Source: http://rutgerspolicyjournal.org/trademark-infringement-third-circuit-offers-guidance-evidence-needed-satisfy-irreparable-harm-prelim
Timestamp: 2017-03-29 05:35:19
Document Index: 133454743

Matched Legal Cases: ['§ 30', '§ 30', '§ 30', '§ 30', '§ 30', '§ 23', '§ 20', '§ 43', '§ 1125', '§ 2', '§ 23', '§ 30']

Trademark Infringement: Third Circuit Offers Guidance on Evidence Needed to Satisfy Irreparable Harm in Preliminary Injunctions | Rutgers Journal of Law & Public Policy
Home	Trademark Infringement: Third Circuit Offers Guidance on Evidence Needed to Satisfy Irreparable Harm in Preliminary Injunctions By: Heather Schubert*
For a trademark owner asserting infringement, a preliminary injunction is a powerful tool: once acquired by the owner, the alleged infringer is obliged to immediately stop all use of the challenged mark, until the infringement issue is determined in a full trial on the merits.[1] In the Third Circuit, a plaintiff must establish four elements for a district court to grant a preliminary injunction in trademark and unfair competition matters: (1) he is likely to succeed on the merits; (2) he is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in his favor; and (4) a preliminary injunction is in the public interest.[2] Traditionally, courts presumed irreparable harm if the plaintiff met the burden of showing a likelihood of success on the merits of his trademark infringement claim.[3] However, this presumption is in danger due to recent Supreme Court decisions. In eBay, Inc. v. MercExchange, L.L.C.[4] the Supreme Court addressed permanent injunctions in the context of patent law, ruling that the traditional, four-factor test must be applied by courts. Two years later, the Supreme Court addressed the irreparable harm standard in a preliminary injunction context in Winter v. Natural Resources Defense Council, Inc.[5] Due to the rulings in eBay and Winter, the various federal circuit courts have begun to question the traditional presumption of irreparable harm in trademark injunctions. Recently, the Third Circuit Court of Appeals applied the eBay and Winter rulings to trademark preliminary injunctions in the case of Ferring Pharmaceuticals, Inc. v. Watson Pharmaceuticals, Inc., holding that “a party bringing a claim under the Lanham Act is not entitled to a presumption of irreparable harm when seeking a preliminary injunction and must demonstrate that irreparable harm is likely.”[6] In December 2014, the Third Circuit took it a step further by ruling that a court can indeed find irreparable harm by permissible inference, in the case of Groupe SEB USA, Inc. v. Euro-Pro Operating, L.L.C.[7]
II. Justification for the Traditional Presumption of Irreparable Harm
Before eBay and Winter, almost all federal courts followed the rule that irreparable harm is presumed if the plaintiff proves a likelihood of success on the merits.[8] In the case of Opticians Association of America v. Independent Opticians of America, the Third Circuit went as far as saying that once a showing of likely confusion between the two marks at issue is made, the “inescapable conclusion is that there was also irreparable injury.”[9]
The justification for this powerful presumption of harm stems from the root of trademark law. Trademarks, as source indicators to consumers, have two uses: (1) they represent the acquired goodwill attributable to the owner of the mark; and (2) they assure consumers of the quality of the goods or services associated with the mark.[10] According to, the “acquired goodwill and quality assurance” prong, a “mark’s reputation,” and therefore the trademark owner’s reputation, is just as important as monetary damages. However, the problem with reputational damage is quantification: how can you put a fair and adequate dollar amount on a brand’s reputation? Therefore, the traditional presumption is that, in the language of equity, monetary relief is “inherently ‘inadequate’ and the injury is ‘irreparable.’”[11]
To meet the traditional presumption of irreparable harm, the plaintiff must establish they are likely to succeed on proving a claim of likelihood of confusion between the owner’s mark and the alleged infringer’s mark.[12] By establishing a likelihood of confusion, the plaintiff has shown that it is likely consumers will assume a connection between the plaintiff and the defendant’s two products: for example, that the defendant’s product was approved by the plaintiff; or that the defendant’s product was created by the plaintiff.[13] This type of confusion can be detrimental to plaintiff’s reputation if consumers mistakenly attribute the plaintiff’s quality brand with a defective or inferior product.[14] Therefore, since the plaintiff cannot “control the nature and quality of defendant’s goods,” the harm due to trademark infringement is fundamentally irreparable.[15]
III. Supreme Court Rulings: eBay and Winter
