Originally published in Litigation Intellectual Property, Oct. 16, 2014. ©2014 by the American Bar Association
For a plaintiff in a trademark suit, an injunction is the essential element of requested relief. Traditionally, when a plaintiff proved trademark infringement by demonstrating a likelihood of confusion of the public (or a likelihood of success in proving infringement, in a preliminary injunction context), courts applied a presumption of irreparable harm, which generally entitled the plaintiff to an injunction. This presumption flowed from (1) the inherent nature of trademark injury, in which a trademark owner loses control over goods and services sold under a confusingly similar mark, resulting in actual or threatened harm to its goodwill and reputation; and (2) the inherent difficulty in quantifying resulting damages. See, e.g., Ty, Inc. v. Jones Grp., Inc., 237 F.3d 891, 902–3 (7th Cir. 2001); Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 640 (1st Cir. 1992).
However, in eBay Inc. v. MercExhange, L.L.C., 547 U.S. 388, 391 (2006), the Supreme Court rejected a presumption of irreparable harm in patent infringement cases and held that courts should apply the traditional four-factor test in deciding whether to award permanent injunctive relief (the existence of irreparable injury, inadequacy of remedies at law, balancing of hardships, and public interest). Since eBay, federal courts have struggled and reached conflicting results in determining whether there is still a presumption of irreparable harm in trademark cases. The good news for trademark owners is that while a number of courts have chosen not to apply the presumption or have questioned whether it is still applicable, many of them have tended to make factual findings of irreparable harm relying on the same loss of control, harm to goodwill and reputation, and difficulty in quantifying damages, on which the presumption is or was based.
Trademark Irreparable Harm Rulings since eBay Since eBay, eight of the twelve regional circuit courts have raised the question of whether the presumption of irreparable harm still applies in trademark cases. However, only four of them appear to have decided that question—inconsistently.
The Fifth Circuit is the only circuit that has clearly continued to apply the presumption of irreparable harm after eBay. In Abraham v. Alpha Chi Omega, 708 F.3d 614 (5th Cir. 2013), the court cited eBay in identifying the elements necessary to obtain a permanent injunction but then affirmed entry of an injunction in reliance on the presumption, stating “[a]ll that must be proven to establish liability and the need for an injunction against infringement is the likelihood of confusion—injury is presumed.” Id. at 627 (quoting 5 McCarthy on Trademarks and Unfair Competition § 30:2). In Community of Christ Copyright Corp. v. Devon Park Restoration Branch of Jesus Christ’s Church, 634 F.3d 1005, 1012 (8th Cir. 2011), the Eighth Circuit also affirmed a permanent injunction by stating that “in trademark law, injury is presumed once a likelihood of confusion has been established.” However, in that case, the court did not even mention eBay, and a later Eighth Circuit case has questioned, without deciding, whether a presumption of irreparable harm still arises after eBay. Novus Franchising, Inc. v. Dawson, 725 F.3d 885, 894–95 (8th Cir. 2013).
The Ninth Circuit, on the other hand, holds that eBay forecloses the traditional presumption of irreparable harm in trademark cases, both for permanent and preliminary injunctions. Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239, 1250 (9th Cir. 2013). In Herb Reed, the court reversed entry of a preliminary injunction—because the district court did not make a factual finding of irreparable harm—and remanded for further consideration. Id. However, district courts in the Ninth Circuit have made factual findings of irreparable harm, relying on the trademark owner’s loss of control over its marks and the resulting damage to goodwill. (Seecases cited in the chart at the end of this article.) The Sixth Circuit also appears to have held that a trademark plaintiff must demonstrate irreparable harm to obtain a permanent injunction; it found irreparable harm existed where (1) without an injunction, customers would continue purchasing counterfeit items from the defendant’s website instead of the plaintiff’s lawful products; and (2) “there was potential for future harm, and therefore, there was no adequate remedy at law.” Audi AG v. D’Amato, 469 F.3d 534, 550 (6th Cir. 2006).
The other four circuit courts that have considered the presumption issue declined to decide it, although some indicated that the presumption may no longer survive in view of eBay. Those courts either remanded the case to the district court, affirmed factual findings of irreparable harm, or decided the case on other grounds. For example, in North American Medical Corp. v. Axiom Worldwide, Inc., the Eleventh Circuit noted that “a strong case can be made that eBay’s holding necessarily extends to the grant of preliminary injunctions [in trademark cases] under the Lanham Act.” 522 F.3d 1211, 1228 (11th Cir. 2008). But it declined to decide that issue, instead reversing the preliminary injunction and remanding to the district court for further consideration. The court noted that the district court
may well conclude on remand that it can readily reach an appropriate decision by fully applyingeBay without the benefit of a presumption of irreparable injury, or it may well decide that the particular circumstances of the instant case bear substantial parallels to previous cases such that a presumption of irreparable injury is an appropriate exercise of its discretion in light of the historical traditions.
In U.S. Polo Ass’n, Inc. v. PRL USA Holdings, Inc., 511 F. App’x 81, 85 (2d Cir. 2013), the Second Circuit also declined to decide whether the presumption of irreparable harm applied in light ofeBay.It did so, however, because it decided that the district court made a specific factual finding that the plaintiff would be irreparably harmed by ceding control over its reputation and goodwill to defendant. Id. The court remarked that a similar finding might be made in many infringement cases but that “it is a factual finding nonetheless, and not simply the product of a legal presumption.” Id.
The Tenth Circuit, in Lorillard Tobacco Co. v. Engida, 213 F. App’x 654 (10th Cir. 2007), also declined to decide the issue, noting that in that specific case, the plaintiff was unable to show that any harm it would suffer in the absence of an injunction outweighed the potential harm to the defendant if the injunction were granted. Id. at 657.
