Profit Disgorgement Archives

Chill Out: Request for Profit Disgorgement Isn’t Entitled to Jury Trial

by Dexter Hamilton | Dec 5, 2024 | Trademarks

The US Court of Appeals for the Eighth Circuit affirmed a district court ruling that a plaintiff was not entitled to a jury trial regarding its trade dress infringement claim and that the plaintiff failed to prove that its trade dress had acquired the required secondary meaning. National Presto Industries Inc. v. U.S. Merchants Financial Group Inc., Case No. 23-1493 (8th Cir. Nov. 12, 2024) (Loken, Erickson, Grasz, JJ.)

National Presto manufactures household appliances, including personal electric heaters sold under the brand name “HeatDish” since 1989. These heaters had “a parabolic design that looked like a satellite dish.” National Presto supplied HeatDish heaters to Costco for many years. However, amid slumping sales, Costco began exploring alternative options. In 2017, Costco requested a “parabolic electric heater that was UL approved, had high heat, and looked industrial and robust” from another supplier, U.S. Merchants Financial Group. U.S. Merchants began development of a heater named “The Heat Machine.” Costco requested modifications to the initial design, including “changes focused on a comparison with Presto’s HeatDish.” Costco began selling The Heat Machine in 2018.

In December 2018, National Presto filed suit against U.S. Merchants asserting trade dress infringement under the Lanham Act. National Presto requested both injunctive relief and that U.S. Merchants “be required, pursuant to 15 U.S.C. § 1117, to account to National Presto for any and all profits derived by them, either individually or jointly to be ordered to disgorge, and be ordered to pay all damages sustained by National Presto by reason of Defendant’s actions complained herein.”

National Presto sought a jury trial for its trade dress claim, but the district court ruled that National Presto was seeking equitable relief and thus was not entitled to a jury trial. The district court noted that under the Lanham Act, courts generally “find that a claim for disgorgement of an infringer’s profits is an equitable claim” and therefore the Seventh Amendment does not provide the right to a jury trial for such a claim. After a bench trial, the district court ruled that National Presto failed to prove infringement because its trade dress had not acquired secondary meaning. National Presto appealed.

The Eighth Circuit affirmed. Regarding the denial of a jury trial, which the Court reviewed de novo, National Presto argued that “disgorgement is considered a legal claim when the infringer’s profits serve as a ‘proxy’ for the plaintiff’s damages.” Although the district court did not reject that legal theory, it found that the facts National Presto presented were not sufficient to support a finding that the profits were in fact serving as a proxy. The Court rejected several of National Presto’s arguments, including that “Presto’s desired remedy was legal rather than equitable because its aim was compensation rather than disgorgement of unjust enrichment.”

Regarding the district court’s secondary meaning finding, which the Eighth Circuit reviewed for clear error, the Court noted that “the chief inquiry is whether in the consumer’s mind the mark has become associated with a particular source.” In rejecting National [...]

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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.

Disgorgement of Profits Appropriate Remedy for Breach of Contract, Trademark Infringement

by Kathleen Lynch | Aug 24, 2023 | Trademarks

In a trademark infringement and breach of contract case involving real estate companies with a shared name, the US Court of Appeals for the Fourth Circuit affirmed summary judgment in favor of the trademark owner, including almost $43 million in profit disgorgement. Dewberry Engineers v. Dewberry Group, Case Nos. 22-1622; -1845 (4th Cir. Aug. 9, 2023) (Gregory, Thacker, JJ.) (Quattlebaum, J., dissenting).

Dewberry Engineers and Dewberry Group (formerly Dewberry Capital) operate in the same states, and both provide commercial real estate services. Dewberry Engineers started in the mid-1950s as a civil engineering and surveying firm in northern Virginia. Over time, its business expanded to include real estate development services such as architecture and site development. Dewberry Group similarly provides real estate development services through its affiliates, including the Dewberry Hotel in Charleston, South Carolina.

In 2006, Dewberry Group sent Dewberry Engineers a cease-and-desist letter, asserting that Dewberry Group had “senior common law rights” to use “Dewberry” in real estate. In response, Dewberry Engineers sued Dewberry Group for infringing its federally registered DEWBERRY trademark. That litigation ended in 2007 when the parties entered a confidential settlement agreement (CSA). Among other things, the CSA stated that Dewberry Group:

Would not challenge Dewberry Engineers’ trademark registrations
Could use its “Dewberry Capital” name except in enumerated geographical areas where it instead must use “DCC”
Would use no logo other than its “column” logo.

In 2017, Dewberry Group rebranded and attempted to register DEWBERRY GROUP and other marks, which the US Patent & Trademark Office (PTO) repeatedly rejected.

In 2020, Dewberry Engineers filed suit claiming breach of contract and trademark infringement under the Lanham Act and Virginia common law. The district court granted summary judgment to Dewberry Engineers on the contract claim, finding that Dewberry Group had violated the unambiguous CSA by changing its logo, among other offenses. The district court also granted summary judgment to Dewberry Engineers on its trademark infringement claim, finding that Dewberry Engineers’ mark was not only valid, it was incontestable since it had been in continuous use for more than five years. The district court also found that the likelihood-of-confusion factors favored infringement. The district court entered a permanent injunction against Dewberry Group’s use of “Dewberry” and granted Dewberry Engineers its attorneys’ fees and profit disgorgement. Because the court believed the tax information Dewberry Group provided did not show the true “economic reality” of the close relationship between Dewberry Group and its affiliates, the disgorgement calculation also included some of Dewberry Group’s affiliated companies’ profits. Dewberry Group appealed, challenging the summary judgment grant, the permanent injunction and the monetary awards.

The Fourth Circuit began by noting that there was “uncontroverted evidence” that Dewberry Group used the DEWBERRY trademark, used a logo other than its column logo and failed to use “DCC” in restricted areas, all in breach of the undisputedly valid CSA. The Court therefore affirmed the district court’s finding that Dewberry Group breached the CSA.

The Fourth Circuit next addressed the trademark infringement claim. The Court rejected [...]

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Supreme Court: Profit Disgorgement Available Remedy for Trademark Infringement, Willful or Not

by Sarah Bro | Apr 30, 2020 | Trademarks

Resolving a split among the circuits regarding whether proof of willfulness is necessary for an award of a trademark infringer’s profits, the Supreme Court of the United States issued a unanimous decision holding that the plain language of the Lanham Act has never required a showing of willful infringement in order to obtain a profits award in a suit for trademark infringement under §1125(a). Romag Fasteners, Inc. v. Fossil, Inc., et al. Case No. 18-1233 (Supr. Ct. Apr. 23, 2020) (Gorsuch, Justice) (Alito, Justice, concurring) (Sotomayor, Justice, concurring).

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