New TM Act's Irreparable Harm Presumption Is Not A Panacea

If a defendant meets the presumption with contrary evidence and levels the playing field, however, the plaintiff will face the expense and difficulty of providing evidence on an equitable factor ─ irreparable injury ─ which is notoriously elusive.

As now widely reported, the Trademark Modernization Act became law as part of the 5,600-page Consolidated Appropriations Act of Dec. 27, 2020. Many trademark litigators have noted or celebrated the act's statutory amendment because it includes a mandate that plaintiffs "shall be entitled to a presumption of irreparable injury" upon a finding of likelihood of success on the merits of a trademark infringement claim.

This amendment ensures the inapplicability of the 2006 U.S. Supreme Court patent case, eBay Inc. v. MercExchange LLC, which hobbled preliminary injunction motions by requiring plaintiffs to provide independent proof of likely irreparable injury. Before eBay, many district courts presumed irreparable injury in trademark cases upon a showing of likely success of proving a likelihood of confusion, the gravamen of trademark infringement.

The eBay patent holding spread to trademark cases, becoming a serious challenge for plaintiffs because proving irreparable injury in the trademark context can be difficult. The key perplexity is that a trademark by definition is a symbol of the seller's goodwill in the minds of consumers. Injury to that goodwill resides in the mind. Proving what customers in a mass market think proved challenging.

Some courts, even after finding a likelihood of confusion, denied motions for preliminary injunctions due to a failure of proof on the irreparable injury element. For example, when a brand owner claimed that the infringement interfered with its right of control, a basic function of trademark ownership, courts often dismissed the claim as a mere conclusory statement of law, not evidence of the fact.

Many of those who supported the statutory presumption now believe that trademark litigation will return to the status quo ante, when proving likelihood of confusion was key and irreparable injury received lip service at best, most of the time. On its face, the burden of proving irreparable injury has seemingly shifted to the defendants, leaving them to prove the negative, i.e., that there is no irreparable injury.

There are, however, some stumbling blocks to restoration of pre-eBay preliminary injunction motion practice. The statutory shifting of the burden of producing evidence of irreparable injury does not remove irreparable injury from the case. It remains, as the Supreme Court held, a long-established principle of equity relating to granting any injunction. Fifteen years of trademark litigation since the eBay case hammered this point home, focusing the parties and courts on the issue, pro and con.

As for the rebuttability of the presumption, some have held that it is a bubble bursting when an accused infringer presents contrary evidence. Others contend that a rebuttable presumption is sturdier than a bubble and can, depending on the proofs, withstand contrary evidence.

Federal Rule of Evidence 301 elucidates these contrary perceptions: "the party against whom a presumption is directed has the burden of producing evidence to rebut the presumption." More fundamentally however, the rule goes on to state that a presumption "does not shift the burden of persuasion, which remains on the party who had it originally." That would be the plaintiff.

Thus, plaintiffs are well-advised to consider the issue of irreparable injury before filing motions for preliminary injunctions. If defendants manage to rebut the presumption, plaintiffs will be catapulted back into the depths — and expense — of sufficiently proving irreparable injury. If plaintiffs anticipate trouble on the issue, they may choose to present it with the initial motion for preliminary injunction. That tactic, however, would open the evidence to scrutiny, anticipation and attack by a defendant.

On the other hand, if the plaintiff waits to see what if any evidence the defendant provides to refute irreparable injury, there will be little time and scope to counter it if the opportunity is limited to a reply brief. The timetable of preliminary injunction briefing is often so tight that there seems scarcely enough time to write a reply, much less assemble and prepare sufficient evidence on such a crucial but challenging factor.

How might an accused infringer adduce evidence of lack of irreparable injury sufficient to burst the presumption bubble or put the plaintiff to its proofs? The basic way is to prove that if the plaintiff suffered any injury, then it is compensable by money damages. The inadequacy of money is inherent in the definition of irreparability. Plaintiffs routinely argue that reputational injury is not quantifiable and therefore not amenable to monetary remedy.

The primary way to rebut the presumption is with consumer perception surveys, which are common in trademark cases. An accused infringer could try to show that the plaintiff has little reputation to injure in the first place — that the plaintiff's claimed mark is not distinctive or strong in the marketplace. It would follow that the defendant's mark does not reduce consumers' esteem, if any, for the plaintiff's mark, or reduce consumers' willingness, if any, to buy the branded product.

Another type of survey tending to rebut the presumption would be one showing no appreciable likely confusion between the marks in issue. Depending on the court, a minimum threshold for a probative confusion rate is 10%-15% of relevant purchasers. If there is negligible confusion between marks, it becomes much harder for the plaintiff to argue that there is injury to the plaintiff and that any such alleged injury is irreparable.

Post-eBay trademark cases did not settle on appropriate contours of surveys impacting irreparable injury. The question is akin to trademark dilution, which has been the subject of federal law in one form or another for a quarter century. While there is not yet a gold-standard form of dilution survey, many have been offered to show that one mark blurs or tarnishes another. Such claims of injury seem comparable to those routinely raised to support dilution allegations, i.e., endangerment of trademark control and distinctiveness.

There are other types of evidence that have been accepted by courts in trademark confusion cases to show that injury is not irreparable. The plaintiff may have dragged its feet in bringing a motion for preliminary injunction, which can show there is no extraordinary emergency to the case. The plaintiff's alleged loss of trade or website visits may not have been legally caused by or directly attributable to the defendant's alleged infringement.

While the takeaway for defendants is that all is not lost on preliminary injunction motions, the counterpart takeaway for plaintiffs is to be prepared. Be prepared to provide evidence of irreparable injury even though it is presumed by statute. A plaintiff should anticipate such facts as those discussed above, as well as the many other defenses and attacks that the past 15 years of post-eBay efforts have provided.

Surveys and other evidence may show that the plaintiff's mark has a strong reputation in the marketplace. Surveys may show that there is in fact appreciable confusion; anecdotal evidence of actual confusion, product quality controls, poor quality of the defendant's product; evidence that the plaintiff carefully selects its channels of trade and that the accused product is being sold outside those channels; the fact that the defendant will continue sales without an injunction; and diminished revenue and lost customers.

The new statutory, rebuttable presumption is not a complete panacea for plaintiffs and also not fatal to defendants. Irreparable injury remains in play in trademark cases. The challenge is to be prepared for it.

This article appeared in Law360 on March 4, 2021.