Originally posted 2012-04-09 16:28:16. Republished by Blog Post Promoter

The Denver Post reports a very interesting, and for trademark plaintiffs very troubling, decision that the Supreme Court has refused to review. It has to do with one of the standard criteria for the granting of a preliminary injunction in any case:   A “balancing of the harms.” In short, a court has to balance the harm that would result in not granting a preliminary injunction against a defendant, where likelihood of success has already been demonstrated by the plaintiff, against the harm that would be imposed on the defendant if it did grant the injunction.

newport2.JPGCourts, frankly, frequently give this factor short shrift in trademark cases, and especially counterfeiting cases. Under long established precedent, as this article discusses, irreparable harm is usually presumed when a trademark is infringed, and courts and even litigants do not typically spill a lot of ink on this factor, though there are exceptions.

Here’s a big one: Where evidence of the sale of counterfeit goods — here, cigarettes — suggested such a low volume of sales that the court figured that the preliminary injunction was not warranted (links added):

After discovering the sale of the fake cigarettes, Lorillard sought a preliminary injunction early last year against I&G Liquors, to prevent future sales of counterfeit goods.But a district court refused to grant the injunction, and the 10th U.S. Circuit Court of Appeals, based in Denver, upheld the decision earlier this year.

The appeals court ruled that Lorillard failed to prove it would suffer great harm without the injunction, as required by law, and also found that as a small business, the retailer would suffer greater harm from the injunction.

The court noted that Engida said an injunction would force him to stop selling all Newport cigarettes due to the difficulty of detecting bogus packages.

NAM said in its brief that the appeals-court decision set a far stricter standard for obtaining preliminary injunctions than Congress intended.

Now, trial judges are given wide latitude on these issues, and although the Tenth Circuit opinion addressed the issues —

Lorillard argues I and G would not be harmed from being barred from selling counterfeit cigarettes, since doing so is illegal anyway. As I and G points out, however, the counterfeit packages are so similar to genuine packages that an injunction would probably require it to stop selling any Newport® cigarettes while the suit was pending, for fear that it would inadvertently violate the injunction. Further, the district court did not clearly err in taking account of I and G’s status as a small business. All of these factors indicate that an injunction would weigh much more heavily on I and G than the lack of one would affect Lorillard.

— the heart of it, really, is this sentence:  

Under the circumstances, the district court’s decision to deny preliminary injunctive relief was not arbitrary, capricious, whimsical, or manifestly unreasonable.

Hm. I never saw “whimsical” in that formulation before!

The decision sounds right, actually, and I have nothing against Big IP and trial judges being reminded, from time to time — even in a counterfeiting case — that being the markholder does not mean you get everything you want, all the time. Having said that, it’s hard to imagine this company made more money on its sale of Newports during this period than it spent litigating this point alone; in that regard, it’s always “advantage, big company.”

And of course I am always suspicious, too, of cynical, off-topic spin from lawyers, like that of the defendant of this case, to wit: “It has been hard work, but we are gratified by this victory against Big Tobacco.” That’s from Stephen Peters of Denver’s Lindquist & Vennum.” Please! Your client is little tobacco, and no less guilty of being an accessory to suicide by tobacco than Lorillard.

Maybe a little “balancing of harms” outside of the courtroom is in order, too. But meanwhile, we can put this in our pipes and smoke it: No free pass on balancing the harms in Lanham Act cases.

By Ron Coleman

I write this blog.