It is black-letter law that a party seeking preliminary injunctive relief must show (1) it is likely to succeed on the merits, and (2) that it will suffer irreparable harm without an injunction. For years, plaintiffs in intellectual property cases in the Ninth Circuit could count on courts presuming irreparable harm if they could show a likelihood of success on the merits. See e.g. Brookfield Commc'ns, Inc. v. W. Coast Ent. Corp., 174 F.3d 1036, 1066 (9th Cir. 1999) (trademark infringement); Rosen Entm't Sys, LP v. Icon Enters, Inc., 359 F. Supp. 2d 902, 910 (C.D. Cal. 2005) (patent infringement); Ticketmaster L.L.C. v. RMG Techs., Inc., 507 F. Supp. 2d 1096, 1113 (C.D. Cal. 2007) (copyright infringement); W. Directories, Inc. v. Golden Guide Directories, Inc., No. C 09-1625 CW, 2009 WL 1625945, at *6 (N.D. Cal. Jun. 8, 2009) (trade secrets).
All of that changed when the Supreme Court eliminated the presumption of irreparable harm in the context of patent cases. No longer can a plaintiff rely on the basic fact of infringement to secure an injunction. But does this holding extend to a trade secret injunction? This question has been left for the lower courts to sort out. The result is a split of opinion between courts that believe they may still presume irreparable harm, and those that believe only a showing that irreparable harm is likely will support a preliminary injunction.
Supreme Court Precedent: eBay and Winter
The Supreme Court expressly rejected any automatic presumption of irreparable harm upon a finding of patent infringement in eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006). The Court emphasized that the decision to grant or deny permanent injunctive relief rests within the equitable discretion of the district courts, consistent with traditional principles of equity. Similarly, in Winter v. Natural Resources Defense Council, Inc., 555 U.S. 7 (2008), the Court clarified that plaintiffs seeking preliminary injunctions must demonstrate that irreparable harm is likely, not merely possible, further reinforcing the requirement for evidence-based findings rather than reliance on presumptions.
Ninth Circuit Authority: The Presumption of Irreparable Harm Fades Away
There is an animating principle behind the decision to eliminate the presumption for patent cases. It rests on the fact that many patent plaintiffs are non-practicing entities, colloquially referred to as “patent trolls.” By their very nature, non-practicing entities do not commercialize the patented product, so they are less likely to suffer classic forms of irreparable harm—lost market share or customer relationships—due to infringement. They instead primarily exist primarily to secure licensing fees. This typically makes money damages adequate compensation. EBay, 547 U.S. at 396 (J. Kennedy, concurring); Evolutionary Intel. LLC v. Yelp Inc, No. C-13-03587 DMR, 2013 WL 6672451, at *8 (N.D. Cal. Dec. 18, 2013).
Despite the fact that other forms of intellectual property rights generally do not deal with non-practicing entities, the Ninth Circuit has extended the eBay and Winter reasoning to other areas of intellectual property law:
For example, in Flexible Lifeline Systems, Inc. v. Precision Lift, Inc., 654 F.3d 989 (9th Cir. 2011), the court held that the logic of eBay and Winter ruled out applying the presumption of irreparable harm in copyright infringement cases. Likewise, in Herb Reed Enterprises, LLC v. Florida Entertainment Management, Inc., 736 F.3d 1239 (9th Cir. 2013), the Ninth Circuit rejected the presumption of irreparable harm in trademark cases. Irreparable harm must be proven with evidence and factual findings, not merely conclusory statements or reliance on other cases.
Application to Trade Secret Cases: The Split
Post-eBay and Winter, the Ninth Circuit has not issued a definitive, published opinion squarely addressing the presumption of irreparable harm in trade secret misappropriation cases. This uncertainty has left district courts within the Circuit divided:
Some district courts, following the logic of eBay, Winter, Flexible Lifeline, and Herb Reed, have held that there is no automatic presumption of irreparable harm in trade secret cases. See Cutera, Inc. v. Lutronic Aesthetics, Inc., 444 F. Supp. 3d 1198, 1208 (E.D. Cal. 2020).
These courts require plaintiffs to present evidence demonstrating that irreparable harm is likely if an injunction is not granted. This approach is supported by the trend in Ninth Circuit jurisprudence, which rejects presumptions in favor of evidence-based findings.
Other district courts, however, have continued to apply a presumption of irreparable harm in trade secret cases, relying on authority predating Flexible Lifeline Systems to hold that a district court may presume irreparable harm when proprietary information is misappropriated. See Comet Techs. United States of Am. Inc. v. Beuerman, No. 18-CV-01441-LHK, 2018 WL 1990226, at *5 (N.D. Cal. Mar. 15, 2018).
And other courts have tried to have it both ways, finding a presumption of irreparable harm when proprietary information is misappropriated, but that a plaintiff must still demonstrate immediate threatened injury as a prerequisite to preliminary injunctive relief. See Sitrus Tech. Corp. v. Le, 600 F. Supp. 3d 1106, 1110 (C.D. Cal. 2022).
Do Not Presume a Presumption
In an unpublished—and therefore not precedential—decision the Ninth Circuit rejected the argument that trade secret misappropriation always leads to at least a presumption of future irreparable harm, and explained permanent injunctive relief does not “automatically flow[]” from a successful trade secret misappropriation claim. Citcon USA, LLC v. RiverPay Inc., No. 20-16929, 2022 WL 287563, at *2 (9th Cir. Jan. 31, 2022). While this decision does not fully dispatch with the presumption, it comes awfully close, and there is little reason to believe that the Ninth Circuit will treat trade secret cases differently than other IP cases.
Takeaways
The trend to apply the same injunction standard to trade secrets as other forms of intellectual property may ultimately do a disservice to protecting trade secrets. A trade secret is a unique property right in an important way: mere disclosure may destroy it. This makes it a more fragile property right than a patent, trademark, or copyright. And without a protective injunction, there is nothing stopping a defendant from disclosing—and thus destroying—the property right on a whim.
A trade secret litigant will thus be well-served to emphasize this risk when seeking injunctive relief, regardless of whether the presumption formally applies.
For more information regarding Alto Litigation’s litigation practice, please contact one of Alto Litigation’s partners: Bahram Seyedin-Noor, Bryan Ketroser, Joshua Korr, or Kevin O’Brien.
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