Trademark Law Is Presumptuous Again

Party Like it’s 2006

I mentioned last time that the gigantic Consolidated Appropriations Act, 2021 (remember that?) had three “IP”-related Easter eggs, two for trademark and one for copyright. I blogged about the copyright one last time, the “copyright small claims court.” Tara has previously blogged about the trademark Easter Eggs, but I wanted to expand and emphasize one of them here: the restoration of the presumption of irreparable harm for trademark injunctions.

Is the damage here irreparable? Can we fix this by giving you money to buy a new one, or do we have to put all the pieces back together? Photo 50441948 © Jennifer Tatum – Dreamstime.com

I know that sounds kind of technical, but it’s a very big deal. When you own “intellectual property”¹Why the scare quotes? Not everyone agrees that “intellectual property” is a conceptually helpful term, or that trademarks are really “intellectual property.”, you usually want the infringer to stop infringing. Sometimes, you don’t even care about the money. You just want it to stop. It is, after all, yours, and the law has given you exclusive control over it. And the way you get people to stop infringing your right is with an injunction, which is just a court order telling the (likely) infringer to stop it.

There are different types of injunctions, but they all require two crucial things. First, you either won (in the case of a permanent injunction) or are likely to win (in the case of an emergency²I’m using “emergency injunction” to cover preliminary injunctions, temporary restraining orders and other temporary injunctions issued during the pendency of the case. injunction).³The difference between the two main types of injunction: a permanent injunction last forever (or at least indefinitely), but may be issued only at the end of a case; an emergency injunction is issued during the case (often right at the beginning) but lasts only while the case is pending. For more about preliminary and other emergency injunctions. Second, the harm you’re suffering from the infringement is “irreparable,” which means that money can’t make things right.

I Bought it on eBay

For a long time, the logic went like this. “IP” rights are “exclusive rights,” i.e., the right to “exclude” others from doing certain things with your “IP.” And how else can you exclude others doing those things but with an order telling them to stop it. Injunctions were inherent in exclusive rights. Therefore, they were pretty much automatically granted in “IP” cases.

But in 2006, the U.S. Supreme Court threw us all for a big loop. In eBay v. MercExchange, the Court held that, no, an injunction was not automatic or even presumptive, even after a jury found patent infringement. In terms of injunctions, at least, there’s nothing special about patents, even they’re described in the Patent Act as rights to exclude. The reasoning turned on a single word from the Patent Act: “may,” as in, “may grant injunctive relief.” If injunctions were automatic or nearly so, then the authors of the Patent Act would have written “must,” not “may.” eBay v MercExchange was quickly applied to copyright claims. This made sense because the Copyright Act also uses “may” not “must,” and the Supreme Court actually discussed copyright law in its opinion.

The question became: does eBay v. MercExchange extend to trademark claims? Just as the Patent and Copyright Acts used “may” instead of must, the statute governing federal⁴Why am I being so specific? It’s because both state and federal law govern trademark claims—simultaneous. I.e., the same act can violate both state and federal trademark law. By contrast, there is no such thing as state copyright or patent law, so I don’t need to specify. Having said that, state trademark law tends to follow federal trademark law. trademark claims (known to nerds as the “Lanham Act”) effectively did as well. The part of the Lanham Act governing injunctions says that courts “shall have the power to grant injunctions,” which clearly gives the courts discretion about whether to grant them or not.

Dr. MercExchange, I Presume?

Unlike in eBay v. MercExchange, trademark injunctions have never been automatic or even a “general rule.” But trademark law has something that is arguably close to this: a presumption of irreparable harm, if you can prove actual or likely infringement. Since irreparable harm is the other crucial component of an injunction, this presumption was functionally very similar to (if not quite identical to) the rule the Supreme Court reversed in eBay v. MercExchange. In all three areas, once you prove your substantive case (i.e., you win or are likely to win), the next crucial step is a lot easier.

Yet, eBay v. MercExchange wasn’t about a presumption, exactly, and that might be an important difference. The rule at issue in eBay v. MercExchange was that injunctions in patent (and copyright) cases are granted as a “general rule.” By that, the lower court meant that they will be granted except in highly unusual cases: “rare cases to protect the public interest.”

A presumption, by contrast, has to do with burdens of proof. A presumption that X is true just shifts the burden from whoever would normally need to prove X to the other party, which would need to prove that X wasn’t true. Thus, normally the mark-holder must prove irreparable harm in order to get an injunction, but with the presumption, the (likely) infringer must prove the harm is reparable, i.e., it can be fixed with money.

You could argue that a presumption of irreparable harm was entirely consistent with the statutory language (that courts “shall have the power to issue injunctions”). Courts still have discretion whether to grant them or not. The only difference is who bears the initial burden on the issue of irreparable harm.

Trademark Different

The reason for trademark law’s special presumption also differed from the “general rule” at issue in patent and copyright cases. In those cases, the “general rule” flowed from the exclusive nature of patent and copyright rights. It didn’t matter whether irreparable harm was really all that common, just that the right to exclude demanded injunctive relief. By contrast, the presumption of irreparable harm in trademark cases arose from the observation that the harm caused by trademark infringement was nearly always going to be irreparable, just because of the way trademarks worked.

Prof. McCarthy, the leading authority on trademark law⁵In my opinion., explained the reason for the presumption: if a customer mistakenly buys an infringer’s product believing it to be the mark-holder’s, and if the product is of lower quality, either now or in the future, then the customer will also mistakenly ascribe that low quality to the mark holder. Such injury is real but almost impossible to track down, let alone quantify into money. In other words, irreparable harm was baked into trademark infringement.

