ote: This blog is cross-posted from Law360.com with permission from Portfolio Media, Inc.
For decades, obtaining an injunction in a copyright or trademark case was simple: Show success on the merits (or likely success on the merits, at the preliminary injunction stage), and injunctive relief was usually automatically yours. Then, in 2006, the U.S. Supreme Court issued a ruling in a patent case called eBay Inc. v. MercExchange LLC, which upended the standard for obtaining injunctive relief in patent cases. Around 2010, appellate courts began to apply eBay to copyright cases; the past few months have seen the first instances of appellate courts’ application of eBay to cases under the Lanham Act.
The change in the injunction standard has had a significant impact on the way copyright and trademark plaintiffs do and should prepare their cases for seeking injunctions, and it provides new angles for defendants looking to oppose injunctive relief. If the trend in copyright law is any indicator, the forecast for 2015 shows expansion of the eBay standard in Lanham Act cases. With that in mind, this article will navigate the new legal standards and identify some of the types of cases that may not be as amenable to injunctive relief as they were before.
eBay and the Four-Factor Test
In eBay, a unanimous Supreme Court rejected the general rule in patent cases that permanent injunctions should be denied only in rare instances to protect the public interest. Instead, a plaintiff should be required to prove more than just likely or actual success on the merits in order to obtain the “extraordinary remedy” of an injunction — it also would need to show three extra factors: the plaintiff suffered an irreparable injury for which money damages would not be adequate; the balance of the hardships among the parties tips in favor of issuing the injunction; and the public interest would not be disserved by an injunction. Two years later, the court extended the standard to preliminary injunctions in Winter v. Natural Resources Defense Council, making the four-factor test applicable to injunctions at any stage of the case.
For a while, litigants in copyright and trademark cases appeared to disregard the four-factor test, and apart from a handful of district courts, judges appeared to disregard the test, too. But in 2010, in a case involving an unauthorized sequel to J.D. Salinger’s “Catcher in the Rye,” the Second Circuit held that the district court erred in issuing an injunction against the sequel without first considering the eBay factors. The next year, the Ninth Circuit applied eBay to affirm the denial of a preliminary injunction where the copyright owner failed to show a sufficient connection between the injury to its business and the infringement at issue. As of today, nearly all appellate courts have extended eBay and Winter to copyright infringement actions.
The shift did not appear to be happening in any significant way in trademark cases until last year, when the Ninth Circuit, in the Herb Reed Enterprises case, applied eBay in reversing a district court’s preliminary injunction against the use of the trademark “The Platters.” Strong amicus support accompanied the petition for certiorari, but the U.S. Supreme Court declined earlier this year to take the case. Since then, the Third Circuit has expressly extended eBay to a Lanham Act case, expressly agreeing with the rationale in Herb Reed, while other circuits, including the First and Eleventh, have ducked the issue.
Nonetheless, the denial of certiorari means that courts are quite likely to continue to follow the path set by Herb Reed — or at least until a circuit split or other cert-worthy situation arises. And even if it does, there are no guarantees that the Court would rule any differently than it did in eBay and Winter. Therefore, until some certainty arises, parties in trademark cases should be prepared to show or disprove the four factors, and take them into account even before formal litigation is commenced.
How the eBay Factors Apply in Copyright and Trademark Infringement Actions
With each issued opinion, we have started to learn more about what each of the three “new” factors means, and what it takes to satisfy them.
In assessing irreparable harm in copyright cases, courts have found certain types of evidence to be compelling as proof of irreparable harm, including: a showing that the loss cannot be measured or is one that nobody would expect to suffer; specific instances of marketplace confusion; harm to a plaintiff’s reputation, goodwill or brand; demonstrated inability to reign in the infringing acts (such as with widespread distribution of works); in a preliminary injunction case, the loss of a short window to exploit a work; or other significant business injury.
In contrast, courts have declined to find irreparable harm where the injury can be remedied by money damages (even where the defendant cannot pay those damages); the harm is hypothetical, minor or not proven; or where all that is shown is that the defendant intends to continue infringing. Furthermore, the traditional defense argument of delay in seeking an injunction appears to be carrying more weight in the irreparable harm inquiry in the post-eBay era.
