eBay's Long Shadow Falls Over Presumption of Irreparable Harm in Trademark Infringement Cases: Ninth Circuit

Practical Law Legal Update 5-550-9745 (Approx. 6 pages)

eBay's Long Shadow Falls Over Presumption of Irreparable Harm in Trademark Infringement Cases: Ninth Circuit

by Practical Law Intellectual Property & Technology

Background

Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc. is the latest in a line of decisions concerning the ownership and use of the THE PLATTERS trademark by a variety of litigants associated with the popular 1950s R&B vocal group, The Platters.

Earlier Related Cases

In 1956, the group's manager acquired the rights to the THE PLATTERS mark through a company called Five Platters, Inc. (FPI). Ownership of the mark has since been litigated in various courts with varying outcomes, including:

A 1972 California state court decision in which FPI lost a trademark infringement suit against two of the original group members based on the court's ruling that the group members' 1956 transfer of their trademark rights to FPI was a sham.
A contrary 1982 New York state court ruling that FPI had legally acquired exclusive ownership of THE PLATTERS and enjoining a third original group member's use of the mark.
A 1987 settlement before trial in the US District Court for the Southern District of Florida of a trademark infringement action by FPI against Herb Reed (one of the group's founders), by the terms of which:
- Reed agreed not to perform under the THE PLATTERS mark except in the form HERB REED AND THE PLATTERS; and
- the settlement agreement's restriction against Reed's use of THE PLATTERS would be nullified if a court of competent jurisdiction were to issue a final order declaring that FPI had no rights in the mark.
A 1990 affirmance by the Ninth Circuit of an order of the US District Court of the Central District of California cancelling FPI's federal registrations of THE PLATTERS for fraud on the USPTO.
A 2001 order of the US District Court of the Eastern District of New York enjoining Reed from asserting any right to the mark THE PLATTERS against FPI except as specifically allowed in the 1987 settlement agreement.

FPI transferred its ownership rights in THE PLATTERS to the defendants in the current action, Florida Entertainment Management, Inc. and Larry Marshak (FEM) in 2009. In 2010, Reed's company, Herb Reed Enterprises, LLC (Reed Enterprises) sued FEM for trademark infringement in the US District Court for the District of Nevada, arguing that FEM's use of THE PLATTERS was confusingly similar to Reed Enterprises' use of the HERB REED AND THE PLATTERS mark. The following year, Reed Enterprises won a default judgment and permanent injunction in the District of Nevada action declaring that:

FPI (defendant FEM's predecessor in interest), which had already been stripped of its statutory rights in the THE PLATTERS by the cancellation of its federal trademark registrations, never acquired common law rights in this trademark because it had consistently used the mark in a false and misleading manner.
Reed had acquired superior rights to THE PLATTERS, having first used the mark in commerce in 1953 and continuously using it in commerce since that time.

Current Action

In 2012, Reed Enterprises filed this latest action against FEM in the District of Nevada alleging trademark infringement and seeking a preliminary injunction against FEM's continued use of THE PLATTERS. The district court granted a preliminary injunction in Reed Enterprises' favor, ruling that:

Reed Enterprises was not precluded from asserting a right in THE PLATTERS by either:
- the 1987 settlement, because the escape clause of the settlement agreement was triggered by the 2011 default judgment in the earlier District of Nevada action; or
- the equitable doctrine of laches.
Reed Enterprises, by having shown a likelihood of success on the merits of its claim of trademark infringement, a likelihood of irreparable injury, a balance of hardships in its favor and that a preliminary injunction would serve the public interest, had established its right to a preliminary injunction ordering FEM to cease using THE PLATTERS.

FEM appealed, asserting, among other arguments, that the district court abused its discretion in granting the preliminary injunction by relying on the Reed Enterprises' unsupported and conclusory allegations that it was likely to suffer irreparable harm.

Outcome

On appeal, the Ninth Circuit reversed the district court's order granting Reed Enterprises a preliminary injunction and remanded the case for further proceedings on the issue of irreparable harm.

Likelihood of Irreparable Injury

The Ninth Circuit concurred with FEM's argument that the district court had abused its discretion in finding that Reed Enterprises was likely to suffer irreparable injury. Deciding what it observed to be an issue of first impression in the Ninth Circuit, the panel ruled that the classic presumption that trademark infringement results in irreparable injury is no longer tenable after the US Supreme Court's decisions in eBay Inc v. MercExchange, LLC (547 U.S. 388 (2006)) and Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008).

Finding no relevant distinction between patent infringement, copyright infringement and trademark infringement cases, the Ninth Circuit ruled that, to prevail on a motion for a preliminary injunction, the trademark infringement plaintiff, like its patent and copyright counterparts:

Cannot rely on a showing of likelihood of success on the merits of its infringement claim and a mere possibility or presumption of irreparable injury.
Must produce evidence establishing an actual likelihood of irreparable harm.

