Type: Law Bulletins
Date: 04/11/2022

A Tale of Two Committees: Board of Directors Splits in Two then Battles for IP Rights

The US Court of Appeals for the Tenth Circuit has upheld a district court decision to consider new evidence and grant a preliminary injunction. However, the Tenth Circuit has held that the district court went too far by requiring the Spence Group to remove certain sculptures.

The appeal grew out of a dispute over a program to train trial lawyers known as the Trial Lawyers College. The college’s board of directors splintered into two factions, the Spence Group and the Sloan Group. The two groups sued each other: the Spence Group in state court for dissolution of the college and a declaratory judgment recognizing the Spence Group’s control of the board, the Sloan Group then sued in federal court, claiming trademark infringement under the Lanham Act. Both groups sought relief in the federal case, and the Sloan Group requested a preliminary injunction with regard to the trademark claims.

The district court granted a preliminary injunction, finding in part that the Sloan Group had shown irreparable injury. The Spence Group challenged this finding, the order to remove sculptures, restrictions on what the Spence Group can say, and the consideration of the evidence presented after the hearing had ended.

With regard to irreparable injury, the Tenth Circuit disagreed with the Sloan Group’s argument that courts should presume irreparable injury whenever a plaintiff establishes trademark infringement. While acknowledging that it sometimes referred to a presumption of irreparable injury in similar circumstances, the Tenth Circuit rejected this approach citing the Supreme Court’s 2006 decision in eBay. In this, the Supreme Court cautioned against categorical rules that would undermine the traditional four-part test for preliminary injunctions in cases involving intellectual property. The Tenth Circuit noted that after the district court had granted the preliminary injunction, Congress amended the Lanham Act to expressly allow a presumption of irreparable injury when the owner of a trademark proves the likelihood of success on the merits. However, because no such presumption existed at the time of the decision, the court held that it could not presume irreparable injury.

The Spence Group argued that without a presumption, the Sloan Group did not prove irreparable injury; in response, the court held the opposite, finding that the evidence permitted a reasonable factfinder to infer irreparable injury. It also said that “[t]hough a rebuttable presumption didn’t exist, its underlying logic could bear on the existence of irreparable injury.” That logic involves difficulties, both in distinguishing between the services of the trademark owner and the services of a competitor, and quantifying the damage from consumer confusion. The court relied on the Sloan Group’s efforts to protect its name and logo as trademarks and evidence of likely confusion among customers of the college. The court pointed out the Spence Group’s use of Instagram for a post that incorporated the college’s logo and the hashtag #traillawyerscollege. The Tenth Circuit held that “[t]aken as a whole, the evidence provided reasonable support for the finding of a risk to the College’s reputation and goodwill.”

With regard to the preliminary injunction, the Tenth Circuit held that the district court did not abuse its discretion in finding irreparable harm.

This article originally appeared in World Trademark Review Weekly on Feb. 10, 2022 and is reprinted with permission. 

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