Hold my Stones”). Thus, the Court found that Stone Brewing brought the suit within the four-year statute of limitations period.

Molson also argued that the district court erred in refusing to set aside the jury verdict on the ground that Molson had a superior interest in the STONE mark. Stone Brewing applied to register the STONE mark in 1996, and the Ninth Circuit found there was substantial evidence that Molson did not approve production of packaging that used “Stone” before that date.

Molson argued that the district court erred in refusing to set aside the jury verdict on likelihood of confusion. The Ninth Circuit disagreed, explaining that Stone Brewing provided evidence from which a jury could plausibly conclude there was “actual confusion” by distributors and customers who thought that Stone Brewing sold Keystone Light. The Court noted that Molson expressly de-emphasized “Keystone” and instead highlighted “Stone” in its 2017 product refresh. The Court also explained that both brands compete in the same beer space, use the same marketing and distribution channels, and are relatively inexpensive products, all of which allowed the jury to plausibly conclude that Molson’s 2017 product refresh of Keystone Light was likely to cause consumer confusion.

Molson also challenged the damages award. At trial, Stone Brewing sought damages in three categories:

$32.7 million for past lost profits
$141.4 million for future lost profits
$41.8 million for corrective advertising.

The jury returned a verdict of $56 million in general damages, which was about one quarter of the requested damages, but did not indicate what amount came from each category. Molson argued that [...]

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Just Compensation Based on Hypothetical Negotiation

by Paul Devinsky | Jan 16, 2025 | Copyrights

In a long-standing copyright dispute on its second visit to the US Court of Appeals for the Federal Circuit, the Court affirmed the modest damages award from the US Court of Federal Claims, ruling that a hypothetical negotiation between the parties would have resulted in a license in the amount awarded by the claims court. Bitmanagement Software GmBH v. United States, Case No. 23-1506 (Fed. Cir. Jan. 7, 2025) (Dyk, Stoll, Stark, JJ.)

In 2016 Bitmanagement sued the US Navy for copyright infringement of its software. The Court of Federal Claims awarded damages based on usage of the software, rather than the number of copies made. In the first appeal, the Federal Circuit agreed with the claims court that the Navy had an implied license to make copies of the software but was limited as to simultaneous users of the software, a condition that the Navy breached. The Federal Circuit remanded the case with the following instruction:

Because Bitmanagement’s action is against the government, it is entitled only to “reasonable and entire compensation as damages . . . , including the minimum statutory damages as set forth in section 504(c) of title 17, United States Code.” 28 U.S.C. § 1498(b).

The Federal Circuit further instructed the claims court that Bitmanagement was:

. . . not entitled to recover the cost of a seat license for each installation. If Bitmanagement chooses not to pursue statutory damages, the proper measure of damages shall be determined by the Navy’s actual usage of BS Contact Geo in excess of the limited usage contemplated by the parties’ implied license. That analysis should take the form of a hypothetical negotiation. . . . As the party who breached the . . . requirement in the implied license, the Navy bears the burden of proving its actual usage of the . . . software and the extent to which any of it fell within the bounds of any existing license.

Following this mandate, the claims court denied Bitmanagement’s damages demand of almost $86 million and awarded $154,000. Bitmanagement appealed, arguing that it was entitled to damages based on each copy of the software made, rather than damages based on use exceeding the implied license.

The Federal Circuit disagreed, explaining that the law does not require that every award of copyright damages be on a per-copy basis:

. . . whenever the copyright in any work protected under the copyright laws of the United States shall be infringed by the United States . . . the exclusive action which may be brought for such infringement shall be an action by the copyright owner against the United States in the Court of Federal Claims for the recovery of his reasonable and entire compensation as damages for such infringement . . .

As the Federal Circuit noted, the methods used to determine recovery of “actual damages” under § 504 are those “appropriate for measuring the copyright owner’s loss.” Therefore, in § 504(b) cases, the copyright owner must prove “the actual [...]

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No Matter How You Slice and Dice It, Conclusory Evidence Can’t Support Entire Market Value Damages

by Sydney E. McDermott | Oct 10, 2024 | Patents

The US Court of Appeals for the Federal Circuit concluded that the entire market value rule was not applicable where conclusory expert testimony was the only evidence that a product’s infringing features drove consumer demand, and therefore reversed. Provisur Techs., Inc. v. Weber, Inc., Case No. 23-1438 (Fed. Cir. Oct. 2, 2024) (Moore, C.J.; Taranto, Cecchi, JJ.)

Provisur sued Weber in the Western District of Missouri over three patents related to slicing and packaging meats and cheeses. The jury determined that Weber willfully infringed several claims of the three asserted patents and awarded damages. Following the trial, Weber moved for judgment as a matter of law (JMOL) on the issues of infringement and willfulness, and a new trial on infringement, willfulness, and damages. The district court denied Weber’s motion in its entirety. Weber appealed.

