Fascinating to have this case come out just as I’m teaching
remedies in my trademark class. The
casebook (Ginsburg et al.) is hanging on by its fingernails to the pre-eBay world in which likely success
routinely translated to irreparable injury for purposes of preliminary
injunctive relief. The Ninth Circuit
gives the most explicit rejection yet of finding irreparable injury based on
the theory that likely confusion inherently involves the risk that the
plaintiff will lose control over its reputation.
The Platters were one of the most successful performing
groups of the 1950s. Defendants (known
here as Marshak) appealed the preliminary injunction in favor of plaintiff HRE,
enjoining Marshak from using The Platters in connection with any vocal group
(with narrow exceptions). Herb Reed was
one founder; others who came to be recognized as “original” members were Paul
Robi, David Lynch, Zola Taylor, and Tony Williams. The original members left one by one, but
continued to perform under some version of “The Platters.” Multiple legal disputes followed.
This mare’s nest, brutally simplified, is roughly as
follows: Marshak claims rights descending from 1956 employment contracts
between the original members and Five Platters, Inc. (“FPI”), the company
belonging the group’s then-manager. FPI
transferred its rights to a company that then transferred rights to
Marshak. “Litigation over the validity
of the contracts and ownership of the mark left a trail of conflicting
decisions in various jurisdictions, which provide the backdrop for the present
controversy.” FPI sued Robi and Taylor
in 1972; a 1974 California decision held that FPI was a sham. But an analogous dispute between FPI and
Williams in New York resulted in a 1982 decision that FPI had lawful exclusive
ownership of the name.
The Ninth Circuit upheld an award of compensatory and
punitive damages to Robi, as well as cancellation of FPI’s registered Platters
marks. FPI sued Reed for trademark
infringement in Florida, and avoided Reed’s preclusion argument based on the
California judgment. Reed then settled,
assigning FPI all his rights in FPI stock but retaining the right to perform as
“Herb Reed and the Platters.” The
settlement had an escape clause if a final order by a court of competent
jurisdiction provided that FPI had no right to the name The Platters. A key
question was whether the escape clause had been triggered.
Marshak, FPI, and others sued Reed in New York, and Reed
counterclaimed. The court ruled that the
settlement barred Reed from asserting rights against FPI, and that the escape clause
hadn’t been triggered because the earlier decisions didn’t count as a final judgment that FPI wasn’t entitled
to use the name, leaving open a remote possibility that FPI could establish
common law trademark rights. (It was
remote because the Ninth Circuit held that FPI would need to present evidence
that they used the mark in a way that was not false and misleading, and noted
that FPI was “unlikely” to be able to make the required showing. FPI abandoned its trademark claim on remand
and the evidentiary hearing ordered by the court of appeals never occurred.)
HRE, acting for Reed, sued FPI in Nevada. “To get around the restrictions in the 1987
settlement, HRE creatively alleged that it owned the ‘Herb Reed and the
Platters’ mark and that defendants used a confusingly similar mark, namely ‘The
Platters.’” FPI, then defunct and
(according to Marshak) already having transferred its rights, defaulted, and a
permanent injunction issued declaring that FPI never had common law rights to
the mark and that Reed had superior rights.
Then, HRE obtained a preliminary injunction against a former
performer-employee of FPI; the court in that Nevada case held that the escape
clause had been triggered because the time to appeal the default judgment had
expired.
HRE then sued Marshak in Nevada, alleging trademark
infringement. The district court held
that HRE wasn’t precluded in asserting a right in “The Platters” either by the
settlement, because the escape clause had been triggered, or by laches. The court found that HRE established all the
factors needed to support a preliminary injunction: likely success on the
merits, a balance of hardships in its favor, irreparable harm, and a public
interest favoring relief.
