Preliminary Injunction Archives

Preliminary Injunction

Don’t Assume Sweet Success: Forum Selection Clause Doesn’t Preclude IPR

by Thomas DaMario | Jan 11, 2024 | Patents

The US Court of Appeals for the Federal Circuit affirmed a district court’s denial of a preliminary injunction seeking to bar a petitioner from challenging certain patents at the US Patent & Trademark Office (PTO) because of a forum selection clause in a settlement agreement. The Court found that the patent owner was unlikely to succeed on the merits based on the likelihood of success factor. DexCom, Inc. v. Abbott Diabetes Care, Inc., Case No. 23-1795 (Fed. Cir. Jan. 3, 2024) (Dyk, Hughes, Stoll, JJ.)

DexCom and Abbott are competing manufacturers of continuous glucose monitoring systems. In 2014, the parties entered into a settlement agreement that included a cross-license to certain patents, covenants not to sue or challenge the patents for a “Covenant Period,” and a forum selection clause identifying the US District Court for the District of Delaware as the exclusive jurisdiction “over any dispute arising from or under or relating to [the] Agreement, to the extent permitted by law.” After expiration of the Covenant Period, DexCom sued Abbott in the Western District of Texas. Abbott moved to transfer the case to the District of Delaware and added a breach of contract counterclaim, citing the settlement agreement’s forum selection clause. The case was transferred to Delaware, after which Abbott filed eight petitions for inter partes review (IPR) at the PTO. DexCom responded to the breach of contract counterclaim by alleging that Abbott had breached the forum selection clause by filing the IPR petitions. Until this point, DexCom had consistently taken the position that the asserted claims were not subject to the cross-license, rendering the forum selection clause inapplicable.

Six months after Abbott filed the IPR petitions, DexCom moved for a preliminary injunction prohibiting the IPRs from proceeding. The district court denied the preliminary injunction. In evaluating the four injunctive relief factors (i.e., likelihood of success on the merits, irreparable harm, balance of hardships and public interest), the district court simply assumed the likelihood of success in favor of DexCom. It nevertheless denied the injunction because DexCom waited six months to file the motion (suggesting there was no irreparable harm) and because DexCom had taken inconsistent legal positions with respect to whether the challenged patents were licensed, thus weighing against DexCom in the balance of hardships factor. DexCom sought interlocutory appeal of the district court’s order.

The Federal Circuit focused on the first factor, likelihood of success on the merits. While the district court assumed that this factor favored DexCom, the Federal Circuit disagreed. The Court noted that the agreement required that DexCom and Abbott “shall not Challenge” each other’s patents during the Covenant Period, with the exception that “each Party reserves its rights and is permitted to Challenge any of the patents of the other Party if there is a statute, regulation, or rule that sets a deadline to make the Challenge,” assuming certain conditions were met. The Court first explained that “challenge” includes IPRs of the patents and that nothing in the forum selection clause differentiated between the [...]

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Grubhub Relishes Victory Against Trademark Preliminary Injunction

by Tessa Kroll | Sep 28, 2023 | Trademarks

Upholding the denial of a preliminary injunction motion in a trademark infringement dispute, the US Court of Appeals for the Seventh Circuit concluded that the district court did not err in finding that the trademark owner failed to show a likelihood of success on its reverse confusion theory. Grubhub Inc. v. Relish Labs LLC, Case No. 22-1950 (7th Cir. Sept. 12, 2023) (Lee, Jackson-Akiwumi, Wood, JJ.)

Relish Labs and the Kroger Company (Home Chef) create and deliver meal kits with pre-portioned ingredients that customers can cook at home. Home Chef began using its “HC Home Mark,” which is protected by five federal trademark registrations, in 2014. Home Chef has spent more than $450 million on advertising and reached $1 billion in annual sales in October 2021.

Grubhub is an online food ordering and delivery service that provides on-demand order management, dispatching and procurement. In June 2021, Grubhub was acquired by Netherlands-based Just Eat Takeaway (JET), an international food delivery company that typically combines its “JET House Mark” with the marks of its local brands.

