“The Lanham Act’s invocation of equitable principles limits the types of relief that district courts may award.”
—John Masslon, WLF Senior Litigation Counsel

Click HERE for WLF’s brief.

WASHINGTON, DC—Washington Legal Foundation (WLF) today urged the U.S Supreme Court to reverse a decision of the U.S. Court of Appeals for the Fourth Circuit that permits district courts to award disgorgement of non-parties’ profits. In an amicus brief, WLF explains that the Lanham Act’s plain text limits the relief available to plaintiffs and that affirming would harm American businesses.

The case arises 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 describes 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 by their unlawful behavior. The Fourth Circuit’s rule violates both limits.  

The brief also describes how the Fourth Circuit’s rule will harm the American economy if affirmed. First, forcing companies to sue all infringers to recover ill-gotten profits is not burdensome. Suing in the United States is easy, and the Lanham Act allows for successful plaintiffs to recover attorney fees and costs. Second, the corporate form is key to ensuring that capital is used where it will be most productive. Allowing a corporation to be held liable for its corporate affiliates’ conduct will cause a decrease in investment and GDP as capital is spent on less productive pursuits.