All questions
Year in review
Trademark law in the past year saw another substantive decision from the highest court in the land: the United States Supreme Court. Additional noteworthy trademark decisions came out of the Ninth and Federal Circuits.
In Dewberry Group Inc v. Dewberry Engineers Inc, the Supreme Court unanimously held that the Lanham Act provision for disgorgement of profits for trademark infringement is limited to the profits of a named defendant, reversing the Fourth Circuit and vacating the district court’s US$43 million profit award that treated the defendant and its separately incorporated affiliates as a single corporate entity. The Court based its holding on the statute’s language and the basic principles of corporate law. The statute provides that a prevailing plaintiff may recover ‘the defendant’s profits’,1 and because the term ‘defendant’ was not specifically defined, it held its usual legal meaning: the party against whom relief or recovery is sought in an action or the named defendant in the action. Additionally, based on the principles of corporate law, separately incorporated entities must be treated as separate legal units with distinct legal rights and obligations, even where they share common ownership.
Here, the plaintiff Dewberry Engineers chose not to add Dewberry Group’s affiliates as defendants and had not tried to make the showing required to pierce the corporate veil. The Court also rejected Dewberry Engineers’ argument that other language in the statute gave the district court discretion to enter judgment for a sum the court finds ‘just’ if the court finds the amount of the recovery based on profit to be inadequate.2 The Court did not reach whether the just-sum rule might have applied, rather it held that the district court did not rely on the just-sum rule nor did it attribute certain affiliates’ profits to Dewberry Group as reflecting its true gain. In reversing the lower court ruling, the Supreme Court was clear that it was not expressing an opinion on the just sum approach to calculating damages or whether Dewberry Engineers could pursue the just sum theory on remand. The Court also did not address whether corporate veil-piercing was available on remand or when courts can consider the economic realities of a transaction and identify the defendant’s true financial gain.
In Yuga Labs, Inc v. Ripps, the Ninth Circuit held in a matter of first impression that non-fungible tokens (NFTs) qualify as goods under the Lanham Act and are eligible for trademark protection.3 The Court rejected the argument that NFTs are categorically excluded from trademark protection and gave weight to the USPTO’s statement in its March 2024 report that ‘[t]rademarks perform the same [source-identifying] functions in NFT markets as they do in other markets’. The Court also distinguished NFTs from the intangible content at issue in Dastar Corp v. Twentieth Century Fox Film Corp4 and Slep-Tone Ent Corp v. Wired for Sound Karaoke and DJ Servs, LLC5 noting that these ‘cases addressed tangible goods that contained intangible, expressive content’. NFTs, by comparison, are not contained in tangible goods sold in the marketplace, exist only in the digital world as digital files, and are marketed and actively traded in commerce as commercial goods. Based on this analysis, the court held that Yuga Labs’ NFTs qualify as goods under the Lanham Act and are therefore eligible for trademark protection.
In Bullshine Distillery LLC v. Sazerac Brands, LLC, the Federal Circuit held in a matter of first impression that in a cancellation proceeding, the alleged genericness of a challenged mark is determined at the time of registration.6 The Court rejected the argument that once a term is generic, it is always generic and cannot later be registered. It held that such an argument was inconsistent with the Lanham Act and its underlying understanding that the genericness inquiry, or public perception of a term, can change over time.
