IP Law Daily, TOP STORY—NDCal: “Angry Birds” Developer Not Entitled to Ex Parte TRO to Prevent Infringing Sales of Plush Toys, (Nov 8, 2012)

By Mark Engstrom, J.D.

The Finnish video game company that developed the Angry Birds franchise (Rovio Entertainment Ltd.) was not entitled to an ex parte temporary restraining order (TRO) to prevent four defendants from selling Angry Birds “plush” toys that allegedly infringed Rovio’s copyrights and trademarks, the federal district court in Oakland has ruled (Rovio Entertainment Ltd. V. Royal Plush Toys, Inc., November 6, 2012, Armstrong, S.). Because Rovio failed to show that it would suffer an immediate and irreparable loss before the defendants could be notified and heard, its motion for an ex parte TRO was denied. For similar reasons, the court denied Rovio’s motion for an ex parte seizure order and a substitute custodian order. Although expedited discovery was also denied, the court granted Rovio’s request for an order to show cause why a preliminary injunction should not be issued.

Temporary Restraining Order

To obtain a TRO, Rovio had to show: (1) a likelihood of success on the merits; (2) a likelihood of irreparable harm absent preliminary relief; (3) that a balance of the equities favored Rovio; and (4) that a TRO was in the public interest. The court in this case focused on the second element: whether Rovio would suffer irreparable harm absent a TRO.

Presumption of irreparable harm. The court refused to presume irreparable harm as the result of any showing by Rovio that it would succeed on the merits of its copyright or trademark claims. In light of the Ninth Circuit’s 2011 decision in Flexible Lifeline Sys., Inc. v. Precision Lift, Inc. (654 F.3d 989, 994, 998), the presumption was no longer permissible for copyright claims. Although the continuing validity of the presumption for trademark infringement claims was unclear (because the Ninth Circuit had not directly addressed it), district courts in the Ninth Circuit that reached the issue concluded that plaintiffs were not entitled to a presumption of irreparable harm upon a showing that success on the merits was likely. According to the court in this case, there appeared to be no principled reason why the newly announced standard for patent and trademark claims should not be applied in the trademark context.

Ex parte relief. An ex parte TRO could be issued only if: (1) specific facts in an affidavit or verified complaint clearly showed that an immediate and irreparable injury, loss, or damage would result to the movant before the adverse party could be heard in opposition and (2) the movant’s attorney certified in writing any efforts that were made to provide notice and the reasons why notice should not be required. According to the court, there were very few circumstances that would justify the issuance of an ex parte TRO.

Rovio argued that it had suffered, and would continue to suffer, irreparable harm as the result of the defendants’ fraudulent sale of plush toys that were nearly identical to the copyrighted plush toys that Rovio sold under its Angry Birds trademarks. According to Rovio, the company would lose its hard-earned sales, goodwill, and consumer confidence in the absence of ex parte relief. Further, the risk that was involved in allowing the wide-scale distribution of a child’s toy that had not been tested for harmful or hazardous materials in accordance with federal laws was “overwhelming.”

Rovio failed, however, to clearly show that immediate and irreparable injury, loss, or damage would result before the defendants could be heard in opposition. Because it failed to show the immediacy of any harm, it failed to show good cause for being excused from the notice requirements of Rule 65(b)(1) of the Federal Rules of Civil Procedure.

The court noted that ex parte injunctive relief was generally confined to two situations: (1) when the identity of the adverse party was unknown (or because a party could not be located in time for a hearing) and (2) when notice to the defendant would “render fruitless the further prosecution of the action.”

In this case, Rovio did not argue that the defendants’ identities were unknown or that the defendants could not be located in time for a hearing. In fact, Rovio identified each of the defendants—and their shared address—in its complaint. Further, Rovio failed to submit any evidence showing that “notice to the defendant[s] would render fruitless the further prosecution of the action.” It did not, for example, offer evidence showing that the defendants would disregard a court order and immediately dispose of or hide the allegedly infringing goods. Nor did it offer evidence to show that the defendants had failed to appear in court when required, or evidence suggesting that they (or similar entities) had a history of disposing evidence.

Rovio did submit a declaration by one of its attorneys, who stated that: (1) his experience in investigating the defendants and his “nearly twenty (20) years experience” as an intellectual property attorney confirmed his suspicions that “infringing parties often secrete or destroy records revealing the true identity of their upstream supplier(s) … and the volume of product manufactured, purchased or sold” and (2) given the defendants’ “brazen illegal conduct,” one could reasonably conclude that the defendants might dispose of critical evidence unless it was seized. These statements, without more, were insufficient to justify an ex parte TRO, according to the court.

Finally, the court found that Rovio’s delay in requesting preliminary relief militated against the issuance of a TRO. Rovio had been aware of the defendants’ alleged counterfeiting activities since “at least April 2012,” the court explained, but the company did not file suit until the end of October.

Ex Parte Seizure Order, Substitute Custodian Order

Because the court determined that an ex parte TRO was unwarranted, it also ruled that an ex parte seizure order and a substitute custodian order were unwarranted, as well.

Expedited Discovery

Rovio requested permission to immediately depose the defendants and to immediately propound requests for the production of documents and interrogatories, with a command that the defendants’ responses be served within three days. It failed, however, to demonstrate the requisite good cause to justify an expedited discovery. More specifically, it failed to identify any specific missing evidence that was essential for injunctive relief.

Rovio failed, for example, to show that a reasonable basis existed to conclude that there were other individuals or entities that were involved in the alleged counterfeiting scheme. It also failed to show that an expedited discovery process was warranted under the rationale that it could lose the opportunity for meaningful discovery as the result of the defendants’ allegedly deceptive practices. Nor did Rovio establish that the defendants were predisposed to destroy or hide evidence. Finally, Rovio did not clearly show that its discovery request was narrowly tailored to obtain information that was relevant to a preliminary injunction determination.

Show Cause Order

Rovio’s evidence raised serious allegations of counterfeiting. Therefore, the court decided to: (1) issue an evidence preservation order and (2) set an expedited briefing schedule for hearing on Rovio’s request for a preliminary injunction. Accordingly, the court granted Rovio’s request for a show cause order that required the defendants to explain why a preliminary injunction should not be issued.

The case is No. C 12-5543 SBA.

J. Andrew Coombs (J. Andrew Coombs, a Professional Corporation) for Rovio Entertainment, Ltd.

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