The Trademark Modernization Act (TMA) FAILED to clarify confusing mechanisms in trademark law—means that the AFF is impossible to enforce AND keep courts unclogged.

On Dec. 27, 2020, the Trademark Modernization Act of 2020 (TMA) became law. A key component of that legislation was the codification in Section 34(a) of the Lanham Act of the common-law principle that a trademark owner seeking injunctive relief in actions for trademark infringement and unfair competition under Sections 32 and 43 of the Lanham Act is entitled to a rebuttable presumption of irreparable harm. The presumption arises upon the movant demonstrating liability at the proof stage, or a showing of a likelihood of liability in the context of motions for expedited relief seeking a temporary restraining order or a preliminary injunction. By enacting legislation confirming the existence of the presumption of irreparable harm in cases of trademark infringement and unfair competition, many commentators predicted that litigants would be dissuaded from the forum shopping in which many engaged after the existence of the presumption was called into question following the U.S. Supreme Court decisions in eBay, Inc. v. MercExchange, 547 U.S. 388 (2006), and Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008). Unfortunately, even with the TMA’s confirmation of the presumption’s existence, the probability that litigants will continue forum shopping remains high because of Congress’s failure to provide additional guidance relating to application of the presumption. This article explores developments (both positive and negative) in the post-TMA world in which courts have wrestled with implementation of the presumption of irreparable harm in trademark cases. The Good Prior to the TMA’s enactment, largely as a result of the eBay and Winter decisions, a significant debate emerged whether the holdings in these cases should apply to Lanham Act cases involving trademark infringement and unfair competition. Some courts ignored eBay and Winter altogether and found the presumption applicable. Other courts either hinted or expressly held that the presumption no longer applied and therefore required the plaintiff to provide affirmative evidence of irreparable harm to establish that factor. Because of the divergence of decisions on whether the presumption remained applicable, those seeking injunctive relief in trademark cases were forced to assess carefully the law of the jurisdiction in which they were pursuing that relief, and to ascertain whether or not evidence of irreparable harm would be required, as well as the types and quantity of evidence of irreparable harm courts in that jurisdiction had found will satisfy that burden. Similarly, nonmovants were required to assess what evidence courts in the applicable jurisdiction had found to be persuasive in overcoming the trademark owner’s evidence of harm. The good news is that the TMA has now resolved the debate at least as to the presumption’s existence. This expressly abrogates court decisions that applied eBay and Winter to trademark cases and eliminated the presumption of irreparable harm. Another development falling in the “good” category is that post-TMA courts appear to agree that the confirmed presumption shifts only the burden of production rather than the burden of proof to a defendant against which it is asserted. The Third Circuit’s opinion in Nichino America, Inc. v. Valent U.S.A. LLC, 44 F.4th 180 (3d Cir. 2022), provides one of the more detailed analyses of this issue. Nichino America involved a dispute between two manufacturers of pesticides used in farming. The plaintiff offered a pesticide product under the Centaur mark and sued the defendant after it introduced a pesticide product under the Senstar mark. The plaintiff moved for a preliminary injunction. Although the district court found that the plaintiff had established a likelihood of success on the merits and was therefore entitled to a rebuttable presumption of irreparable harm under the TMA, it also found the defendant had rebutted the presumption. The plaintiff then appealed the denial of the preliminary injunction to the Third Circuit. At the outset, the Third Circuit, like the district court, acknowledged that the TMA created a rebuttable presumption of irreparable harm. The Third Circuit added, however, that the TMA failed to explain how the presumption should be applied. According to the court, in such cases Federal Rule of Evidence 301 provided a default rule as to how the presumption should be applied in federal cases. The court added that Rule 301 only provided for the evidentiary burden of