The court of appeals first found that the res judicata
effect of the New York cases didn’t bar HRE from bringing the underlying
suit. Then the court found that laches
did not foreclose the suit, because HRE couldn’t have brought its lawsuit until
there was a final ruling with all appeals exhausted that triggered the escape
clause. HRE sued less than a year after
the escape clause was triggered, which was shorter than the analogous state
statute of limitations, creating a strong presumption against laches.
Marshak didn’t challenge likely success on the merits except
to argue that Reed abandoned “The Platters” by signing the settlement agreement
in 1987. But abandonment must be strictly proved, and the district court didn’t
err in concluding that Marshak failed to meet his burden of showing
discontinuance plus intent not to resume use. HRE presented evidence that,
despite the settlement, it continued to receive royalties from previously
recorded material. “The 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.” (Comment: Whoa. So abandonment is basically impossible when you've created copyrighted works with ongoing value.) Receiving royalties “certainly qualifies” as
placing the mark on goods. The court
rejected Marshak’s argument that HRE’s receipt of royalties violated the
settlement agreement and thus wasn’t bona fide. The settlement focused on the
right to perform and explicitly excluded commercial recordings.
However, the injunction faltered on irreparable harm. eBay
made clear that the Court “has consistently rejected . . . a rule that an injunction
automatically follows a determination that a copyright has been infringed,” and
emphasized that a departure from the traditional principles of equity “should not
be lightly implied.” The Ninth Circuit concluded: “The same principle applies to
trademark infringement under the Lanham Act.” Nothing in the Lanham Act
indicates that Congress intended a departure in trademark cases; instead, like
the Patent Act, the Lanham Act provides that injunctions may be granted in accordance
with “the principles of equity.” A possibility of irreparable harm is too
lenient; it must be likely.
This foreclosed a presumption of irreparable harm in
trademark cases. The Ninth Circuit considered this consistent with other
circuits’ holdings—N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211
(11th Cir. 2008) and Audi AG v. D’Amato, 469 F.3d 534 (6th Cir. 2006). But the court is about to go further.
The district court, anticipating that eBay and Winter were relevant,
said that it was requiring HRE to establish irreparable harm. “Although the district court identified the correct
legal principle, we conclude that the record does not support a determination
of the likelihood of irreparable harm…. The district court’s analysis of
irreparable harm is cursory and conclusory, rather than being grounded in any
evidence or showing offered by HRE.” The
district court stated that it couldn’t condone infringement just because it had
been occurring for a long time; that could encourage wide-scale infringement by
people trading on the goodwill of vintage music groups. The court of appeals responded:
Evidence of loss of control over business
reputation and damage to goodwill could constitute irreparable harm. Here, however,
the court’s pronouncements are grounded in platitudes rather than evidence, and
relate neither to whether “irreparable injury is likely in the absence of an
injunction,” nor to whether legal remedies, such as money damages, are inadequate
in this case.
HRE might be able to establish likely irreparable harm, but
it hadn’t on this record. The district
court “simply cited to another district court case in Nevada ‘with a
substantially similar claim’ in which the court found that ‘the harm to Reed’s
reputation caused by a different unauthorized Platters group warranted a
preliminary injunction.’” But “citation
to a different case with a different record does not meet the standard of
showing ‘likely’ irreparable harm.”
(I added the emphasis because this is really big, if the court is
serious. The “different case” here
involved the same trademark and the same type of infringing conduct; if that’s
not enough, general citations to other infringement cases in which “goodwill”
was at risk can’t possibly be—which means that the tradition of considering
infringement to cause irreparable harm has to be rethought.)
The strongest record evidence—not cited by the district
court—was an email from a potential customer complaining to Marshak’s booking
agent that the customer wanted Reed’s band, not another tribute band. But that just showed confusion, not
irreparable harm. “The practical effect of
the district court’s conclusions, which included no factual findings, is to reinsert
the now-rejected presumption of irreparable harm based solely on a strong case
of trademark infringement.” One cannot
collapse likely success and irreparable harm; evidence of irreparable harm is required. Remand for another look.
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