“The Lanham Act’s invocation of equitable principles limits the types of relief that district courts may award.”
—Cory L. Andrews, WLF General Counsel & Vice President of Litigation
WASHINGTON, DC— The U.S Supreme Court today reversed a decision of the U.S. Court of Appeals for the Fourth Circuit that permitted district courts to award disgorgement of non-parties’ profits. The decision was a victory for Washington Legal Foundation (WLF), which filed an amicus brief explaining that the Lanham Act’s plain text limits the relief available to plaintiffs and affirming would harm American businesses.
The case arose from Petitioner’s infringement of Respondent’s trademark. The District Court found that both Petitioner and its non-party corporate affiliates infringed the trademark. When the District Court calculated the amount of disgorgement Petitioner owed, it included profits earned by the non-party corporate affiliates because that was the “fair” thing to do. The Fourth Circuit affirmed, holding that 15 U.S.C. § 1117(a) permitted the award. The Supreme Court granted review to decide whether a corporation can be held liable for the profits earned by its non-party corporate affiliates.
WLF’s brief described the precedent interpretating statutes that invoke equity. Under that precedent, equitable remedies are limited to those remedies that courts of equity could typically award before they merged with courts of law. From the time of the Revolutionary War until the merger of courts of equity and law, disgorgement could not be awarded for profits earned by anyone except the defendant. As for defendants, disgorgement was limited to the actual profits earned as a result of their unlawful behavior. The Fourth Circuit’s rule violated both limits. The Supreme Court’s opinion today clarifies that in awarding the “defendant’s profits” to the prevailing plaintiff in a trademark infringement suit under the Lanham Act, a court can award only profits ascribable to the “defendant” itself.