U.S. District of Arizona: “No automatic injunction upon a finding of copyright infringement”

Not that the plaintiffs in the Designer Skin case didn’t get an injunction:  They did (here it is); a narrow one utilizing proposed language by defendants explicitly permitting S&L to use its own photographs of Designer Skin merchandise on its website (see the prior post).  But the Court ruled that they were not entitled to it merely by virtue of proving copyright infringement.  Here’s an excerpt from the opinion, discussing the point:

The parties dispute the law governing the issuance of a permanent injunction in a copyright-infringement case. Relying on MAI Sys. Corp. v. Peak Computer, Inc., 991 F.2d 511, 520 (9th Cir. 1993), Designer Skin argues that “a permanent injunction [should] be granted in a copyright infringement case when liability has been established and there is a threat of continuing violations.”  Conversely, S & L Vitamins argues that the MAI rule has been overruled by the recent Supreme Court opinion in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006), and that the traditional four-factor test reaffirmed by eBay applies.

MAI’s general rule may accurately describe the result of applying the four-factor test to a copyright-infringement case in which liability has been established and there is a threat of continuing violations. Nevertheless, as Judge Wilson persuasively demonstrated in Metro-Goldwyn-Mayer Studios, Inc. v. Grokster, Ltd., 518 F. Supp. 2d 1197, 1209-10 (C.D. Cal. 2007), this general rule, as a rule, is clearly inconsistent with the Supreme Court’s decision in eBay. Thus, for the reasons given by Judge White in Grokster, Designer Skin’s reliance on this pre-eBay rule is unavailing, and the Court will apply the traditional four-factor test. . . .

This is an important holding, making the District of Arizona among the handful of earliest courts to apply the rule of eBay to copyright infringement.  After the jump, you can see how the court did apply it to one particular factor of interest, the need for a plaintiff seeking an injunction to prove irreparable harm.  The court agreed with S&L that past infringement does not lead to a presumption of future infringement. Unfortunately, to our client’s (nominal) detriment, and despite our argument that, seeing as how Designer Skin enunciated no coherent description of harm it suffered by the infringement — and that, in fact, it probably benefited from it — an injunction should not issue, the court found that there was irreparable harm, for reasons best expressed in its own words.

Before a court can grant permanent injunctive relief, a plaintiff has the burden of proving: (1) that it has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction. eBay, 547 U.S. at 391. The Court will address each factor in turn.

1. Irreparable Harm
Although courts have articulated the meaning of “irreparable harm” in various ways, the core essence of these varying formulations seems to be that harm is irreparable when it cannot otherwise be remedied except through injunctive relief. See Grokster, 518 F. Supp. 2d at 1210 (noting differences between cases).

Before eBay, many courts indulged in a presumption of irreparable harm upon a finding of copyright infringement. Grokster, 518 F. Supp. 2d at 1210 (citing cases). But after eBay, most courts addressing the issue have found the presumption to be irreconcilable with eBay’s holding that it is the plaintiff who”must demonstrate . . . irreparable injury,” 547 U.S. at 391, because the application of the presumption would effectively shift the burden of proof to the defendant. See, e.g., Grokster, 518 F. Supp. 2d at 1211 (“the presumption of irreparable harm no longer inures to the benefit of Plaintiffs” because “[s]uch a rule would contravene the Supreme Court’s intent that Plaintiffs establish not merely that infringement causes ‘harm,’ but how it amounts to irreparable harm”); MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556, 568 (E.D. Va. 2007) (“a presumption of irreparable harm is inconsistent with the Supreme Court’s instruction that traditional equitable principles require the plaintiff to demonstrate that it has suffered an irreparable injury”). There is no reason to doubt the soundness of this reasoning, and this Court embraces it. As a result, it is now clear that past infringement alone cannot equal irreparable harm. Grokster, 518 F. Supp. 2d at 1214.

But query whether a finding of past infringement coupled with a threat of future violations is sufficient to constitute irreparable harm. The district judge in Grokster did not think so, reasoning that “future copyright infringement can always be redressed via damages.” Id. at 1215. But Chief Justice Roberts, with whom Justices Scalia and Ginsburg joined, suggested otherwise in an eBay concurrence. 547 U.S. at 395 (noting “the difficulty of protecting a right to exclude through monetary remedies that allow an infringer to use”). And the Eighth Circuit has stated, albeit in a pre-eBay decision, that “irreparable harm inescapably flows from the denial of [the right to control the use of one’s copyrighted materials].” Taylor Corp. v. Four Seasons Greetings, LLC, 403 F.3d 958, 968 (8th Cir. 2005); see also MercExchange, 500 F. Supp. 2d at 568 (stating that “the right to exclude . . . will frequently result in a plaintiff successfully establishing irreparable harm in the wake of establishing validity and infringement”).