Before finalizing its acquisition of Grubhub, JET filed an international trademark application for the JET House Mark. However, the US Patent & Trademark Office (PTO) examiner preliminarily rejected the mark, finding it to be “confusingly similar” to the HC Home Mark. JET did not respond and withdrew the application. After acquiring Grubhub, JET adopted the “Grubhub House Logo,” which combined the Grubhub logo with the JET House Mark. Grubhub introduced the new logo in July 2021 and has spent millions of dollars rebranding.

After receiving a cease-and-desist letter from Home Chef, Grubhub sued, seeking a declaratory judgment that its logo did not infringe Home Chef’s marks. Home Chef countered with a motion for preliminary injunction, which was referred to a magistrate judge. The magistrate judge recommended that the court grant Home Chef preliminary injunctive relief, but the district court rejected the recommendation and denied Home Chef’s motion, finding that it had not shown a likelihood of success on the merits. Home Chef appealed.

On appeal, the Seventh Circuit began by addressing which Grubhub mark was at issue: the JET House Mark alone or the Grubhub House Logo (which incorporated the logo portion of the JET House Mark). The Court noted that Grubhub had not used the JET House Mark without the Grubhub brand name in the United States and thus agreed with the district court that the accused mark was the Grubhub House Logo:

Turning next to Home Chef’s reverse confusion theory, the Seventh Circuit addressed the relevant four factors from its [...]

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Quack, Waddle and Duck: Order That Grants Injunctive Relief Is an Injunction

by Kavya Rallabhandi | Jun 15, 2023 | Trademarks

The US Court of Appeals for the Fourth Circuit vacated and remanded a district court ruling, finding that the district court failed to properly apply the Federal Rules of Civil Procedure (FRCP) in granting injunctive relief. Wudi Industrial (Shanghai) Co., Ltd. v. Wong et al., Case Nos. 22-1495; -1662 (4th Cir. June 5, 2023) (Gregory, King, JJ.) (Rushing, J., dissenting). The dissent argued that the district court simply entered a permissible order enforcing a settlement agreement between the parties.

The FRCP outlines the necessary criteria and steps for courts to grant injunctive relief. FRCP 52(a)(2) requires courts to state the findings and conclusions that support their actions. FRCP 65(d) requires courts to state the reasons why the injunction was issued, state the injunction’s terms specifically or describe the restrained/required act(s) in detail. Per the Supreme Court’s Ebay test, a party seeking injunctive relief must demonstrate the following:

It has suffered an irreparable injury.
Remedies available at law, such as monetary damages, are inadequate to compensate for that injury.
Considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted.
The public interest would not be disserved by an injunction.

Wudi Industrial competes with Wai L. Wong and his business entity GT Omega Racing (collectively, GTOR) in marketing video gaming chairs and other products. GTOR challenged Wudi’s GTRACING trademark registration in a cancellation proceeding at the Trademark Trial & Appeal Board, alleging that the mark encroached on GTOR’s earlier use of GT OMEGA RACING. The Board ruled in favor of GTOR, and Wudi initiated a first appeal at the district court. The parties subsequently entered into a concurrent-use agreement that assigned to Wudi the right to use the GTRACING word mark in all global markets except within a European carve-out of 53 named countries in exchange for a $4.5 million payment to GTOR. Under the agreement, Wudi was barred from purchasing ad words from search engines and shopping sites or using any social media platforms to promote GTRACING in the European carve-out countries.

In May 2022, GTOR filed a motion for enforcement in the district court, alleging breach because some of Wudi’s marketing and promotional content in the European carve-out contained the GTRACING mark. The district court granted GTOR’s motion and issued a first order. Under threat of contempt for noncompliance, Wudi was ordered to cease impermissible conduct and take down all posts accessible in the European carve-out containing GTRACING within seven days. In June 2022, the district court issued a second order stating that the first order was a grant of specific performance, not a preliminary injunction. Wudi appealed both orders.

The Fourth Circuit vacated and remanded the district court’s first and second orders because of procedural errors amounting to abuses of discretion, despite the dissent’s argument that the orders merely enforced the parties’ agreement. The Court concluded that the first order constituted a preliminary injunction, later made permanent by the second order, because “if it walks like a duck, quacks like a [...]

