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August 25, 2022

Rebuttal Presumption of Irreparable Harm Still Alive When Assessing Trademark Preliminary Injunctions

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In one of the first decisions to construe the Trademark Modernization Act of 2020 (TMA), the US Court of Appeals for the Third Circuit found that a district court properly applied the TMA's rebuttal presumption of irreparable harm when it denied a trademark owner's motion for a preliminary injunction. Nichino America, Inc. v. Valent U.S.A., LLC, Case No. 21-1850 (3rd Cir. Aug. 12, 2022) (Bibas, Matey, Phipps, JJ.)

Nichino and Valent sell pesticides for farming. Since 2004, Nichino has offered a trademarked product known as CENTAUR. Valent trademarked a competing product called SENSTAR in 2019, giving it a logo resembling CENTAUR's colors, fonts and arrow artwork. Both pesticides are used in the same geographic areas against many of the same insects, and both are sold to farmers through distributors. SENSTAR is a liquid and uses a unique combination of two active chemicals. It costs $425 per gallon and ships in cases containing four one-gallon containers. CENTAUR is manufactured as a solid and sold by the pallet, with each pallet containing 622 pounds of pesticide packed into bags and cases. CENTAUR costs $24 per pound.

Nichino sued Valent for trademark infringement and sought a preliminary injunction against SENSTAR's launch, arguing that Valent's use of the SENSTAR mark would create confusion among consumers. The district court found that Nichino narrowly demonstrated that its infringement claim would likely succeed but explained that "there is not an abundance of evidence of likelihood of confusion" between the products. As part of its injunction analysis, the district court applied the TMA to presume Nichino would suffer irreparable harm without an injunction. However, the court noted that the presumption was rebuttable. The court credited Valent's evidence of a sophisticated consumer class that makes careful purchases and noted the lack of any evidence of actual consumer confusion. The court also found that Nichino failed to proffer any affirmative evidence that it would suffer irreparable harm. Accordingly, the district court found that the presumption of irreparable harm was rebutted, and therefore denied the injunction request. Nichino appealed.

Nichino argued that the TMA precluded the district court from finding no irreparable harm. The Third Circuit, however, found that the district court "admirably navigated" the TMA's rebuttable presumption by finding that Valent rebutted the presumption and Nichino did not independently show irreparable harm. The Court explained that the three-step process for applying the TMA's rebuttable presumption requires the following:

  1. The court must assess the plaintiff's evidence only as it relates to a likelihood of success on the merits.
  2. If the plaintiff's evidence establishes likely trademark infringement, the TMA is triggered, and the burden of production shifts to the defendant to introduce evidence sufficient for a reasonable factfinder to conclude that the consumer confusion is unlikely to cause irreparable harm.
  3. If a defendant successfully rebuts the TMA's presumption by making this slight evidentiary showing, the presumption has no further effect.

The Third Circuit found that the district court correctly followed this three-step analysis in finding that Valent rebutted the TMA's presumption. As to the first step, the Court found that the district court correctly assessed likelihood of consumer confusion to determine Nichino's likelihood of success on the merits without simultaneously considering irreparable harm. Finding that Nichino would likely succeed on the merits, the district court correctly moved to the second step by presuming irreparable harm and turning to Valent's rebuttal evidence, where it found that Valent had rebutted the presumption by producing evidence of a sophisticated consumer class.

As to the second step, the Third Circuit accepted Nichino's argument that the district court erred in considering Nichino's failure to produce evidence of actual confusion at this stage (given that the sole focus should be on Valent) but found that this slight error did not undermine the district court's judgment because it also credited Valent's evidence that the relevant consumers are sophisticated buyers who exercise great care in purchasing pesticides.

With the presumption rebutted, the Third Circuit found that the district court correctly turned to the third step, where it concluded that the presumption had no further effect. The Court further found that it was undisputed that Nichino did not provide any affirmative evidence of irreparable harm. Accordingly, the Court affirmed the district court's order denying Nichino's motion for a preliminary injunction.

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