Feature

The Value of First Impressions: Considering the Effect of Motions for Preliminary Injunctive Relief on Ultimate Results in IP Cases

Ronald J. Ventola II and Samuel W. Silver

©2014. Published in Landslide, Vol. 7, No. 1, September/October 2014, by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association or the copyright holder.

Will Rogers said, “You never get a second chance to make a good first impression.”1 This adage resonates with litigators—many of us believe that a court’s first impression of a case will affect its consideration of the numerous decisions it will make over the life of the case. In any litigation, the decision whether to move for preliminary injunctive relief seems to implicate this adage about first impressions. But the normal concern about making a good first impression can acquire even greater force in cases involving false advertising, unfair competition, or infringement of intellectual property rights, where a high percentage of plaintiffs plead the right to permanent injunctive relief and expect to receive it if they prevail.

Litigators in these cases wonder how the decision to seek or not to seek preliminary injunctive relief will affect the rest of the case, especially a later request for a permanent injunction. When we decide whether to seek preliminary injunctive relief, do we send a message to the court about the urgency and genuineness of the plaintiff’s need for relief? If we do not move for preliminary injunctive relief, will the court infer that our case is weak? Will a decision not to seek preliminary injunctive relief be thrown back at us, argued by our opponent or cited by the court in an opinion denying permanent injunctive relief? If we move for preliminary injunctive relief and it is denied, is our case lost? This article considers these questions in light of case decisions and a statistical analysis of requests for preliminary injunctive relief in trademark cases.

Deciding Whether to Seek Preliminary Injunctive Relief

It often is difficult to decide whether to move for preliminary injunctive relief. There are several potential advantages. First and perhaps most important, an order of preliminary injunctive relief typically will confer a direct benefit by halting at least some of the disputed activity until the case proceeds to final disposition. Second, preliminary injunctive relief may indirectly lead to a permanent halt of the enjoined activity, by creating such a break in the activity that resuming it no longer makes business sense for the defendant. Third, for a party that has the time, money, and commitment to prepare a powerful presentation that is ready when the case is filed, there can be a crushing effect on the defendant, who may not be ready or able to defend against a well-developed presentation, especially if the litigation itself comes as a surprise. Fourth, conventional wisdom suggests that if the plaintiff successfully moves for preliminary injunctive relief, that success will often—maybe even usually—foretell the ultimate outcome of the case. As a result, winning a request for preliminary injunctive relief seems like a tremendous advantage. Fifth, moving for preliminary injunctive relief strongly bolsters the impression that the relief sought is needed urgently.

Of course, moving for preliminary injunctive relief also imposes costs and risks. First, a motion for preliminary relief compresses the timeline for much of the work in a case, causing a substantial portion of the discovery, briefing, and presentation of evidence to be performed in a short time. This compression usually shifts a major portion of the cost of the case to the beginning, and it often requires the parties to expend considerable effort and attention in a short period of time, potentially diverting key employees from their normal work outside the litigation. Second, preparing a motion for preliminary injunctive relief may hinder settlement. Because the effort to prepare and present the motion for preliminary relief can consume so much of the parties’ time, energy, and money, the parties often are unable to pursue settlement negotiations that might otherwise be fruitful. The cost of making or opposing a motion for preliminary injunctive relief may be so high that an early settlement no longer seems justified. Moreover, because the preliminary injunction proceedings typically require a fast-paced, hard-fought, high-stakes battle, parties can find it psychologically impossible to withdraw and consider amicable resolutions while they are fighting over preliminary relief. Third, although the possibility of seizing the early momentum by prevailing on a motion for preliminary injunctive relief is appealing, the prospect of an adverse decision looms just as large and is often assessed as a risk that if preliminary relief is denied, the case will be lost.

The remainder of this article examines the perceived costs and benefits of seeking preliminary injunctive relief in two ways. First, we examine reported opinions to see whether courts appear to consider either the filing or the outcome of a motion for preliminary injunctive relief as a factor in a later decision on permanent injunctive relief. Second, we consider whether there is a correlation between the existence or outcomes of motions for preliminary injunctive relief and ultimate case outcomes.

Motion for Preliminary Injunctive Relief as a Factor in Considering a Permanent Injunction

Relatively few reported cases discuss a potential link between a plaintiff’s motion for preliminary injunctive relief and the court’s later consideration of permanent injunctive relief. Although some courts have considered whether the plaintiff moved for preliminary injunctive relief as a relevant factor in the decision on whether to order permanent injunctive relief, they have not held or said it was a dispositive or even an important factor in their decision. Instead, courts typically have mentioned and then dismissed a defendant’s argument that a lack of truly irreparable harm should be inferred from the plaintiff’s failure to move for preliminary injunctive relief.