In eBay Inc. v. MercExchange, L.L.C., MercExchange filed an infringement suit against eBay, alleging that eBay infringed upon MercExchange’s business method patent.[16] Although a jury found patent infringement and awarded MercExchange damages, the district court denied MercExchange’s motion for permanent injunctive relief.[17] Although the district court applied the proper four-factor test in analyzing the request for injunctive relief, the district court found that MercExchange failed to establish irreparable harm: “plaintiff’s willingness to license its patents, its lack of commercial activity in practicing the patents, and its comments to the media as to its intent with respect to enforcement of its patent rights, are sufficient to rebut the presumption that it will suffer irreparable harm [without] an injunction.”[18] On appeal, the Federal Circuit applied its “general rule” in reversing the district court’s denial of a permanent injunction: except in “exceptional circumstances” and “rare instances,” “a permanent injunction will issue once infringement and validity have been adjudged.”[19]
On appeal, the Supreme Court ruled that the Federal Circuit erred by improperly applying its “general rule” instead of the traditional four-factor test for permanent injunctions.[20] In addition, the Court found that the district court, although applying the correct four-factor test, had also erred by adopting a broad, categorical rule: that injunctions could not issue in cases where the plaintiffs’ willingness to license patents and lack of commercial activity in practicing patents were used to rebut presumptive irreparable harm.[21] The Court unmistakably rejected the adoption of such a categorical rule: “traditional equitable principles do not permit such broad classifications.”[22]
Interestingly, the Supreme Court never specifically addressed the validity of the presumption of irreparable harm in its eBay opinion.[23] The Court only emphasized that the discretion used by district courts in determining whether to grant or deny injunctive relief should be “exercised consistent with traditional principles of equity.”[24] However, on remand, the district court reviewed relevant case law and the majority’s language in eBay to hold that the presumption no longer exists.[25] After eBay, courts across the country began questioning the presumption of harm in the context of trademark injunctions, with some holding outright that eBay eliminated the presumption of harm in trademark situations.[26]
Circuit courts have used the Supreme Court’s ruling in Winter v. Natural Resources Defense Council, Inc.[27] to further doubt the presumption of irreparable harm in trademark injunctions. In Winter, the district court granted a preliminary injunction against the United States Navy because the NRDC had established “at least a ‘possibility’ of irreparable harm to the environment;” the Ninth Circuit on appeal upheld this “possibility” standard.[28] The Supreme Court expressly overruled the Ninth Circuit “possibility” standard, holding that “issuing a preliminary injunction based only on a possibility of irreparable harm is inconsistent with our characterization of injunctive relief as an extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief.”[29] The Court also confirmed the proper application of the four traditional injunction factors to both permanent and preliminary injunctions.[30] Although the claim in this case was not related to intellectual property, circuit courts have begun to use Winter, and the permanent injunction holding in eBay, to hold that the presumption of irreparable harm is no longer valid in trademark infringement.[31]
IV. Third Circuit Application: Ferring Pharmaceuticals and Groupe SEB
After eBay and Winter, The Ninth Circuit was the first to affirmatively state that the presumption of irreparable harm was no longer valid in trademark injunctions in Herb Reed Enterprises v. Florida Entertainment Management.[32] In August, the Third Circuit became the second appeals court to deny validity of a presumption in Ferring Pharmaceuticals.[33] Plaintiff Ferring Pharmaceuticals filed a false advertising claim pursuant to the Lanham Act and sought a preliminary injunction to prevent Watson Pharmaceuticals from making further false statements.[34] The district court found that Ferring was not entitled to a presumption of irreparable harm and that, without the presumption, Ferring had failed to present sufficient evidence to demonstrate a likelihood of irreparable harm, denying the request for injunctive relief.[35] The court of appeals affirmed, holding that, due to eBay and Winter, the plaintiffs are no longer entitled to a presumption of irreparable harm when seeking preliminary injunctive relief for Lanham Act claims.[36] To allow such a presumption, the court reasoned, would deviate from the traditional principles of equity, which require a movant to demonstrate irreparable harm.[37]
