People generally associate the term “disgorgement” (or “disgorgement of ill-gotten gains”) with fraud cases wherein a party has engaged in embezzlement, insider trading or other illegal activity. It involves a court or regulatory authority ordering that party to repay profits they made off of others illegally.
Disgorgement can also be ordered in intellectual property (IP) infringement cases. Say that an individual or organization infringed on someone else’s registered trademark to confuse customers and profit off another business’s name and reputation. A judge may order them (or they may agree in a settlement) to pay the trademark’s rightful owner the amount of profit they made by using that trademark.
That amount can be significant. For example, last year, guitar maker Gibson was awarded over $168,000 in disgorgement damages in its case against the company that makes Dean Guitars for the profit it made through its unauthorized use of multiple Gibson trademarked shapes and wordmarks for its own instruments.
Calculating the amount of disgorgement damages due can be complicated. That’s because it involves the amount of profit made solely because of the wrongful activity – in this case, trademark infringement.
Disgorgement is just one possible remedy
Disgorgement is usually just one type of trademark infringement remedy ordered. Those found liable typically have to pay damages as well. For example, they may need to reimburse a trademark holder for any losses it suffered if their brand became unwittingly associated with an inferior product or customers purchased the infringer’s product in error.
It’s always important for victims of trademark or other IP infringement to act as soon as possible to stop the infringement and stem their losses. The best first step – almost always – is to get experienced legal guidance accordingly.