For example, in Louis Vuitton Malletier S.A. v. LY USA, Inc.,2 roughly one year into a civil proceeding for trademark infringement and counterfeiting, the defendants were indicted in a related criminal proceeding. The defendants moved to stay the civil proceeding pending resolution of the criminal proceeding. The district court denied the stay, in part because the plaintiff “had a compelling interest in prompt resolution of the civil case . . . because of the apparent scale of the counterfeiting operation and the potential for lost sales and consumer confusion.”3 On appeal, the defendants argued that the plaintiff’s “commercial interests must not have been in grave jeopardy because [it] did not seek a temporary restraining order or preliminary injunction.”4 The Second Circuit rejected this argument, noting that “the failure to seek a preliminary injunction in a case of infringement is not generally considered a factor that weighs against a plaintiff seeking permanent injunctive relief.”5 It is also worth noting that the district court granted the plaintiff a permanent injunction, though this decision was not at issue before the Second Circuit.6 (The defendants appealed the district court’s grant of summary judgment to the plaintiff on its infringement claims, a decision the Second Circuit affirmed in a separate unpublished opinion; but the defendants apparently did not specifically appeal the district court’s entry of a permanent injunction.)

In Mytee Products, Inc. v. Harris Research, Inc.,7 the Federal Circuit affirmed the district court’s entry of a permanent injunction in an action for patent infringement. The court rejected the defendant’s argument that the district court should have considered the plaintiff’s failure to move for preliminary injunctive relief in deciding whether to enter a permanent injunction. The appellate court wrote, “While we have held that delay in seeking an injunction is a factor to be considered in determining whether to issue a preliminary injunction, we have never held that failure to seek a preliminary injunction must be considered as a factor weighing against a court’s issuance of a permanent injunction.”8 The court was concerned that a rule tying the right to permanent injunctive relief to whether a party sought preliminary injunctive relief “would likely result in a substantial increase in the number of requests for preliminary injunctions; in many cases, such requests would be filed not because of the need for preliminary injunctive relief, but merely to protect the patent owner’s ultimate right to a permanent injunction.”9 The court further based its decision on the “significant differences in the requirements and uses of preliminary and permanent injunctions.”10

Similarly, in MercExchange, L.L.C. v. eBay, Inc.,11 the Federal Circuit reversed the district court’s denial of a permanent injunction on a claim of patent infringement. The district court reasoned that the plaintiff’s failure to move for preliminary injunctive relief should outweigh what was, at the time of the Federal Circuit’s decision, a general rule that permanent injunctions would be granted in cases of patent infringement “absent exceptional circumstances.” The Federal Circuit disagreed:

[W]e do not agree with the court that [the plaintiff’s] failure to move for a preliminary injunction militates against its right to a permanent injunction. A preliminary injunction is extraordinary relief that is available only on a special showing of need for relief pendente lite; a preliminary injunction and a permanent injunction ‘are distinct forms of equitable relief that have different prerequisites and serve entirely different purposes.’12

The Supreme Court granted certiorari, and in eBay Inc. v. MercExchange, L.L.C.13 altered the analysis for granting injunctions in patent cases by eliminating the rule that an injunction against infringement would be awarded absent extraordinary circumstances. On remand, the district court reconsidered the plaintiff’s motion for a permanent injunction under the standard that had just been clarified by the Supreme Court.14 The court denied the injunction, reciting factors demonstrating that the plaintiff was not suffering irreparable harm from the infringement, including “lack of commercial activity in practicing the [relevant] patents,” and “public and private actions indicat[ing] its desire to obtain royalties from [the defendant]” (as opposed to preventing infringement).15 The court described the plaintiff’s failure to seek a preliminary injunction as “plainly not dispositive [but] yet another factor in the calculus indicating both that [the plaintiff] is not being irreparably harmed by [the defendant’s] infringement and that money damages are adequate.”16 Thus, the court considered the plaintiff’s failure to seek preliminary injunctive relief in deciding to deny permanent injunctive relief.

Similarly, in Halo Electronics, Inc. v. Pulse Electronics, Inc.,17 the district court found that the plaintiff’s “failure to file for a preliminary injunction gives some indication that [it] is not irreparably harmed by [the defendant’s] infringement.”18 But, unlike in eBay, the plaintiff’s decision not to move for preliminary injunctive relief was outweighed by other factors, and the court granted the permanent injunction.

