9th Circuit accepts irreparable harm finding in TM licensee breach case

2Die4Kourt v. Hillair Capital Management, LLC, --- Fed.Appx. ----, 2017 WL 2304376, No. 16-56217 (9th Cir. May 26, 2017) 

The district court enjoined Hillair from using trademarks/publicity rights owned by 2Die4Kourt, Kimsaprincess, Inc., Khlomoney, Inc., Kourtney Kardashian, Kim Kardashian West, and Khloe Kardashian (“[k]ollectively, Kardashians”).  Hillair was a licensee; the agreement contemplated that Hillair would make quarterly royalty payments based on product sales. “Although the Kardashians were supposed to provide invoices for the royalty payments owed to them, the Agreement states that their failure to do so did not affect their ‘rights to receive the amounts due,’” so Hillair’s argument that it was okay that it never made any royalty payments in the absence of an invoice failed.  Anyway, Hillair continued to use the Kardashian marks during the agreement and after its termination.  “A party to a contract cannot both refuse to perform its obligations and continue to avail itself of the contract’s benefits, even if it believes that the other party has breached.”

The district court didn’t abuse its discretion in rejecting Hillair’s unclean hands defense.  The Kardashians’ alleged breaches of the licensing agreement (apparently their behavior with respect to competing products) weren’t equivalent to false advertising, since Hillair didn’t identify false statements about any products.

The district court also didn’t abuse its discretion in finding that the balance of equities favored the Kardashians even though Hillair presented evidence demonstrating that it likely would be forced to shut down, terminate its employees, and default on its obligations if it was enjoined, because this irreparable harm resulted from allegedly infringing conduct.  To the extent Hillair was challenging the finding of irreparable harm to the Kardashians, the court again didn’t abuse its discretion.  “While irreparable harm may not be presumed based on a likelihood of success in a trademark action, ‘[e]vidence of loss of control over business reputation and damage to goodwill c[an] constitute irreparable harm,’” and using the Kardashian’s trademarks after the termination of their agreement to release an unapproved line of cosmetics was “enough to support a finding, at this early stage, that the Kardashians likely will lose some measure of control over their business reputation in the absence of injunctive relief.”  

Comment: This isn't exactly consistent with the requirement of proof imposed in non-licensee cases, but it's the 9th Circuit.