No presumption, but inference of irreparable harm permissible under Lanham Act

United States of America

In Groupe SEB USA Inc v Euro-Pro Operating LLC (Case No 14-2767 (December 17 2014) (Fisher J), addressing  theinterpretation of advertising claims when the packaging or label unambiguously defines a claim term and an inference of irreparable harm where the advertisements were literally false, the US Court of Appeals for the Third Circuit has affirmed a district court’s order granting the plaintiff’s motion for a preliminary injunction, finding the district court’s approach firmly based in false advertising law and logic. 

Groupe SEB distributes and sells household consumer products, including electric steam irons sold under the Rowenta brand. Euro-Pro also distributes and sells kitchen and household appliances, including steam irons, under the Shark brand name. Euro-Pro included two advertising claims on the packaging for two of the Shark-brand steam irons. Text on the packaging front asserted that the steam iron offers “MORE POWERFUL STEAM vs Rowenta®† at half the price” and “#1 MOST POWERFUL STEAM*”. Both of these statements made reference to footnotes found on the bottom of the packaging which provided a definition for measurement of steam power in grams per shot or grams per minute.

SEB conducted internal laboratory tests using the footnote guidelines to determine whether the claims were true. The internal tests showed the Rowenta steam irons performed the same as or better than the Shark steam irons.  SEB then commissioned an independent laboratory to run the same tests and obtained the same results. SEB sued Euro-Pro for false advertising under the Lanham Act, as well for unfair competition under state law. SEB then moved for a preliminary injunction.

The district court granted SEB’s preliminary injunction motion concluding that SEB established a likelihood of success on the merits by demonstrating the Shark claims are literally false with the laboratory test results and that SEB had successfully demonstrated a likelihood of irreparable harm. Euro-Pro appealed.

The Third Circuit explained that where a claim on packaging includes a definition, the definition used becomes part of the claim. The fact that the guidelines were in fine-print footnotes and presumably less likely to be read by consumers did not alter the conclusion. At trial, Euro-Pro provided a customer survey report showing consumers do not have a uniform understanding of the packaging claim. However, the Third Circuit found that because Euro-Pro chose a definition for the claim on the packaging, it could not later use a consumer survey to create an ambiguity where there was none.

Euro-Pro also argued that the district court erred by applying a relaxed standard in finding SEB established a likelihood it would suffer irreparable harm in the absence of a preliminary injunction. In Ferring Pharmaceuticals v Watson Pharmaceuticals, the Third Circuit clarified that a party seeking a preliminary injunction in a Lanham Act case is not entitled to a presumption of irreparable harm but is required to demonstrate that it is likely to suffer irreparable harm if an injunction is not granted. In the present case, the Third Circuit clarified that Ferring does not bar the drawing of fair inferences from facts in the record. Where, as here, the advertisements are literally false, an inference of harm may be made where a plaintiff has clearly demonstrated that its goodwill and reputation are being damaged.

The case shows that plaintiffs seeking a preliminary injunction in Lanham Act cases may be entitled to an inference of irreparable harm based on facts in the record.

Jacqueline Mahoney, McDermott Will & Emery LLP, Silicon Valley

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