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Preliminary Injunction, Meet Irreparable Harm

by Alexander Piala, PhD | Apr 13, 2023 | Trade Secrets

The US Court of Appeals for the Fifth Circuit, in a case where an ex-employer sought preliminary injunctive relief based on an alleged breach of non-disclosure and non-compete agreements and alleged misappropriation of confidential business information, ruled that the Texas presumption of irreparable harm for breach of non-compete clauses does not always apply and that a finding of irreparable harm requires particularized findings regarding the alleged harm. Direct Biologics L.L.C. v. McQueen, Case No. 22-50442 (5th Cir. April 3, 2023) (Davis, Dennis, JJ., Higginson, C.J.).

Adam McQueen previously was executive vice president of Direct Biologics (DB). As a member of DB’s management, McQueen had access to DB’s confidential trade secret information regarding the production and production specifications of DB’s novel medical technologies. To protect that information, McQueen signed both non-compete and non-disclosure agreements with DB, preventing him from providing “services . . . similar to that which [he] provided to [DB],” and from disclosing or using DB’s confidential information.

McQueen resigned from his position and joined Vivex, DB’s direct competitor. Almost immediately DB sued McQueen and Vivex, alleging breach of the non-compete, breach of the non-disclosure agreement and trade secret misappropriation. Shortly thereafter, DB moved for a preliminary injunction to compel McQueen to comply with the non-compete covenant and prevent him from using DB’s confidential and trade secret information. Vivex countered by arguing that McQueen’s new role as vice president of product strategy was a “non-competitive role,” and that McQueen was sequestered from all products that would compete with DB. The district court denied the preliminary injunction motion, agreeing with Vivex that DB failed to provide any evidence that DB had been harmed. DB appealed.

DB argued that the district court erred in two ways—first, by failing to apply Texas’s presumption of irreparable harm based on McQueen’s breach of a non-compete agreement, and second, by failing to correctly apply the irreparable harm analysis by looking only at past actions.

The Fifth Circuit began by reviewing Texas’s presumption of irreparable harm. Under Texas law, the breach of a non-compete agreement can result in a presumption of irreparable harm. But, as the Court explained, the presumption does not always apply. Texas courts can decline to apply the presumption when there is no independent proof of harm. Here, not only did DB fail to produce any evidence that McQueen disclosed or used DB’s confidential information, but there also was evidence showing that he had not. Based on this record, the Court held that it was not an abuse of discretion to decline to apply the presumption.

The Fifth Circuit then analyzed the district court’s irreparable harm analysis. The Court explained that the irreparable harm analysis requires that the trial court make particularized findings regarding whether the harm was likely to occur over the pendency of the litigation, and if so, whether the harm would be difficult to quantify monetarily. While the district court here made findings directed to whether McQueen had caused harm, it did not make any findings regarding what might happen during the litigation. The [...]

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Stryking Noncompete Preliminary Injunction

by Tessa Kroll | Mar 9, 2023 | Trade Secrets

The US Court of Appeals for the Sixth Circuit upheld a district court’s grant of a preliminary injunction restricting a former employee from working for conflicting organizations or communicating with a competitor’s counsel. Stryker Emp. Co., LLC v. Abbas, Case No. 22-1563 (6th Cir. Feb. 16, 2023) (Clay, Bush, JJ.; Sutton, C.J.) The Court found that the preliminary injunction was an appropriate measure to protect the plaintiff’s confidential information that was consistent with the employee’s noncompete agreement.

Stryker develops and manufactures spinal implants and related medical products. From 2013 through mid-2022, Stryker employed Abbas in various roles relating to finance and sales. As part of his job duties, Abbas led sales and finance projects, assisted with Stryker’s litigation efforts, and cultivated relationships with customers, distributors and sales representatives. These responsibilities required Abbas to have access to Stryker’s confidential information and trade secrets.

In April 2022, Abbas entered into a confidentiality, noncompetition and nonsolicitation agreement with Stryker. This agreement prohibited Abbas from disclosing Stryker’s confidential information without its consent and barred Abbas from working for “any Conflicting Organization” in which Abbas could use Stryker’s confidential information to boost the marketability of a “Conflicting Product or Service.” The noncompete provision was time limited to one year following Abbas’s departure from Stryker.