production to be shifted to the party against whom the presumption is directed. The allocation did not shift the burden of persuasion, which remains on the party who had it originally. With that framework in mind, the Third Circuit provided the following step-by-step instructions for applying the TMA’s rebuttable presumption: Step 1. Courts first consider the plaintiff’s evidence only as it relates to the likelihood of success factor. Step 2. If the plaintiff’s evidence establishes likely infringement or unfair competition, the TMA’s presumption is triggered, and the burden of product shifts to the defendant to introduce evidence sufficient for a reasonable fact finder to consider that consumer confusion is unlikely to cause irreparable harm. Step 3. If a defendant successfully rebuts the TMA’s presumption by making this evidentiary showing, the presumption has no further effect. The burden of proof then returns to the plaintiff to point to affirmative evidence proving as a factual matter that irreparable harm is likely absent an injunction. Nichino America’s Rule 301 approach has been mirrored by other post-TMA courts as well. See, e.g., Pizza Inn, Inc. v. Allen’s Dynamic Food, Inc., No. CIV-23-00164-PRW, 2023 WL 3015297 at *3 (W.D. Okla. Apr. 19, 2023); Vital Pharms. v. PhD Mktg., Inc., No. CV 20-6745-RSWL-JCx, 2021 WL 6881866, at *5 (C.D. Cal. Mar 12, 2021). The Bad Although confirmation of the existence of the presumption is a boon for trademark owners, Congress unfortunately passed on an opportunity to go further and provide concrete guidance as to the mechanics of the presumption, including its weight and the amount of evidence required to establish and overcome it. Many industry organizations, including the American Bar Association, International Trademark Association, and American Intellectual Property Law Association had heavily lobbied Congress for these legislative clarifications prior to the TMA’s enactment. Indeed, even the House of Representatives Committee on the Judiciary had observed prior to the TMA’s passage the existence of uncertainty as to the evidence required to demonstrate irreparable harm: In Adidas [adidas Am., Inc. v. Sketchers USA, Inc., 890 F. 3d 747, 759 (9th Cir. 2018)] and similar cases, it is unclear what additional evidence could or should be provided to establish irreparable harm given the evidence of record already demonstrating consumer confusion or loss of control over the brand. Thus, while the Ninth Circuit, for instance, states that “[e]vidence of loss of control over business reputation and damage to goodwill could constitute irreparable harm,” when presented with evidence of actual consumer confusion, a district court nonetheless concluded that it “simply underscores consumer confusion, not irreparable harm” — demonstrating an unwillingness to conclude that such confusion is the sort of the irreparable harm typically addressed by equitable relief. In sum, trademark litigants in courts adopting eBay are faced with uncertainty over what constitutes sufficient evidence of irreparable injury. H.R. Rep. No. 116-645, at 19 (2020). Because of Congress’s inaction, post-TMA courts have exhibited nearly unbridled discretion in assigning the presumption whatever weight they desire. This has resulted in a broad range of judicial views of the presumption’s weight from “slight” to “heavy.” Compare Nishino Am., 44 F.4th at 186, with Savage Tavern, Inc. v. Signature Stag, LLC, 589 F. Supp. 3d 624, 659 (N.D. Tex. 2022), and Theorem, Inc. v. Citrusbyte, LLC, No. CV 21-4660-GW-AGRx, 2021 WL 5750238, at *8 (C.D. Cal. Nov. 16, 2021), order entered, No. CV 21-4660-GW-AGRx, 2021 WL 6206964 (C.D. Cal. Dec. 27, 2021), stay pending appeal denied, No. CV 21-4660-GW-AGRx, 2022 WL 13314041 (C.D. Cal. Jan. 18, 2022), appeal dismissed, Nos. 21-56289, 21-56385, 2022 WL 1721193 (9th Cir. May 23, 2022). And this confusion as to the presumption’s weight has not been alleviated by the language used by courts in characterizing the presumption, such as describing it as a “bursting bubble.” Some courts have used that description to indicate that the presumption is slight, whereas others have characterized it as heavy. Another development falling in the “bad” category is that a surprising number of courts in virtually every circuit — and apparently litigants as well — have remained oblivious to the changes imposed by the TMA as to the presumption of irreparable harm, although the instances of this appear to be diminishing. See, e.g., Leather Bros., Inc. v. Springhaus, LLC, No. 6:23-cv-439-WWB-LHP, 2023 WL 2584457 (M.D. Fla. Mar. 21, 2023); Richardson v. Cascade Skating Rink, No. 