Did eBay irreparably injure trademark law?

Author:Lemley, Mark A.
Position:Negotiating IP's Boundaries in an Evolving World

In eBay v. MercExchange, (1) the Supreme Court held that patent owners were not automatically entitled to an injunction when they won their cases. Relying on the patent statute, which provides that courts "may grant injunctions in accordance with the principles of equity," (2) the Court held that courts should consider four traditional equitable factors on a case-by-case basis before deciding whether to grant an injunction. (3) Copyright courts quickly followed suit, applying the same four-factor test. (4) More recently, three circuits have held that the same four factors govern the grant of trademark injunctions, (5) pointing to statutory language similar to that in the patent and copyright statutes. (6)

A number of scholars have questioned the eBay result, either as a matter of history (7) or on policy grounds. (8) That is not my intent here. The conclusion that injunctions are not automatic seems an unexceptional reading of the relevant statutes. Even accepting the criticism that the Court cobbled together the four-factor test, which wasn't well-established as a separate test, it certainly seems to capture the factors courts in equity cases have used in the past in deciding whether to grant injunctions in various areas of law. (9) And the results in patent cases have been salutary as a policy matter, allowing courts to deny injunctions to non-practicing entities that sought injunctions only to hold up defendants while still granting injunctions to those who need it. (10) I think that eBay was a good--indeed, great--development in patent and copyright law.

Trademark, however, is different. The purposes of trademark law--and whom it benefits--should lead us to treat trademark injunctions differently than patent and copyright injunctions. Further, trademark courts have misinterpreted eBay, treating each of the four factors as a requirement rather than a consideration. That is a particular problem in trademark law, where proof of future injury can be elusive. And perhaps most remarkably, courts have expanded eBay in trademark cases at the same time they have denied damages relief, with the result that trademark owners can and do win their case only to receive no remedy at all. (11) The result is a very real risk that courts will hurt rather than help consumers by allowing confusion to continue.

eBay is about the application of equity. Trademark cases should take account of the true equities of trademark cases, not simply cement the eBay factors into a rule. Doing so will not mean that trademark owners always win injunctions, but it should make it more common, at least in the core cases in which confusion is a real risk. And doing so will remain true to the core insight of eBay, which is that context matters.

  1. eBAY AND TRADEMARK INJUNCTIONS

    The decision whether to grant an injunction has long been a matter of discretion for courts of equity. Before 1938, when courts sat separately in law and equity, (12) only equity courts could grant injunctive relief. Even after the merger of law and equity, the federal courts have considered various factors in deciding whether an injunction was appropriate. Those factors have included the adequacy of legal remedies in the form of damages, the hardship an injunction (or its denial) would work on both parties, and the public interest. (13) While Doug Laycock has demonstrated that none of these factors are any longer prerequisites to injunctive relief, (14) they are factors that courts have long considered in the exercise of their discretion. (15)

    Except, that is, in IP law. IP cases before 2006 nominally applied these various equitable factors, but they almost always concluded that the equitable factors supported an injunction. Courts in patent, copyright, and trademark cases concluded that irreparable injury did not have to be shown but could be presumed from the act of infringement. (16) And courts similarly concluded that as a matter of policy the public interest favored the enforcement of IP rights. (17) The result was that in IP cases, if you won your case, you were entitled to an injunction--not quite as a matter of right, but as a practical matter. Between 1984 and 2006, for instance, the Federal Circuit never once denied an injunction to a prevailing patentee. (18) Trademark cases similarly presumed that an injunction was the appropriate remedy in the large majority of cases. (19)

    eBay changed that. The Supreme Court held that the patent statute meant what it said: that courts "may grant injunctions in accordance with the principles of equity." (20) "May" is not "must." Accordingly, the Court held that injunctions in patent cases were not automatic. Rather, whether a patentee should receive an injunction should depend on a case-by-case analysis of four traditional factors: (1) whether the plaintiff would suffer irreparable injury if the infringement continued; (2) whether the plaintiff had an adequate remedy at law; (3) the balance of the hardships imposed by granting or denying the injunction; and (4) the public interest. (21) Courts could not simply presume that a factor favored the patentee; patentees had to provide evidence on the factors. While some commentators have (correctly) observed that this four-factor test was not traditional in equity, (22) each of the factors the Court identified were in fact traditional considerations courts use in deciding whether to grant injunctions in other areas of law. (23)

