The Preliminary Injunction with Regard to Emerging Legal Issues Surrounding the Internet

A recent case out of the Federal District Court in Minnesota shows how important the proper use of a preliminary injunction can be to protect a business from harm.

In the case of Nadia Wood v. Sergey Kasputin et al, what began as a dispute over an automobile sale quickly spun out of control as Ms. Nadia Wood, the lawyer for car buyers, set up a website designed to collect information, mainly customer complaints, for use in a lawsuit against the car dealership.  In response, the owner of the dealership set up his own website, Nadiawood.net, using the same logo and typeface as the site Wood had used for her law firm’s website, and implicitly accused Wood of being a blackmailer and of running a racket.

Wood immediately filed suit in Federal court, accusing Kasputin of violating her copyright as well as violations of federal anti-cybersquatting laws. As part of that action, she filed for a preliminary injunction in order to have Nadiawood.net shut down pending the litigation.

In determining whether or not the injunction should be granted, the court used the usual four-part test to determine whether or not the injunction should be granted.

First, it looked at whether there was a likelihood of success on the merits. As part of Wood’s claim was that Kasputin had infringed on her copyright, the court was forced to examine the likelihood of Wood prevailing on the two elements of copyright infringement. That is, whether or not Wood had a valid copyright, and whether or not Kasputin had copied that protected material.

The court found Wood would likely be able to show that the copyright was valid. The logo and wordmark appeared to be original, and she had already filed registration paperwork with the Copyright Office. Next, the court examined whether Wood would be able to show that Kasputin likely copied that copyrighted material.  As Wood could not show that Kasputin had directly copied her logo and wordmark, the court instead investigated the likelihood that Kasputin had indirectly copied her work. In this case, that analysis was rather simple, as the logo used by Kasputin was identical to the copyrighted logo registered by Wood. The court thus found that Wood was likely to prevail on her copyright claim, meeting the first element of the four-part test.

The second question was whether Wood would suffer an irreparable harm for which there was no adequate remedy in law should the preliminary injunction not be granted. In this case, this element was rather easily met. The website in question, though it had been scrubbed since the filing of the lawsuit, had previously accused Wood of various unsavory activities that posed a serious threat to her reputation. As the court noted, harm to intangible assets such as reputation and goodwill can be nearly impossible to quantify in terms of dollars, making it virtually impossible to compensate Wood with money damages. As a result, the court concluded that this element was met as well.

The next element was to balance the harms. On Wood’s side, there was the harm to her reputation. Reading the order, it appears that Kasputin did not make an argument in his own defense on this point. Granted, given that it was a case of copyright infringement, and he had copied Wood’s copyrighted logo, there would likely have been no harm he could allege that would have prevented the injunction outright, but he likely did miss an opportunity to claim that an injunction that would entirely block the website he set up would harm him by infringing on his ability to freely express himself. As Kasputin did raise this argument, however, the court instead concluded that he would suffer no serious harm, and so concluded that this element had been met as well. The court’s opinion did not differentiate between the harm caused by infringing the copyright and the harm caused by the criticism of Wood.

The final element was one of public interest. Whether or not Kasputin could have raised some sort of defense here, namely that an overbroad injunction might have a chilling effect on free speech, or anything else, it seems clear that no such argument was ever proffered, and the court simply concluded that because Wood had shown that she likely had a valid copyright claim, the public interest supported the injunction. In the guise of an infringement action, a prior restraint of speech was accomplished by Wood.

As a result, the court ruled that not only would Kasputin be enjoined from using the copied copyrights, but also that the website addresses he had set up would be automatically redirected to Wood’s site. In addition, the court, because it is in a jurisdiction where the bond requirement is mandatory, was forced to issue a bond, but decided that, in light of the circumstances, to require only a nominal amount, in this case, $1000.

This case is a good example of both how a preliminary injunction can be useful in the context of copyright violations, and also how important it can be for a party to defend itself against preliminary injunctions. While some manner of preliminary injunction would have been given no matter what Kasputin had argued, the record makes it clear that Kasputin did himself no favors by neglecting to vigorously argue about the harm an overbroad injunction might do to him.  

 

Garon Foods v. Montieth

The recent Garon Foods v. Montieth case shows how a preliminary injunction can be useful in protecting trade secrets. In this case, the plaintiff is a company whose primary source of business is the distribution of peppers from suppliers to cheese manufacturers for the creation of Pepper Jack cheese. The defendant had worked for the plaintiff for roughly two years before resigning in February 2013, and going to work as an independent contractor attempting to connect the supplier of the peppers directly with the cheese-makers, and therefore bypassing the plaintiff.

In March 2013, the plaintiff filed suit against the defendant, alleging that the defendant had breached her contract with the plaintiff, which had included a non-disclosure clause, as well as violation of the Illinois Trade Secrets Act (ITSA).  It also filed for a preliminary injunction to prevent the defendant from continuing to solicit cheese-makers while the litigation was ongoing.

The meat of the court’s ruling was primarily in dealing with the first element of the four-part test for the granting of a preliminary injunction, that is, whether or not there is a likelihood of success on the merits of the case. The court found that there was a likelihood of success on the merits of claims dealing with how the defendant used the information she had to solicit the plaintiff’s customers. What is interesting about this case is exactly what the court found to be a breach of the non-disclosure agreement.  The court rejected a number of the plaintiff’s arguments, finding it unlikely that the plaintiff would be able to show that the plaintiff had materially breached the contract by emailing confidential information to herself, taking paper documents from the plaintiff’s offices, or even that the defendant had been soliciting customers based on a proprietary list developed by the plaintiff. The court did find, however, the claims regarding the defendant leaking the identity of her new employer as the supplier of peppers to the plaintiff, and the defendant using her memory to recall the past purchases of cheese-makers did constitute likely breaches of the contract, as well as violations under ITSA.

Because of the particular nature of the business of the plaintiff, the court next ruled that without an injunction, there was a possibility of a irreparable harm to the company, as she can draw on the confidential information contained in her memory in order to tempt customers away from the plaintiff, which may, if defendant solicits enough customers, do enough harm to the plaintiff that money damages will not be able to compensate them entirely for their losses.

By entering this injunction, though, the court also recognized that the defendant would suffer significant harm, as the defendant’s ability to earn a living in her chosen career would be severely compromised if she were totally barred from soliciting cheese-makers on behalf of the supplier. To that end, the court decided to limit the score of the injunction, generally only enjoining the defendant from soliciting those cheese-makers she had personally serviced while working for the plaintiff, as well as identifying the supplier as the party responsible for supplying pepper to the plaintiff to potential customers, or any other sensitive information she might have learned while working for plaintiff.

One interesting note is that the amount of bond is not mentioned. While Illinois courts do not require a bond for the issuing of a preliminary injunction, in a case such as this one, where the court openly acknowledged that the injunction would limit the ability of the defendant to make a living, a bond could, and perhaps should, have been issued to reimburse the defendant if the plaintiff’s claims proved fruitless.