District court decisions since eBay similarly have split on the issue of the presumption. For example, in the Eighth Circuit, some courts continue to apply the presumption, while another has done away with it post-eBay. See, e.g., Omaha Steaks Int’l, Inc. v. Frontier Choice Steaks, LLC, No. C 13-4095-MWB, 2013 WL 6491475, at *1 (N.D. Iowa Dec. 10, 2013) (“In trademark law, injury is presumed once a likelihood of confusion has been established.”); Anytime Fitness, LLC v. Roberts, No. 12-CV-02913-SRN-JJG, 2013 WL 1760950, at *6 (D. Minn. Apr. 24, 2013) (“Anytime Fitness’s showing of a likelihood of consumer confusion regarding the source of Defendants’ goods or services creates a presumption that Anytime Fitness will suffer irreparable harm if Defendants are not permanently enjoined from infringing the Anytime Fitness trademarks.”); but see KTM NORTH AMERICA, INC. v. Cycle Hutt, Inc., No. 13-5033-JLV, 2013 WL 1932797, at *1 & 1* n.2 (D.S.D. May 8, 2013) (holding that presumption is no longer valid and finding that plaintiff established irreparable harm by showing loss of reputation) (citing non-trademark cases).
To find irreparable harm, courts may draw inferences about the impact of confusion or likely confusion on the relevant markets. See 165 Park Row, Inc. v. JHR Dev., LLC, 2:12-CV-00106-NT, 2014 WL 442554, at *5 (D. Me. Feb. 4, 2014) (discussing witness testimony regarding persistence of confusion for which it would be difficult to measure resulting lost sales; also mentioning trademark holder’s loss of control over its reputation and goodwill and need to file additional future lawsuits to vindicate its rights if permanent injunction not granted); Microban Prods. Co. v. API Indus., Inc., No. 14 CIV. 41 KPF, 2014 WL 1856471, at *20–21 (S.D.N.Y. May 8, 2014) (“Courts have found irreparable harm to exist in situations where there is a likelihood of confusion between the marks, and where the reputation and goodwill cultivated by the party seeking the injunction would be out of the party’s control because of the infringement.”); adidas AG v. adidascrazylight2.com, No. 13-21230-CIV, 2013 WL 1651731, at *7 (S.D. Fla. Apr. 16, 2013) (“The operation of Defendants’ websites displaying Plaintiffs’ Marks and the sale of Defendants’ inferior goods to consumers is likely to cause irreparable damage to Plaintiffs’ respective reputations if they continue because Plaintiffs will not have the ability to control the quality of what appears to be their products in the marketplace.”). But not all courts find irreparable harm. See, e.g., Buzz Bee Toys, Inc. v. Swimways Corp., No. CIV. 14-1948 JBS/KMW, 2014 WL 2006799 (D.N.J. May 15, 2014) (discussing lack of witness testimony and other evidence to support finding of irreparable harm in retail market).
Practical Impact and Tips for Trademark Cases A good argument can be made that a presumption of irreparable harm in trademark cases is appropriate and not inconsistent with the letter or spirit of the Supreme Court’s eBay decision. As Professor McCarthy states in his well-regarded trademark treatise,
the reason for the trademark presumption of irreparable injury is that once a probability of proving likelihood of confusion at trial is shown, the trademark owner’s business goodwill and reputation are at risk. Because of the likelihood that confused persons will mistakenly attribute to plaintiff defects or negative impressions they have of defendant’s goods or services, the plaintiff’s reputation is threatened; it is in the hands of the defendant.
A likelihood of damage to reputation is by its nature “irreparable.” Like trying to un-ring a bell, trying to “compensate” after the fact for damage to business goodwill and reputation cannot constitute a just or full compensation. This distinguishes trademark cases from the neighboring areas of patent and copyright law.
5 McCarthy on Trademarks and Unfair Competition § 30:37 (4th ed. 2014).
However, at this point, a lawyer litigating a plaintiff’s trademark case outside the Fifth Circuit cannot count on a presumption being applied. As a result, he or she has to be prepared to submit evidence and argument to support a factual finding of irreparable injury. This has not proven to be difficult in most cases, as illustrated by the cases discussed in this article and the accompanying chart. In fact, the same evidence showing success on the merits in proving a likelihood of confusion will often support a finding of irreparable harm through loss of control of the marks and resulting harm to reputation and goodwill that cannot be adequately compensated by monetary damages.
Evidence of actual consumer confusion, or of inferior goods or services offered under the infringing marks, will help in proving irreparable harm by showing a strong threat of damage to the plaintiff’s reputation. Evidence that the parties are competitors will also help to prove the ongoing threat of lost sales and customer relationships that would be difficult to quantify. On the other hand, if these factors are not present, a trademark defendant can argue that the risk of harm is less and should not be considered irreparable. A defendant should also focus on ways to quantify or calculate damages that could adequately compensate the plaintiff, which could refute a showing of irreparable harm at least at the preliminary injunction phase.
Conclusion The nature of trademark rights, and of the type of harm suffered from infringement of those rights, means that damages are often inherently difficult to quantify and thus will often support a factual finding of irreparable harm even in the absence of a presumption. Thus, eBay should not alter the outcome of most trademark cases, and an injunction should continue to be a court’s remedy of choice in a large majority of cases in which infringement is proven.
The following chart identifies whether and how each circuit court has addressed whether the presumption of irreparable harm applies in trademark cases after eBay, and notes additional illustrative district court cases in certain circuits.
Click here to view the table.