Injunctions Not Always a Slam Dunk in Trademark Litigation
January 21, 2010
by Michael Fleming
A recent decision out of federal court in Illinois illustrates how trademark owners, even with a relatively promising case for trademark infringement, should not presume that courts will automatically grant short-term injunctive relief to prevent the alleged infringer from continuing to use the mark during the course of the litigation. The matter also shows once again how spending some time on the details of the business terms in a trademark license up front could have paid off later to avoid a particularly dangerous situation for the trademark owner.
In the Illinois case, a trademark owner had licensed its mark for food products to another company. After a few years, the relationship deteriorated, and the registered owner of the mark purported to terminate the license. The licensee resisted, and eventually claimed that the trademark owner had failed to properly maintain its rights in the mark and had effectively abandoned the mark, allowing the licensee to pick up the mark as its true new owner. Litigation ensued.
In this decision over the granting of a temporary restraining order (TRO) to prevent the licensee from continuing to use the mark while the full course of litigation took place, the court acknowledged that even at this early stage of the case the original owner had a “better than negligible likelihood of success on the merits of the case.” However, that alone did not give the trademark owner enough power to win the TRO. Here, although there was clearly a potential for ongoing damage to the mark owner’s rights, the defendant argued that the mark owner had no existing business that used the mark, and that therefore the harm to the owner while the litigation continued would be mitigated. On the other hand, the TRO, if granted, would nearly destroy the business of the defendant. And, in the end, while there was some tipping towards the owner as the likely winner at the end of the case, the court did not see a slam dunk in the case’s future.
In all, applying a balancing test looking at the above factors and many others, the court determined that the extraordinary remedy of a TRO was not available to the trademark owner. As with most litigation, the likelihood that the case will actually go to trial is fairly small. Thus, as a practical matter, the real impact of this decision is that the settlement value for the case has likely been severely tilted toward the defendant.
The lessons for businesses out of a case like this are many-fold. The first is that injunctive relief, particularly at the beginning of a case before all of the discovery and trial has unfolded, is not always a sure thing. Second, the licensing transaction should address important business terms such as how the license might be terminated and quality control for the use of the mark by the licensee. In this case, the transaction failed to address these issues and, as usual, those shortcomings were not evident until the relationship went sour. At that point, the licensee discovered he had leverage to use in the subsequent litigation.
Smart trademark licensing should always be done with the potential for termination in mind, which may take a bit more time up front. But, that time will be considered well-spent if the relationship turns for the worse at a later date.
- Michael Fleming is a member of the Larkin Hoffman Daly & Lindgren Ltd. Intellectual Property, Technology and Internet Practice.