In summer 2021, a competing spinal implant manufacturer, Alphatec, began recruiting Abbas for a finance position. After determining that the finance position was too similar to Abbas’s previous work at Stryker, Alphatec created a new “sales role” that was allegedly “crafted to protect Stryker’s confidential information.” Abbas resigned from Stryker in May 2022 to take the newly created role.

Shortly after Abbas resigned, Stryker sued for breach of contract, misappropriation of trade secrets and violation of the Michigan Uniform Trade Secrets Act. Stryker also requested a no-notice temporary restraining order (TRO) and preliminary and permanent injunctions. The district court granted Stryker’s motion for preliminary injunction prohibiting Abbas from the following:

Working in any capacity for Alphatec or any “Conflicting Organization”
Having any ex parte communications with Alphatec’s counsel or otherwise disclosing information concerning Stryker’s litigation strategies.

Abbas appealed, arguing that the noncompetition portion of the preliminary injunction amounted to an industry-wide ban and that the communication portion impermissibly disqualified counsel.

The Noncompetition Provision

The Sixth Circuit first noted that federal law, rather than state law, defines a court’s power to issue a noncompetition restriction in a preliminary injunction. Under federal law, courts have discretion to craft preliminary injunctions based on the equities of a case and can even “proscribe activities that, standing alone, would have been unassailable.” Applying this standard, the Sixth Circuit reasoned that the preliminary injunction was not overly broad but instead preserved the status quo. First, the district court found that Abbas often worked beyond the scope of his position. Second, the district court agreed to entertain a motion to vacate the injunction if Alphatec created a new position for Abbas that Stryker found acceptable. Third, the injunction merely sought to enforce the noncompetition agreement, which [...]

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Actual Confusion Is the Best Evidence of Confusion

by Ashley T. Brzezinski | Feb 9, 2023 | Trademarks

The US Court of Appeals for the Eighth Circuit reversed and vacated a district court’s preliminary injunction grant in a trademark dispute, concluding that potential confusion is insufficient to satisfy the burden of showing a substantial likelihood of confusion. H&R Block, Inc.; HRB Innovations, Inc. v. Block, Inc., Case Nos. 22-2075; -2023 (8th Cir. Jan. 24, 2023) (Gruender, Erickson, JJ.) (Melloy, J., dissenting).

H&R Block was founded in 1955 and specializes in income tax preparation and other tax and financial services. Over the years, H&R Block has invested billions of dollars in advertising campaigns and has developed significant market presence both in person and online. The company has also obtained several federal registrations directed to the use of a green square logo with its products and asserts that in addition to “H&R Block” it is known as just “Block.”

Square, Inc., is the company behind the Square payment card reader and point-of-sale software that allows individual sellers to accept credit card payments. Square was founded in 2009 and grew over time by acquiring or developing other businesses. Cash App is one of Square’s businesses. Cash App started in 2013 as Square Cash and is a purely digital platform that allows users to deposit and store money on the app. In November 2020, Square acquired free tax credit service Credit Karma Tax, which was rebranded as Cash App Taxes and integrated into the Cash App platform for the 2022 tax season. In December 2021, Square was renamed Block, Inc., and the name change was publicized via Twitter.

Fifteen days after the name change was announced, H&R Block filed suit alleging trademark infringement. Shortly thereafter, H&R Block moved for a preliminary injunction. The district court analyzed the marks at issue for likelihood of confusion and granted, in part, H&R Block’s request for a preliminary injunction. Block appealed.

The Eighth Circuit analyzed a list of six non-exclusive and non-exhaustive factors in assessing likelihood of confusion:

The strength of the owner’s mark
The similarity of the owner’s and the alleged infringer’s marks
The degree to which the products compete with each other
The alleged infringer’s intent to pass off its goods as those of the trademark owner
Incidents of actual confusion
The type of product, its cost and its conditions of purchase.

The Eighth Circuit agreed with the district court that H&R Block had demonstrated that its registered and common law marks were commercially strong but found that the record as a whole did not weigh in favor of H&R Block on the similarity factor because there were observable differences between the two logos and the competing products.

