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Eleventh Circuit: eBay may eliminate presumption of irreparable harm in trademark cases
April 14, 2008

In a recent decision, the Eleventh Circuit vacated a district court's injunction against the use of a competitor's trademarks in the meta tags of a defendant's website. The court held that while the plaintiffs had shown likelihood of success on both their trademark infringement and false advertising claims, because the district court relied on a presumption of irreparable harm to support its injunction, the injunction must be vacated.Specifically, the court noted that the Supreme Court's eBay decision did away with the notion of irreparable harm in patent cases, and that the statutory authorization for injunctions is similar in trademark cases. While the court noted that eBay applied to the case, it declined to decide its effect, specifically "whether the nature of trademark infringement gives rise to a presumption of irreparable injury," meaning whether presuming irreparable harm in trademark cases would run afoul of eBay.More detail of N. Am. Med. Corp. v. Axiom Worldwide, Inc. after the jump.

The plaintiffs are North American Medical Corp. (NAM), which designs and manufactures physiotherapeutic spinal devices, better known as traction devices, and one of its authorized distributors, Adagen. The defendant, Axiom, is a competitor of NAM and Adagen. NAM's products are sold under the registered trademarks Accu-Spina and IDD Therapy. Axiom sells its devices under the trademark DRX 9000.

The trademark infringement claim arose from Axiom's use of NAM's Accu-Spina and IDD Therapy trademarks as meta tags for its website. Axiom's website never displays NAM's trademarks to visitors and never mentions NAM's products. The meta tags are present to influence search engines, which listed Axiom's website as the second most relevant search result when a computer user entered NAM's trademarks as search terms. NAM's trademarks also appeared in Google's brief description of Axiom's website.The false advertising claims arise from Axiom's statements that its DRX 9000 product had an affiliation with NASA, and that the product is FDA approved.The district court preliminarily enjoined Axiom from using NAM's trademarks as meta tags and from making the statements which were literally false.On appeal, Axiom argued that use of NAM's trademarks in invisible meta tags was not "use in commerce" and does not create a likelihood of confusion, and that the advertising statements were not literally false and not material to a consumer's purchasing decisions.The Eleventh Circuit readily concluded that meta tags constituted use in commerce as contemplated by the Lanham Act in connection with the sale or advertisement of goods. The meta tags are part of Axiom's efforts to promote and advertise its products on the Internet. Thus, the use in commerce requirement for trademark infringement is satisfied by the meta tags.The Eleventh Circuit also concluded that the district court's finding of likelihood of confusion was not clearly erroneous. The Eleventh Circuit relied, in part, upon the leading case on meta tags, Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999), which barred a defendant from including in its meta tags a competitor's trademark or confusingly similar terms. In Brookfield, Ninth Circuit concluded that use of a trademark in meta tags results in "initial interest confusion," meaning although there is no source confusion in the sense the consumers know they are patronizing the competitor rather than the trademark owner, there is nevertheless confusion in the sense that, by using the trademark to divert people looking for the trademark owner's website, the competitor improperly benefits from the good will that the trademark owner has developed in its mark. The Eleventh Circuit also noted the Seventh Circuit's support for Brookfield in Promatek Industries, Ltd. v. Equitrac Corp., 300 F.3d 808 (7th Cir. 2002), which had similar facts to Brookfield and agreed with the Brookfield analysis. The Eleventh Circuit also noted that other courts have criticized various aspects of Brookfield. Turning to the facts of the case, the court observed that when consumers entered NAM's trademark into a search engine, the search results not only displayed Axiom's competing website, but the brief description of Axiom's website included and highlighted NAM's trademarks. Thus, "source" confusion existed because consumers are likely to be confused as to whether Axiom's products have the same source or sponsor as NAM's products, or whether there is some other affiliation or relationship between the two parties. The court concluded that the appearance of NAM's trademarks in connection with Axiom's website was misleading to the consumer because Axiom is not related in anyway to NAM, Axiom does not sell NAM products, and Axiom does not clarify the notion that there is no relationship between Axiom and NAM. Consumers who access Axiom's website after viewing the Google search results are met with utter silence with respect to NAM's products. Thus, Axiom's use of the meta tags caused a likelihood of actual consumer confusion as to the source, or that Axiom sold both product lines, or that there was some other relationship between Axiom and NAM. Thus, the district court's finding of likelihood of confusion was not clearly erroneous.With respect to the false advertising claims, the district court did not clearly err in finding that Axiom's statements regarding it being affiliated with NASA and its products being "FDA approved" were literally false and material to consumer's purchasing decisions. While Axiom had one engineer with NASA training or experience, there was no actual collaboration between Axiom and NASA. Also, the products at issue are Class II medical devices, which only receive FDA "clearance." Class III medical devices receive FDA "approval." Further, 21 C.F.R. § 807.97 states that such a statement "is misleading and constitutes misbranding." The court also concluded that these types of statements "logically would influence a doctor's decision to purchase" the Axiom product over a competitor's product, and therefore was material to the purchasing decision.These facts notwithstanding, the Eleventh Circuit vacated the injunction. This was because the district court relied on presumptions of irreparable harm that were either inapplicable or called into question. With regard to the false advertising claims, irreparable harm is only presumed when there is a literally false statement made in the context of comparative advertising. Here, the false statement was not in that context, so the presumption of irreparable harm did not apply.On the trademark side, the court noted that its prior cases extend a presumption of irreparable harm once a plaintiff establishes a likelihood of success on the merits of trademark infringement. Nonetheless, the Eleventh Circuit noted the recent Supreme Court decision eBay, Inc. v. MercExchange, LLC, 547 U.S. 388 (2006), which eliminated the presumption of irreparable harm in the context of patent infringement cases. In eBay, the Court stressed that the Patent Act permits injunctive relief in accordance with the principles of equity. The Eleventh Circuit asserted that a strong case can be made that the holding in eBay necessarily extends to the grant of preliminary injunctions under the Lanham Act, which also grants Federal Courts the power to issue injunctions in accordance with the principles of equity. In the end, however, the court did not decide whether a presumption of irreparable harm in trademark cases survived eBay due to the nature of trademark infringement. This will be an issue to watch if this case returns to the court on another appeal, as well as one to watch for in other circuits.To read the full decision in N. Am. Med. Corp. v. Axiom Worldwide, Inc., click here.

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