Ninth Circuit: no presumption of irreparable harm for mark owners seeking preliminary injunction

United States of America

In Herb Reed Enterprises LLC v Florida Entertainment Management Inc (Case 12-16868, December 2 2013), in the latest chapter of a battle that has involved skirmishes spanning five decades, the US Court of Appeals for the Ninth Circuit has weighed in on the applicability of the Supreme Court’s patent-based ruling in eBay Inc v MercExchange LLC (547 US 388 (2006)) to preliminary injunctions in the trademark context.

Taking a step that few circuit courts have taken thus far, the Ninth Circuit made clear that a party seeking a preliminary injunction in a trademark matter will need to establish - by way of demonstrable proof - that irreparable harm will result if such relief is not granted. In so doing, the court put to rest the presumption of irreparable harm that has traditionally accompanied a finding that an alleged infringer’s trademark is likely to cause confusion. 

Herb Reed Enterprises involved trademark claims originating with the 1950s musical group The Platters. A series of employment contracts signed by original band members in the mid-1950s assigning their rights to the group’s name to the management company Five Platters Inc (FPI) formed the basis of multiple lawsuits following the group’s breakup. As the original members went on to perform on their own or in follow-on groups making use of the name The Platters or versions thereof, FPI and later its alleged successors, including, ultimately, Florida Entertainment Management Group Inc and its owner Larry Marshak (collectively FMEG), sued to prevent the members from using the name in connection with their performances. 

Between 1972 and 2001 multiple lawsuits were filed in California, New York and Florida, attempting to sort out rights to the name. One such suit concluded with original band member Herb Reed entering into a settlement agreement limiting his right to use the name. That agreement, however, included an ‘escape clause’ providing that, if a court of competent jurisdiction entered a final judgment declaring that FPI had no rights in the name The Platters, then the bar to Herb Reed’s use of the name would be lifted.

In 2010 Herb Reed Enterprises (HRE) filed suit in Nevada alleging that it owned the mark HERB REED AND THE PLATTERS (a name permitted under the settlement agreement), and that FPI, by permitting employees to perform under the name The Platters, was infringing HRE’s trademark. FPI was not represented and a default judgment and permanent injunction was entered declaring, among other things, that:

(1) FPI never used the mark [THE PLATTERS] in a manner that [was] not false and misleading and thus never acquired common law rights to the mark, and (2) Reed, having first used the mark [THE PLATTERS] in commerce in 1953, and having continuously used the mark in commerce since then, ha[d] superior rights to the mark to all others, including FPI and anyone claiming through FPI.”

That judgment was never appealed and was thereafter held to have triggered the escape clause in Reed’s prior settlement agreement with FPI.

In 2012 HRE sued FMEG in Nevada seeking a preliminary injunction against the continued use of The Platters by FEMG performers. The district court found that, in light of the now-triggered escape clause, HRE was free to assert trademark rights in ‘The Platters’, and was not barred by laches from doing so. Finding that HRE had established a likelihood of success on the merits, a likelihood of irreparable harm and a balance of hardships in its favour, and further finding that a preliminary injunction would serve the public interest, the court granted preliminary injunctive relief. FMEG appealed.

The Ninth Circuit, recognising the significant litigation history surrounding the trademark, began by addressing whether the district court had erred in not giving prior decisions - in particular certain New York actions brought by Marshak - preclusive effect against HRE’s claims. The appeals court found that the district court had properly concluded that neither claim preclusion nor issue preclusion prevented the HRE suit against FMEG because, irrespective of what had happened as a result of Marshak’s 1980s New York actions, the 2011 triggering of the escape clause provided HRE with rights that it could not have litigated at the time of the New York actions. Similarly, because the case giving rise to the instant appeal had been filed within a year of the 2011 Nevada default judgment, FMEG could not rely on laches as a defence.

Turning to the preliminary injunction, the appeals court concluded that the district court had properly found HRE to have rights in the asserted THE PLATTERS trademark, reasoning that although the settlement agreement had prevented Herb Reed from performing under the name, he (and HRE) had not abandoned the trademark because they continued to receive royalties from the sales of Platters recordings. According to the court:

[t]he receipt of royalties is a genuine but limited usage of the mark that satisfies the ‘use’ requirement, especially when viewed within the totality of the circumstances - namely that Reed was constrained by the settlement.”   

However, on the ‘likelihood of irreparable harm’ requirement, the appeals court was not persuaded that the district court had properly evaluated the showing made by HRE. Referring to the Supreme Court’s decision in eBay (permanent injunction in a patent case) and the follow-on decision in Winter v Natural Res Def Council Inc (555 US 7, 20 (2008)) (preliminary injunction), the court explained that those decisions had “cast doubt on this court’s previous rule that the ‘likelihood of irreparable injury may be presumed from a showing of a likelihood of success on the merits of a trademark infringement claim’” (emphasis in original; citation omitted). Just as the eBay court had concluded that there was nothing in the Patent Act to indicate that Congress’ intent had been for injunctions in patent cases to automatically result from a finding of success on the merits, the court reasoned that there is nothing in the Lanham Act to indicate that Congress intended a different standard for trademark cases. “Both statutes provide that injunctions may only be granted in accordance with the principles of equity.” Accordingly - at least in the Ninth Circuit - a plaintiff must now establish irreparable harm in order to be entitled to a preliminary injunction in a trademark infringement case. Irreparable harm is thus no longer a foregone conclusion following a moving party’s proof that it is likely to succeed on the merits of its trademark infringement claim.

Reciting the standard, however, is not the same as proving it. In the present case, the Ninth Circuit concluded that the district court had done nothing more than a “cursory and conclusory” analysis of the evidence submitted by HRE in support of its irreparable harm claim. The court acknowledged that “evidence of loss of control over business reputation and damage to goodwill could constitute irreparable harm”, but concluded that, in granting the preliminary injunction, the district court had not based its irreparable harm determination on facts in the record that supported the likelihood of irreparable injury in the absence of a preliminary injunction, or on how legal remedies, such as money damages, would be inadequate. “Those seeking injunctive relief must proffer evidence sufficient to establish a likelihood of irreparable harm” in order to support their entitlement to such relief. 

It will be interesting to see how future plaintiffs satisfy this burden in the courts of the Ninth Circuit and whether the appeals courts in other circuits will follow the lead of the Ninth Circuit.

Timothy J Kelly, Fitzpatrick Cella Harper & Scinto, New York

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