The Northern District of Illinois recently pronounced the governing standards for injunctive relief in a franchise dispute between rival auto repair shops.
SBA-TLC, LLC v. Merlin Corp., 2015 WL 6955493 (N.D.Ill. 2015) sued its former franchisee for trademark infringement after the franchisee continued using the plaintiff’s signage, logo and design plans after the franchisor declared a default and terminated the franchise.
The court granted the plaintiff’s motion for a preliminary injunction based on the following black-letter basics:
To obtain injunctive relief, the moving party must show (1) he is likely to succeed on the merits, (2) the movant is likely to suffer irreparable harm if an injunction isn’t issued, (3) the balance of harms tips in the movant’s favor, and (4) an injunction is in the public interest.
To win a trademark infringement suit, the plaintiff must show (1) a protectable trademark, and (2) a likelihood of confusion as to the origin of the defendant’s product. In the injunction context, the trademark plaintiff merely has to show a “better than negligible chance of winning on the merits.
The plaintiff here introduced evidence that it properly registered its trademarks and that the defendant continued to use them after plaintiff declared a franchise agreement default. This satisfied the likelihood of success prong.
The court next found the plaintiff satisfied the irreparable harm and inadequate remedy at law injunction elements. Irreparable harm means harm that is not fully compensable (or avoidable) by a final judgment in the plaintiff’s favor. To show an inadequate remedy at law, the plaintiff doesn’t have to prove that a remedy is entirely worthless. Instead, the plaintiff needs to show that a money damage award is “seriously deficient.”
Trademark cases especially lend themselves to court findings of irreparable harm and an inadequate remedy at law since it is difficult to monetize the impact trademark infringement has on a given brand. Lost profits and loss of goodwill are factors that signal irreparable harm in trademark disputes. The court further found that since it’s difficult to accurately measure economic damages in trademark cases, an inadequate remedy at law could be presumed.
Finally, the court found that the balance of harms weighed in favor of an injunction. It found the potential harm to plaintiff if an injunction did not issue would be great since the defendant franchisee could continue to use plaintiff’s marks and financially harm the plaintiff. By contrast, harm to the franchisee defendant was relatively minimal since the franchisee could easily be compensated for any lost profits sustained during the period of the injunction.
Take-away:
SBA=TLC provides a succinct summary of governing injunction standards under FRCP 65. The case stands for proposition that the irreparable harm and inadequate remedy at law prongs of injunctive relief are presumed in the trademark infringement context given the intrinsic difficulties in quantifying infringement damages.
