Court Opinion

ID: 2968575
Source: CourtListenerOpinion
Date Created: 2015-09-22 07:34:51.761343+00
Date Added: 2024-06-11T15:28:45.451510
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                              No. 11-1860

BETHESDA SOFTWORKS, L.L.C.,

                Plaintiff – Appellant,

          v.

INTERPLAY ENTERTAINMENT CORPORATION,

                Defendant – Appellee.

Appeal from the United States District Court for the District of
Maryland, at Greenbelt.    Deborah K. Chasanow, Chief District
Judge. (8:09-cv-02357-DKC)

Submitted:   October 14, 2011               Decided:   October 26, 2011

Before NIEMEYER, DUNCAN, and AGEE, Circuit Judges.

Affirmed by unpublished per curiam opinion.

Howard H. Stahl, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, LLP,
Washington, D.C., for Appellant. Jeffrey F. Gersh, GERSH DERBY,
Encino, California, for Appellee.

Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:

                Bethesda    Softworks,         L.L.C.      (“Bethesda”),       sought     a

preliminary        injunction          in     the     district    court       prohibiting

Interplay        Entertainment         Corp.        (“Interplay”)      from    infringing

Bethesda’s       copyrighted          works   relating     to    the   “Fallout”      video

game series.         The district court denied the motion.                       Bethesda

appeals, arguing that the district court abused its discretion

and misapplied the law in concluding that Bethesda failed to

establish a likelihood of irreparable harm.                      We affirm.

                We review the district court’s resolution of a motion

for preliminary injunction for abuse of discretion.                           WV Ass’n of

Club Owners & Fraternal Servs. Inc. v. Musgrave, 553 F.3d 292,

298 (4th Cir. 2009).              A district court abuses its discretion

when it denies a preliminary injunction motion only if it bases

its decision on an erroneous legal standard or clearly erroneous

factual findings.          Id.

                “A preliminary injunction is an extraordinary remedy,

to   be   granted     only       if    the    moving    party    clearly      establishes

entitlement to the relief sought.”                      Manning v. Hunt, 119 F.3d
254,      263     (4th Cir. 1997)             (internal     quotation         marks     and

alteration omitted).              Entitlement to relief is determined by

considering four factors:                (1) that the plaintiff “is likely to

succeed on the merits,” (2) that the plaintiff “is likely to

suffer irreparable harm in the absence of preliminary relief,

                                               2
[(3)] that the balance of equities tips in [the plaintiff’s]

favor, and [(4)] that an injunction is in the public interest.”

Winter    v.    Natural          Res.    Def.    Council,      Inc.,         555 U.S. 7,     20

(2008).       An injunction “is not granted as a matter of course,”

Salazar v. Buono, 130 S. Ct. 1803, 1816 (2010), and “whether to

grant the injunction still remains in the ‘equitable discretion’

of the [district] court” even when a plaintiff has made the

requisite       showing.               Christopher     Phelps       &     Assocs.,         LLC    v.

Galloway, 492 F.3d 532, 543 (4th Cir. 2007).

               First, Bethesda notes that the parties agreed that a

breach of the Asset Purchase Agreement (“APA”) would “result in

irreparable         injury       for    which    there    is   no       adequate         remedy   at

law,”    such       that    “[Bethesda]          shall    be   entitled            to    equitable

relief” in the event of a breach.                      (J.A. 76). 1           Bethesda argues

that,    in    light        of    the     APA,   the     district        court       abused       its

discretion       in     concluding          that     Bethesda       did        not       establish

irreparable harm.            However, as the Tenth Circuit concluded after

canvassing extant case law, contractual agreements alone do not

control       the     district           court’s     exercise           of    its        equitable

discretion.           See    Dominion       Video      Satellite,        Inc.       v.    Echostar

Satellite       Corp.,           356 F.3d 1256,     1266         (10th       Cir.     2004)

     1
       The citations to “J.A. [page number]” refer to the Joint
Appendix filed by the parties in this appeal.

                                                 3
(identifying        factors       courts       consider         in    determining          whether

plaintiff        has    established           irreparable            harm).      The       Second

Circuit’s decision in North Atlantic Instruments, Inc. v. Haber,

188 F.3d 38 (2d Cir. 1999), cited by Bethesda, is not to the

contrary.        Accordingly, we conclude that the district court did

not   abuse      its    discretion       when       it   looked       beyond    the    parties’

stipulation        to     determine        whether         Bethesda       had    established

irreparable harm.

