Trademark infringement litigation often starts with a request for preliminary injunctive relief. In the usual case, at the outset of litigation, plaintiff will seek a preliminary injunction ordering defendant to immediately cease its use of plaintiff's mark and stop all sales of potentially infringing goods. In order to obtain preliminary injunctive relief, a plaintiff must establish a) that it is likely to succeed on the merits of its case; b) that it will suffer an irreparable harm in the absence of preliminary injunctive relief; c) that the balance of hardships tilts in its favor and d) that a preliminary injunction is in the public's interest. It is fairly easy to see how cessation of use of an infringing mark and cessation of sales of infringing goods fit within these parameters: infringement destroys plaintiff's goodwill, which could be an irreparable harm; and may cause public confusion, which should be avoided.
If plaintiff ultimately proves its infringement case (or settles) it will likely seek a permanent injunction further barring defendant from use of plaintiff's mark and providing other relief to the plaintiff. Among the more common permanent-injunction provisions is a requirement that defendant recall any infringing product from distributors and resellers.
When, however, would a recall be appropriate at the preliminary stage of litigation? What behavior or facts would support a court-mandated recall at the outset of litigation? A recent decision by the United States Court of Appeals for the Ninth Circuit addressed this very issue.
In Marlyn Nutraceuticals Inc. v. Mucos Pharma GMBH & Co., Mucos owned a federal trademark registration for the mark WOBENZYM, which covered dietary supplements. Mucos manufactured the supplements and distributed them globally. Marlyn was, at one time, the sole US distributor of WOBENZYM. In 2006, a dispute arose between Marlyn and Mucos regarding alleged product changes and Marlyn took it upon itself to manufacture and continue marketing dietary supplements under the mark WOBENZYM pursuant to a different formula.
Mucos brought a trademark-infringement action and among the preliminary injunctive relief sought was a recall of WOBENZYM sold by Marlyn and restitution to customers. After what appears to have been a long, thorough and contested hearing on the preliminary injunction, the U.S. District Court in Arizona granted the injunction and Marlyn appealed.
The appeals court reviewed the question of propriety of the recall order. This was a case of first impression, so there was no prior binding precedent on the issue. The Ninth Circuit first pointed out the distinction between prohibitory injunctive relief, which is intended to prevent additional action by a party and to maintain the status quo and mandatory injunctive relief, which goes further than maintaining status quo by forcing a party to take action. Such mandatory relief is allowed at the preliminary injunction stage only in extreme cases. Here, the Court considered the recall mandatory injunctive relief, since it required Marlyn to take steps to pull product off the market and out of the hands of consumers. Because the relief was mandatory, what standard must be met, if any, to support the recall requirement?
The Ninth Circuit adopted a test first articulated by Third Circuit Court of Appeals which requires a plaintiff to meet threshold requirements before mandatory injunctive relief is granted. In the context of product recalls in trademark-infringement litigation, the additional factors to consider when presented with a recall request include a) whether defendant's infringement was willful or intentional; b) whether the risk of confusion to the public and injury to the trademark owner are greater than the burden of the recall to the defendant; and c) how substantial is the risk of danger to the public due to the defendant's infringing activity. There is no indication as to which factor may be determinative, but all must be considered.
Because this was an issue of first impression, the Appeals Court remanded the matter to the District Court to consider the propriety of the recall in light of these additional factors. As of this date, no decision has been issued by that court. The Appellate decision, however, provides some fairly clear guidance as to what facts are relevant when a plaintiff seeks a recall at the preliminary injunction stage of an infringement action. Due to the drastic nature of the relief, the situation will have to be fairly egregious. Where a defendant's illegitimate motives are clear, or where the public may be in danger—especially where public health and safety are at issue—a recall may be appropriate. This could encompass situations involving counterfeiting and low-quality knockoffs, where motive is fairly clear. Defendants who act in good faith may be able to avoid a recall order. Similarly, some classes of product may lend themselves more readily to a recall, such as foods and drugs or supplements that could impact health, or manufactured goods that might impact safety.
Though the Marlyn Neutraceuticals decision is recent, the standard required to obtain a recall as preliminary injunctive relief has been set. Where a party is considering litigating against an infringer, it should closely analyze the facts to determine whether a product recall at the preliminary injunction stage is appropriate.
Vol. 53, June 2010