Fortunately, only three months after deciding Ferring Pharmaceuticals, the Third Circuit took on this issue again in Groupe SEB USA, Inc. v. Euro-Pro Operating, L.L.C. and gave some guidance as to the evidence needed for a plaintiff to demonstrate irreparable harm.[38] Groupe SEB sued Euro-Pro for false advertising under the Lanham Act and requested a preliminary injunction.[39] The advertising at issue involved unambiguous comparative power claims by Euro-Pro on their packaging, advertising that their steam iron was more powerful than their competitor’s, Groupe SEB.[40] Group SEB provided evidence, created through its internal laboratory and independent testing, that its products were actually more powerful and thus the advertising claims were not true.[41] The district court relied upon this evidence of falsity, in addition to testimony from Groupe SEB’s marketing director explaining how the direct reference to their product in the false advertisements on their competitors products were very likely to erode their brand’s reputation, in granting the preliminary injunction.[42]
The Third Circuit clarified that, even though the district court did not have the benefit of the Ferring holding explicitly requiring a demonstration of irreparable harm, the district court’s ruling should still be upheld due to the facts in the record that serve as evidence of such harm.[43] The important evidence in this case included the marketing director’s testimony as to the strength of the reputation, the fact that the products compete side by side on the shelves, the proven falsity of the advertising claims, the importance of steam power as a selling point to consumers, and the marketing director’s testimony as to the likely harm that would follow due to false claims that identify their product by name.[44] By taking this evidence into consideration, the court of appeals ruled that irreparable harm is a reasonable inference made by the marketing director, the district court, and now the appeals court.[45] The court emphasized that this finding of a likelihood of irreparable harm, inferred by the evidence, is not a “veiled presumption of irreparable harm,” since Ferring barred such a presumption.[46] Rather, by drawing a reasonable inference from the facts in the record, the court was following Ferring’s direction for courts to apply equitable discretion in a case-by-case, fact-specific manner.[47]
V. Conclusion: Uniformity Needed but Not Found
The Groupe SEB decision is a welcome expansion upon the Third Circuit’s ruling in Ferring Pharmaceuticals. Although Ferring established the requirement for a plaintiff have evidentiary support demonstrating a likelihood of irreparable harm, Groupe SEB clarified that irreparable harm can be found by permissible inference given the specific facts of each case. In addition, it provided solid examples of evidence to which litigants can use as guidance in their Third Circuit suits.
However helpful this may be, the law regarding the irreparable harm factor for injunctions in the trademark context is still substantially unclear. While the Ninth and Third Circuits have now invalidated the presumption and given some guidance to the type and amount of evidence needed to show irreparable harm, the rest of the circuits are varied in their application of the law.[48] The current treatment of relevant cases among the district courts are leading to a continued, uneven application of eBay and Winter in the trademark injunction context.[49]
In addition, a significant amount of commentators question whether eBay and Winter should even be applied to injunctions in the trademark context, due to the fundamental differences between trademark rights and other intellectual property rights. Patent and copyright infringement can be measured by monetary harm; however, trademark infringement causes reputational harm and public confusion – two harms that are “nearly impossible to calculate.”[50] Given that the Lanham Act is, at its core, a consumer protection law, public policy would support the continuation of the presumption of irreparable harm in trademark infringement cases since the harm is suffered by not only the trademark owner, but also by consumers.[51] Furthermore, requiring a plaintiff to demonstrate the likelihood of irreparable harm, instead of allowing the presumption of harm, requires a trademark owner to find evidence of a harm that has yet to occur.[52] While enforcing this requirement would greatly burden the plaintiff, enforcing the presumption instead would put a much smaller burden on the defendant to rebut the presumption.[53]
Unfortunately, the Supreme Court denied certiorari this year in Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc., the Ninth Circuit case that affirmatively rejected the traditional presumption based on the eBay and Winter rulings.[54] A Supreme Court ruling in Herb Reed could have provided the circuit uniformity for which this irreparable harm issue needs.[55] Without guidance from the Supreme Court or the legislature, the circuits will continue to approach the issue in a variety of ways, leading to a fractured and uneven application of the irreparable harm element of injunctions in the trademark context.
