Absent Evidence of On-going Sales of Counterfeits Court Concludes Risk of Harm from Preliminary Injunction Outweighs Harm Trademark Owner Would Suffer If Injunction Denied
The 10th Circuit Court of Appeals recently affirmed denial of a preliminary injunction against a liquor retailer that had sold two packs of counterfeit Newport cigarettes to a Lorillard representative. The decision in Lorillard Tobacco Co. v. Engida, reported at 2007 WestLaw 39207 (Jan. 8, 2007), hints that getting a preliminary injunction in a trademark counterfeiting case may not always be as straight-forward as brand owners would like.
In the case, Lorillard had requested and the district court had granted both a temporary restraining order (TRO) and ex parte seizure order on the basis of the retailer's sale of two counterfeit cigarette packs to the Lorillard rep. However, the resulting search of the liquor store found no Newport cigarettes, either genuine or counterfeit. At a subsequent hearing, the court held that Lorillard had failed to demonstrate that the retailer presented a sufficient risk of irreparable harm to Lorillard to justify an on-going injunction. It, therefore, dissolved the TRO and denied Lorillard a preliminary injunction. [In snippets from the hearing that are reproduced in the appeals court's decision, the judge expressed considerable annoyance that he had been persuaded to issue an ex parte seizure order authorizing a raid on a location where no counterfeits were found. (E.g., "I think plaintiff's counsel better consider seriously continuing this case. Perhaps you ought to find a better small fish.")]
To qualify for a preliminary injunction, a plaintiff must show that the defendant's conduct threatens it with irreparable harm. On appeal, the 10th Circuit rejected Lorillard's argument that a prima facie case of trademark infringement establishes irreparable harm per se. It pointed out that, while irreparable harm is frequently presumed where trademark infringement is shown, there is no iron-clad rule requiring the court to apply this presumption. Interestingly, the court of appeals cited the Supreme Court's recent decision in the patent case eBay, Inc. v. MercExchange, LLC, 126 S. Ct. 837, 1840-41 (2006), which put an end to a presumption that a permanent injunction should follow a finding of patent infringement, observing that eBay disapproved of "the use of categorical rules in connection with injunctive relief in intellectual property actions." It then side-stepped the question of whether eBay will make it more difficult to obtain injunctions in trademark cases, stating that "we need not consider how eBay may apply in this context" because Lorillard failed to satisfy another requirement for injunctive relief -- that it show that the threatened injury to it outweighs the injury that would be caused to the defendant by the injunction. (For more on the eBay decision, check out the blog Patently O.)
How, one might ask, could a court conclude that an injunction against continued sales of counterfeits would cause greater harm to the defendant than denial of the injunction would cause Lorillard? In this case, it did so by reasoning that, because "the counterfeit packages are so similar to genuine packages...,an injunction would probably require [the liquor store] to stop selling any Newport cigarettes while the suit was pending, for fear that it would inadvertently violate the injunction." Thus, the risk that the preliminary injunction would have a chilling effect on the liquor store's sales of genuine Newport cigarettes was deemed greater than the risk to Lorillard that the defendant would knowingly sell counterfeits in the absence of an injunction.
It seems that irreparable harm has become a tougher threshold in recent cases than in the past.