X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.
Law students learn early that injunctive relief is an extraordinary remedy reserved for cases where monetary damages are inadequate. One of the first lessons trademark lawyers learn is that courts will presume irreparable injury, justifying an extraordinary remedy, when a plaintiff proves trademark infringement or establishes a likelihood of success on the merits of a trademark claim. Alarmingly, this fundamental trademark assumption is now in jeopardy as a result of the Supreme Court’s decision last year in eBay Inc. v MercExchange LLC. In eBay, the justices rejected the long-standing presumption that a prevailing patent owner is entitled to a permanent injunction against the infringer. Now the lower courts are assuming, without any analysis, that the eBay holding making injunctive relief less certain applies to all intellectual property cases. Equally troubling, this trend has yet to be recognized, let alone challenged, by the trademark bar. The fact is that the foundations of patent (and copyright) law are entirely different from the foundations of trademark law. Because of these fundamental differences, the holding in eBay is simply not relevant to trademark disputes. The eBay case arose when MercExchange, having acquired three business method patents from a bankrupt entity, brought a suit against eBay and other online retailers based on those patents. A jury found that eBay and the other defendants infringed multiple claims of some of the patents and awarded MercExchange damages in excess of $35 million. Contrary to the weight of authority on this issue, the district court denied permanent injunctive relief to the prevailing patent owner. The court’s reason, in part, was the “growing concern over the issuance of business-method patents.” The denial of injunctive relief also reflected concern over the growing numbers of plaintiffs who appear more interested in licensing than practicing their patents. While the district court in eBay avoided the term, many refer to such plaintiffs as “patent trolls.” (Let’s stop right here and state the obvious: There is no such thing as a business-method trademark. And U.S. trademark law expressly rejects any effort to traffic in trademarks for speculative purposes.) The U.S. Court of Appeals for the Federal Circuit summarily reversed the district court’s denial of injunctive relief, relying on its own rule that a prevailing patent plaintiff is generally entitled to a permanent injunction. Because the right to exclude others is the essence of the concept of property, a permanent injunction is issued once infringement and validity have been adjudged. To be sure, wrote the Federal Circuit, “courts have in rare instances exercised their discretion to deny injunctive relief in order to protect the public interest.” But the Federal Circuit rejected the district court’s reasoning that the public was disserved by the growing number of business method patents or the emergence of patent trolls: “If the injunction gives the patentee additional leverage in licensing, that is a natural consequence of the right to exclude and not an inappropriate reward.” HIGHT COURT CAUTION The Supreme Court unanimously reversed the Federal Circuit’s decision. But this unanimity is deceptive. A careful reading of the majority opinion and two concurrences, each joined by three justices, strongly suggests that the Court was divided on whether to create a special rule making injunctions more difficult to obtain where the plaintiff was a patent troll. The majority opinion, written by Justice Clarence Thomas, notes that patent rights exist only by statute, not by common law, and that the Patent Act provides for injunctive relief “in accordance with the principles of equity.” The statute thus permits but does not require a permanent injunction. As Thomas noted, “the creation of a right is distinct from the provisions of remedies for violations of that right.” In support of this conclusion, Thomas looked to cases arising under the Copyright Act. According to Thomas, prior Supreme Court precedent “rejected invitations to replace traditional equitable considerations” with a rule that an injunction follows automatically when a copyright is deemed to be infringed. Significantly, Thomas made no mention of any trademark case in support of this conclusion. Chief Justice John Roberts Jr. warned in his concurring opinion that the Court’s decision should not be read to suggest that the permanent injunctions granted in the vast majority of past patent cases were granted in error. He urged future courts to remember that “a page of history is worth a volume of logic.” Thus, while endorsing the requirement that permanent injunctions be granted only when they satisfy the traditional test for such relief, the chief justice made clear that this test would be satisfied in most cases. The concurrence by Justice Anthony Kennedy focused on the special concerns implicated by the facts of the case and appears to endorse the view of the district court that injunctive relief is presumptively not appropriate in certain patent cases. Thus, while some claim that eBay altered the fundamental nature of injunctive relief for patents, a more careful analysis suggests that the Court’s real objective was simply to instill sufficient flexibility in the patent law to forestall the truly draconian settlements in favor of patent trolls. While this conclusion may be open to debate, what is clear is that eBay makes no reference or analogy to trademark law. TURNING TO TRADEMARK Yet two months after eBay, the 9th Circuit, reviewing the grant of a permanent injunction to a trademark plaintiff, assumed without discussion that the Supreme Court’s decision applied to trademark cases. In that case, Reno Air Racing Association v. McCord (2006), the 9th Circuit found that the district court’s order was not