              Second,      relying       on    Hughes       Network      Systems,      Inc.       v.

InterDigital Communications Corp., 17 F.3d 691 (4th Cir. 1994),

Bethesda         argues     that      Interplay’s               insolvency       establishes

irreparable        harm    because,        even       if    damages      could     adequately

remedy the alleged infringement, Bethesda would be unable to

recover     in    the     event    that       Interplay         enters    bankruptcy.             In

Hughes Network Systems, we noted that a preliminary injunction

is    not   normally       available          where      the    harm     at    issue       can    be

remedied by money damages.                 Id. at 693-94.               However, we stated

that, “[e]ven if a loss can be compensated by money damages . .

. , extraordinary circumstances may give rise to the irreparable

harm required for a preliminary injunction.”                              Id. at 694.             We

explained that such circumstances may exist where, for example,

“the moving party’s business cannot survive absent a preliminary

injunction        or    where     damages        may       be    unobtainable         from       the

defendant        because    he     may        become       insolvent      before       a     final

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judgment     can      be   entered        and        collected.”         Id.             (internal

quotations      marks      and     alterations            omitted).           In    the     narrow

circumstances       in     which    preliminary            injunctions         are      warranted

despite     the       adequacy      of     money           damages,      injunctions             are

“carefully tailored, generally operating simply to preserve the

plaintiff’s opportunity to receive an award of money damages at

judgment.”      Id.

            Hughes Network Systems does not support the conclusion

that     Interplay’s       alleged        insolvency         warrants         a     finding       of

irreparable        harm    supporting           the       injunctive     relief           Bethesda

seeks.     “The traditional office of a preliminary injunction is

to protect the status quo and to prevent irreparable harm during

the pendency of a lawsuit ultimately to preserve the court’s

ability to render a meaningful judgment on the merits.”                                        In re

Microsoft       Corp.          Antitrust        Litig.,        333 F.3d 517,     525

(4th Cir. 2003).           Hughes contemplates that insolvency may alter

the    status   quo      and    undermine        a    court’s     ability          to    render    a

meaningful      judgment.           Hughes, 17 F.3d    at    694.            Thus,     a

preliminary       injunction        may    be        appropriate        “to       preserve       the

plaintiff’s opportunity to receive an award of money damages at

the judgment.”           Id.     Here, the injunctive relief that Bethesda

seeks would not preserve Interplay’s assets such that Interplay

could satisfy a judgment in the event Bethesda prevails on the

merits.

                                                5
              Third, Bethesda argues that irreparable harm may be

presumed at the preliminary injunction stage in a copyright case

once the plaintiff has shown a likelihood of success on the

merits.       At one time, federal courts, including this circuit,

presumed irreparable harm in copyright cases once the plaintiff

established probable likelihood of success on the merits.                        See,

e.g., In re Microsoft Corp. Antitrust Litig., 333 F.3d at 536;

Lexmark Int’l, Inc. v. Static Control Components, Inc., 387 F.3d
522, 532-33 (6th Cir. 2004); Elvis Presley Enters. v. Passport

Video, 349 F.3d 622, 627 (9th Cir. 2003); 2 Random House, Inc. v.

Rosetta Books LLC, 283 F.3d 490, 491 (2d Cir. 2002).                        In 2006,

the    Supreme       Court    declared    such    presumptions       inappropriate.

eBay       Inc.    v.    MercExchange,     L.L.C.,     547 U.S. 388     (2006).

Instead, courts are to apply the “well-established principles of

equity”      and    grant    injunctive     relief   only    after     a    plaintiff

satisfies         the    traditional     four-factor      test.      Id.    at    391.

Although      eBay      concerned   a    patent   dispute,   the     Supreme     Court

observed that its approach was “consistent with our treatment of

injunctions under the Copyright Act,” noting that the Court “has

consistently            rejected    invitations      to    replace      traditional

       2
       The Ninth Circuit later held that the presumption no
longer was valid. See Flexible Lifeline Sys., Inc. v. Precision
Lift, Inc., __ F.3d __, __, 2011 WL 3659315, at *9 (9th Cir.
2011).

                                            6
equitable       considerations         with       a     rule     that     an       injunction

automatically follows a determination that a copyright has been

infringed.”         Id. at 392-93.