* Managing Research Editor, Rutgers Journal of Law & Public Policy; J.D. Candidate May 2015, Rutgers University School of Law – Camden.
[1] J. Thomas McCarthy, Are Preliminary Injunctions Against Trademark Infringement Getting Harder to Achieve?, 14 INTELL. POP. L. BULL. 1, 1 (2009).
[2] Ferring Pharmaceuticals, Inc. v. Watson Pharmaceuticals, Inc., 765 F.3d 205 (3d Cir. 2014); Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008). The elements needed for a preliminary injunction differ slightly throughout the thirteen federal circuits. See 5 J. Thomas McCarthy, McCARTHY ON TRADEMARKS § 30:32 (detailing the specific criteria used in each of the thirteen federal circuits, in preliminary injunction decisions involving trademark and unfair competition matters).
[3] McCarthy, supra note 2, § 30:47.
[4] eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).
[5] Winter, 555 U.S. 7 (2008).
[6] Ferring Pharmaceuticals, 765 F.3d at 206. [7] Groupe SEB USA, Inc. v. Euro-Pro Operating, L.L.C., 774 F.3d 192 (3d Cir. 2014).
[8] McCarthy, supra note 2, § 30:47.
[9] Opticians Association of America v. Independent Opticians of America, 920 F.2d 187, 196-97 (3d Cir. 1990). See also McCarthy, supra note 2, § 30:47, n. 1 (for essential cases in each circuit that ruled a presumption of irreparable harm, before eBay and Winter).
[10] Jeffrey M. Sanchez, The Irreparably Harmed Presumption? Why the Presumption of Irreparable Harm in Trademark Law Will Survive eBay and Winter, 2011 B.Y.U. L. REV. 535, 535 (2011).
[11] McCarthy, supra note 2, § 30:47.
[12] See McCarthy, supra note 2, § 23:1 (citing Restatement Third, Unfair Competition § 20, cmt. d (1995)) (“‘Likelihood of confusion’ is the fundamental test of both state common-law and statutory trademark infringement.”)
[13] A federal claim for trademark infringement is brought pursuant to the Lanham Act, § 43(a), 15 U.S.C.A. § 1125(a):
Any person who […] uses in commerce any word, term, name, symbol, or device […] which is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association or such person with another person, as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person […] shall be liable in a civil action by any person who believes that he or she is likely to be damaged by such act.
The Patent and Trademark Office uses the same test (under the Lanham Act § 2(d)) in analyzing likelihood of confusion in the context of trademark applications. McCarthy, supra note 2, § 23:1.
[14] McCarthy, supra note 1, at 4.
[15] Sanchez, supra note 10, at 539.
[16] 547 U.S. 388, 390 (2006).
[17] MercExchange, L.L.C. v. eBay, Inc., 275 F. Supp. 2d 695, 715 (E.D. Va. 2003). aff'd in part, rev'd in part sub nom. MercExchange, L.L.C. v. eBay, Inc., 401 F.3d 1323 (Fed. Cir. 2005) vacated and remanded sub nom. See also eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, (2006) and judgment entered, 660 F. Supp. 2d 653 (E.D. Va. 2007).