Other courts have considered a party’s failure to seek preliminary injunctive relief while downplaying the failure’s relevance. For example, in Complex Systems, Inc. v. ABN Amro Bank N.V.,19 the district court held that the plaintiff’s failure to move for a preliminary injunction at the outset of the litigation “is, of course, not determinative of whether permanent injunctive relief is appropriate.”20 The court found the defendant’s argument that the plaintiff’s failure to seek preliminary relief should be considered in determining whether to grant permanent injunctive relief “all the more unpersuasive in light of [the plaintiff’s] expeditious request for a permanent injunction following the Court’s . . . decision granting summary judgment in [its] favor.”21 The plaintiff also “reasonably explained its calculation to not seek preliminary injunctive relief,” which included the belief that the effect of a preliminary injunction would be so strong that the bond for such an injunction would be prohibitively expensive.22

In Capitol Records Inc. v. Thomas-Rasset,23 the district court granted a permanent injunction against a copyright infringer. The court rejected the defendant’s argument that the plaintiffs’ failure to move for a preliminary injunction should prevent entry of a permanent injunction. The court quoted the district court’s opinion on remand in eBay for the rule that the plaintiff’s failure to seek a preliminary injunction is “plainly not dispositive.” The court found no evidence that the plaintiffs’ decision not to move for a preliminary injunction “was part of an overall strategy to attempt to exact licenses or was otherwise contrary to the propriety of entry of a permanent injunction.”24

Likewise, in ePlus, Inc. v. Lawson Software, Inc.,25 the district court entered a permanent injunction against a patent infringer despite the plaintiff’s failure to move for preliminary injunctive relief. The court said there was no rule requiring a plaintiff to move for a preliminary injunction in order to obtain a permanent injunction, nor was it aware of any authority that failure to move for a preliminary injunction should “counsel[] against a finding of irreparable injury.”26 The court went on to explain why it found such a rule undesirable: “Indeed, principles of judicial efficiency and sound judicial administration strongly militate against such a rule, lest the courts be besieged with motions for preliminary injunction filed to preserve the right to permanent injunctive relief.”27

In summary, although courts have occasionally cited a plaintiff’s failure to move for preliminary injunctive relief as being a factor considered in deciding to deny permanent injunctive relief, such reported cases are rare, and the denial of injunctive relief seems always to be supported by other facts indicating a lack of irreparable harm. More common are cases in which courts have granted permanent injunctions despite the plaintiff’s failure to seek preliminary injunctive relief, reasoning that a plaintiff’s failure to seek preliminary injunctive relief is not determinative of the plaintiff’s right to a permanent injunction. And some courts have gone as far as to assert that a rule tying the availability of a permanent injunction to the presence or absence of a motion for preliminary injunction would tend to waste judicial resources by encouraging unnecessary motions for preliminary injunction.

Correlation between Motions for Preliminary Injunction and Ultimate Case Outcomes

Irrespective of how courts treat the issue, conventional wisdom is that the result of a motion for preliminary injunctive relief will generally foretell the ultimate outcome in a case. A motion for preliminary injunctive relief thus provides both an opportunity and a risk for a plaintiff—the opportunity to significantly increase the probability of prevailing, and the risk that an unsuccessful motion for preliminary injunctive relief may significantly decrease that probability.

To attempt to assess the conventional wisdom objectively, we commissioned a study from LegalMetric Inc. correlating contested case outcomes—summary judgments and judgments entered after trial—in trademark infringement cases in the federal district courts with the presence or absence of a motion for preliminary injunctive relief.28 The study showed a positive correlation between the presence of a motion for preliminary injunctive relief and a positive outcome for the plaintiff. Plaintiffs prevailed in about 64 percent of cases in which a motion for preliminary injunctive relief was filed and in about 46 percent of cases in which the plaintiff did not seek preliminary injunctive relief. In cases in which the plaintiff moved for preliminary injunctive relief, final case outcomes also correlate with the results of motions for preliminary injunctive relief. In cases in which the court granted a plaintiff’s motion for preliminary injunctive relief, the plaintiff prevailed in 84 percent of the corresponding final judgments; and only 16 percent of the defendants that were preliminarily enjoined managed to escape an adverse final judgment. A court’s denial of a plaintiff’s motion for preliminary injunctive relief also correlated with final outcomes: when the plaintiff was denied preliminary injunctive relief, the plaintiff prevailed in only about 39 percent of final case outcomes.

At first glance, the statistics appear to support the conventional wisdom concerning the positive effects of a motion for preliminary injunctive relief: plaintiffs who seek preliminary injunctive relief prevail at a higher rate than plaintiffs who do not move for preliminary injunctive relief, and plaintiffs who prevail on such a motion prevail at final judgment at about twice the rate of plaintiffs whose motions for preliminary injunctive relief are denied. But the statistics show only a correlation between motions for preliminary injunctive relief and final outcomes; the statistics do not explain why the correlation exists (if, indeed, there is a specific reason). Although one might infer that a plaintiff’s motion for preliminary injunctive relief helps to persuade the court that the plaintiff should prevail upon final judgment, the correlation might just as well show that decisions on motions for preliminary injunctive relief simply reflect a self-selection process in which a plaintiff generally seeks preliminary injunctive relief when its case (for preliminary and final relief) is strong.

