by Dale Campbell

The long-held rule in the Ninth Circuit was that a plaintiff, in a copyright infringement claim, is presumed to have suffered irreparable harm upon a showing of likelihood of success. (Elvis Presley Enterprises, Inc. v. Passport Video, 249 F.3d 622, 627 (9th Cir. 2003).) Two Supreme Court decisions cast doubt on the continued liability of that precedent, a doubt that was lifted in August 2011 when the Ninth Circuit overruled its own long line of precedents – hence, the Court’s poignant observation that “Elvis has left the building.”[1]

The decision overruling the Elvis presumption of irreparable harm is Flexible Lifeline Systems, Inc. v. Precision Lift, Inc., et al., Ninth Circuit Case No. 6:10-CV-00044, filed August 22, 2011, 2011 U.S. App. LEXIS 17462. The plaintiff, Flexible Lifeline Systems, Inc. (“Flexible”) claimed sole ownership of technical drawings for the manufacturing of aircraft maintenance stands used to repair aircraft.[2] Defendant Precision Lift was a company that had sold Flexible’s aircraft maintenance stands for a number of years. In 2008, Flexible and Precision entered into a joint venture to design, manufacture, and sell aircraft maintenance stands to the United States Air Force. Flexible and Precision designed custom maintenance stands and submitted an initial proposal to the Air Force. For various reasons, the joint venture broke down and was terminated.  Precision found another joint venturer and utilized the design plans developed in conjunction with Flexible to continue with its proposal to the Air Force.

Flexible and Precision disputed ownership of the plans created during the joint venture. Flexible claimed that its engineers alone designed the maintenance stands. Conversely, Precision contended that its employees participated in the design of the custom stands and that it owned, or at least co-owned, the drawings as a result of the joint venture. Flexible brought a motion for preliminary injunction to enjoin Precision from utilizing the plans in connection with its continued proposal to the Air Force. The district court found that: (1) Flexible was likely to prove its drawings are copyrightable; (2) Flexible was the sole author and creator of the drawings; (3) Flexible had valid copyrights on the drawings; and (4) Flexible was likely to succeed on the infringement claim. Flexible offered no evidence concerning irreparable harm, instead arguing that it was entitled to a presumption of irreparable harm upon a showing of likelihood to succeed. The trial court made no finding concerning irreparable harm, but concluded that Flexible “has shown a likelihood of success on the merits [ ] and is presumed to be irreparably harmed,” citing the Elvis case.

Precision appealed, arguing that the United States Supreme Court decisions in eBay v. Merc Exchange LLC, 547 U.S. 388 (2006) and Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008) had effectively overruled Elvis. The Ninth Circuit agreed.

The Supreme Court’s decision in eBay involved a permanent injunction issued in a patent infringement case. The Supreme Court found that the general rule that a permanent injunction would be issued against patent infringement absent exceptional circumstances could not be “squared with the principles of equity established by Congress.” The Supreme Court made it clear that a permanent injunction could not be issued absent evidence of irreparable injury, even drawing a parallel analysis to the Copyright Act which contained similar language creating the right to preliminary and permanent injunctions. 

Flexible argued that eBay was distinguishable in that it involved a permanent injunction, not a preliminary injunction, and that the presumption of irreparable injury should prevail when seeking a preliminary injunction. The Ninth Circuit rejected that argument by relying on the Supreme Court’s decision in Winter v. Natural Resources, 55 U.S. 7 (2008), which involved a preliminary injunction issued to prohibit the United States Navy’s ability to conduct war readiness exercises off the coast of California. The Supreme Court, in Winter, overruled the Ninth Circuit precedent that a “possibility of irreparable harm” was sufficient to issue an injunction involving environmental damage. The Supreme Court found that preliminary injunctions are an extraordinary remedy never awarded as of right. Courts are required to balance competing claims of injury and must consider the effect in granting the requested relief. The Ninth Circuit’s precedent allowing a plaintiff to show a possibility of irreparable harm was found to be “too lenient.” The proper standard was likely to suffer irreparable harm.

The Flexible decision clearly holds that the well-established “four-factor test” is to be applied in all cases involving intellectual property rights. A presumption of irreparable harm is no longer permissible. The four-factor test requires a plaintiff to establish: (1) likelihood of success on the merits; (2) the plaintiff is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in plaintiff’s favor; and (4) an injunction is in the public interest. (Citing Marlyn Nutraceuticals, Inc. v. Mucose Pharma GmvH & Co., 571 F.3d 873, 877 (9th Cir. 2009).) The Ninth Circuit remanded the case to district court for factual findings with respect to irreparable injury. 

Plaintiffs seeking preliminary injunctions must be careful to submit admissible evidence that they are likely to suffer irreparable harm in the event the injunctive relief is granted. In Flexible, the Ninth Circuit noted that the only reference to harm in the district court’s decision was an observation that Flexible failed to establish that it had ever submitted competing bids against Precision involving the copyrighted plans at issue. The Ninth Circuit noted that such a finding would actually weigh against a finding of irreparable injury. Admissible evidence establishing the nature and extent of the irreparable injury is essential and simple monetary damage may not be sufficient.