The Eighth Circuit indicated that ultimately the best evidence of likelihood of confusion is actual consumer confusion. While the record supported possible confusion by some consumers, the Court found that the district court had erred in finding actual consumer confusion and that H&R Block had not presented sufficient evidence to rise to the level of substantial confusion by an appreciable number of ordinary consumers. [...]

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Not So Clean: Federal Circuit Upholds Trade Dress Preliminary Injunction, Finds Defenses Improperly Plead

by Kathleen Lynch | Nov 17, 2022 | Trademarks

The US Court of Appeals for the Federal Circuit upheld a “narrow” preliminary injunction in a trade dress case, finding that the opponent of a registered configuration mark failed to prove its lack of secondary meaning and functionality defenses. SoClean, Inc. v. Sunset Healthcare Solutions, Inc., Case No. 21-2311 (Fed. Cir. Nov. 9, 2022) (Newman, Lourie, Prost, JJ.)

SoClean manufactures Continuous Positive Airway Pressure (CPAP) machines. SoClean sued Sunset—a former distributor of SoClean products—for patent infringement and later added trademark infringement claims. At issue in this appeal was a single SoClean mark “for the configuration of replacement filters for its sanitizing devices.”

SoClean requested a preliminary injunction to stop Sunset from making or selling allegedly infringing CPAP filters. The district court granted the injunction but narrowly tailored the injunction to only enjoin Sunset from selling its filter cartridges without Sunset’s own brand name attached to the filter drawing so that customers would not falsely believe they were buying SoClean products. Sunset appealed.

While a party seeking preliminary injunction must prove all four eBay elements, this appeal focused on just one: “likelihood of success on the merits.” Sunset argued that the district court abused its discretion in finding that SoClean would likely defeat Sunset’s lack of secondary meaning defense and its functionality defense.

After noting that the parties agreed that SoClean’s trade dress was protectable only upon a showing that it had obtained secondary meaning, the Federal Circuit divided the secondary meaning issue into two subparts:

Whether the district court should have questioned the validity of SoClean’s registration in light of Sunset’s evidence
Whether the district court held Sunset to an improperly high standard of proof.

As to the first issue, the Court noted that federal registration is prima facie evidence of a mark’s validity. When, as here, the challenged mark was registered fewer than five years prior, the burden shifts from plaintiff to defendant, such that the defendant must rebut the presumption of validity. Sunset acknowledged that it had this burden, but its arguments to the district court focused only on the US Patent & Trademark Office’s decision to grant SoClean’s registration. The Court rebuffed that argument, noting that “scrutinizing the application process and deciding whether the trademark examiner was correct to issue the registration in the first place is the opposite” of the statutory presumption of validity.

Next, the Federal Circuit addressed Sunset’s standard of proof argument. The Court acknowledged that the district court misstated the law by suggesting that there was a “vigorous evidentiary requirement” on the challenging party, instead of simply a “preponderance of the evidence.” However, the Court also noted that the district court considered Sunset’s lack of secondary meaning evidence to be “equivocal, at best,” which “plainly fails to satisfy a preponderance-of-the-evidence standard.” Therefore, the Court judged the error to be harmless.

The Federal Circuit thus affirmed the finding that SoClean would likely defeat Sunset’s secondary meaning challenges.

The Federal Circuit next [...]

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Ordinary Observer Conducts Product-by-Product Analysis in View of Prior Art

by Tessa Kroll | Nov 3, 2022 | Patents

In one of two concurrent opinions concerning the same design patent case, the US Court of Appeals for the Federal Circuit vacated a district court’s entry of a preliminary injunction after concluding that the court had failed to properly consider the accused products separately and in view of the prior art when determining the plaintiffs’ likelihood of success. ABC Corp. I v. P’ship & Unincorporated Ass’ns Identified on Schedule “A”, Case No. 22-1071 (Fed. Cir. Oct. 28, 2022) (Dyk, Taranto, Stoll, JJ.)