[18] MercExchange, 275 F. Supp. 2d at 712.
[19] MercExchange, 401 F.3d at 1338-39 (citing Rite-Hite Corp. v. Kelley, Inc., 56 F.3d 1538, 1547 (Fed. Cir. 1995)).
[20] eBay, 547 U.S. at 393-94.
[22] Id. See also Sanchez, supra note 10, at 540-41 and n. 36 (explaining that some commentators have suggested that the overturning of the district court’s categorical rule was not so much about injunctions and equitable relief, as it was about “the nature of patent rights in the era of patent trolling.”)
[23] Sanchez, supra note 10, at 541.
[24] eBay, 547 U.S. at 394.
[25] See MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556, 591-92 (E.D. Va. 2007); Sanchez, supra note 10 at 541.
[26] McCarthy, supra note 2, § 30:47.30.
[27] 555 U.S. 7 (2008).
[28] Id. at 17, 21.
[30] Id. at 20.
[31] Sanchez, supra note 10, at 544, n.60 (citing as examples: Cytosport, Inc. v. Vital Pharm., Inc., 617 F. Supp. 2d 1051 (E.D. Cal. 2009), aff'd, 348 F. App’x 288 (9th Cir. 2009); Volkswagen AG v. Verdier Microbus & Camper, Inc., No. C 09-00231 JSW, 2009 WL 928130, at *6 (N.D. Cal. Apr. 3, 2009); Maxim Integrated Prods., Inc. v. Quintana, 654 F. Supp. 2d 1024, 1030 (N.D. Cal. 2009); Mortgage Elec. Registration Sys., Inc. v. Brosnan, No. C 09-3600 SBA, 2009 WL 3647125, at *8-9 (N.D. Cal. Sept. 4, 2009)).
[32] 736 F.3d 1239 (9th Cir. 2013); John G. Froemming, et al., Third Circuit Rejects Presumption of Irreparable Harm in Lanham Act Cases, JONESDAY.COM (Aug. 2014), http://www.jonesday.com/Third-Circuit-Rejects-Presumption-of-Irreparable....
[33] 765 F.3d at 206. [34] Id. at 209.
[36] Id. at 216. Although the Third Circuit had never applied a presumption of irreparable harm to false advertising cases, the court did traditionally allow a presumption of harm in Lanham Act trademark infringement claims when plaintiff demonstrated a likelihood of success on the merits. Id. at 210-11.
[37] Id. at 216.
[38] See 774 F.3d 192 (3d Cir. 2014).
[39] Id. at 194.
[40] Id. at 195.
[41] Id. at 195-96.
[42] Id. at 196-97.
[43] Id. at 204.
[44] 774 F.3d at 205.
[45] Id. [emphasis added]. [46] Id.
[48] For example, while some circuits appear to continue to apply the presumption, others have questioned the presumption but have not yet taken a definitive position, and even others have not yet looked at the issue. John G. Froemming, et al. Supreme Court denies cert in Herb Reed: Circuits to remain out of tune as to presumption of irreparable harm, LEXOLOGY.COM (Oct. 8, 2014), http://www.lexology.com/library/detail.aspx?g=efde4a89-138f-4fc6-8f16-a6....
[49] See Mark S. VanderBroek and Lucas A. Westby, Presumption or Proof? Establishing Irreparable Harm in Trademark Cases after eBay, American Bar Association: Intellectual Property Litigation Committee (Oct. 16, 2014), http://apps.americanbar.org/litigation/committees/intellectual/articles/....
[50] Froemming, supra note 48.
[51] Megan Bannigan, U.S. Appeals Court Rejects Presumption of Irreparable Harm in Lanham Act Cases, INTABulletin Vol. 69 No. 17 (Sept. 15, 2014), http://www.inta.org/INTABulletin/Pages/USAppealsCourtRejectsPresumptiono....
[53] Froemming, supra note 48.