USDC D. Oregon, October 12, 2011

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  • District court denies motion for preliminary injunction in a false advertising action brought by manufacturer of knives, concluding that under Supreme Court eBay v. MercExchange decision, irreparable harm may not be presumed once there is a showing of a likelihood of success on the merits.

Defendant Coast Cutlery, a manufacturer of multi-tools and knives, advertised some of its knives as being constructed of 440C steel and having a hardness of 57 to 59 on the Rockwell C scale, a measure of hardness that is abbreviated “HRC”. Plaintiff Leatherman, also a manufacturer of knives, had 61 different types of Coast knives independently tested for the type of steel and hardness of the blade. The results showed that none of the tested knives were made of 440C steel and only two of the tested knives had a hardness of 57 to 59 HRC. Leatherman sued Coast for false advertising under section 43 of the Lanham Act and sought a preliminary injunction requiring Coast to issue corrective notices and prohibiting Coast from stating that its knives are made of 440C steel, are hardened to between 57 and 59 HRC, and are individually hardness tested. Since Leatherman filed the complaint and motion for preliminary injunction, Coast undertook some corrective actions. Leatherman argued that the corrective actions were insufficient.

A party seeking a preliminary injunction, instructed the court, must establish that he is likely to succeed on the merits, he is likely to suffer irreparable harm in the absence of preliminary relief, the balance of equities tips in his favor, and an injunction is in the public interest. Although the court determined that three of the four factors — likelihood of success on the merits, balance of the equities, and the public interest — favored Leatherman, the court denied Leatherman’s request for a preliminary injunction because it failed to show a likelihood of irreparable harm.

The court initially evaluated the strength of Leatherman’s section 43(a) Lanham Act claim. To establish a section 43(a) claim, a plaintiff must establish (1) falsity in a commercial statement, (2) deception, (3) materiality, (4)interstate commerce, and (5) injury. First, the court found that Coast, through its corrective actions, indirectly admitted to falsely advertising that its products are made from 440C steel, have a hardness of 57-59 HRC, and are individually tested for hardness. Second, the court held that Coast’s statements were literally false and thus are presumed to have a tendency to deceive. Third, Leatherman produced sufficient evidence to support the materiality element. A consumer comment showed that the consumer was swayed by the 440C steel description about Coast’s product. In a consumer survey conducted by Coast, 17% of respondents said that a particular type of steel greatly influences their purchasing decision. Fourth, the false statements entered interstate commerce via Coast’s website, product packaging, catalogs, and on the product itself. Finally, the parties merged discussion of injury as an element of a false advertising claim with the discussion of irreparable harm.

In light of the Supreme Court’s decision in eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), and the Ninth Circuit’s decision in Flexible Lifeline v. Precision Lift, Inc., 2011 U.S. App. LEXIS 17462 (9th Cir. Aug. 22, 2011), the court rejected Leatherman’s argument that it is entitled to a presumption of irreparable harm if a tendency to deceive has been established. In eBay, the Ninth Circuit considered a permanent injunction issued based on a finding of patent infringement, and disapproved of the use of “categorical” rules with respect to irreparable harm. In Flexible Lifeline, the Ninth Circuit reversed the long standing precedent that irreparable harm may be presumed in copyright infringement cases once there is a showing of a likelihood of success on the merits. The Ninth Circuit found that eBay has broad implications (that apply equally to preliminary and permanent injunctions), and that eBay is not limited to patent infringement cases. The court noted that other jurisdictions have likewise concluded that presumptions of irreparable harm are no longer appropriate after eBay, and indicated that the First, Second, Fourth, and Eleventh Circuits have raised similar concerns over presumptions of irreparable harm.

Without a presumption, the court concluded that the balance of the elements of the preliminary injunction test did not tip in Leatherman’s favor. Although three of the four factors considered in its preliminary injunction analysis — likelihood of success on the merits, balance of equities, and the public interest — favored Leatherman, the court denied plaintiff’s motion for a preliminary because it failed to demonstrate a likelihood of irreparable harm.