Hangzhou Chic Intelligent Technology and Unicorn Global (collectively, the plaintiffs) own four patents claiming designs for handle-less, two-wheeled, motorized, stand-on vehicles commonly referred to as “hoverboards.” Urbanmax, GaodeshangUS, Gyroor-US, Fengchi-US, Jiangyou-US, Gyroshoes and HGSM (collectively, the appellants) sell Gyroor-branded hoverboards. In 2020, the plaintiffs sued the appellants for patent infringement and sought a temporary restraining order and a preliminary injunction. As explained here, the district court granted the preliminary injunction in 2020, but thereafter invited the plaintiffs to file a second motion for a preliminary injunction in light of unsuccessful motions by Fengchi-US, Urbanmax and Gyroor-US to dissolve the 2020 preliminary injunction for lack of notice under Fed. R. Civ. P. 65(a). Heeding the court’s advice, the plaintiffs filed a motion for a second preliminary injunction on August 24, 2021.

The primary issue before the district court concerning the 2021 preliminary injunction was whether the plaintiffs had demonstrated a likelihood of success on the merits that the accused products infringed the plaintiffs’ patents in light of certain prior art hoverboards. The prior art included a hoverboard with an hourglass-shaped body, which was a significant feature of the patented designs and the majority of the accused products. Despite the similarities between the prior art board and the claimed designs, the plaintiffs generally disregarded the prior art in their analysis. After comparing the four accused products as a group to the claimed designs, the plaintiffs’ expert opined that the accused products infringed the asserted patents based in large part on their similar hourglass bodies, in addition to other features.

The appellants’ expert countered that “the attention of the hypothetical ordinary observer will be drawn to those aspects of the claimed design that differ from the prior art,” rather than the hourglass shape, and that the additional ornamental features of the accused products were not substantially similar to the claimed designs. While the district court acknowledged that “resolving this expert dispute will likely require a trial,” it nonetheless concluded that the plaintiffs had demonstrated likelihood of success and entered the preliminary injunction order. The appellants filed a notice of appeal.

On appeal, the Federal Circuit concluded that the lower court had erred in four material respects:

Applying the wrong legal standard
Failing to conduct the ordinary observer analysis in view of the prior art
Failing to apply the ordinary observer analysis on a product-by-product basis
Crafting an overbroad injunction.

First, the Federal Circuit took issue with the district court’s entry of a preliminary injunction despite its [...]

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Heads Up: Defendants Deserve Fair Notice of Preliminary Injunctions

by Tessa Kroll | Nov 3, 2022 | Patents

In one of two concurrent opinions concerning the same design patent case, the US Court of Appeals for the Federal Circuit vacated a district court’s grant of a preliminary injunction and an order extending the preliminary injunction to new defendants for lack of notice under Rule 65(a). ABC Corp. I v. P’ship & Unincorporated Ass’ns Identified on Schedule “A”, Case No. 21-2150 (Fed. Cir. Oct. 28, 2022) (Taranto, Dyk, Stoll, JJ.)

On August 17, 2020, ABC Corporation I and ABC Corporation II (collectively, ABC) brought a design patent infringement action asserting four “hoverboard” design patents against several online merchants. The ABC patents claim designs for handle-less, two-wheeled, motorized, stand-on vehicles commonly referred to as hoverboards. Attached to its original and amended complaints, ABC provided a list of defendants in a Schedule A that was amended throughout the proceedings as new defendants were identified. Gyroor-US was an originally named defendant on Schedule A, but it was not served with the complaint and summons until January 29, 2021.

On November 24, 2020, the district court granted ABC’s November 20, 2020, motion for a preliminary injunction against the defendants then listed on Schedule A, including Gyroor-US, which had not yet been served and was not given notice of the motion under Fed. R. Civ. P. 65(a). On May 24, 2021, the court also granted ABC’s May 6, 2021, motion to amend Schedule A to add GaodeshangUS, Fengchi-US and Urbanmax, binding them to the 2020 preliminary injunction even though they too had not received Rule 65(a) notice and were not served with process until June 25, 2021. GaodeshangUS filed a notice of appeal immediately following the court’s May 24 order. After several unsuccessful motions to vacate the 2020 preliminary injunction for lack of notice, Fengchi-US, Urbanmax and Gyroor-US also filed notices of appeal.

