Showing irreparable harm isn’t easy

Pruvit Ventures, Inc. v. ForeverGreen International LLC, —
F.Supp.3d —-, 2015 WL 9876952 No. 15-CV-571 (E.D. Tex. Dec. 23, 2015)
(magistrate judge)
 
Defendants moved for a preliminary injunction on their
counterclaims involving dietary suppplements. 
Defendant Axcess is the exclusive licensee of patented technology
relating to
appetite suppression and weight loss.  Defendants alleged that a prospective
sub-license to Pruvit never became effective, while Pruvit argued that it was
approved.  Pruvit went to market with a
supplement called KETO//OS1, allegedly using defendants’ patent and trade
secrets, while defendant ForeverGreen then launched a competing supplement,
KetonX.  Pruvit sued defendants for
breach of contract, disparagement, and related claims.  Defendants counterclaimed for, among other
things, trade secret misappropriation, patent infringement, and false
advertising.  Defendants sought a
preliminary injunction, and the court analyzed irreparable harm in detail,
assuming arguendo that they’d shown likely success on the merits.
 
Speculation isn’t enough to show irreparable harm.  The movant must show that monetary damages
are an insufficient remedy and that their alleged harms are not just possible,
but likely. The judge reviewed six theories of harm, none of which worked.
 
Price erosion: Pruvit’s product allegedly caused price
erosion in the relevant supplement market, and defendants might be forced to
drop the price of KetonX to compete. 
Further, customers would resist future price increases, so ForeverGreen
wouldn’t then be able to raise the price without destroying goodwill.  Price erosion isn’t irreparable harm; money
damages can compensate for it.  Plus, the
testimony was merely speculative, with no economics expert or other expert
testifying to it.
 
Reputational harm: although this can be irreparable harm, “the
showing of reputational harm must be concrete and corroborated, not merely
speculative.” Defendants argued that Pruvit’s supplement had negative side
effects, such as headaches, diarrhea, and nervous system issues, and that such
problems were likely to be attributed to KetonX or ketosis supplements
generally because the products are seen as alternatives.  But they failed to show that the established
negative side effects of Pruvit’s KETO//OS were causing customers to turn away
from KetonX and/or the ketosis supplement market, or that KetonX didn’t also
cause the side effects alleged.  The
court agreed that “[i]t is difficult to imagine under what extraordinary set of
circumstances the introduction of a product with a ‘lower reputation for
quality’ would, instead of highlighting the higher quality of its competitors,
reflect adversely upon the field as a whole.” Moreover, the Fifth Circuit previously
held that “[t]he lost goodwill of a business operated over a short period of
time is usually compensable in money damages,” and both products had only been
on the market for about six months.
 
Harm to shareholder value: There were other explanations for
a decline in share value, like ForeverGreen’s losses in 9 out of 12 fiscal
years, and mere speculation wasn’t enough, nor was alleged temporal proximity
between Pruvit’s launch and the decrease in value.
 
Lost market share/first-to-market advantages: Defendants
argued that, in the multilevel marketing model both parties used, being first
to market was extremely important, because a new product launch creates
significant interest in the industry and attracts distributors excited to take
the new product to market, maintaining a larger market share than would
otherwise exist. Moreover, Pruvit’s presence in the market also limited the
supply of raw materials necessary to manufacture KetonX, prevented defendants
from making important industry contacts/acquiring important distributors, and
deceived consumers through false labeling.
 
Lost market share/lost sales aren’t irreparable harm in
themselves.  Moreover, lost market share
must be substantiated, and here all defendants did was claim that they must
have lost market share, without quantifying it or establishing that it had
happened. “[N]either the difficulty of calculating losses in market share, nor
speculation that such losses might occur, amount to proof of special
circumstances justifying the extraordinary relief of an injunction prior to
trial.”
 
Lost opportunities to obtain raw materials: there was no
evidence that Pruvit’s supplier was the only supplier.  Nor did the evidence show that Pruvit was to
blame for lost distributors, or that Pruvit’s labeling had turned customers away
from the ketosis supplement market as a whole.
 
Lost profits: these are readily quantifiable and thus not
irreparable.
 
Lost right to exclude: Also not irreparable, especially
given that defendant Axcess, at least initially, voluntarily began a sublicense
agreement.
 
Defendants’ five-month delay in seeking relief also weighed
against a finding of irreparable harm; they even delayed two months after
Pruvit sued them to counterclaim, weighing heavily against a finding of
irreparable harm.

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