19-8935-NLH-MJS, 2022 WL 833319 (D. N.J. Mar. 21, 2022); Sycamore Brewing, LLC v. Stone Brewing Co., No. 3:22-CV-00148-FDW-DSC, 2022 WL 1185895 (W.D.N.C. Apr. 21, 2022). Accordingly, trademark owners would do well to inform courts in their briefing of the TMA’s existence and their reliance on the TMA’s confirmation of the existence of the presumption. Otherwise, decisions may be reached by the court relying on eBay and Winter or on other less favorable pre-TMA law of the circuit at issue. The Ugly Congress’s deliberate election not to provide additional parameters and guideposts as to the presumption of irreparable harm analysis has led to some presumably unanticipated negative consequences in applications of the presumption, at least from the perspective of trademark owners. For example, both before and after the TMA courts had historically only allowed defendants to rebut the presumption by reliance on equitable principles such as delay, a showing of purely pecuniary injuries, or demonstration that the nonmovant had or would soon cease the allegedly infringing activity. Courts had also routinely rejected defendants’ efforts simply to rehash evidence considered in the likelihood-of-confusion analysis to rebut the presumption of irreparable harm. However, the Third Circuit in Nichino America, Inc. v. Valent U.S.A. LLC, recently ruled that a defendant could (and did) rebut the presumption by relying on a single element of that analysis. As indicated above, Nichino America involved a dispute between two pesticide manufacturers. The plaintiff moved for a preliminary injunction after the defendant introduced its competing product, which was denied by the district court and affirmed by the Third Circuit. In assessing the plaintiff’s likelihood of success on the merits, the Third Circuit endorsed the district court’s analysis of the plaintiff’s infringement claim utilizing the 10-factor analysis adopted by the court in Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 462-63 (3d Cir. 1983). The Third Circuit observed that the district court concluded five of the Lapp factors favored the plaintiff, two were neutral and three (overall degree in similarity, consumer purchasing habits and the defendant’s intent) favored the defendant. Based on that tally, both the district court and Third Circuit found the plaintiff had established a likelihood of success on the merits and was entitled to a presumption of irreparable harm under the TMA. But then the district court and Third Circuit deviated from established law when they turned to whether the defendant had rebutted the presumption. Rather than resorting to an analysis of equitable considerations, both courts instead allowed the defendant to conflate the likelihood-of-confusion and irreparable harm elements and rely on a single Lapp factor (i.e., that the relevant consumers were sophisticated buyers who exercise great care in purchasing pesticides) to rebut the presumption. Stated another way, after concluding that this likelihood-of-confusion factor along with others favoring the defendant were insufficient to overcome the plaintiff’s likelihood of success on the merits, that factor alone was deemed sufficient to rebut the presumption. Nichino America may turn out to be an aberration for trademark owners going forward. However, it is now controlling law in the Third Circuit, and, should other courts adopt the Third Circuit’s conflated analysis, the presumption’s weight will be weakened nearly to the point of nonexistence. Finally, several recent decisions have also demonstrated the risks trademark owners now face where they rely solely on the presumption of irreparable harm to establish the balance-of-harms element in the preliminary injunction analysis. At least two post-TMA courts have held that despite the fact the plaintiff had established a likelihood of success on the merits and that the defendant had failed to rebut the presumption, the plaintiff was still found not to be entitled to injunctive relief because the balance-of-harms factor was viewed by the court as favoring the defendant. See, Concord Music Grp., Inc. v. STAX. Pty Ltd., No. 2:22-cv-03331-AB (PVCx), 2023 WL 2977495, at *7-8 (C.D. Cal. Apr. 6, 2023), appeal filed, No. 23-55352 (9th Cir. Apr. 17, 2023); Kohler Co. v. Whistling Oak Apartments LLC, No. 20-CV-1563, 2021 WL 2434203, at *10-14 (E.D. Wis. June 14, 2021). This departs from the approach many courts adopted pre-TMA, as they usually held that when a defendant was shown to have improperly used a plaintiff’s trademark, the threat and harm to the plaintiff outweighed the threat and harm to the defendant.