I would add that that consumer protection is a separate, independent reason for the presumption. Customers have a right to know what they’re buying, and confusion wrought by trademark infringement interferes with a customer’s ability to make rational choices. Since customers can’t be represented in lawsuits between mark-holders and alleged infringers, we do the next best thing: err on the side of protecting the customers. Thus, the quality of a mistakenly purchased product doesn’t matter. Even if the mistaken product was of a higher quality, the customer would mistakenly believe the mark-holder’s products are better than they are. That might be OK for the mark-holder, but it’s not OK for customers. And once a consumer is confused, there’s no easy way to reverse that.

In addition, trademark law differs from copyright and patent law in that infringement occurs before any real harm has to take place. An infringing act in trademark law isn’t just one that causes confusion among consumers but is also one that is likely to cause such confusion. That language is also in the statute. Trademark law is there to prevent confusion from happening in the first place (within reason), before you even know what form the future harm will cause (for better or for worse).

But Not Different Enough

Slowly and hesitantly at first, courts began to apply eBay v. MercExchange to trademark cases. They tended to ignore how trademark law’s presumption of irreparable harm rested on different premises from copyright’s and patent’s premises. Instead, they focus on the language of the statutes. Unless the statute says injunctions are effectively automatic, then a presumption of irreparable harm is unwarranted.

Since I represent mark-holders who might need emergency injunctions—and their potential litigation targets—it was important to my practice to keep track of how courts were implementing eBay v. MercExchange in trademark cases. Alas, I didn’t keep strict count because I was mostly interested in what arguments seem and seem not to work. But my sense was that, in about half the cases, the presumption was kept but under a new guise. Such courts would accept almost any evidence, including self-serving, conclusory testimony from the mark-holder, to find irreparable harm. It seemed, in these cases, all you had to say was something, something, something, lose control of goodwill.

In the others, however, where the court required real proof of irreparable harm, the mark-holders were really struggling, especially at the emergency injunction stage. If there was already some actual confusion you could prove, you could argue that these lost sales are just the tip of the iceberg and thus a complete accounting of damages is impossible.⁶This argument is undermined by the availability of the infringer’s profits from infringing sales as money damages. But even that only reflects the harm at a moment in time and can’t account for ongoing damage. The trouble with this approach is: (a) actual confusion is something you’re trying to avoid, (b) proving actual confusion is very hard, and (c) the actual confusion has to be so bad that you’re able to link lost sales to it. Another approach is to attack the quality of the infringing products⁷By “infringing products” I mean products sold in connection with the infringing trademark. Except in certain rare trade-dress cases, products themselves aren’t infringing, but it’s a convenient short-hand., but this was usually impossible at the state of an emergency injunction. There just isn’t time to line up the necessary experts, and “quality” isn’t easily measured for many products, especially services.⁸As an aside, it is difficult to say how much any of this mattered. Trademark law rests on certain psychological assumptions about consumers and certain economic assumptions about the effects of confusion. Was there more consumer confusion during the period after courts began to apply eBay v. MercExchange to trademark cases? Did mark holders generally lose sales to infringers during this period? And was the harm really that irreversible?

Trademark Law Is Presumptuous Again

Well, we can put such deep questions aside. Congress fixed it. Congress amended the U.S. trademark statute (“Lanham Act”) to include this sentence into the part governing the issuance of injunctions: “A plaintiff seeking any such injunction shall be entitled to a rebuttable presumption of irreparable harm upon” a finding of actual infringement (in the case of permanent injunctions) or likely infringement (in the case of emergency injunctions).

So things can go back to the way they were before. If you have a trademark emergency—e.g., you just found out your competitor will be rolling out a new product line under a mark similar to yours, next week—you can rush into court and focus just on proving up your infringement case.

But It’s Just a Presumption

It does not mean injunctions for trademark infringement are automatic or even a “general rule.” All it means is the burden of proof is shifted to the actual/likely infringer (again, depending on whether it’s a permanent or emergency injunction) to prove that the harm caused by the actual/likely infringement isn’t “irreparable.” If I’m representing the accused infringer, I prefer not to have that burden, naturally. But I’m not without hope either. For example, in those (relatively uncommon) cases that involve either expensive products or highly discriminating buyers⁹These are also factors against a finding of likelihood of confusion., I can argue that any confusion isn’t likely to linger beyond identifiable purchases because so much deliberation goes into each purchase.

It also does not mean that mark-holders should ignore irreparable harm. If there’s a positive case for irreparable harm to be made, the mark-holder should consider making it. Not only might the defendant come up with some strong arguments that you’ll need to counter, but the rest of your case for injunctive relief might not be strong enough to rely on a mere presumption. For motions for emergency injunction, the analysis is supposed to weigh the strength of the claim (i.e., how likely the plaintiff is to win at the end) against the strength of the irreparable harm (i.e., how bad it will be for the plaintiff if nothing is done). A strong case for irreparable harm can make up for a weaker case for likelihood of success (and vice-versa). But if you’re relying on just the presumption, how much weight is the judge giving the irreparable harm prong, and is it enough in light of your infringement case?

A final thought: eBay v. MercExchange remains good law. It’s just been legislatively overturned as to trademark claims. Further, it is applicable to more than just intellectual-property cases. For example, in Monstanto v. Geerston Seed Farms (which admittedly looks like a patent case), the Supreme Court applied eBay in an environmental-regulation matter.¹⁰I’ll add that I don’t think anything in Monsanto changes any of my analysis in this blog post. The rule at issue is almost exactly like the one reversed in eBay.

Thanks for reading!

Rick Sanders

Rick is currently General Counsel for Software Freedom Conservancy. Previously, he has been practicing law as an intellectual-property litigator since 2000.