Whatever else might be said against the propriety of a rule that holds that past infringement plus the threat of future infringement equals irreparable harm, it seems clear to this Court that such a rule would not run afoul of eBay’s directives. First of all, the eBay Court did not address the showing necessary to establish “irreparable harm.” It merely held that the plaintiff has the burden of proving it. 547 U.S. at 391. Second, this two-part test does not resurrect the “presumption of irreparable harm” impliedly laid to rest by the eBay court. It simply recognizes that a plaintiff meets the burden of proving irreparable harm by making this two-part showing. And finally, the two-part test does not represent “a rule that an injunction automatically follows a determination that a copyright has been infringed.” Id. at 392-93. In exercising their equitable discretion, courts would still have the freedom to deny injunctive relief when the public interest or the balance of hardships weighs against such relief./6

n. 6:  The opportunity to deny injunctive relief for other reasons also explains why the two-part test does not conflict with the eBay Court’s statement that ‘the creation of a right is distinct from the provision of remedies for violations of that right.

Id. at 392. Although violations of the right to exclude would establish irreparable harm, they would not in and of themselves guarantee injunctive relief.

In the end, however, this Court need not stake out its position on this issue to determine whether irreparable harm is present in the case before it. S & L Vitamins is an internet reseller of Designer Skin products. In conducting its internet business, S & L Vitamins has impermissibly used 42 of Designer Skin’s copyrighted images to market the products, without ever paying Designer Skin one cent in licensing fees. Designer Skin does not want S & L Vitamins to use its copyrighted images. Throughout this litigation and even before, S & L Vitamins has repeatedly shunned Designer Skin’s efforts to protect its copyright interests by claiming that the images appearing on its websites are lawful photographs of Designer Skin’s products. Yet at trial, S & L Vitamins offered no proof to support this contention. Certainly S & L Vitamins had every right to decline to put on a defense case and to put Designer Skin to its burden of proof at trial. But the complete lack of evidence to support S & L Vitamins’ factual contention “do[es] not inspire confidence that [S & L Vitamins] poses no threat of future infringements.” /7 Broad. Music, Inc. v. Blueberry Hill Family Rests., 899 F. Supp. 474, 483 (D. Nev. 1995) (inferring a threat of future infringement from the “thin excuses” the defendant made when confronted with infringement allegations).

n. 7:  This is especially true in light of the Court’s summary-judgment ruling that the only triable issue of fact was whether the images on S & L Vitamins’ websites were lawful photographs or infringing copies of Designer Skin’s electronic renderings.

Finally, the nature of the infringing activity in this case makes actual damages difficult to prove — after all, how do you quantify the value of a product license that has no market? — and the availability of statutory damages in the wake of Derek Andrew, Inc. v. Poof Apparel Corp., 528 F.3d 696, 701 (9th Cir. 2008), is uncertain at best. Failing to issue an injunction under the circumstances of this case would be tantamount to forcing Designer Skin to license its copyrighted images to S & L Vitamins for some unknown price yet to be determined in future litigation (if possible), thus rendering its right to exclude others from using its images illusory. Designer Skin has established irreparable harm.

The court ruled that this reasoning applied as well to the second factor, the inadequacy of damages, and found that the plaintiff has satisfied that as well.

As to the third factor, the balance of hardships, the court wrote, “Because the injunction crafted by the Court will not enjoin S & L Vitamins from displaying original photographs of the products, S & L Vitamins’ claimed hardship is alleviated, and this factor weighs in favor of issuing an injunction.”

Finally, regarding the final factor — the public interest — the court, of course, noted that “Finally, the public interest in protecting the exclusive rights conferred upon a copyright holder will be served by issuing an injunction, Apple Computer, Inc. v. Franklin Computer Corp., 714 F.2d 1240, 1255 (3d Cir. 1983).”  Nonetheless, in opposing issuance of an injunction, S & L made the following submission:

69. Plaintiffs’ real purpose in bringing its claims was to shut down Defendants’ lawful business selling Designer Skin products. Much to the chagrin of Designer Skin, however, S&L had a perfect right to sell Designer Skin products. See Excerpted Oral Argument re Rule 50 Motion at 37.

70. In fact, Designer Skin’s chief executive officer admitted, on cross examination, that Designer Skin seeks to end discounted sales of their merchandise to willing buyers. Such an objective is not in the public interest.

71. Indeed, as a leading authority, and author of a major treatise, on copyright law recently wrote, “Copyright law has abandoned its reason for being: to encourage learning and the creation of new works. Instead, its principal functions now are to preserve existing failed business models, to suppress new business models and technologies, and to obtain, if possible, enormous windfall profits from activity that not only causes no harm, but which is beneficial to copyright owners.” Patry, William, “End of the blog,” Patry Copyright Blog (August 1, 2008). Plaintiffs have not given this Court any reason why it should be part of that destructive process that is, in fact, contrary to the purposes of the Copyright Act.

The court addressed this argument as follows:  “S & L Vitamins has not identified any public interest that will be disserved by the issuance of an injunction.”  And so issue, it did.

Originally posted 2014-06-25 01:28:26. Republished by Blog Post Promoter