Christmas in November: No TRO for alleged false advertising because no showing of irreparable harm

Balsam Brands Inc. v. Cinmar, LLC, 2015 WL 7015417, No.
15-cv-04829 (N.D. Cal. Nov. 12, 2015)
 
Balsam sought a TRO based on claimed patent rights in an
invertible artificial Christmas tree, the “Flip Tree,” that includes a “pivot
joint” in the trunk that separates the trunk into two parts and allows the tree
to fold for simplified set up and storage. They sued Cinmar, aka Frontgate, for
selling allegedly infringing artificial Christmas trees, as well as for false
marking/false advertising.
 
Plaintiffs failed to show standing to sue for patent
infringement, and also defendants raised a substantial question of whether the
accused trees were infringing.  For the
non-patent claims, Balsam didn’t show irreparable harm.  Balsam alleged that (1) Frontgate has
marketed the accused trees as “featuring patented inversion technology,” but
Frontgate lacks patent rights in the inversion technology featured in the
trees; and (2) Frontgate has marketed the accused trees as featuring “exclusive
inversion technology,” but the inversion technology featured in the trees is
not exclusive to it, because plaintiffs also use the same technology.
 
The only evidence of irreparable harm came from Balsam’s
CEO, whose declaration said:
 
Based on Frontgate’s holiday
marketing promotions in past years, Balsam expects Frontgate to advertise a
variety of price promotions and discounts throughout the Christmas selling
season. For example, over the October 24 weekend, Frontgate is offering $50
back for every $200 spent, resulting in a 25% discount. Balsam will soon need
to decide whether to lower its own prices to compete with Frontgate’s
infringing products.
Frontgate’s sale of infringing
invertible trees, and its false advertising claiming it’s the exclusive
provider of such trees and that it even owns the patent on them, erodes Balsam
Hill’s identity as an innovation leader. Frontgate’s actions also discredit our
marketing campaign promoting our exclusive right to the Flip Trees.
Frontgate’s actions are also
costing us sales and market share. Catalog and ecommerce businesses depend on
acquiring new customers and then benefiting from the lifetime value of those
customers. Typical ecommerce or catalog retailers like Frontgate may break even
or even lose money on initial sales to new customers. Their strategy is to
acquire customers and then build lifetime relationships that lead to downstream
sales. Former Frontgate employees have told me that Frontgate in particular
uses trees as its acquisition tool, and then later sells décor and many other
products to those customers.
Each lifetime customer relationship
Frontgate builds using infringing trees and false advertising is a lifetime
relationship potentially lost to Balsam Hill. And because our brand and not
just our Flip Tree is under fire, we also stand to lose downstream customers
and sales across our whole product line. This includes conventional Christmas
trees, wreaths, garlands, ornaments, stockings, tree skirts, and other
products. These losses may last a lifetime.
Christmas trees are highly
seasonal. Our business grows tremendously each week in October and November and
hits a fever pitch by the Thanksgiving holiday weekend. Based on 2013 and 2014
sales data, … A single poor Christmas season could be devastating to the
company.
 
Whether the false advertising claims actually go to anything
material, you have to admit, that’s a lot better than many harm declarations
do.  However, the court noted, the
majority of the irreparable harm came from the fact of the allegedly infringing
sales, not from the allegedly false
advertising.  Without additional evidence
of “eroded identity as an innovation leader,” “discredited exclusive right,” or
“lost lifetime customer relationships” actually occurring, the claim of
immediate irreparable harm was too speculative.
 
In addition, Frontgate submitted a declaration that its description
of its trees as “featuring patented inversion technology” was based on its
misunderstanding that the pending application on the slotted hinge technology
had already issued, and that it had since removed the offending language from
its website.  The only allegedly false
statements in Frontgate’s catalogs were that Frontgate’s trees feature
“exclusive, state-of-the-art technology guaranteed to make setup a snap,” and
that Frontgate’s “exclusive new Inversion tree goes from packed-away to put-up
in about a minute.” Plaintiffs didn’t show a likelihood of immediate harm from
those statements that couldn’t be adequately addressed by money damages.
 
Finally, plaintiffs’ delay in seeking a TRO was also
noticeable.  Plaintiffs allegedly learned
on August 18, 2015 that Frontgate was selling the accused trees, and presumably
learned of the alleged false advertising around the same time. But they didn’t
file their complaint until October 20, 2015 and did not seek a TRO until
October 26, 2015, just days before the start of the month when Balsam alleged that
they generally earn approximately 50 percent of their annual revenue. A ten-week
delay “would be of little if any concern in most circumstances, given the
extent to which plaintiffs emphasize the importance of the holiday shopping
season in claiming that they will suffer irreparable harm, their failure to
seek injunctive relief sooner further weighs against this claim.”

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