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Fifth Circuit passes on eBay's applicability in trademark cases

May 29, 2008
Post by Blog Staff

In a decision last week, the Fifth Circuit affirmed a district court's conclusion it had subject matter jurisdiction over a trademark case, as well as its grant of a preliminary injunction. While the activities giving rise to the claim of trademark infringement took place in Mexico, they had a "substantial effect" on United States commerce, and thus were within the court's subject matter jurisdiction. After ruling on subject matter jurisdiction, the court moved on to the issue of preliminary injunction. The Fifth Circuit affirmed the preliminary injunction, stating the district court did not abuse its discretion concluding the plaintiff would likely prevail on the issue of likelihood of confusion, and that the likelihood of confusion would lead to an irreparable injury. Unfortunately for practitioners, however, the court did not address the potential applicability of the Supreme Court's eBay decision to the commonly-applied presumption of irreparable harm in trademark cases, making it the second circuit court to pass on the issue (the Eleventh Circuit did likewise last month).More concerning Paulsson Geophysical Servs., Inc. v. Sigmar after the jump.The plaintiff, Paulsson Geophysical Services ("Paulsson"), markets a three-dimensional vertical seismic profile service. It markets the service under the registered marks "P/GSI" and "MASSIVE 3D VSP." The defendants were Alex Sigmar, the registered agent for Reservoir Systems, Inc. ("RSI") and Sigma Research, Inc. ("SRI") (both Texas corporations) and is the board of administration president at Reservoir Systems Internacional ("RSM"), a Mexican corporation. Paulsson and the three defendant companies began talks to promote the MASSIVE 3D VSP in Mexico. Paulsson signed a letter of authority with RSI, allowing RSI to fully promote it in Mexico. RSI then signed over all the rights to RSM, but then also included the right to "use" the MASSIVE 3D VSP. Prior to and after signing the original agreement, Paulsson made it clear that the agreement was only to promote the service, not use the service. RSM then entered into a multimillion dollar agreement with a prominent Mexican corporation to purportedly use the MASSIVE 3D VSP technology. Paulsson believed RSM was not going to use the MASSIVE 3D VSP technology, but was instead just using Paulsson's marks to land the client and then perform the client's work using a different system.Paulsson brought suit seeking a preliminary injunction hoping to prevent the use of their marks and proprietary technology by Sigmar and his affiliated companies. RSM was dismissed from the lawsuit by the district court for lack of personal and subject matter jurisdiction, but the court awarded a temporary restraining order and preliminary injunction against the remaining defendants, Sigmar, RSI, and SRI. These defendants appealed, challenging the district court's subject matter jurisdiction over the case and the ruling granting a preliminary injunction. The Fifth Circuit affirmed. The court first tackled the question of subject matter jurisdiction. Relying on previous case law and the Lanham Act, the court ruled that subject matter jurisdiction may exist when a resident and citizen of the United States engages in infringement outside of the United States, as long as there is "some effect" upon United States commerce. Rather than deciding whether "some effect" was sufficient, the court noted that the agreement between the Mexican Company and RSM had "substantial effects" on U.S. commerce (including financing via a New York company, a loan agreement with a Delaware company, chartering a vessel from another Delaware corporation, and various monetary transfers between the defendants), and therefore the court properly had subject matter jurisdiction. After holding the district court had subject matter jurisdiction, the court moved on to the preliminary injunction. The defendants attacked the likelihood of success and irreparable harm factors in the injunction analysis. Regarding likelihood of success, the defendants conceded that Paulssen had protectible rights in its "MASSIVE 3D VSP" mark, and chose to and focus their argument on likelihood of confusion existed. The Fifth Circuit uses eight non-exclusive factors (called the "digits of confusion") to determine likelihood of confusion. These factors are:

  1. Type of trademark allegedly infringed
  2. Similarity between the marks
  3. Similarity of the products or services
  4. Identity of retail outlets and purchasers
  5. Identity of advertising media
  6. Defendant's intent
  7. Evidence of actual confusion
  8. Degree of care employed by consumers
The court noted it is not necessary to examine and weigh all of the "digits of confusion" when the marks at issue are the exact same mark. In this case, the court affirmed a likelihood of confusion existed due to the continued use of the "Massive 3D VSP" mark, and therefore found the district court's conclusion that Paulssen was likely to succeed on its claim was not clearly erroneous. The court likewise held the district court's finding of irreparable harm not clearly erroneous. Interestingly, the court noted the recent decision by the Eleventh Circuit questioning whether the Supreme Court's eBay decision abolished any previously-applicable presumption of irreparable harm in trademark cases, but, like the Eleventh Circuit in that case, did not reach the issue. So, practitioners will have to wait for another day for the first circuit court to decide the applicability (if any) of eBay in trademark cases. Because the district court's findings of likely success and irreparable harm were not clearly erroneous, the grant of the preliminary injunction was not an abuse of discretion, and the court therefore affirmed the injunction.To read the full decision in Paulsson Geophysical Servs., Inc. v. Sigmar, click here.


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