The Federal Circuit first determined that it had jurisdiction to hear the three appeals by GaodeshangUS, Fengchi-US, Urbanmax and Gyroor-US under 28 U.S.C. § 1292(c)(1), which grants the Federal Circuit exclusive jurisdiction of an appeal from an “interlocutory order[] . . . granting, continuing, modifying, refusing or dissolving [an] injunction[], or refusing to dissolve or modify [an] injunction[]” in any case over which the Federal Circuit would have jurisdiction of an appeal under 28 U.S.C. § 1295, such as cases arising under the patent laws. The Court began by considering GaodeshangUS’s May 24, 2021, notice of appeal, which stated that the appeal was from the preliminary injunction “entered in this action on November 24, 2021 [sic],” rather than the May 24, 2021, order. The parties disputed whether GaodeshangUS’s notice of appeal was timely filed within 30 days of the relevant order and whether the May 24 order was appealable as a modification of the 2020 preliminary injunction. The Federal Circuit concluded that GaodeshangUS’s appeal should be interpreted to refer to the May 24 order because it was filed on the same day as the order and “a mistake in designating the judgment appealed from” is not fatal if “the intent to [...]

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Novel Derivative Sovereign Immunity Defense Struck as Forfeited

by Joshua Revilla | Sep 8, 2022 | Copyrights

The US Court of Appeals for the Sixth Circuit affirmed a district court decision implementing a preliminary injunction and striking a new defense first asserted in an amended complaint as untimely and frivolous. ACT, Inc. v. Worldwide Interactive Network, Inc., Case Nos. 21-5889; -5907; -6155 (6th Cir. Aug. 23, 2022) (White, Bush, Reader, JJ.)

ACT publishes WorkKeys, a product designed to assess job performance skills. Three of the product’s assessments (Applied Mathematics, Locating Information and Reading for Information) were at issue in this case, and all included various “Skill Definitions” that describe the skills tested by the assessments. ACT and Worldwide Interactive Network (WIN) worked together from 1997 to 2011. During that time, WIN had the authority to develop and sell WorkKeys. After the business relationship ended, WIN began developing and promoting its own assessment tests.

In 2018, competing bids between ACT and WIN to provide educational material to the state of South Carolina showed that WIN’s “Learning Objectives” that were virtually indistinguishable from ACT’s Skill Definitions. ACT brought suit against WIN asserting claims, including copyright infringement, based on WIN’s alleged copying of ACT’s Learning Objectives. The district court granted partial summary judgment to ACT in March 2020 with the additional claims to go to trial, but trial was seriously delayed by COVID-19. During this time, WIN revised its Learning Objectives and claimed they no longer infringed. The district court ordered ACT to amend its complaint to include new allegations regarding the revisions. ACT complied. WIN then asserted a new derivative sovereign immunity defense in its amended answer, to which ACT objected. The district court agreed and struck the defense as untimely and frivolous. The district court entered a preliminary injunction in August 2021 barring WIN from distributing the original and revised Learning Objectives and assessments. WIN appealed, contesting the preliminary injunction and the striking of the defense.

After explaining its jurisdiction, the Sixth Circuit examined whether the district court had abused its discretion in imposing an overly broad preliminary injunction. Both the district court and the Sixth Circuit agreed that ACT was likely to succeed on its copyright claim. WIN’s argument on this issue was primarily based on its belief that the Skill Definitions were not creative or original to ACT and therefore were not copyrightable. The Court stated that while ACT’s selection of the skills was likely not copyrightable, the descriptions and arrangement of the skills were likely protectable. The Sixth Circuit also determined that the district court did not erroneously presume irreparable harm because it did not rely on a presumption but independently found irreparable harm. The Sixth Circuit also stated that the district court properly weighed the parties’ competing interests in the preliminary injunction and found minimal legitimate interest for WIN based on WIN’s business model essentially being infringement of ACT’s intellectual property.

The Sixth Circuit then explained why the district court properly struck the derivative sovereign immunity defense. While states generally enjoy sovereign immunity from suit, private contractors can sometimes obtain certain immunity in connection [...]

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