The Federal Circuit affirmed the district court’s judgment with respect to two of the asserted patents but reversed the infringement finding on the sole asserted claim of the third patent. Provisur’s infringement theory was that the consumer could program the device to infringe the limitations of the claim. However, at trial, Provisur provided no evidence that it was actually possible for the consumer to configure the device to practice the claim or that any consumer had ever done so. Some of the software necessary to be configured in an infringing manner was not accessible to the consumer. Instead, only Weber service technicians could access it. Provisur also proffered no evidence that the devices had ever actually been configured to infringe the claims, instead only offering evidence that the claims could have been infringed.

Next, the Federal Circuit assessed willfulness. Weber’s primary argument was that the district court improperly allowed expert testimony in violation of 35 U.S.C. § 298, which states that a party’s failure “to obtain the advice of counsel with respect to any allegedly infringed patent . . . may not be used to prove that the accused infringer willfully infringed the patent.” Provisur’s expert, who testified about industry standards for intellectual property management, “did not distinguish between legal and non-legal services when testifying about consulting a third party.” The Court concluded that that portion of the testimony was inadmissible and the remaining evidence could not support a finding of willfulness.

Finally, the Federal Circuit addressed the damages issue, specifically focusing on the reasonable royalty award. The infringing features were subparts of a larger accused product – which had many non-infringing features. The accused product contained multiple separate machines unrelated to the alleged invention.

Provisur’s royalty award was predicated on its use of the entire market value rule, where the base to which the royalty rate is applied is the cost of the entire accused product as opposed the cost of just the infringing part. The Federal Circuit noted that the entire market value rule is an acceptable theory, but it requires a showing that the infringing part “is the basis for customer demand.”

Provisur’s damages expert used the entire market value rule in calculating the [...]

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Rewind: Federal Circuit Grants En Banc Rehearing Over Royalty Damages

by Keval Amin | Oct 3, 2024 | Patents

The en banc US Court of Appeals for the Federal Circuit issued a per curiam order vacating its previous panel decision upholding a district court’s denial of the defendant’s motion for a new trial on damages. In that decision, the Federal Circuit found that the plaintiff’s damages expert adequately demonstrated the economic comparability of prior license agreements to a hypothetical negotiation between the parties. Now, the Court has granted the defendant’s petition for rehearing en banc. EcoFactor, Inc. v. Google LLC, Case No. 23-1101 (Fed. Cir. Sept. 25, 2024) (per curiam) (Moore, C.J.; Lourie, Dyk, Prost, Reyna, Taranto, Chen, Hughes, Stoll, Stark, JJ.) Judge Prost dissented in part in the original panel decision.

EcoFactor sued Google over Nest thermostats allegedly infringing EcoFactor’s HVAC patent. The initial appeal revolved around the validity of the patent, the infringement verdict, and the damages awarded. Google argued that the patent was directed to an abstract idea and therefore was patent ineligible under 35 U.S.C. §101. Google also argued that the district court erred in its rulings on noninfringement and damages. The Federal Circuit majority upheld the district court’s decisions, finding genuine issues of material fact on patent validity, substantial evidence of infringement, and admissible expert testimony supporting the damages award. The Court dismissed Google’s challenge to the expert’s use of license agreements for calculating royalties, as the Court found the methodology reasonable. However, Judge Prost’s dissent in the original panel decision criticized the damages calculation, arguing that the expert’s methodology lacked rigor, particularly for failing to apportion the patented technology’s value from other licensed patents.

The en banc Federal Circuit will now reconsider the practice of using a patent owner’s prior license agreements to determine royalty rates, a method that can become complicated when the scope of licenses varies or when lump sums and royalties are not clearly apportioned.

The en banc order directed the parties to file new briefs limited to the issue of whether “the district court[] adhere[d] to Federal Rule of Evidence 702 and Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993), in its allowance of testimony from EcoFactor’s damages expert assigning a per-unit royalty rate to the three licenses in evidence in this case.”

Message Received: Trade Secret Law Damages Available for Sales Outside US

by Amol Parikh | Jul 18, 2024 | Copyrights, Trade Secrets

The US Court of Appeals for the Seventh Circuit affirmed, in a matter of first impression, a district court’s decision to apply trade secret law extraterritorially and award trade secret damages for foreign sales while also finding that the copyright damages award needed to be reduced to eliminate foreign sales. Motorola Solutions, Inc. v. Hytera Communications Ltd., Case Nos. 22-2370; -2413 (7th Cir. July 2, 2024) (Hamilton, Brennan, St. Eve., JJ.)