Where irreparable harm is established, courts have failed to find in favor of issuing an injunction where the defendant would suffer significant expense in removing infringing material, or where the cessation of infringement would destroy primarily noninfringing components of a defendant’s work or business. However, not surprisingly, the inability to continue to sell an infringing work is not the type of hardship that a court will consider.
The public interest factor — perhaps the factor with the least amount of historical precedent — can cut both ways in copyright cases. On the one hand, the public interest is served by upholding copyright protections and preventing misappropriation of creative investments in a work. On the other hand, an injunction could negatively affect innocent parties that bear little relationship to the infringement, or it could violate certain public policies that may be related or unrelated to copyright law.
The types of evidence found persuasive in copyright cases appear to be probative and relevant in the few district and appellate courts to have considered eBay in trademark cases and other cases arising under the Lanham Act. Demonstrated or supported evidence of loss of goodwill, long-term loss of customers, reputational injury, consumer confusion, and consumer complaints are all considered to be harm that cannot be remedied. However, unlike previously, a plaintiff must be prepared to back these injuries up with proof. As in copyright cases, unexplained delay can negatively impact the likelihood of injunctive relief, both by undercutting the stated need for emergency relief and by increasing the hardships to a defendant that may have incurred more expense as the plaintiff waited to enforce its rights. But, as in copyright cases, a court will not find the lost opportunity to use an infringing name or mark alone to be a hardship.
Unlike in copyright cases, where the exclusive rights under copyright law are often balanced with First Amendment and other concerns about dissemination of knowledge into the market, the public interest in Lanham Act cases generally tilts only one way: toward the prevention of consumer confusion in the marketplace. Rarely is there a justification for having a misleading advertisement or infringing product permeating the market. Thus, even in a post-eBay world, a plaintiff that establishes likely or actual success on the merits of an infringement claim will typically satisfy the public interest factor quite easily.
What the Shift May Mean for Media, Entertainment and Other Industries that Copyright and Trademark Law Affects
Even from the little amount of time that we have had to observe eBay in practice, we can already see certain trends. While an injunction-seeking plaintiff must always be prepared to make a good showing on the four factors regardless of the facts, it is unlikely that injunctive relief will be denied in cases of simple piracy or counterfeiting. Nor will a court likely deny an injunction if there is an established risk of consumer injury, even after eBay.
However, there are contexts where injunctions have a better chance of being denied than they would have been under a pre-eBay standard. For example, if an artist or film producer uses another’s copyright-protected work or branded product as a relatively small part of the overall work, the application of the eBay standard makes it much more likely that the defendant’s work will not be enjoined. If consumer confusion is slight, a brand is merely minimally diluted or confusion is fleeting, the equities might not tilt toward issuing injunctive relief at all, and certainly not as reflexively as before.
Depending on the evidence shown, a court may also decline to grant an injunction where the defendant has made a good faith, but incorrect, fair use assessment. We may even see instances where a court decides that a license is a preferred result over an injunction, although courts have hesitated to transform themselves into rate-setting bodies unless otherwise required. If a use has a well-established price, however, a court may simply decide that the equities favor imposing a license rather than issue an injunction — a result that has occurred frequently in certain photography cases and music cases in which the proper license fee is well settled in the market.
As we bid farewell to 2014, we know that eBay has had an impact on intellectual property cases beyond the patent area, and we can say with some certainty that eBay will be influencing relief in copyright and trademark cases for some time to come. In 2015, the copyright or trademark litigator will need to keep an eye on the courts as they continue to tell us what it takes to win or defeat an injunction in a copyright or trademark case in the post-eBay world.
-By Eleanor M. Lackman, Cowan DeBaets Abrahams & Sheppard LLP
Eleanor Lackman is a partner in the litigation, copyright and trademark groups in Cowan DeBaets’ New York Office.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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Filed in: Copyright, IP/Internet Transactions, Legal Blog, Litigation, Trademarks and Brands
January 5, 2015