Irreparable Harm No Longer Presumed in the Third Circuit for Lanham Act Plaintiffs

In a recent decision, the Court of Appeals for the Third Circuit eliminated the presumption of irreparable harm for Lanham Act plaintiffs seeking preliminary injunctive relief. In Ferring Pharms., Inc. v. Watson Pharms., Inc., No.13-2290 (Aug. 26, 2014), the Third Circuit extended the Supreme Court’s ruling in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 403 (2006), and Winter v. Natural Resources Defense Council, 555 U.S. 7 (2008), to claims brought under the Lanham Act. Under the Third Circuit’s decision, a plaintiff in a trademark infringement or false advertising lawsuit seeking a preliminary injunction in the Third Circuit now needs to prove that irreparable harm is “likely” to occur. Such harm is no longer presumed from a mere showing of likelihood of success on the merits. Instead, a plaintiff needs to present compelling evidence that its brands, products or services will likely be harmed should an injunction not issue.

In its recent decision, the Third Circuit followed the Ninth Circuit’s ruling in Herb Reed Enters., LLC v. Fla. Entm’t Mgmt., Inc., 736 F.3d 1239 (9th Cir. 2013), breaking with a long tradition of presuming irreparable harm for trademark infringement plaintiffs who have demonstrated a likelihood of success on the merits. Until 2006, the majority of courts presumed irreparable harm and liberally granted preliminary injunctive relief to plaintiffs who established a likelihood of success in most trademark infringement and false advertising actions. The rationale for such presumption was twofold: (1) confusing or misleading consumers about certain qualities or origin of a product causes that product harm by diminishing its value in the minds of the consumers; and (2) the harm resulting from trademark infringement or false advertising oftentimes harms the goodwill and reputation of the product’s owner and is irreparable because it is virtually impossible to quantify in terms of monetary damages.

After the Supreme Court in eBay overruled the presumption of irreparable harm in patent infringement cases, several appellate courts were faced with the question of whether the eBay rationale applies to claims brought under the Lanham Act. Some courts answered this question in the affirmative and rejected the presumption of irreparable harm; other courts continued to apply the presumption in trademark infringement and false advertising cases post-eBay.

The dispute in this case arose between two competing pharmaceutical companies from allegedly false and misleading statements made by a consultant for Watson about Ferring’s drug. As summarized by the court, the statements were made during two presentations to doctors and healthcare professionals and were included in two webcasts accessible online to anyone who had the appropriate password. In the first statement, Watson’s consultant claimed that Ferring’s drug contained a Black Box warning, implying that it carried a significant risk of serious or life-threatening effects to women over 35. In the second statement, Watson’s consultant claimed that a significantly higher percentage of patients preferred Watson’s product to the product manufactured by Ferring. The third statement concerned the efficacy of Ferring’s drug in women 35 years of age and older. After Ferring brought its lawsuit for false advertising and moved for preliminary injunction to enjoin Watson from making further false statements and for corrective advertising, Watson admitted that the statement about the Black Box warning was false and removed it from the Internet. In addition, Watson’s consultant promised that he would not repeat any of the three statements at issue ever again. As summarized in the decision, Ferring claimed that it was entitled to a preliminary injunction because it had established a likelihood of success in its false advertising claim and thus should be given the benefit of the presumption of irreparable harm. The district court disagreed.

Affirming the district’s court decision, the Court of Appeals for the Third Circuit held that a Lanham Act plaintiff was not entitled to a presumption of irreparable harm, regardless of how strong the likelihood of success on the merits was. While the court recognized that an injury to goodwill and reputation that is frequently sustained by a Lanham Act plaintiff may not be measured in monetary damages and so may differ from an injury suffered by a patent or copyright holder, the court declined to limit the eBay ruling to patent and other property rights. Instead, the court reasoned that eBay should apply to all other cases governed by the traditional principles of equity, including trademark infringement and false advertising claims. Because under equity principles the decision whether to grant or deny injunctive relief rests with the discretion of the district court, an automatic presumption would be a major departure from these principles. Holding that such a departure was not intended by Congress, the Third Circuit concluded that irreparable harm cannot be presumed in the Lanham Act context.

Having rejected a presumption of irreparable harm, the Third Circuit assessed the evidence of irreparable harm presented by Ferring. Relying on the Supreme Court’s ruling in Winter, the Third Circuit held that Ferring had to show the irreparable harm was “likely” and not merely “probable” or “possible” in the absence of the injunction. As cited by the court, Ferring’s main piece of evidence was a declaration from a doctor that he and other doctors “would be less likely” to prescribe Ferring’s drug if it contained a Black Box warning or was less effective or less preferred than another product. The Third Circuit held that such evidence was speculative and not sufficient to warrant injunctive relief. The court also focused on the fact that Watson’s allegedly false statements were no longer available to consumers.

This ruling is a reminder that after the Supreme Court’s decision in eBay, a prudent plaintiff moving for a preliminary injunction in the Third Circuit — or perhaps in any Circuit — may no longer rely on the presumption of irreparable harm and must be prepared to present compelling evidence on that subject. Such evidence may include instances of actual consumer confusion, loss of market share, loss of customers, evidence of inferior goods offered under the infringing mark, lost sales attributable to alleged false statements or infringing trademarks, and damage to reputation or goodwill.