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Special Feature -- The Second Circuit Finally Acknowledges the Impact of the Supreme Courtís eBay Decision on Preliminary Injunction Standards in Intellectual Property Cases

Wednesday, May 05, 2010

By Kim J. Landsman and Eric Pollex Rasmussen

On April 30, the Second Circuit issued an opinion in Salinger v. Colting, ___ F.3d ___, 2010 WL 1729126 (2d Cir. 2010), confirming what some commentators have predicted for years: The standard for granting permanent injunctions that the Supreme Court articulated in eBay, Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006) also applies to preliminary injunctions in other intellectual property contexts.

Background of the Case

The case concerned the publication of the novel 60 Years Later, written as an unauthorized sequel to the famous novel Catcher in the Rye by J.D. Salinger. Salinger sued for copyright infringement and moved to preliminarily enjoin publication of the novel. Opposition to the motion focused on a fair use defense. Rejecting that defense, the district court held that Salinger had shown a likelihood of success on the merits, and, following well-established Second Circuit precedents, presumed that irreparable harm was likely and granted a preliminary injunction. Salinger v. Colting, 641 F. Supp. 2d 250 (S.D.N.Y. 2009).

Why Didn’t the District Court Apply eBay?

In eBay, Inc. v. MercExchange, L.L.C, decided three years before the Salinger district court issued the preliminary injunction, the Supreme Court held that a plaintiff seeking a permanent injunction as a remedy for patent infringement must establish the following: (1) that it has suffered irreparable injury; (2) that remedies available at law are inadequate to compensate for that injury; (3) that, considering the balance of hardships between plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. 547 U.S. at 391-94.

Soon after the eBay decision, some predicted that the decision would bring about sweeping changes in the injunction standards in other intellectual property fields, not just patent law. In his 2007 Brace Memorial Lecture to the Copyright Society, Richard Dannay noted that the eBay court’s reliance on well-established principles of equity would lead to its application beyond patent cases at least to other areas of intellectual property and to preliminary as well as permanent injunctions. Equally important, eBay‘s analysis would “prohibit any presumption of irreparable harm as contrary to traditional equitable principles.” Richard Dannay, Copyright Injunctions and Fair Use: Enter eBay—Four-Factor Fatigue or Four-Factor Freedom?, 55 J. Copyr. Soc’y 449 (2008).

The leading copyright treatises soon echoed that analysis. See 4 Melville B. Nimmer & David Nimmer, Nimmer on Copyright §14.06[A][3][a] (2009); 2 Paul Goldstein, Goldstein on Copyright §13.2.1 (2009); 6 William F. Patry, Patry on Copyright §22 (2009). Patry, in particular, welcomed this result and used a significant amount of his chapter on remedies to discuss the presumption of irreparable harm and its “disastrous impact” on decision making. 6 Patry §22:44-22:59.

The Second Circuit’s Application of eBay to Copyright

It may therefore seem puzzling that courts in the Second Circuit had not uniformly applied eBay’s standards to copyright cases until the Second Circuit’s ruling in Salinger. The district court in Salinger noted the different eBay standards but distinguished the holding as limited to patent law and applied the venerable Second Circuit presumption of irreparable harm in copyright cases. On appeal, the Second Circuit vacated and remanded because the district court had followed Second Circuit precedent without taking into account the change in preliminary injunction standards required by eBay. 2010 WL 1729126, at *12. The appellate court agreed with the district court’s analysis concerning the likelihood that the plaintiff would ultimately prevail on the merits, but held that that was no longer enough for a preliminary injunction and remanded the case to the district court to apply the eBay standard.

Potential Future Impact

The narrow holding of Salinger is that “eBay applies with equal force (a) to preliminary injunctions (b) that are issued for alleged copyright infringement.” Id. at *7. The change in preliminary injunction standards in the Second Circuit will not end there, however.

