Tag: Inadequate Remedy at Law

Trademark Infringement – The Irreparable Harm and Inadequate Remedy at Law Injunction Elements

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.

 

 

Record Company’s Injunction Attempt Against Rock Band Fails

Victory Records’ attempt to prevent the rock band A Day to Remember (ADTR) from releasing an album in the Fall of 2013 failed because it couldn’t establish the elements for injunctive relief under Illinois law.

In Woodard v. Victory Records, 2013 WL 5517926 (N.D.Ill. 2013), the defendant record company (“Victory” or the “Record Company”) sued to prevent the Florida pop-punk quartet from self releasing its Common Courtesy record.

The Court denied the Victory’s request to block the band’s album release.

To get a temporary restraining order, a plaintiff must show:

  • irreparable harm,
  • an inadequate remedy at law,
  • a likelihood of success on the merits;
  • the harm that will result if the injunction isn’t entered will outweigh harm to the opposing side if the injunction is entered.  *2.   

Victory established a likelihood of success on the merits.  “This is not a high burden.”  All the movant must show is a “better than negligible” chance of winning on the merits.

The crux of the dispute was the parties’ differing interpretations of the word “album” as it was used in the contract. 

The Court found the term ambiguous and each side’s interpretation was plausible.  ( *3).  Because each side’s reading of the contract had facial validity, the Record Company demonstrated a better than negligible chance of prevailing on the merits.

Irreparable harm denotes “likely” injury that is “real” and “immediate”, not “conjectural or hypothetical.”

The movant has to show money damages would not adequately remedy the harm suffered without an injunction.  ( *3).

Here, Victory couldn’t establish likely irreparable harm or an inadequate remedy at law because ADTR was a known quantity. 

ADTR had released several successful albums under the Victory label.  Because of this, Victory could gauge any lost profits resulting from ADTR’s independent album release. 

This ability to extrapolate the album’s likely profits from ADTR’s prior sales meant Victory had an adequate legal remedy (e.g. a suit for money damages) for breach of the recording contract. 

The Court also rejected Victory’s reputational harm argument – that if ADTR is allowed to self-release an album and the album is flawed and doesn’t sell, Victory’s reputation will suffer.  The Court held that since ADTR was perennially successful and had a wide fan base, it wasn’t likely that ADTR would intentionally (or not) release an inferior music product. (*4-5).

The balance of harms element also favored ADTR.  The Court applied a “sliding scale” analysis: the more likely a movant is to win, the less the balance of harms must weigh in the movant’s favor (and vice versa). (*2).

 Here, the Record Company had a lost profits breach of contract remedy if the band breached the recording contract.  In contrast, if ADTR was prevented from releasing its album with no end in sight to the underlying litigation, the band’s fan support could likely erode in an ultra-competitive industry (the music business) resulting in definite financial harm to the band.  (*5)

Take-aways:

Victory Records illustrates that injunctive relief is difficult to get where the moving party has a clear legal remedy.

 The Court found that past album sales provided a basis for lost profits and a sufficient legal remedy if the band breached the recording contract.