Ninth Circuit Raises The Bar For Plaintiffs Seeking Trademark Injunctions

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The Ninth Circuit’s recent decision in Herb Reed Enterprises, LLC v. Florida Entertainment Management Inc.1 increases the burden on trademark plaintiffs seeking preliminary injunctions. The case is the first decision from a federal appeals court to hold clearly that the 2006 Supreme Court patent case eBay Inc. v. MercExchange, L.L.C2 applies in trademark cases to eliminate the long-established rule that a plaintiff demonstrating a likelihood of trademark confusion is thereby entitled to a presumption that it will suffer irreparable harm. The case is also noteworthy for setting a high and arguably ambiguous standard for the amount and type of evidence necessary, in the absence of the jettisoned presumption, to establish irreparable harm.

Background

eBay held that, in patent cases, a permanent injunction should not “automatically follow” an infringement determination, and should be awarded only after consideration of “the four-factor test historically employed by courts of equity.”3 Since the decision was issued seven years ago, the question of whether and how eBay applied in the trademark law context has been the subject of much academic debate and conflicting federal district court decisions.

Some commentators have argued that eBay should not affect the presumption of irreparable harm in trademark cases. They reason that a rebuttable presumption as to one of the is not the same as a general rule, struck down in eBay, that an injunction will automatically issue.4 A plaintiff still needs to overcome a defendant’s effort to rebut the presumption, and also satisfy the other traditional factors by showing that legal remedies such as monetary damages would be inadequate compensation (second factor), that the balance of hardships is in its favor (third factor), and that the public interest would not be harmed by the injunction (fourth factor).

It is also urged that infringement of a trademark is simply different from patent or copyright infringement. Trademark infringement creates confusion among consumers and means that the plaintiff does not have control over its own reputation. In addition, injury from trademark infringement is notoriously difficult to prove.5 Defendants are not likely to volunteer customers they obtained through confusion with the plaintiff, and plaintiffs are not likely to learn from their own lost customers the reasons why they did not provide business. Because the motivations or mistakes of lost customers are less relevant in patent and copyright cases, the difficulty of such proof is reduced. As one commentator put it, “the harm from trademark infringement is fundamentally irreparable.”6

Those arguing that the presumption should not survive eBay assert that the Supreme Court’s intent was to strike down all “formulaic assumptions” in considering injunction requests.7 Particularly since the other factors in the test are rarely given much weight, a presumption on the irreparable harm factor has, effectively, often led to the automatic injunctions that eBay prohibited.8 This side also argues that, as trademark rights have been effectively broadened through developments such as protection against “initial interest confusion,” trademark infringement is no longer necessarily different, in any relevant way, from other types of property rights violations.9 It is no longer valid to presume, if it ever has been, that all trademark infringement results in irreparable harm.

The debate was reignited by the Supreme Court’s decision in Winter v. Natural Resources Defense Council, Inc.10 That 2008 decision overturned a generally-applicable Ninth Circuit rule that “when a plaintiff demonstrates a strong likelihood of prevailing on the merits, a preliminary injunction may be entered based only on a ‘possibility’ of irreparable harm.” The correct standard, Chief Justice Roberts’ decision held instead, “requires plaintiffs seeking preliminary relief to demonstrate that irreparable injury is likely in the absence of an injunction.”11 Although Winter is not an intellectual property case, and does not mention eBay, it has raised further questions about whether the trademark law presumption is consistent with Supreme Court mandates.12

Federal courts have inconsistently applied eBay in the trademark context, both before and after Winter. Several federal appeals courts have essentially dodged the question. “We have no need to decide whether a court may presume irreparable injury upon finding a likelihood of confusion in a trademark case, a difficult question considering the Supreme Court's opinion in eBay,” the Fifth Circuit held in a 2008 decision. “The facts of this case support a finding of a substantial threat of irreparable injury.”13 Other appeals courts have taken similar approaches.14

Left without definitive guidance, federal district courts have come to widely varying conclusions. Many continue to apply the presumption without considering whether it might no longer be valid.15 Others have found explicitly that the Supreme Court decisions should not affect the presumption. The Middle District of North Carolina, for example, found that “there are distinctions between copyright and patent infringement actions, where monetary damages are often central, and trademark infringement, where confusion may have long-lasting effects.”16 A Southern District of New York decision distinguished eBay in one sentence, reasoning that that case “involved permanent injunctions issued under the Patent Act,” so that the presumption still stood in the Second Circuit for preliminary injunctions in trademark cases.17

The district courts of the Ninth Circuit, prior to Herb Reed, were particularly divided. A Central District of California court noted that Winter required that it issue a preliminary injunction only “if the moving party shows that irreparable injury is likely,” but nonetheless held, absent a ruling specifically overturning the rule in trademark cases, that it would continue to presume such injury was likely.18 Another Central District of California case, however, considering the impact of both Winter and eBay, found eBay “more pertinent,” and refused to presume irreparable injury.19 Other district courts in the Ninth Circuit considered it essentially self-evident that Winter had eliminated the presumption in trademark law, without even citing eBay.20

