Irreparable harm after Herb Reed

E. & J. Gallo Winery v. Grenade Beverage LLC, No. 1:13-cv-00770 (E.D. Cal. Aug. 15, 2014)

Via the Trademark Blog, this case applying Herb Reed but finding irreparable harm based on the same reasoning rejected in Herb Reed shows just how poorly we think about trademark harm.  The court first found that plaintiff showed likely success on the merits of its confusion claim based on Gallo wines versus El Gallo energy drinks, including the highly-plaintiff-friendly ruling that inquiries about whether two parties are related evidence confusion (when really they evidence some awareness that the two don’t ‘fit’ in some way; this might however be some reason to think that other people would be confused in the case of very cheap mass consumer goods like these).  The court also denied an injunction as to defendant’s plan to use El Gallito for energy drinks, finding that Gallo didn’t submit any evidence about confusion as to that mark though emphasizing that it wasn’t finding that confusion was not likely either.

Turning to irreparable injury: the court found the declaration of Gallo’s director of marketing, Anna Bell, sufficient.  She stated:

Plaintiff does not want to associate its GALLO trademark with energy drinks because it believes that mixing energy drinks with alcoholic beverages promotes irresponsible drinking behavior, which is directly contrary to Gallo's philosophy. Therefore, if consumers are likely to or actually do believe that Defendant's EL GALLO energy drinks are in some way associated with or condoned by Plaintiff, Gallo as a company would suffer damage to its reputation. And because there have been some reports that drinking excessive amounts of alcoholic beverages mixed with energy drinks could cause physical harm, the harm to Plaintiff's reputation could be devastating.

… Further, as explained in this Declaration, Gallo as a company is very proud of its GALLO mark and GALLO products, and therefore exerts an enormous amount of time, energy and money on how these marks are used in the marketplace. Gallo ensures that licensees of its marks, like those marketing GALLO meat products and cheese, follow certain quality standards. If Defendant is permitted to use the EL GALLO and EL GALLITO marks for energy drinks, as mixers for tequila or otherwise, Gallo's name and reputation are put at risk. This harm would be irreparable to Plaintiff.

Though Bell wasn’t qualified to opine that mixing energy drinks with alcohol promotes irresponsible drinking, that didn’t matter, because she was qualified to testify that Gallo believed that an association with energy drinks would be harmful to its reputation because it believed that consumers would perceive such an association as endorsing harmful and irresponsible drinking behavior.  Courts (pre-Herb Reed) have said that the injury from infringement stems from lost control over a business’s reputation, which lost control has the “potential” to damage its reputation.  Of course, potential and likelihood are usually very different things for injunctive relief purposes.

The court found that, though Gallo didn’t introduce admissible evidence that association with energy drinks would harm its reputation, “it is enough that Plaintiff has introduced evidence of loss of control over [its] own business reputation.”    But the only “evidence” of lost control, as opposed to the consequences of that lost control, was the evidence of likely confusion.  And if “lost control” is irreparable injury regardless of whether that lost control results in any actual change to reputation, then we’re back to presuming irreparable harm from likely success on the merits, since it’s the likely confusion that produces the lost control.  This is the argument INTA would like courts to agree with.  (Compare Purdum v. Wolfe, which rejected the “lost control” argument in the absence of evidence about poor quality/other actual harm to plaintiff.)  Here’s the court’s summary, which makes clear that this is just the pre-Herb Reed rationale: “[T]rademark law affords Plaintiff the right to control its branding and image via the legal right to control the usage of the GALLO mark. Defendant’s actions rob Plaintiff of this control, which is a sufficient showing of irreparable harm.”

Then the court found that, even after eBay, money damages are inadequate to remedy infringement.  Gallo’s licensing agreements for use of the mark didn’t show that damages here would be readily calculable or adequate. And Gallo abandoned its claim for money damages, which “suggests that monetary damages are inadequate because they are too difficult to calculate and prove.”