United States: Trademark Modernization Act Resolves Disparate Handling Of Presumption Of Irreparable Harm In Trademark Cases

The Trademark Modernization Act of 2020 ("TM Act"), which was signed December 27, 2020 and will go into effect on December 27, 2021, is notable for several major changes to trademark law and practice. One of the more consequential changes involves an amendment to the Lanham Act regarding the presumption of irreparable harm when determining injunctive relief in trademark cases. A new addition to Section 34 of the Lanham Act (15 USC §1116(a)) requires courts to apply a rebuttable presumption of irreparable harm if the plaintiff demonstrates a likelihood of confusion. This revised approach resolves a circuit split that developed over the past eight years, when some courts imported Supreme Court patent principles into trademark law and refused to apply such a presumption. Now, courts are required to apply it, although they must still consider principles of equity in determining whether to grant either a preliminary or permanent injunction.

Various approaches to irreparable injury

In Federal Courts, a plaintiff can obtain a permanent injunction if it can demonstrate: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by an injunction. See, e.g., Weinberger v. Romero—Barcelo, 456 U.S. 305, 311–313, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982). A plaintiff can obtain a preliminary injunction if it can show: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm to the moving party in the absence of preliminary relief; (3) that the balance of equities tips in favor of the moving party; and (4) that an injunction is in the public interest. Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008)

In trademark cases, many courts presume irreparable injury where the plaintiff shows likelihood of success on the merits (for a preliminary injunction) or prevails on the merits by showing likelihood of confusion (for a permanent injunction). This follows from the notion that consumer confusion over a brand causes its owner loss of goodwill in, or harm to, the brand - neither of which is easy to quantify - as well as harm to the public, given that confusion is likely. As one court explained, "By its very nature, trademark infringement results in irreparable harm because the attendant loss of profits, goodwill, and reputation cannot be satisfactorily quantified and, thus, the trademark owner cannot adequately be compensated. Hence, irreparable harm flows from an unlawful

trademark infringement as a matter of law." Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 25 U.S.P.Q.2d 1256 (1st Cir. 1992).

Courts varied in their degree of treatment of irreparable harm, though. Some courts found that irreparable injury was inherent in showing a likelihood of confusion, others found it followed from a substantial showing of likelihood of confusion, and still others found that a showing of likelihood of confusion only created a "rebuttable presumption" of irreparable injury. See Solar Cosms. Labs, Inc. v. Sun-Fun Prod., Inc., 941 F. Supp. 1185, 1188 (M.D. Fla. 1996) (providing a summary of various Fifth and Eleventh Circuit rulings); Brennan's, Inc. v. Brennan's Restaurant, L.L.C., 360 F.3d 125, 69 U.S.P.Q.2d 1939 (2d Cir. 2004) ("In a trademark infringement case, proof of a likelihood of confusion establishes both a likelihood of success on the merits and irreparable harm."); Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922, 939, 33 U.S.P.Q.2d 1481, 1494, 31 Fed. R. Serv. 3d 1082 (4th Cir. 1995) ("[W]e recognize that irreparable injury regularly follows from trademark infringement."); Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1066 (9th Cir.1999) ("irreparable injury may be presumed from a showing of likelihood of success on the merits of a trademark infringement claim.").

Other courts, such as the Fifth Circuit, on the other hand, refused to apply any presumption. See Plains Cotton Co-op. Ass'n of Lubbock, Texas v. Goodpasture Computer Serv., Inc., 807 F.2d 1256, 1261 (5th Cir. 1987) ("we have made it clear in our decisions that preliminary injunctions will be denied based on a failure to prove separately each of the four elements of the four prong test for obtaining the injunction.").

For courts that applied only a presumption of irreparable harm, the presumption was not absolute. It was a rebuttable presumption, meaning that the party opposing an injunction could attempt to show that there was no likelihood of irreparable harm, and a failure to provide any evidence of irreparable injury could also rebut the presumption. See Dos Gringos, Inc. v. Chronic Tacos, Inc., No. SACV07900AHSANX, 2008 WL 11334495, at *10 (C.D. Cal. Jan. 7, 2008) ("any such presumption has been rebutted on the facts presented here" where the plaintiff provided only a declaration with the statement "[u]nauthorized use of the SUNDAY FUNDAY mark by Defendants is likely to hurt Dos Gringos' business and reputation.").

Given the state of the law though, in the overwhelming majority of cases, a plaintiff could obtain an injunction if it was able to succeed on the merits (or show likelihood of success on the merits).

Supreme Court decisions spark change

The first hint of a change came from the Supreme Court decisions in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388, 393, 126 S.Ct. 1837, 164 L. Ed.2d 641 (2006) and Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20, 129 S.Ct. 365, 172 L.Ed.2d 249 (2008).