Probably more common than district court decisions finding that the presumption no longer applies have been decisions indicating that such a presumption exists but then implicitly or explicitly acknowledging some degree of uncertainty by citing evidence that, in any case, is held to establish irreparable harm.21 Many such cases have effectively carried the essence of the presumption forward, even as they question its viability. The Fifth Circuit found a sufficient showing of likely irreparable harm due to “possible injury to” plaintiff’s goodwill “in the event that” defendant used its confusingly similar mark with “inferior or inappropriate technology and services.”22 A federal district court in Texas similarly found irreparable harm because the infringement a trademark owner had shown made it “likely” that it would suffer an erosion of its trademark rights and loss of control over how its mark is used.23 Another court found irreparable injury “even absent the presumption,” because the defendant’s actions led consumers to believe it was associated with the plaintiff and diminished the value of the plaintiff’s trademark.24 Since the same could be said in almost any case where a likelihood of confusion has been demonstrated, the effect is to hold that the nature of trademark infringement, with its impact on reputation and goodwill, means that proof of irreparable harm is not difficult to establish whether or not any presumption exists.

The Herb Reed Decision

Into this context comes Herb Reed, a dispute over use of THE PLATTERS, the trademark and name of the pop music group that first achieved fame in the 1950s.25 A company connected to the estate of Herb Reed, an original member of the group, sued a promoter who used the mark with his own musical group, winning a preliminary injunction in a Nevada federal district court.26

In reversing the preliminary injunction, the Ninth Circuit held that the presumption of irreparable harm did not survive eBay and Winter. The Supreme Court’s determination in eBay that “[n]othing in the Patent Act indicates that Congress intended” a departure from “traditional principles of equity” applies with equal force to trademark infringement under the Lanham Act, the Ninth Circuit reasoned, pointing out that “[b]oth statutes provide that injunctions may be granted in accordance with 'the principles of equity.'”27

The Ninth Circuit observed that Winter “underscored the requirement that the plaintiff seeking a preliminary injunction ‘demonstrate that irreparable injury is likely in the absence of an injunction.’”28 The Ninth Circuit held that “Winter’s admonition that irreparable harm must be shown to be likely in the absence of a preliminary injunction also forecloses the presumption of irreparable harm here.”

At just two paragraphs, the court’s analysis of why the presumption is foreclosed by eBay and Winter is surprisingly short. The court does not analyze the contrary arguments that have been put forth, such as that trademarks are different in kind from other forms of intellectual property, so that trademark infringement is inherently irreparable.

It also indicates that it is not taking an unprecedented step. “We now join other circuits,” the decision says, “in holding that the eBay principle—that a plaintiff must establish irreparable harm—applies to a preliminary injunction in a trademark infringement case.”29 But the two cases the Ninth Circuit cites do not say that the presumption of irreparable harm is no longer valid. In fact, the Eleventh Circuit case North American Medical Corp. v. Axiom Worldwide, Inc. states unequivocally that it was not making any ruling on that issue.30 The Sixth Circuit decision in Audi AG v. D'Amato involved a permanent injunction and, while it included no clear statement on the viability of the presumption,31 its cursory application of the eBay factors to the trademark infringement facts at issue led the treatise writer J. Thomas McCarthy to conclude that it was, in fact, applying the presumption.32

The Ninth Circuit also downplays the step it takes in Herb Reed by stating that it had already held, in a 2006 case, that eBay eliminates the presumption of irreparable harm in the trademark permanent injunction context, implying that extending that rule to preliminary injunctions is a small step.33 But the case it cites makes no mention of the presumption, and its brief analysis of the decision granting the injunction does not seem inconsistent with the presumption.34 Whether it acknowledges the fact or not, the Ninth Circuit’s decision does appear to break new ground.

Herb Reed is also noteworthy for rejecting the approach that has emerged in some decisions since eBay and Winter of declining to presume irreparable harm, but nonetheless treating infringement of a trademark as being particularly likely to lead to irreparable harm, and therefore requiring minimal evidence, beyond the evidence of the infringement itself.35

The district court in Herb Reed had recognized that the continued viability of the presumption was in doubt and did not give the plaintiff the benefit of that presumption.36 It nonetheless found that irreparable harm was likely from damage to Reed’s reputation and a loss of goodwill among fans.37 It noted that other courts considering claims by Reed against different parties using the THE PLATTERS mark had made similar determinations.38

But the Ninth Circuit holds that the district court improperly relied on “unsupported and conclusory statements regarding harm that [plaintiff] might suffer” and in doing so abused its discretion.39 “The practical effect of the district court's conclusions,” the appeals court holds, “which included no factual findings, is to reinsert the now rejected presumption of irreparable harm based solely on a strong case of trademark infringement.40 The appeals court conducted its own review of the record and found that the strongest evidence of irreparable harm, “albeit evidence not cited by the district court, is an email from a potential customer complaining [to defendant] that the customer wanted Herb Reed's band rather than another tribute band.”41 But, the Ninth Circuit writes, “[t]his evidence… simply underscores customer confusion, not irreparable harm.”42

The question of what evidence might meet the standard is left open. The court writes only that, “[t]hose seeking injunctive relief must proffer evidence sufficient to establish a likelihood of irreparable harm,” and offers that “[e]vidence of loss of control over business reputation and damage to goodwill could constitute irreparable harm.”43