    While eBay was a patent case, its reasoning was not limited to patent law. Several circuits have applied eBay to copyright cases, based on a copyright statute that did not specifically invoke equity but that made it clear courts had discretion whether to grant injunctions. (24)

    The Lanham Act remedies statute is a hybrid of the patent and copyright statutes. It provides that a court "shall have power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable." (25) So it is not all that surprising that three circuits have similarly applied eBay's four-factor test to trademark law. In North American Medical Corp. v. Axiom Worldwide, Inc., (26) the Eleventh Circuit in vacating a preliminary injunction in a trademark case noted:

    Although eBay dealt with the Patent Act and with permanent injunctive relief, a strong case can be made that eBay's holding necessarily extends to the grant of preliminary injunctions under the Lanham Act.... Because the language of the Lanham Act ... is so similar to the language of the Patent Act, we conclude that the Supreme Court's eBay case is applicable to the instant case. (27) Nonetheless, the court did not expressly hold that eBay applied, instead remanding the issue for consideration by the district court in the first instance.

    The Ninth Circuit actually held that eBay applied to preliminary trademark injunctions in Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc. (28) Quoting eBay, the Court said:

    The same principle applies to trademark infringement under the Lanham Act. Just as "[n]othing in the Patent Act indicates that Congress intended such a departure," so too nothing in the Lanham Act indicates that Congress intended a departure for trademark infringement cases. Both statutes provide that injunctions may be granted in accordance with "the principles of equity." (29) The Ninth Circuit went further in dictum, suggesting that its rule applied to permanent injunctions as well: "[W]e held that likely irreparable harm must be demonstrated to obtain a preliminary injunction in a copyright infringement case and that actual irreparable harm must be demonstrated to obtain a permanent injunction in a trademark infringement action." (30)

    The Third Circuit has followed Herb Reed in a Lanham Act false advertising case, rejecting the presumption of irreparable harm as inconsistent with eBay. (31) The First Circuit has also followed suit in a preliminary injunction case, although arguably in dictum. (32)

    Judge Wallace, concurring in Herb Reed, emphasized that the case applied only to preliminary, not permanent, injunctions. (33) Nonetheless, the Ninth Circuit has taken the applicability of eBay to permanent injunctions as settled law. (34) The Second Circuit has, without mentioning eBay, applied some of its factors to permanent injunctions, noting that "the competing equities do not always favor a senior user that has shown infringement," particularly if the defendant acted in good faith and an injunction would destroy its own goodwill (the balance of the hardships factor). (35) And the logic of Axiom and Herb Reed seems to apply equally to preliminary and permanent injunctions after eBay. eBay itself involved a permanent injunction, after all. The Tenth Circuit has noted but refused to decide the question. (36) No circuit courts have refused to apply eBay in trademark cases, though some district courts have done so. (37) The Supreme Court in Winter seemed to think eBay applied to all cases, whether or not they involved IP. (38) eBay seems to be here to stay in trademark law.

  2. THE LIMITS OF ANALOGY: WHEN IS A TRADEMARK NOT LIKE A PATENT?

    The courts that have applied eBay to trademark cases have taken the similarity of the patent, copyright, and trademark remedies statutes and the fact that they are all IP laws as a reason the same rules should apply. And at one level that makes sense. The statute does not provide that injunctions should be mandatory. Rather, it suggests that traditional equitable rules should govern the decision. And that is all that eBay really holds.

    eBay is supposed to be about case-by-case analysis that is sensitive to the context of the demand for an injunction. But the courts that have extended eBay to trademark cases have not paid sufficient attention either to the case-specific nature of the eBay rule or to the ways trademark law differs from patent and copyright law. Four such differences are apparent in the cases.

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