In eBay, the plaintiff prevailed on patent infringement claims at a jury trial, but the court refused to enter a permanent injunction. The Federal Circuit reversed, stating that "the general rule is that a permanent injunction will issue once infringement and validity have been adjudged," absent certain circumstances, such as when "a patentee's failure to practice the patented invention frustrates an important public need for the invention, such as the need to use an invention to protect public health." MercExchange, LLC v. eBay, Inc., 401 F.3d 1323, 1338 (Fed. Cir. 2005). The Supreme Court overruled the Federal Circuit, stating that "as in our decision today, this Court has consistently rejected invitations to replace traditional equitable considerations with a rule that an injunction automatically follows a determination that a copyright has been infringed." (emphasis added). Finding that neither the district court nor the Federal Circuit had applied correctly the four-factor test, the Supreme Court remanded to the district court to properly consider the matter.

The Winter decision was not an intellectual property case, and did not address the presumption of irreparable harm after showing likelihood of success on the merits. Nonetheless, it was a case that many saw as limiting the availability of injunctions, as it found that irreparable harm must be likely and not merely possible, noted that "[a] preliminary injunction is an extraordinary remedy never awarded as of right," and emphasized the

balancing of harms and consideration of the public interest to reverse a grant of preliminary injunction.

Immediately after those decisions, the Ninth Circuit appeared to continue to apply the presumption in trademark cases. See Marlyn Nutraceuticals, Inc. v. Mucos Pharma GmbH & Co., 571 F.3d 873, 877 (9th Cir. 2009) ("Because the court found a likelihood of success on the merits, it reasonably presumed irreparable injury."). Within a few years, it would change course.

First, the Ninth Circuit found that the presumption of irreparable harm no longer applied in copyright cases in Perfect 10, Inc. v. Google, Inc., 653 F.3d 976, 2011 WL 3320297 (9th Cir. Aug. 3, 2011) and Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989, 994, 998 (9th Cir.2011). The Second Circuit did as well. See Salinger v. Colting, 607 F.3d 68, 80 (2d Cir. 2010).

Next, the Ninth Circuit refused to apply the presumption in Herb Reed Enterprises, LLC v. Fla. Entm't Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013). Its analysis was cursory, as the Ninth Circuit stated, "[f]ollowing eBay and Winter, we held that... actual irreparable harm must be demonstrated to obtain a permanent injunction in a trademark infringement action." Id. at 1249. The Ninth Circuit relied on Reno Air Racing Ass'n, Inc., v. McCord, 452 F.3d 1126, 1137-38 (9th Cir. 2006), which concerned the scope of an injunction, not harm, or whether a presumption of harm applied in trademark cases. There, in a footnote, the Court stated, "a plaintiff seeking a permanent injunction must demonstrate... that it has suffered an irreparable injury...." 452 F.3d at 1137, n. 11. In turn, Reno Air relied on eBay for that proposition. The Ninth Circuit claimed that it was following the Sixth and Eleventh Circuits in eliminating the presumption, but in fact, neither had explicitly done so. The Ninth Circuit in Herb Reed provided upon a finding of likelihood of success on the merits for a violation identified in this subsection in the case of a motion for a preliminary injunction or temporary restraining order." The TM Act also clarified that this new language is retroactive, stating, "The amendment made by subsection (a) shall not be construed to mean that a plaintiff seeking an injunction was not entitled to a presumption of irreparable harm before the date of the enactment of this Act."

Notwithstanding the new rule, parties seeking an injunction should not rely solely on the presumption of irreparable harm. After all, it is a rebuttable presumption, and parties should attempt to introduce evidence (including at a minimum testimony or declarations) attesting to the damage to goodwill, potential for lost customers, or other harm that may reasonably occur, and explaining why that harm cannot be remedied with a monetary reward. Courts should continue to scrutinize that evidence to determine whether it is speculative, well-reasoned, and uncontradicted by other evidence. Parties should also address the balance of harms, explaining why their harm if no injunction issues outweighs the other party's harm if it is enjoined. And parties should explain why the public interest supports an injunction, as the alternative

is continued likelihood of confusion.

On the other hand, a party opposing an injunction should attempt to overcome the presumption by showing the opposite. If an injunction would effectively end its business, or prevent the launch of a new business, it should explain to the court the harm an injunction will cause. At the same time, the party opposing an injunction should attempt to rebut the evidence of irreparable harm, and try to tie any losses to something that could be compensated monetarily, if proven.

Above all, parties should remember that, presumption or not, an injunction is a question of equity. Explaining to the court why equity is served by the imposition of an injunction, or not, is necessary to prevail.

Originally Published by The Trademark Lawyer

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