A district court decision last month denying a preliminary injunction in a trademark case, Citigroup v. AT&T Svcs., No. 16-cv-433-KBF (S.D.N.Y. Aug. 11, 2016), is notable for several reasons, one of which is that it underscores the effect of eBay v. MercExchange, 547 U.S. 388 (2006), in eliminating the presumption of irreparable harm. (Citigroup later dismissed its suit on Aug. 22, 2016.)
Citigroup sought to protect its trademark THANKYOU, used in its loyalty, redemption and rewards programs by enjoining AT&T over the use of the name AT&T THANKS marketing a similar rewards program for its customers. Citigroup’s mark, registered since 2004, was “incontestable,” so AT&T did not even challenge the validity of Citigroup mark.
The district court found that Citigroup had both failed to establish a likelihood of irreparable harm or a likelihood of success on the merits. The case teaches several important lessons about litigating trademark cases.
On irreparable harm, in support of its motion, Citigroup noted evidence of negative comments about AT&T. The court found that evidence “much less convincing” than other reported trademark cases where courts had found irreparable harm.
For example, in one prior case, NYC Triathlon v. NYC Triathlon Club, 704 F.Supp.2d 305, 343 (S.D.N.Y. 2010), the plaintiff showed how confusion caused by use of a similar mark would interfere with customer relationships; because there was evidence that the defendant provided sub-par services, that made it likely that the confusion would negatively affect the plaintiff’s reputation and goodwill.
In another prior case, the goods at issue were closely competitive, and the confusion would result in a loss of goodwill. U.S. Polo Assoc. v. PRL USA Holdings, 800 F.Supp.2d 515, 531, 541 (S.D.N.Y. 2011).
In the Citigroup case, in contrast, Citigroup proffered evidence of negative comments about AT&T, but these tended to relate to AT&T’s telecommunications services, not its rewards program, and/or compared the rewards program to those of other telecommunications services. Citigroup, however, does not offer those types of services, and there was little reason to think that Citigroup’s for and credit card services would suffer, the court found.
Success on the Merits
On the merits, the district court reviewed the facts under the eight-factor test of Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492, 495 (2d Cir. 1961) and noted several crucial differences between the marks and the services.
Citigroup claimed that its THANKYOU mark for rewards programs for banking and credit card services would be infringed by AT&T’s use of AT&T THANKS for a rewards program for telecommunications services. But, the court found, when Citigroup had applied to register its mark, the Trademark Office rejected the application, in that Citigroup’s mark would likely cause confusion with two prior registered marks (UBS PAINEWEBBER THANK YOU and THANK YOU, NEW SOUTH) used by competitor banks for their own rewards programs.
Citigroup successfully avoided the rejection in the Trademark Office by arguing that (a) these other registrations contained house marks, thus obviating confusion and (b) although the cited marks were all in the realm of banking, Citigroup intended to use its mark specifically for credit card services, which the competitors did not offer.
These arguments came back against Citigroup in litigation: AT&T’s mark always contained its house mark and was for a rewards program for, much farther afield than the banking services in the registrations cited by the Trademark Office against Citigroup. Citigroup’s own arguments in the Trademark Office were clearly at odds with its assertion of likelihood of confusion in the district court, and weighed heavily against it succeeding on the merits.
There are several important takeaways from this decision:
Irreparable Harm Must Be Rigorously Evidenced, Not Presumed.
Irreparable harm is a crucial prerequisite to obtaining injunctive relief. Although for decades the U.S. Court of Appeals for the Second Circuit presumed irreparable harm upon a showing of likelihood of confusion (the test for trademark infringement), in 2006 the Supreme Court decided eBay v. MercExchange, 547 U.S. 388, a patent case in which it frowned upon any kind of presumptions influencing a request for injunctive relief.
In Salinger v. Colting, 607 F.3d 68 (2d Cir. 2010), the Second Circuit applied eBay to a copyright case, holding that the traditional presumption of irreparable harm in copyright cases does not survive eBay.
The Second Circuit has yet to face the issue in a trademark case, but most lower courts have assumed that the same applies. The court noted this issue in a footnote, but claimed not to reach it. Yet in fact its discussion of irreparable harm, which closely scrutinized Citigroup’s irreparable harm evidence, can only be understood in a post-eBay world, where likelihood of irreparable harm must always be demonstrated.
The days when a trademark plaintiff could simply ask the court to presume irreparable harm are long gone.
Act Quickly—Sometimes Even Before Infringement Has Commenced.
Even when irreparable harm is presumed, the presumption could be rebutted (at least for preliminary relief) by showing that the plaintiff delayed too long in seeking an injunction. The Second Circuit has been particularly stringent on this point; delays of as little as six weeks can result in denial of a preliminary-injunction motion. See Citibank v. Citytrust, 756 F.2d 273, 276 (2d Cir. 1985).
The Citigroup decision presented an interesting twist on the issue: When is a party required to act, such that failure to act begins to count as delay? AT&T sent Citigroup an email in February 2016 that included a reference to its plans to use the mark at issue, and by no later than March it was clear to Citigroup that AT&T was going to use such a mark for its rewards program.
Yet, AT&T did not formally announce the new program until June 2016; Citigroup filed suit a week later and then its motion for a preliminary injunction two weeks after that. From what date should Citigroup have acted?
Depending on the answer, this could be considered a three-week delay, a three-month delay, or a four-month delay. The first would generally be considered too short to matter, but the second and third options, under Second Circuit law, would likely obviate preliminary relief.
The court concluded that the delay-clock began to run no later than March, particularly since Citigroup began threatening legal action in April. This weighed heavily against a preliminary injunction.
Of course, this kind of result will not occur in many cases. In many cases, the trademark owner may have no knowledge about a future infringer’s plans, and even if it does, they may not be concrete enough to form the basis of a suit. (Quaere whether if Citigroup had brought suit in April 2016, AT&T could have successfully argued that the suit was not yet ripe because it had not commenced any acts of infringement?)
But at least in some cases, this decision raises the stakes considerably for parties who may seek preliminary relief. At least where it is clear that the putative infringer is embarked on a course of infringement, the trademark owner may be required to act quickly to enjoin such actions, or risk denial because of delay.
Arguments and Assertions Previously Made Can Come Back to Haunt You.
Citigroup claimed that its THANKYOU mark for rewards programs for banking and credit card services would be infringed by AT&T’s use of AT&T THANKS for a rewards program for telecommunications services. As discussed, Citigroup’s own arguments to the Trademark Office to acquire its registration weighed heavily against its success against AT&T in court 12 years later.
The takeaway is clear: Trademark owners and their counsel have to be aware of what arguments and assertions have been previously made by the party on the same or related topics. Where prior assertions are in tension with the party’s current desired position in a case, then that position may have to be carefully rethought.
A previous version of this post appeared in the New York Law Journal, September 13, 2016