an abuse of discretion. Four months later, the 6th Circuit in Audi AG v. D’Amato (2006) made the same assumption of applicability in another trademark case involving the appeal of a permanent injunction. The presumption that eBay applies to trademark cases is so strong that courts are assuming it lessens the ability to gain preliminary injunctions as well. The U.S. District Court for Utah sweepingly remarked — in In-N-Out Burgers v. Chadders Restaurant (June 29, 2007) — that “the parties agree that after [ eBay], irreparable injury is no longer presumed from a finding of likelihood of success on the merits of a claim of infringement of trademark or trade dress.” If that doesn’t worry trademark owners, what will? One district court did see some problem with applying eBay to trademarks. The U.S. District Court for the Eastern District of Pennsylvania noted, in the context of a preliminary injunction, the potential conflict between eBay and the presumption of irreparable injury that flows from a showing of likelihood of success on the merits. But the court in Tillery v. Leonard & Sciolla LLP (2006) did not reach the issue because the plaintiff failed to show he was likely to succeed. Only recently did one court actually examine whether eBay applies in the context of an application for a preliminary injunction. In National League of Junior Cotillions Inc. v. Porter (Aug. 9, 2007), the U.S. District Court for the Western District of North Carolina noted that the Federal Circuit last year in Abbott Laboratories v. Andrx Pharmaceuticals Inc. recognized that the Supreme Court’s precedent with respect to a final injunction order may not apply to preliminary injunctions. Even this district court’s thoughtful decision, however, failed to reach the broader question of whether eBay applies to all intellectual property cases. BIG DIFFERENCES In fact, the law and history of trademarks suggest exactly the opposite. Application of eBay to trademark cases should be rejected at both the preliminary and final stages of litigation. The reasons are many: • Under the U.S. Constitution, the purpose of patent and copyright law is “[t]o promote the Progress of Science and Useful arts, by securing for limited Times to Authors and Inventors the exclusive right to their respective Writings and Discoveries.” The act of creation is key. By contrast, as the Supreme Court explained more than 100 years ago in In re Trade-Mark Cases (1879), trademarks have “no necessary relation to invention or discovery.” Instead of being the incentive to encourage creativity and scientific progress, a trademark is the result of associations that consumers make between a product and its source. It is a right typically developed over time as a result of commercial activity. Thus, while rights and remedies in the context of patents exist only because of congressional action, trademark rights and remedies are deeply rooted in the common law. • One central purpose of trademark law is to create a marketplace free from deceptive practices that may prevent consumers from getting what they want. Once it is established that consumers will likely be confused in distinguishing between two trademarks, injunctive relief barring use of one mark is the only way to clear up that confusion — and preliminary injunctive relief is the only way to do it expeditiously. Thus, the presumption of irreparable injury in the trademark context is well-established in common law. That is not the case in the patent arena. • Monetary damages may be adequate to redress harms to copyright and patent owners. Copyrights and patents are meant to allow the owners to reap the rewards of their creation, not the least of which is money. But trademark law is premised on the right of the trademark owner to control its own reputation. Even if the infringing products are of high quality, the trademark owner loses control of its own destiny, an injury that money is inadequate to address. • Copyright law contains several statutorily created compulsory licenses, which suggests that the right to exclude others is properly tempered by other considerations. Likewise, patent cases are often resolved with damages based on royalties paid under retroactive licenses. But trademark law contains no such provisions forcing the owner to let others use the mark. Indeed, Article 21 of the international Agreement on Trade-Related Aspects of Intellectual Property prohibits the use of compulsory licenses as a remedy for trademark infringement. • The Copyright Act expressly provides for monetary damages for infringement of a registered work, and patent law has a long history of awarding damages based on a reasonable royalty. But monetary damages are difficult to obtain in trademark cases. They require a showing of actual confusion, of actual financial injury (which, practically speaking, is almost impossible to prove), or of willfulness. If eBay is applied to trademark cases, it is only a matter of time before a prevailing plaintiff is denied both monetary and injunctive relief. Given these strong arguments, it’s surprising that trademark plaintiffs have not been more aggressive in pushing the courts to recognize that not all intellectual property rights are the same. Unless trademark plaintiffs begin to challenge the trend toward wider application of eBay, the well-established presumptions in favor of injunctive relief for prevailing trademark plaintiffs will disappear. And trademark owners will wonder why it is so much harder to protect their brands.
Stephen W. Feingold is a partner in the New York City office of Day Pitney, where he leads the trademark, copyright, advertising, and Internet group. Feingold focuses on litigation and branding issues. Associate Cecilia Stiber assisted with the preparation of this article.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]

 
 

ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.