               Bethesda      seeks    to    distinguish          eBay   as     a    permanent

injunction case, inapplicable to its request for a preliminary

injunction.           Bethesda        relies       on     the     distinction         between

preliminary and permanent injunctions, noting that a permanent

injunction      requires      a     showing    of       irreparable      harm       whereas    a

preliminary injunction requires only a likelihood of irreparable

harm.     Bethesda argues that copyright infringement is likely to

result, thereby meeting the preliminary injunction standard, due

to the intangible nature of copyrights.                         Bethesda relies on our

decision in Christopher Phelps & Associates, LLC v. Galloway,

492 F.3d 532 (4th Cir. 2007), as support for its position.

               The    Supreme       Court’s       decision       in     eBay       rested     on

principles of equity.               See eBay, 547 U.S. at 391-92.                     Despite

the    differences      between       preliminary         and    permanent         injunctive

relief,     the       same     equitable          principles          undergird       courts’

authority       in    each    posture.         The       differences      are       therefore

insufficient to warrant a presumption of irreparable harm with

respect        to     preliminary          injunctions           but     not        permanent

injunctions.         See Amoco Prod. Co. v. Vill. of Gambell, 480 U.S.
531, 544-46 & n.12 (1987) (rejecting presumption of irreparable

harm    upon    violation      of    environmental         statute       and       finding    no

                                              7
significant        difference        between        preliminary           and     permanent

injunction      standards);     Winter       v.     Natural    Res.       Def.     Council,

Inc., 555 U.S. 7, 24 (2008) (“A preliminary injunction is an

extraordinary remedy never awarded as of right.”).                               The Courts

of Appeals to consider this question have held that eBay applies

to     permanent    and    preliminary       injunctions           with    equal     force.

Flexible Lifeline Sys., Inc., __ F.3d at __, 2011 WL 3659315, at

*7-*9; Voice of the Arab World, Inc. v. MDTV Med. News Now,

Inc., 645 F.3d 26, 34 (1st Cir. 2011); Salinger v. Colting, 607
F.3d 68, 77 (2d Cir. 2010).            We agree with this conclusion.

               Bethesda    points     to     our     observation           in     Phelps    &

Associates      that     “[i]rreparable          injury    often       derives    from     the

nature    of    copyright     violations,          which    deprive       the     copyright

holder of intangible exclusive rights.”                      Phelps & Assocs., 492
F.3d at 544.            Bethesda argues that this language supports a

rebuttable      presumption     because          irreparable       harm    is    likely     to

result from copyright infringement.                       However, this reading of

Phelps & Associates is impermissibly broad.                        Following eBay, we

ruled that “[i]nsofar as Phelps & Associates suggests that it is

entitled to injunctive relief, we reject the argument.”                              Id. at

543.       We    then     analyzed     the       circumstances          surrounding        the

infringement       and     concluded       that      Phelps        &    Associates         had

demonstrated irreparable harm.               Id. at 544.           Our conclusion was

not based on the intangible nature of the copyright alone, as

                                             8
such    reasoning         would   lead    to    the    very      presumption      that     eBay

prohibits,          but      on     the        circumstances            surrounding         the

infringement.

              Lastly,       Bethesda       argues         that    the     district        court

misapplied the legal standard for preliminary injunctive relief

by     requiring      Bethesda      to    identify         with     particularity          each

element      of     the     copyrighted        works      being     infringed       and    the

resulting specific, tangible harm.                     We disagree with Bethesda’s

characterization of the district court’s reasoning.                              Our review

of the record leads us to conclude that the district court did

not    demand       the    high   degree       of     particularity        that     Bethesda

claims; rather it required that Bethesda demonstrate copyright

infringement “that can be stopped or needs to be stopped before

it causes irreparable harm to [Bethesda].”                              (J.A. 409).         The

district      court       found   unconvincing         Bethesda’s        claim    that     its

alleged loss of intangible rights in the copyrighted material

alone       established      irreparable           harm    because       “[t]here     is     no

evidence that the development has been made public to anybody.

It is an internal development project.                        There can be no launch

of     an    MMOG    by     Interplay      without         express       permission        from

Bethesda.”          (J.A. 419).          We conclude that the district court

applied the proper standard.               To the extent that Bethesda argues

the nature of its intangible rights are such that the district

court should have inquired no further than whether Interplay

                                               9
infringed Bethesda’s copyright, this position has been resolved

to the contrary by the Supreme Court’s decision in eBay.

            Based on the foregoing, we affirm the order of the

district    court.     We     deny    Bethesda’s      motion   to    file     a

supplemental appendix.       We dispense with oral argument because

the facts and legal contentions are adequately presented in the

materials   before   the    court    and   argument   would    not   aid    the

decisional process.

                                                                     AFFIRMED

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