Amylin Pharm. v. Eli Lilly Part II

 This is Part II of a post on the Amylin v. Eil Lilly Litigation.  For background on the case and to read about the original TRO see Part I of the post.

 

Denial of Preliminary Injunction

After granting the temporary restraining order, the parties further briefed the matter and a preliminary injunction hearing was held on June 2, 2011.  As a result, the Court vacated the TRO and denied the preliminary injunction.

The main thrust of the Court’s reversal comes from a more careful analysis of the irreparable harm factor. The Court did not address the remaining elements of the preliminary injunction after determining that Amylin failed to show irreparable harm: 

Under Winter, Amylin “must establish that irreparable harm is likely, not just possible, in order to obtain a preliminary injunction.” Alliance for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131 (9th Cir. 2011). “‘Irreparable harm is the single most important prerequisite for the issuance of a preliminary injunction. . . . Accordingly, the moving party must first demonstrate that such injury is likely before other requirements for the issuance of an injunction will be considered.’” Freedom Holdings, Inc. v. Spitzer, 408 F.3d 112, 114 (2d Cir. 2005) (alteration in original) (quoting Rodriguez ex rel. Rodriguez v. DeBuono, 175 F.3d 227, 233–34 (2d Cir. 1999)).

In footnote 2 of its order, the Court repudiated the presumption of irreparable harm from the original TRO.  Instead, the Court examined Amylin’s injury claims: (1) harm attributable to Defendant’s misuse of Amylin’s confidential information and (2) loss of prospective customer and goodwill. 

The Court found Amylin’s claim of harm—misuse of confidential information— was too speculative.  “Speculative injury does not constitute irreparable injury sufficient to warrant granting a preliminary injunction.” Carribean Marine Servs. Co. v. Baldrige, 844 F.2d 668, 674 (9th Cir. 1988).  The Court does not do a great job explaining this finding.  Instead, it passes the buck to the two points below.

Secondly, the Court points to Food and Drug Administration’s regulations that prohibit Lilly’s sales representatives from making any potentially misleading statement regarding Amylin’s product without adequate supporting data, including statements comparing the attributes of the other product.  Amylin’s argument that the Defendant’s sales representatives would intentionally mislead consumers to the detriment of Amylin is clearly specious.  The Court concluded that the sales representatives would not risk FDA sanctions to maximize sales of a competing product.

Finally, in order to prevail in a preliminary injunction, damages cannot be monetarily compensable: “[E]conomic injury alone does not support a finding of irreparable harm, because such injury can be remedied by a damage award.” Rent-A-Center, Inc. v. Canyon Television & Appliance Rental, Inc., 944 F.2d 597, 603 (9th Cir. 1991).  The Court relied on Defendant’s economic expert who asserted money damages were sufficient to cover any harm arising from Defendant’s actions:

To the extent that Amylin would suffer from the alleged actions, the resulting loss would take the form of profits on lost exenatide sales. Losses of this nature are generally calculable through the use of standard economic analyses undertaken in the calculation of economic harm generally and, specifically, in antitrust actions.  Amylin Pharmaceuticals, Inc. v. Eli Lilly and Company, Case No. 11-CV-1061 JLS (NLS) (S.D. Cal. June 8, 2011)

The courts do not enjoin actions that would result in a calculable economic injury. Accordingly, misappropriation of a trade secret can be remedied with money damages.

Finding no irreparable harm, the Court ended its analysis.    

 

WORLDCARE Trademark Injunction Part I

 Worldcare Limited Corporation v. World Insurance Company, Case No. 8:11CV99 (D. Neb. May 9, 2011).

Written by Jay Lewis

On May 9, 2011, WorldCare Limited Corporation (“WorldCare”) was granted a preliminary injunction against World Insurance Corporation (“Defendant”) preventing further use of the “WORLDCARE” mark or name.

WorldCare is a provider of second-opinion telemedicine services.  The service allows individuals and insureds to request second opinions through WorldCare’s consortium of specialized physicians at highly regarded hospitals and universities.  WorldCare sells its services through insurance policies as an additional benefit.  WorldCare registered its trademark, “WORLDCARE,” in June of 1996.

Defendant provides health insurance products and services including basic medical, major medical, comprehensive major medical, short-term medical, and dental insurance.  Defendant began using WORLDCARE in February 2003 as a brand name on its insurance products.  Defendant applied for a registration of the WORLDCARE mark on March 28, 2005, but the application was rejected.  Defendant continued to use the mark creating customer confusion in violation of the Lanham Act, 15 U.S.C. §§ 1114(a), 1125(a). WorldCare filed for a preliminary injunction against Defendant on September 21, 2010.

