Ninth Circuit Holds That Irreparable Harm No Longer Presumed in Trademark Cases

• Publication year: 2014
• Author: Vijay K. Toke

Ninth Circuit Holds that Irreparable Harm No Longer Presumed in Trademark Cases

Vijay K. Toke

Hiaring + Smith, LLP

Recently, in Herb Reed Enterprises, LLC v. Florida Entertainment Management,¹ the Ninth Circuit held that the long-established historical presumption of irreparable harm no longer applies where plaintiffs seeking preliminary injunctions in trademark infringement cases under the Lanham Act have established a likelihood of success on the merits. In deciding Herb Reed, the Ninth Circuit became the first circuit court of appeals to squarely address whether the U.S. Supreme Court's decisions in eBay Inc. v. MercExchange, L.L.C.² and Winter v. Natural Res. Def. Counsel, Inc.,³ which addressed the establishment of the right to injunctive relief in a patent case and an environmental case (respectively), abrogated the long-applied rebuttable presumption of irreparable harm in Lanham Act cases.

Most trademark practitioners (this one included) will likely conclude that the Ninth Circuit's decision in Herb Reed is incorrect, as the historical presumption in Lanham Act cases serves important public policies, takes into account the market realities of trademark and false advertising cases, and is consistent with the purposes of the Lanham Act. Nonetheless, unless and until the Supreme Court either reverses the Ninth Circuit's decision or Congress amends the Lanham Act to codify the presumption of irreparable harm, the decision in Herb Reed is the law of this circuit. This article will explore the origins of the historical presumption in Lanham Act cases, discuss the eBay and Winter decisions, analyze the Ninth Circuit's recent decision in Herb Reed, and discuss the potential circuit split that could emerge on this issue. Finally, this article will offer some thoughts on how to establish irreparable harm post-Herb Reed.

THE HISTORICAL PRESUMPTION IN LANHAM ACT CASES

The Lanham Act is, at its heart, a consumer protection law rather than a law designed to protect private property rights. This distinction separates trademark and false advertising claims from other intellectual property claims, such as those concerning patents and copyrights. The rebuttable presumption of irreparable harm in trademark and false advertising cases has developed over many years. It takes into account equitable principles, logic, and the commercial realities present in the context of trademark and false advertising violations. The presumption arises from the premise that the harms caused by false advertising and trademark violations—such as damage to goodwill or reputation, the inability to control the quality of allegedly infringing goods or services, and the permanent loss of market share—are inherently intangible and thus not susceptible to easy or certain measurement. They are by their very nature irreparable.⁴ The presumption grew to prominence slowly, gradually becoming a basic tenet of Lanham Act jurisprudence.⁵ The presumption also derives from, and serves to realize, the Lanham Act's purpose of protecting the public from deception.

By contrast, the principal reason that the law grants protection under the copyright and patent laws is to encourage innovation in the fields of art and science. Infringement of these rights typically involves an encroachment on the economic rights of the rights holder, which typically can be readily measured by lost sales and/or unjust enrichment. Thus, in the patent and copyright context, the law can often tolerate continued sales during the pendency of litigation because the rights holder may still be made whole with an award of damages.

On the other hand, deceiving consumers—which is the harm the Lanham Act is designed to prevent—is never in the public interest. Continued deception of the public during the pendency of litigation is therefore not tolerable in the trademark context. This is also true because the harm to goodwill and reputation cannot be quantified with any reasonable degree of accuracy.⁶ Accordingly, the harms caused by Lanham Act violations are distinct from the harms caused by copyright and patent infringement. To lump trademark law along with the patent and copyright laws merely because it, too, protects an intellectual property right, ignores the significant differences in public policy goals—not to mention distinct commercial realities—underlying each area of intellectual property.

Notably, in Lanham Act cases, a defendant can rebut the presumption that harm from trademark infringement and false advertising is irreparable by presenting sufficient evidence to the contrary. Thus, the presumption is not a categorical finding of irreparable harm that automatically applies in every case. Rather, it is an evidentiary doctrine that allows a Lanham Act plaintiff to establish a prima facie showing of irreparable harm, shifting the burden of production to the defendant to submit at least some evidence that the harm is compensable and, thus, not irreparable.⁷

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THE EBAY AND WINTER DECISIONS

Though the presumption of irreparable harm in Lanham Act cases has been applied for decades, since 2006, two U.S. Supreme Court decisions, eBay Inc. v. MercExchange, L.L.C.⁸ and Winter v. Natural Res. Def. Counsel, Inc.,⁹ have addressed the establishment of irreparable harm for the issuance of injunctive relief. eBay was a patent case while Winter was an environmental case. Both, however, addressed the standards applicable for a party seeking injunctive relief.¹⁰ Taken together, eBay and Winter have caused some courts to question the continued vitality of the long-standing presumption in the Lanham Act context.

In eBay, the Supreme Court rejected the Federal Circuit's categorical rule that, under the Patent Act, irreparable harm can be presumed for a permanent injunction where infringement had been established.¹¹ Instead, the Court required that a plaintiff show that injunctive relief is appropriate based on the four traditional injunction factors, including the existence of irreparable harm.¹² In reaching this decision, the eBay court compared the Patent Act to the Copyright Act, analogizing the presumption in the patent context to the Court's copyright precedent rejecting any categorical rule requiring an injunction upon establishment of copyright infringement.¹³

In eBay, however, the Supreme Court did not consider or discuss the long-standing presumption of irreparable harm in the context of Lanham Act violations, which involve a wholly different injury—the injury to goodwill. Nor did eBay mandate rejection of the traditional evidentiary rebuttable presumption of irreparable harm in such cases. In fact, in two concurrences in eBay, a total of seven justices agreed that district courts may continue to allow such evidentiary rules— implemented as "lesson[s] of...historical practice"—to inform their equitable discretion "when the circumstances of a case bear substantial parallels to litigation the courts have confronted before."¹⁴

Winter also presented a very different scenario than Lanham Act cases: a challenge regarding the environmental impact of the U.S. Navy's use of sonar under the National Environmental Policy Act of 1969. The Ninth Circuit had held that if a plaintiff made a strong showing of likelihood of success on the merits, then the plaintiff only had to prove a "possibility" of irreparable harm to be entitled to a preliminary injunction. The Supreme Court later rejected that rule, holding that a likelihood, rather than a mere possibility, of irreparable injury was required to issue an injunction.¹⁵ But, just like in the eBay decision, the Winter Court did not address the rebuttable presumption of irreparable injury that long has applied in Lanham Act cases.

Because neither eBay nor Winter involved trademark or false advertising claims, it has been unclear whether their holdings should be extended to Lanham Act claims. Post-eBay and Winter, federal district and appellate¹⁶ courts have struggled with this question, with diverse results. A number of courts have extended the holdings in eBay and Winter to Lanham Act claims (some without comment),¹⁷ while others have continued to apply the historical presumption in such cases.¹⁸

Though it may be unpopular with most trademark practitioners, there can be no doubt that the emerging sentiment among district courts is that eBay and Winter have signaled a shift in the law away from the long-applied presumption of irreparable harm. Within the Ninth Circuit post-eBay and Winter, for example, a growing number of district courts began to reject the historical presumption, despite recognizing that the issue remained unsettled.¹⁹ However, until the Ninth Circuit's Herb Reed decision, no circuit court of appeals had squarely addressed whether the holdings in eBay and Winter eliminated the long-standing presumption.

THE NINTH CIRCUIT'S OPINION IN HERB REED

While the facts of Herb Reed are not central to the...