Motorola Solutions and Hytera compete globally in the market for two-way radio systems. Motorola spent years and tens of millions of dollars developing trade secrets embodied in its line of high-end digital mobile radio (DMR) products. Hytera struggled to overcome technical challenges to develop its own competing DMR products. After failing for years, Hytera hatched a plan to “leap-frog Motorola” by stealing its trade secrets. Hytera, headquartered in China, hired three engineers from Motorola in Malaysia, offering them high-paying jobs in exchange for Motorola’s proprietary information. Before the engineers left Motorola, acting at Hytera’s direction, they downloaded thousands of documents and computer files containing Motorola’s trade secrets and copyrighted source code. Hytera relied on the stolen material to develop and launch a line of DMR radios that were functionally indistinguishable from Motorola’s DMR radios. Hytera sold these DMR radios in the United States and abroad.

Motorola sued Hytera for copyright infringement and trade secret misappropriation. The jury found that Hytera had violated both the Defend Trade Secrets Act of 2016 (DTSA) and the Copyright Act. The jury awarded compensatory damages under the Copyright Act and both compensatory and punitive damages under the DTSA for a total award of $765 million. The district court later reduced the award to $544 million, which included $136 million in copyright damages and $408 million in trade secrets damages. Hytera appealed.

Hytera conceded liability and instead challenged the damages award under both the Copyright Act and the DTSA. Among other things, Hytera argued that copyright and trade secret damages should not have been awarded for its sales outside the US. With respect to the copyright award, the Seventh Circuit agreed that Motorola failed to show a domestic violation of the Copyright Act and therefore was not entitled to recover damages for any of Hytera’s foreign sales of infringing products as unjust enrichment. Specifically, to show a domestic violation of the Copyright Act, Motorola had asserted that its code was copied from servers based in Chicago. While the district court accepted Motorola’s argument, the Seventh Circuit found that this factual finding lacked adequate support in the record, citing Motorola’s expert’s admission that there was no evidence of downloads from the Chicago servers. The Court instead found that given the location of the employees in Malaysia, it was likelier that the code was downloaded from Motorola’s Malaysia server. The Court therefore reversed the $136 million copyright award and remanded with instructions to limit the copyright award to Hytera’s domestic sales of infringing products.

The Seventh Circuit affirmed with respect to the trade secret award. Like the [...]

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Robbing Peter to Pay Paul? Supreme Court to Consider Scope of Lanham Act “Defendant’s Profit” Award

by Kathleen Lynch | Jul 11, 2024 | Cert Alert, Trademarks

The Supreme Court has agreed to consider the breadth of a damages award in a long-running trademark dispute between two real estate companies. Dewberry Group, Inc. v. Dewberry Engineers, Inc., Docket No. 23-900 (Supr. Ct. June 24, 2024).

Dewberry Group and Dewberry Engineers both offer commercial real estate services in the same geographic area. The two companies dispute the use of the name “Dewberry” for use in real estate: Dewberry Group has acquired common law rights, and Dewberry Engineers owns registered trademarks. Dewberry Engineers sued Dewberry Group, but the initial litigation ended in settlement in 2007. As part of the settlement, Dewberry Group agreed to various terms, including that it would use a specific logo and an abbreviated name in certain overlapping markets.

Ten years later, Dewberry Group rebranded and attempted to register new marks containing the word “Dewberry” and abandoned the logo and name specified by the settlement agreement. In 2020, Dewberry Engineers again sued Dewberry Group, this time for violating the terms of the confidential settlement agreement and for infringing Dewberry Engineers’ trademarks. The lower court granted Dewberry Engineers summary judgment, a permanent injunction and monetary damages. The damages award included profit disgorgement pursuant to the Lanham Act, 15 U.S.C. § 1117(a), under which the US Court of Appeals for the Fourth Circuit ordered Dewberry Group’s affiliates to disgorge almost $43 million in profits. Dewberry Group appealed, and the Fourth Circuit affirmed in a 2 – 1 decision.

Dewberry Group petitioned for certiorari on the issue of damages, arguing that the Fourth Circuit’s decision to allow Dewberry Engineers to collect damages based on Dewberry Group’s affiliates’ profits “silently invites courts to ignore corporate separateness in trademark disputes without regard to veil-piercing principles.” Dewberry Group argued that the Fourth Circuit decision was substantively incorrect and contradictory to Ninth and Eleventh Circuit decisions as well as the Lanham Act. According to Dewberry Group, the $43 million “never passed through [Dewberry Group’s] hands,” and in fact the company “had zero net profits.” Because the Lanham Act allows only for disgorgement of a defendant’s profits – not defendant’s affiliates’ profits or a penalty against the defendant – Dewberry Group contended that the damages award was improper.

The issue presented is: 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.

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