No Presumption of Irreparable Harm for Lanham Act Injunctions, Says Third Circuit

In a recent decision, the Third Circuit announced that it would no longer presume irreparable harm for plaintiffs requesting preliminary injunctive relief for claims arising under the Lanham Act (see Ferring Pharmaceuticals, Inc. v. Watson Pharmaceuticals, Inc., No. 13-2290 (Aug. 26, 2014)).  Instead, claimants seeking to enjoin acts of trademark infringement or false advertising must bear their burden of establishing each of the four traditional injunction factors, namely: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm; (3) that the balance of the hardships favors the plaintiff; and (4) that the public interest would be served by the injunction’s issuance.

The Third Circuit’s decision in comes in the wake of the Supreme Court’s ruling in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 403 (2006) and Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008).  In eBay, the Supreme Court expressly rejected the notion of a bright line rule that absent extraordinary circumstances, a permanent injunction necessarily follows when patent infringement is found.  Instead, it held that irreparable harm should not be presumed when determining whether to enjoin patent infringement, and further found that the Federal Circuit’s practice to the contrary constituted “a major departure from the long tradition of equity practice.”  In Winter, the Supreme Court extended eBay’s rearticulation of the injunction factors to the preliminary injunction context, confirming the need for each and every one of the above factors to be assessed in determining the propriety of such relief, regardless of whether such relief is preliminary or permanent.  Following eBay and Winter, courts across the country were faced with the question of whether eBay’s repudiation of the irreparable harm presumption was confined to patent cases, or whether it extended to all injunctions, including those arising under the Copyright Act and the Lanham Act.  See, e.g., Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010); Herb Reed Enters., LLC v. Florida Entm’t Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013).

In this case, Ferring, a manufacturer of a prescription progesterone product and applicator alleged that a paid consultant for one of its competitors, Watson Pharmaceuticals, made a slew of false comparative claims to healthcare providers during in-person and internet based presentations, suggesting, among other things, that women preferred Watson’s products over Ferring’s and that its products had serious life-threatening side effects.  Ferring filed suit for false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a) and moved for a preliminary injunction to enjoin Watson from making further false statements. and to compel Watson to engage in corrective advertising.  In response, Watson conceded the inaccuracy of many of its statements and submitted a declaration from one of its paid consultants that it would cease making such statements in the future.  The District Court denied Ferring’s motion on the grounds that it failed to demonstrate that it would be irreparably harmed in the absence of a preliminary injunction.

In affirming the District Court’s decision, the Third Circuit pronounced that it would no longer presume that a plaintiff has been irreparably harmed from trademark infringement, particularly in light of the Supreme Court’s decisions in eBay and Winter.  In doing so, the Third Circuit specifically rejected Ferring’s attempts to distinguish eBay on the grounds that Lanham Act cases give rise to special considerations which are not at issue in patent cases.  Specifically, Ferring contended, among other things, that Lanham Act cases often implicate injury to goodwill and reputation – not just harm resulting from lost sales – which are inherently difficult to quantify and often immeasurable.  This is especially true in the context of preliminary injunctions, which are usually sought at the inception of a case and without the benefit of a full evidentiary record and expert testimony on the question of harm.

Nonetheless, following the Supreme Court’s decisions in eBay and Winter, and armed with guidance from its sister circuits, the Third Circuit found that an award of injunctive relief must be premised on traditional principles of equity, and that any such presumption of irreparable harm would constitute a deviation from those principles.  Accordingly, the Third Circuit held that a party seeking injunctive relief in any case, including those arising under the Lanham Act, must “demonstrate that she is likely to suffer irreparable harm if an injunction is not granted” (emphasis added).

The Third Circuit’s decision in Ferring should serve as a cautionary tale for prospective litigants: when contemplating a preliminary injunction, take care to gather compelling proof of irreparable harm, including evidence of actual consumer confusion, lost sales arising from infringement, loss of customers, reputational injury, and/or loss of market share.