Remedy creep: SCt seems to endorse more disgorgement

Dewberry Group, Inc. v. Dewberry Engineers Inc., No. 23–900 (Feb. 26, 2025)

We’ve gone very fast from most lower courts saying that willfulness was required for Lanham Act disgorgement/profits awards, to the Court saying that it wasn’t required but was still a factor, to “maybe disgorgement is standard.” I’d be happier with the common-law evolution if the Court admitted it was engaged in common-law rule development. Also, it’s true that the Court is writing in the context of willful infringement, but I doubt plaintiffs’ lawyers will limit themselves to quoting it in that situation.

The first line of Justice Kagan’s opinion for the Court: “A prevailing plaintiff in a trademark infringement suit is often entitled to an award of the ‘defendant’s profits’” (emphasis added). In concurrence, Justice Sotomayor similarly says: “Congress enacted the Lanham Act … to ensure ‘trademarks [w]ould receive nationally the greatest protection that can be given them.’ Disgorgement awards play a leading role in that regime, and the text of the Act forecloses any claim that Congress looked favorably on easy evasion” (emphasis added).

Also of note—the Court declines to decide whether/when the award of profits from one entity can be increased by profits from related entities based on the Lanham Act language: “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.” I agree with the idea that this adjustment can reflect the “defendant’s true financial gain.” That’s the only interpretation that can also implement the statutory command that the award is not supposed to be a penalty. Nonetheless you often see courts adjusting upwards for what are essentially penal reasons—punishing bad behavior.