eBay analysis extended to preliminary injunctions in trademark cases

In North American Medical Corporation v Axiom Worldwide Inc (Case 07-11574, April 7 2008), the US Court of Appeals for the Eleventh Circuit has vacated the district court’s grant of a preliminary injunction in favour of North American Medical Corporation (NAM), finding that under the Supreme Court decision in eBay Inc v MercExchange LLC, it was erroneous to presume irreparable harm based only on the plaintiff’s demonstration of a likelihood of confusion. 

 

NAM sought a preliminary injunction against Axiom Worldwide Inc, a competitor in the traction device industry, based on Axiom’s intentional use of NAM’s trademarks in the metatags of Axiom’s website. Although Axiom’s website did not display NAM’s marks and did not refer to NAM’s products, the district court determined that such use was actionable under the Lanham Act. The district court presumed irreparable harm based on NAM’s showing of a likelihood of success and preliminary enjoined Axiom from using NAM’s trademarks as metatags.  

 

On appeal, the Eleventh Circuit affirmed the district court’s holding that NAM had demonstrated a likelihood of success on its trademark infringement claim, finding that Axiom’s metatag use was actionable use in commerce that created a likelihood of confusion. However, the court vacated the injunction, finding that the district could not presume irreparable harm when granting a preliminary injunction in trademark infringement cases based solely on a showing of likelihood of success. The court acknowledged that historically, the Eleventh Circuit has extended the presumption in trademark infringement cases. However, the court stated that the presumption no longer applied after the Supreme Court’s decision in eBay. In that case, the Supreme Court held that injunctions should not be granted automatically based on a finding of patent infringement. Rather, courts must exercise their equitable discretion when deciding whether to grant or deny injunctive relief.

 

Although eBay involved a patent infringement action and request for permanent injunctive relief, the Eleventh Circuit determined that eBay also applied to trademark infringement actions and requests for preliminary injunctive relief. In so doing, the court explained that the language of the Lanham Act governing the grant of injunctive relief was very similar to the corresponding language of the Patent Act. Further, the court stated that “no obvious distinction exists between permanent and preliminary injunctive relief to suggest that eBay should not apply to the latter”. The Eleventh Circuit ultimately declined to opine how eBay would affect the case before it, but remanded the issue to the district court for a determination of whether the district court’s presumption of irreparable harm was the “equivalent of the categorical rules rejected by the court in eBay.”

 

Therefore, the Eleventh Circuit joined the Ninth and Tenth Circuits in holding that use of a competitor’s trademarks in metatags may constitute actionable trademark infringement, although the court cautioned that its holding is factually narrow.

 

This decision will likely spark debate as to whether the holding in eBay should be limited to permanent injunctions, due to the fundamental differences between preliminary and permanent injunctions in terms of purpose, procedure and timing. Additionally, questions are likely to arise as to whether the eBay holding should be extended to trademark cases. In the wake of the NAM decision, trademark owners seeking preliminary injunctions should take care to allege and explain the threat of irreparable harm specifically, separately from any presumption of irreparable harm that may arise based on a showing of likelihood of success on the merits.