United States: Third Circuit Rejects Presumption Of Irreparable Harm In Lanham Act Cases

In a precedential decision issued this week, Ferring Pharmaceuticals v. Watson Pharmaceuticals, the U.S. Court of Appeals for the Third Circuit joined the Ninth Circuit in rejecting the presumption of irreparable harm for plaintiffs seeking a preliminary injunction in Lanham Act false advertising and trademark infringement cases.

While most courts have discarded the presumption of irreparable harm in patent or copyright cases following the United States Supreme Court's decisions in eBay v. MercExchange, 547 U.S. 403 (2006), and Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008), application of the presumption in the trademark context has been inconsistent—due in large part to differences between trademark and other intellectual property rights.

A petition for certiorari in the Ninth Circuit's decision on this issue is currently pending before the U.S. Supreme Court and could provide needed guidance in this area of the law. Until then, trademark litigants in the Third Circuit need to be mindful of the court's newly pronounced position in determining strategy in Lanham Act cases.

The Presumption

Before 2006, it was well established that a Lanham Act plaintiff seeking a preliminary injunction in a trademark infringement case earned a presumption of irreparable harm upon a showing of likelihood of success on the merits. The rebuttable evidentiary presumption arises from the premise that harms caused by false advertising and trademark violations are noneconomic and intangible. A trademark owner's reputation, loss of control, or goodwill-based injury is distinct from a copyright or patent owner's economic injury. The Lanham Act prohibits a mere likelihood of confusion, and a trademark owner's injury cannot be readily measured by diverted sales or disgorgement of a defendant's ill-gotten gain and is inherently irreparable. By the time that actual injury to goodwill has occurred or the harm can be quantified, courts have found that it may be too late.

Trademark cases are also different because courts have held that in addition to the protection afforded to the trademark owner, the presumption of irreparable harm benefits the consuming public. A preliminary injunction is seen by some as a way to correct misinformation in the market as quickly as possible, allowing the public to accurately identify brands and distinguish among products.

Background and Procedural History of Ferring

The dispute between Ferring and Watson, competing pharmaceutical companies, arose from alleged false statements made about Ferring's product during a presentation hosted by Watson. Ferring filed a complaint asserting false advertising claims under the Lanham Act and state law based on Watson's statements. Ferring also sought a preliminary injunction to prevent Watson from making further false statements about Ferring's competing product, Endometrin®.

Ferring presented evidence that the presenter had referenced a "Black Box" warning for Endometrin®, suggesting that Endometrin® carries a significant risk of serious or life-threatening effects even though the drug actually had no such warning. Ferring also alleged that the presenter mischaracterized studies showing the effectiveness of Endometrin® in women over the age of 35, stating that "the efficacy has not been demonstrated" when the Endometrin® package insert actually stated that "[e]fficacy in women 35 years of age and older has not been clearly established." (Emphasis added.) Finally, Ferring showed that the presenter improperly presented patient survey data as if it were a comparison of the two products, even though the survey did not actually compare patient preferences. With respect to each statement, the presenter certified to the District Court that he would not repeat the statements in the future.

The District Court denied Ferring's request for injunctive relief, finding that Ferring was not entitled to a presumption of irreparable harm and that without such presumption, Ferring had failed to put forth sufficient evidence to demonstrate a likelihood of irreparable harm. (Notably, the District Court avoided a decision regarding likelihood of success on the merits by instead finding that Ferring had failed to demonstrate irreparable harm. Because Watson had put forth evidence supporting its statements, the District Court commented that it was not clear that Watson's allegedly false statements were "completely unsubstantiated" so as to be per se false under Third Circuit precedent and to support a finding of likelihood of success. The court stated that it "need not make a determination as to the likelihood of success of Ferring's claims, because, as mentioned above, Ferring has failed to demonstrate irreparable harm.")

On appeal, the U.S. Court of Appeals for the Third Circuit found no clear error. The court acknowledged that it had permitted the presumption of irreparable harm for Lanham Act trademark actions prior to eBay and Winter, based on the fact that injuries in the trademark context such as loss of control, reputation, or goodwill were irreparable. However, there was no analogous Third Circuit precedent with respect to Lanham Act false advertising claimants. Nevertheless, the court went on to hold that, based on the reasoning of eBay and Winter, Lanham Act plaintiffs are no longer entitled to a presumption of irreparable harm when seeking preliminary injunctive relief. The Third Circuit reasoned that the Lanham Act's injunctive relief provision, like the Patent Act's provision, is premised on traditional principles of equity, and therefore the Lanham Act should be interpreted in the same manner as the Patent Act in eBay. Accordingly, since traditional principles of equity require a movant to demonstrate irreparable harm, allowing a presumption deviates from these principles.

The Third Circuit went on to analyze Ferring's evidence of irreparable harm and held that it was insufficient to warrant injunctive relief. The Third Circuit found it significant that Watson's Dr. Silverberg certified to the court that he would not make the statements in the future and that Watson had removed the statements from the webcast of the presentation. The Third Circuit noted that there was no evidence that the allegedly false statements were still available to customers. Finally, the Third Circuit found "speculative" a declaration from a doctor that he and other doctors would be less likely to prescribe Ferring's drug if it contained the Black Box warning that Watson had asserted in its presentation.

The Circuit Split

In Herb Reed Enterprises v. Florida Entertainment Management, 736 F.3d 1239 (9th Cir. 2013), the Ninth Circuit became the first circuit to affirmatively state that the presumption of irreparable harm was no longer valid in the trademark context. (The court in Herb Reed did acknowledge that "[e]vidence of loss of control over business reputation and damage to goodwill could constitute irreparable harm." 736 F.3d at 2011.) The Third Circuit in Ferring agreed with the Ninth Circuit's rejection of the presumption and its rationale on this issue. In contrast, the Fifth Circuit in Abraham v. Alpha Chi Omega, 708 F.3d 614 (5th Cir. 2013), cited eBay and then determined that it was not erroneous for a lower court to grant a preliminary injunction in a trademark infringement case by presuming irreparable injury once the plaintiff had shown a likelihood of confusion. Id. at 627.

Other circuits have commented on the issue but have not yet made a determination one way or the other. For example, the Eleventh Circuit noted in dicta that "a strong case can be made" that eBay's holding would extend to Lanham Act cases, but it "decline[d] to decide whether the district court was correct in its holding that the nature of the trademark infringement gives rise to a presumption of irreparable injury." N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1228 (11th Cir. 2008).

What to Watch For

If the petition for certiorari in Herb Reed is denied, the state of the law regarding presumption of harm in trademark cases will continue to be a circuit-by-circuit analysis and could very well depend upon the type of Lanham Act claim brought.

Lanham Act defendants emphasize that evidence as to likelihood of confusion should not lead to a presumption of irreparable harm. Defendants in the Third Circuit might also attempt to avoid a preliminary injunction by certifying that they will cease making the challenged statement.

Lanham Act plaintiffs argue that failure to retain the presumption may present an insurmountable burden of proof because evidence of actual irreparable harm can be difficult to show at early stages in litigation. Courts denying the presumption offer little guidance as to what evidence does support a finding of irreparable harm. A plaintiff may accordingly find it beneficial to bring Lanham Act claims in those jurisdictions that have not applied eBay in the trademark context. Nevertheless, a plaintiff will want to be prepared to present evidence to support a finding of irreparable harm. Such evidence may include instances of actual confusion, a consumer survey demonstrating confusion, loss of control, evidence of inferior goods offered under the infringing mark, decline in market share, loss of customers, lost sales attributable to alleged false statements or infringing trademarks, or reputational harm.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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