Defendant argued that WorldCare failed to renew its ownership in the WORLDCARE mark under 15 U.S.C. § 1059(a). The Court stated: “Nevertheless, ownership of registration is not determinative of ownership of trademark rights, and ‘the absence of federal registration does not unleash the mark to public use.’" quoting, Gilbert/Robinson, Inc. v. Carrie Beverage-Missouri, Inc., 989 F.2d 985, 992 (8th Cir. 1993).

The Court cited Dataphase Sys., Inc. v. C.L. Systems Inc., 640 F.2d 109 (8th Cir. 1981) for the four factors of a preliminary injunction: “(1) The threat of irreparable harm to the movant; (2) the state of balance between this harm and the injury that granting the injunction will inflict on other parties litigant; (3) the probability that movant will succeed on the merits; and (4) the public interest.” Dataphase at 114.

Balance of Harms

The Court first reviewed the ‘balance of harms’ between the parties and found in favor of WorldCare.  Defendant’s executive testified that the company had already started to phase out the use of the WORLDCARE mark from its products.  The executive explained, however, the phase-out was only temporary.  Defendant was not willing to consent to a complete termination of the mark’s use.  The executive believed the company was not legally obligated to terminate the use and it could be harmed by a negative public perception if did so voluntarily.  The Court found that due to Defendant’s own actions in phasing out the use of the mark, the burden of an injunction had been significantly minimized.  An injunction reinforcing the phase-out would not cause significant additional harm.

Part II of this post will examine the Probability of Success on the Merits.

Verizon Litigation

By Jay Lewis

 Part II

Verizon filed a motion for preliminary injunction based on Defendants’ deceptive acts, which induced customers to purchase non-compliant premium services.  Verizon also claimed that the customers, in turn, threatened to leave the Verizon network because of Defendants’ actions.  The Court granted Verizon’s motion for a preliminary injunction after conducting a hearing. 

The Court cited Winter v. Natural Res. Def. Council, 555 U.S. 7 (2008) for the general factors a plaintiff must show to obtain a preliminary injunction:

  1. A likelihood of success on the merits of the legal claim,
  2. Irreparable harm in the absence of preliminary relief,
  3. The balance of equities tips in the favor plaintiff’s favor, and
  4. The relief is in the public interest.

The Court further cited Alliance for Wild Rockies v. Cottrell, 622 F.3d 1045 (9th Cir. 2010) for the 9th Circuit sliding scale balancing test.  Under this 9th Circuit test, if the balance of hardships tips sharply in the plaintiff’s favor, likelihood of success on the merits becomes less of a factor to consider. Alliance, 1049-53.

Verizon based its request for preliminary injunction on three legal bases:

  1. Arizona Consumer Fraud Act (“ACFA”),
  2. Tortious Interference with Contract, and
  3. Unjust Enrichment.

ACFA, the Court decided, did not apply in this case.  AFCA protects the merchant-consumer relationship.  It provides a means for consumers to bring an action against merchants for deceptive or fraudulent practices.  Here, Verizon was not a purchaser of Defendants services but merely a conduit to the customers.  Therefore, Verizon would not likely succeed on the merits of its AFCA claim.

The Court held that Verizon would likely succeed on the merits of its claim for tortious interference with contractual relations.  The Court affirmatively stated that, under Arizona law, a civil defendant can be held liable for tortious interference with contractual relations if the interference made the plaintiff’s compliance with a contract more expensive. This is an extension of Arizona precedent where the facts of previous tortious interference cases indicate the contract ended in breach or termination.  In Verizon’s case, the Court applies Restatement (Second) of Torts §767 (1979) which punishes tortious actions that merely burden the plaintiff’s performance on an existing contract.  The fact that Verizon paid reimbursement fees to retain customers and monitoring fees to prevent continued deception met the criteria set forth in §767.

The Court found that Verizon’s theory for unjust enrichment would not likely succeed on the merits.  Specifically, Verizon did not suffer the required impoverishment.  In fact, Verizon gained an estimated $24 million from Defendants’ actions.

After determining that Verizon has a likelihood of success on the merits for tortious interference, the Court found the three other factors of a preliminary injunction had been met:

  • Verizon would suffer irreparable harm to its business reputation if Defendants were allowed to continue deceiving customers; damage to goodwill constituted irreparable harm.
  • The balance of harms tipped in Verizon’s favor as Verizon has an interest in protecting its customer relationships and Defendants have no legitimate interest in accessing the network through deceptive means. 
  • The public interest in this matter is to protect contractual relationships from exploitation through improper means.

