How In-House Counsel Can Prepare to Prove Irreparable Harm to Support Trademark Infringement Preliminary Injunctions

The Trademark Modernization Act made it easier for trademark owners to get a preliminary injunction.

One of the ways it did that was by creating a presumption of irreparable harm in all cases of trademark infringement. That presumption is rebuttable though. The Third Circuit just issued the first big opinion where the presumption has been rebutted.

That case showed that when products are purchased by sophisticated purchasers, that fact alone can serve to rebut the presumption of irreparable harm. The case also demonstrates the importance of gathering persuasive evidence.

Trademark owners often need to seek injunctions quickly. In fact, failure to act quickly is a reason for a court to deny an injunction. But before seeking an injunction trademark owners must gather evidence of:

• • Consumer Confusion
  • Lost customers
  • Reputational Harm caused by competitor’s lower quality or inferior goods and services

Before seeking a trademark infringement injunction, companies may also consider:

• • A consumer perception survey
  • A consumer confusion survey

What Happened in The Case?

The lawsuit was between two competitors that sell farming pesticides that have similar names and logos. Both pesticides are used in the same geographic areas, against many of the same insects, and are sold to farmers via distributors. Plaintiff’s product comes as a liquid and sells for $425 a gallon. Defendant’s product is sold as a solid and is much cheaper at $24 per pound.

The importance of the products and the variance in the price points were the difference in the case. The court found that farmers would be very careful in choosing a pesticide because the wrong choice could have catastrophic results for their crops. The court determined that many farmers, who were sophisticated consumers, were using experts to make their pesticide decisions. The experts were even more sophisticated than the farmers. With the two products being offered to sophisticated consumers at such different price points, the Court found that the plaintiff could not prove that consumers would accidently purchase the wrong product. That led the court to deny the injunction request.

Why This Matters

Winning a preliminary injunction often provides all the relief necessary in a trademark infringement case. It gives companies incredible leverage to reach a settlement without the need for years of expensive litigation. On the other hand, having a preliminary injunction denied often signals a long and expensive fight.

Many lawyers assumed that the presumption of irreparable harm would make getting injunctions under the Trademark Modernization Act almost automatic when similar marks were at issue. This case shows otherwise. Instead, getting a preliminary injunction still requires marshalling evidence.

As soon as a company notices an infringement, it should work with its counsel to gather persuasive evidence. Injunctions need to be filed relatively quickly to be effective, but companies must take the time to gather evidence instead of rushing forward with incomplete facts.

The Takeaways

Being prepared requires legal teams to be in contact with front-line sales staff. There should be a process for any person, company-wide, to report suspected trademark infringement. Once those reports are vetted by legal, every salesperson should be given access to a spreadsheet to track:

• • Customer Confusion (including any questions about the infringing products or services)
  • Lost Customers (including any information about why the customers were lost)
  • Proof of Reputational Harm (including reports of problems from use of the infringing product or service)

These spreadsheets and the employee testimony supporting them can ensure the best opportunity to prove irreparable harm without the incurring the costs and delays in relying on surveys. However, in some instances, it may still be necessary to conduct consumer perception or confusion surveys to prove irreparable harm.

When a company faces irreparable harm for trademark infringement, an injunction is the best tool for protecting a company’s brand. The Trademark Modernization Act made getting injunctions easier, but it is still necessary to collect the right information before heading to court.

Our Intellectual Property Team will continue to monitor applications of the Trademark Modernization Act. Please contact Andrew Coffman or any member of Phelps’ Intellectual Property team if you have questions or want advice and guidance.