Still, a plaintiff that is in a position to move for preliminary injunctive relief should consider doing so. If the plaintiff can tolerate the substantial initial investment required to stage a legitimate effort to obtain preliminary injunctive relief and does not need or want time to explore settlement, the plaintiff has an opportunity to push the case at a rapid pace and to obtain a preliminary result that, if positive, correlates strongly with a successful final outcome. Further, an unsuccessful bid for preliminary injunctive relief is not fatal: even where the plaintiff’s motion for preliminary injunctive relief is denied, the plaintiff still manages to prevail in 39 percent of cases.

Conclusion

After a consideration of both case law and statistics, a plaintiff continues to face something of a dilemma in deciding whether to move for preliminary injunctive relief. Though final case outcomes may not turn exclusively on whether a plaintiff sought preliminary relief, courts clearly mull the issue just as do litigants. There seems to be something to the “first impression” concern, but the value of that “something” is far from clear. Still, we can offer some guidance. First, as a matter of law, a plaintiff does not have to move for preliminary injunctive relief in order to preserve its right to a permanent injunction. Few decisions have mentioned a plaintiff’s decision to seek or not to seek preliminary injunctive relief as a factor in deciding whether to award a permanent injunction. In those cases, the absence of a motion for preliminary injunctive relief generally was described as secondary to other factors or as altogether irrelevant. Second, a plaintiff that is sufficiently committed to its case to make a motion for preliminary injunctive relief has little to fear from such a motion. Plaintiffs who obtain preliminary injunctive relief have a high probability of prevailing at final judgment, while plaintiffs who are denied preliminary injunctive relief still have a reasonable opportunity to prevail on summary judgment or at trial.

Endnotes

1. Thoughts on the Business of Life, Forbes, http://thoughts.forbes.com/thoughts/business-will-rogers-you-never-get (last visited June 23, 2014).

2. 676 F.3d 83 (2d Cir. 2012).

3. Id. at 103–04.

4. Id. at 104 n.20.

5. Id. (citing Mytee Prods., Inc. v. Harris Research, Inc., 439 F. App’x 882, 888 (Fed. Cir. 2011)).

6. See id. at 93.

7. 439 F. App’x 882.

8. Id. at 888.

9. Id.

10. Id.

11. 401 F.3d 1323, 1339 (Fed. Cir. 2005), vacated on other grounds, 547 U.S. 388 (2006).

12. Id. (quoting Lermer Ger. GmbH v. Lermer Corp., 94 F.3d 1575, 1577 (Fed. Cir. 1996)).

13. 547 U.S. 388 (2006).

14. MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556, 573 (E.D. Va. 2007).

15. Id. at 570–73.

16. Id. at 573.

17. No. 2:07-cv-00331-PMP-PAL, 2013 U.S. Dist. LEXIS 84672 (D. Nev. June 17, 2013).

18. Id. at *21.

19. No. 08 Civ. 7497(KBF), 2014 U.S. Dist. LEXIS 64467 (S.D.N.Y. May 9, 2014).

20. Id. at *18 n.9.

21. Id.

22. Id.; see also Broadcom Corp. v. Emulex Corp., No. 09-1058 JVS, 2012 U.S. Dist. LEXIS 129524, at *14 (C.D. Cal. Mar. 16, 2012) (granting permanent injunction and finding it “not . . . significant” that plaintiff failed to seek preliminary injunction because “the failure to move for a preliminary injunction [is not] a bar to permanent relief”); K-TEC v. Vita-Mix, 765 F. Supp. 2d 1304, 1318 (D. Utah 2011) (granting permanent injunction where plaintiff had not moved for preliminary injunction, citing plaintiff’s practicing of patents and direct competition between defendant and plaintiff).

23. 680 F. Supp. 2d 1045 (D. Minn. 2010).

24. Id. at 1059–60 (citing MercExchange, L.L.C. v. eBay, Inc., 500 F. Supp. 2d 556, 573 (E.D. Va. 2007).

25. No. 3:09-620, 2011 U.S. Dist. LEXIS 54957 (E.D. Va. May 23, 2011).

26. Id. at *40.

27. Id. at *42.

28. LegalMetric Inc., LegalMetric Custom Report: Trademark Case Outcomes as a Function of TRO/Preliminary Injunction Filings and Decisions 1994–2013 (June 12, 2014).