Applying the eBay standard, the Ninth Circuit ruled that the district court had abused its discretion in relying on Reed Enterprises' conclusory assertions that it might suffer irreparable injury to its goodwill and reputation as a result of FEM's trademark infringement, ruling these bare assertions insufficient to establish a likelihood of irreparable harm.

The Ninth Circuit therefore reversed the grant of a preliminary injunction and remanded the case to the district court for further proceedings on the irreparable injury issue.

Concurring Opinion: Preliminary versus Permanent Injunctions

In a concurring opinion, Senior Circuit Judge Wallace underscored that the court's decision addressed only Reed Enterprises' motion for a preliminary injunction and that the panel expressed no view on issues that may arise after trial concerning Reed Enterprises' entitlement to a permanent injunction.

However, Judge Wallace did not make clear whether he was reserving judgment on either or both:

The legal standard of proof for showing a likelihood of irreparable injury for purposes of obtaining a permanent injunction against trademark infringement.
The facts that may be relevant to finding a likelihood of irreparable injury after a trial of the case.

It is similarly unclear whether, as the panel in this case observed:

The Ninth Circuit has already determined the legal standard for establishing a likelihood of irreparable injury for purposes of obtaining a permanent injunction against trademark infringement.
This standard rules out any presumption of a likelihood of irreparable injury and requires the movant to present evidence of an actual likelihood of irreparable harm.

A close examination of the case the panel relied on in support of these conclusions, Reno Air Racing Association, Inc., v. McCord, calls into question whether its reliance on this decision was misplaced (452 F.3d 1126 (9th Cir. 2006)). The Ninth Circuit in Reno did not address, let alone expressly eliminate, the presumption of irreparable injury in trademark infringement cases. The Reno court merely underscored the courts' broad equitable discretion to fashion injunctions, citing the Supreme Court's decision in eBay for the truism that district courts should apply traditional equitable principles in deciding whether to grant injunctive relief (452 F.3d at 1137-1138). Only the scope of the district court's injunction was at issue in Reno, not the court's interpretation of traditional equitable principles or what presumptions may or may not be made in applying them.

Other Rulings in the Case

The Ninth Circuit addressed three additional FEM defenses, ruling against FEM on each of them as follows:

Res Judicata. Reed Enterprises was not precluded from bringing this trademark action by the New York actions because it could not have asserted a right in the THE PLATTERS mark at the time of these New York proceedings. The Eastern District of New York York's 2001 injunction confirmed that Reed was then bound by the 1987 settlement, the escape clause of which had not yet been triggered. Additionally, this decision did not have res judicata effect on the issue of trademark ownership because the action did not come to a final judgment on the merits of the parties' ownership dispute, but rather, enjoined Reed from litigating this issue based on his obligations under the 1987 settlement.
Laches. Reed Enterprises was not barred by laches from challenging FEM's use of THE PLATTERS because it could not bring the current trademark infringement suit until there was a final ruling that triggered the escape clause of the 1987 settlement agreement. This action was filed less than one year after the 2011 Nevada ruling that triggered the escape clause and presumptively cannot, therefore, be barred by laches.
Likelihood of Success on the Merits. The district court did not err in concluding that Reed Enterprises established a likelihood of success on the merits of its trademark infringement claim because:
- the record supports the court's finding that Reed Enterprises continued to receive royalties on the public performance and sale of recordings under the THE PLATTERS mark; and
- this receipt of royalties constitutes a bona fide trademark use that is sufficient to preclude a finding of abandonment.

Practical Implications

While other circuits have suggested that the presumption of irreparable harm may no longer apply in trademark infringement actions, the Ninth Circuit is the first court to explicitly decide this issue and extend the eBay standard to a preliminary injunction sought to prevent trademark infringement. The weight of this new burden of proving facts establishing a likelihood of irreparable injury, and trademark owners' ability to sustain this burden, are yet to be determined. However, moving forward, trademark owners seeking preliminary injunctions in the Ninth Circuit must be prepared to satisfy this heightened standard and wait to see if the other courts will follow suit.

For a more complete analysis of the eBay and Winter decisions and the courts' application of these decisions to motions for preliminary and permanent injunctions in intellectual property infringement cases, see Practice Note, Copyright Litigation: Injunctive Relief.

Update: On October 6, 2014, the US Supreme Court denied a petition for certiorari filed by Reed Enterprises ( (Oct. 6, 2014)).

eBay's Long Shadow Falls Over Presumption of Irreparable Harm in Trademark Infringement Cases: Ninth Circuit | Practical Law