 Part III shall discuss the Defendants' arguments.

 

Ex Parte Injunctive Relief--Demonstrating Gravity

Bank of America, N.A. v. Federal Deposit Insurance Corp. (Receiver for Colonial Bank), Case No. 09-22384-CIV-JORDON, currently before U.S. District Court Judge Adalberto Jordan of the Southern District of Florida, has garnered some media attention in the Atlanta Business Chronicle and The New Times, but is of interest to us in today’s post because the court granted an emergency motion for an ex parte TRO in a billion dollar case.

Facts

Bank of America (“the Bank”) filed a lawsuit on August 12, 2009 against Colonial Bank (Colonial) to obtain the return of loan agreements, mortgages and sale proceeds valued in excess of a billion dollars. The Bank had sent Colonial a demand for all sale proceeds and loan agreements held by Colonial Bank. Colonial refused to return the loans, and the Bank filed suit for breach of trust and other agreements.

Motion for an Emergency ex parte TRO

Along with the complaint, Colonial filed a motion for an emergency temporary restraining order (TRO), which sought to enjoin Colonial from liquidating, transferring or otherwise encumbering the assets. The motion recited the familiar four-factor test, but is of interest to me today for these three reasons:

  1. The Bank didn’t rest solely on its motion; as new developments occurred, it filed supplemental papers. This is important because TROs are decided on the papers alone, so if new information develops after you have filed your motion, be sure to update the court with new information. Used appropriately, it builds momentum: “yesterday these terrible events took place; today it got worse; Judge please stop them!”
  2. The Bank used newspaper stories effectively. Under Fed. R. Evid. 902(6), newspaper stories are admissible. The Bank intelligently used this Rule.
  3. The Bank used supplemental sources of law. Rather than relying solely on its agreements (which should have and probably would have been sufficient), the Bank also asserted Fla. Stat. § 812.035(6), which relaxes the traditional “irreparable harm” requirement in cases involving civil theft, and instead only requires the movant to make “a showing of immediate danger of significant loss[.]” It is a good practice to always search for supplemental sources of law that may assist you in stating a claim.

Our next post will discuss a few other interesting aspects of this case.

Irreparable harm in patent law

In my prior post (The Federal Circuit Clarifies Injunction Requirements in Patent Cases), I reviewed the Titan case, but my curiosity was piqued by the Court of Appeals noting that irreparable harm, the balance of harms, and the public interest all weighed in favor of the movant; the injunction was denied only because of an unlikelihood of success. So I pulled the lower court’s opinion to see what it said on these subjects: of interest to those who can show a likelihood of success and need to argue these other factors as well.

Patent holders have an interest in not being forced to license their invention. The right to exclude is important. So many cases hold that a presumption of irreparable harm arises from infringement itself.   Most injunction cases rely on an inability to prove money damages to justify irreparable harm arguments, but patent infringement allows money damages, and permits tripling them if the infringement is willful. Why an injunction, then?

The court noted that the potential loss to the moving party may include loss of trade, sales, reputation, and goodwill, some of which may never be remedied with money damages, and the size of the parties’ relative investment.    The court spent time analyzing only a few of these elements.  

  1. The court considered delay, noting that delay in pursuing rights under a patent can negate an argument of irreparable harm, but here the movant explained the delay by its lack of knowledge of infringement, its immediate retention of counsel once discovered, and the short time that elapsed between that time and its sending the cease and desist letter, the investigation of the claims, followed by the lawsuit. The timeline satisfied the court and negated the delay argument.
     
  2. The reputation component. The inventor can select the companies he or she wants to make the product; if they do so badly, the inventor’s reputation suffers. The opponent failed to offer proof to this argument, so the court deemed that irreparable harm was proven.
     
  3. Loss of goodwill. It is difficult to quantify the costs of customer confusion. This occurs if one company is licensed to manufacture the product or if the inventor manufactures it; another similarly appearing or functioning product bleeds off sales. Why can’t this be compensated in money damages from the bleedor? The value of a one-time purchase is more than the profit from the sale. Collateral products might be purchased, or the buyer might return for later sales to the same source at a later time, and it is difficult to determine the value of those sales, all of which is captured in the concept of goodwill, damage to which is a harm that cannot easily be quantified. 
     
  4. The movant explained its great investment in developing the products based on the patent. This went unrebutted by the opponent (who could have explained how much it spent to develop its allegedly infringing product).