Trademark is another area of law where irreparable harm has been presumed when likelihood of success on the merits has been found, and that presumption will almost certainly be resigned to the dustbin of history. A footnote in Salinger states that

although our holding here is limited to preliminary injunctions in the context of copyright cases, eBay's central lesson is that, unless Congress intended a “major departure from the long tradition of equity practice,” a court deciding whether to issue an injunction must not adopt “categorical” or “general” rules or presume that a party has met an element of the injunction standard. Therefore, although today we are not called upon to extend eBay beyond the context of copyright cases, we see no reason that eBay would not apply with equal force to an injunction in any type of case.

Id. at *7 n.7 (quoting 547 U.S. at 391-94).

Salinger also brings the Second Circuit into the mainstream of preliminary injunction law by making consideration of the public interest a formal factor in the analysis. Id. at *9 n.8. The defendant had strenuously argued that the public interest in freedom of expression would be seriously harmed by a prior restraint on publication.

What remains to be seen is whether eBay will actually make it more difficult to obtain preliminary injunctions. Salinger did not say that the standard for determination of irreparable harm in the context of intellectual property infringement cases will be high; only that the court must make such a determination instead of relying on a presumption. The appellate court offered little guidance on this. To the contrary, it provided ammunition for both copyright claimants and defendants.

Salinger noted that a copyright holder’s “First Amendment interest in not speaking” could be irreparably harmed by publication, just as a defendant “also has a core First Amendment interest in the freedom to express him- or herself, so long as that expression does not infringe the plaintiff’s copyright.” Id. at *10 (emphasis in original). It also observed that its prior presumption may well have been empirically based and therefore be an accurate predictor of future cases without it:

This is not to say that most copyright plaintiffs who have shown a likelihood of success on the merits would not be irreparably harmed absent preliminary injunctive relief. As an empirical matter, that may well be the case, and the historical tendency to issue preliminary injunctions readily in copyright cases may reflect just that.

Id. at *11. Copyright owners will no doubt use that language to move the courts toward a de facto return to the idea that if likelihood of success on the merits is shown, irreparable harm and a favorable balance of hardships still virtually inevitably follows.

The discussion of the public interest factor seems to have taken a more defendant-oriented tilt, though the court carefully hedged. “The public’s interest in free expression” was said to be “significant” and “distinct from the parties’ speech interests,” though the example that followed did not seem so distinct from the parties’ competing interests: “Every injunction issued before a final adjudication on the merits risks enjoining speech protected by the First Amendment.” On the other hand, however, “[s]ome uses … will so patently infringe another's copyright, without giving rise to an even colorable fair use defense, that the likely First Amendment value in the use is virtually nonexistent.” Id. at *12.

The language that will undoubtedly be quoted most often by those accused of copyright infringement, and that may be a true harbinger of a future shift in their direction, comes from the discussion of likelihood of success on the merits, where the Second Circuit “emphasize[d] that courts should be particularly cognizant of the difficulty of predicting the merits of a copyright claim at a preliminary injunction hearing” noted that “[t]his difficulty is compounded significantly when a defendant raises a colorable fair use defense.” Id. at *10. The discussion of the factor on which the plaintiff won the appeal may well prove the undoing of future plaintiffs, at least in copyright cases.

There is likely to be less impact on trademark infringement cases. They rarely result in damages awards, and proof of damages (other than in counterfeiting cases) is generally more difficult than in patent or copyright cases. Showing of the inadequacy of a monetary remedy should therefore be easier. Moreover, since the purpose of trademark protection is to prevent consumer confusion, the public interest should favor a preliminary injunction if likelihood of confusion (the test of infringement) is shown.

About the authors: Kim J. Landsman is a partner at Patterson Belknap Webb & Tyler LLP with more than 25 years of experience litigating disputes in all areas of intellectual property, including a wide variety of copyright, trademark, patent, and trade secret issues. Eric Pollex Rasmussen is an associate in the Intellectual Property Transactions Group at Patterson Belknap Webb & Tyler LLP. His practice focuses on counseling companies, not-for-profit organizations, and individuals on a broad range of intellectual property matters relating to publishing, software, media and entertainment, and the Internet.

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