Bethesda Softworks, L.L.C. v. Interplay Entertainment Corp.

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1860
BETHESDA SOFTWORKS, L.L.C.,
Plaintiff – Appellant,
v.
INTERPLAY ENTERTAINMENT CORPORATION,
Defendant – Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Deborah K. Chasanow, Chief District
Judge. (8:09-cv-02357-DKC)
Submitted: October 14, 2011 Decided: October 26, 2011
Before NIEMEYER, DUNCAN, and AGEE, Circuit Judges.
Affirmed by unpublished per curiam opinion.
Howard H. Stahl, FRIED, FRANK, HARRIS, SHRIVER & JACOBSON, LLP,
Washington, D.C., for Appellant. Jeffrey F. Gersh, GERSH DERBY,
Encino, California, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
PER CURIAM:
Bethesda Softworks, L.L.C. (“Bethesda”), sought a
preliminary injunction in the district court prohibiting
Interplay Entertainment Corp. (“Interplay”) from infringing
Bethesda’s copyrighted works relating to the “Fallout” video
game series. The district court denied the motion. Bethesda
appeals, arguing that the district court abused its discretion
and misapplied the law in concluding that Bethesda failed to
establish a likelihood of irreparable harm. We affirm.
We review the district court’s resolution of a motion
for preliminary injunction for abuse of discretion. WV Ass’n of
Club Owners & Fraternal Servs. Inc. v. Musgrave, 553 F.3d 292,
298 (4th Cir. 2009). A district court abuses its discretion
when it denies a preliminary injunction motion only if it bases
its decision on an erroneous legal standard or clearly erroneous
factual findings. Id.
“A preliminary injunction is an extraordinary remedy,
to be granted only if the moving party clearly establishes
entitlement to the relief sought.” Manning v. Hunt, 119 F.3d
254, 263 (4th Cir. 1997) (internal quotation marks and
alteration omitted). Entitlement to relief is determined by
considering four factors: (1) that the plaintiff “is likely to
succeed on the merits,” (2) that the plaintiff “is likely to
suffer irreparable harm in the absence of preliminary relief,
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[(3)] that the balance of equities tips in [the plaintiff’s]
favor, and [(4)] that an injunction is in the public interest.”
Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 20
(2008). An injunction “is not granted as a matter of course,”
Salazar v. Buono, 130 S. Ct. 1803, 1816 (2010), and “whether to
grant the injunction still remains in the ‘equitable discretion’
of the [district] court” even when a plaintiff has made the
requisite showing. Christopher Phelps & Assocs., LLC v.
Galloway, 492 F.3d 532, 543 (4th Cir. 2007).
First, Bethesda notes that the parties agreed that a
breach of the Asset Purchase Agreement (“APA”) would “result in
irreparable injury for which there is no adequate remedy at
law,” such that “[Bethesda] shall be entitled to equitable
relief” in the event of a breach. (J.A. 76). 1 Bethesda argues
that, in light of the APA, the district court abused its
discretion in concluding that Bethesda did not establish
irreparable harm. However, as the Tenth Circuit concluded after
canvassing extant case law, contractual agreements alone do not
control the district court’s exercise of its equitable
discretion. See Dominion Video Satellite, Inc. v. Echostar
Satellite Corp., 356 F.3d 1256, 1266 (10th Cir. 2004)
1
The citations to “J.A. [page number]” refer to the Joint
Appendix filed by the parties in this appeal.
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(identifying factors courts consider in determining whether
plaintiff has established irreparable harm). The Second
Circuit’s decision in North Atlantic Instruments, Inc. v. Haber,
188 F.3d 38 (2d Cir. 1999), cited by Bethesda, is not to the
contrary. Accordingly, we conclude that the district court did
not abuse its discretion when it looked beyond the parties’
stipulation to determine whether Bethesda had established
irreparable harm.
Second, relying on Hughes Network Systems, Inc. v.
InterDigital Communications Corp., 17 F.3d 691 (4th Cir. 1994),
Bethesda argues that Interplay’s insolvency establishes
irreparable harm because, even if damages could adequately
remedy the alleged infringement, Bethesda would be unable to
recover in the event that Interplay enters bankruptcy. In
Hughes Network Systems, we noted that a preliminary injunction
is not normally available where the harm at issue can be
remedied by money damages. Id. at 693-94. However, we stated
that, “[e]ven if a loss can be compensated by money damages . .
. , extraordinary circumstances may give rise to the irreparable
harm required for a preliminary injunction.” Id. at 694. We
explained that such circumstances may exist where, for example,
“the moving party’s business cannot survive absent a preliminary
injunction or where damages may be unobtainable from the
defendant because he may become insolvent before a final
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judgment can be entered and collected.” Id. (internal
quotations marks and alterations omitted). In the narrow
circumstances in which preliminary injunctions are warranted
despite the adequacy of money damages, injunctions are
“carefully tailored, generally operating simply to preserve the
plaintiff’s opportunity to receive an award of money damages at
judgment.” Id.
Hughes Network Systems does not support the conclusion
that Interplay’s alleged insolvency warrants a finding of
irreparable harm supporting the injunctive relief Bethesda
seeks. “The traditional office of a preliminary injunction is
to protect the status quo and to prevent irreparable harm during
the pendency of a lawsuit ultimately to preserve the court’s
ability to render a meaningful judgment on the merits.” In re
Microsoft Corp. Antitrust Litig., 333 F.3d 517, 525
(4th Cir. 2003). Hughes contemplates that insolvency may alter
the status quo and undermine a court’s ability to render a
meaningful judgment. Hughes, 17 F.3d at 694. Thus, a
preliminary injunction may be appropriate “to preserve the
plaintiff’s opportunity to receive an award of money damages at
the judgment.” Id. Here, the injunctive relief that Bethesda
seeks would not preserve Interplay’s assets such that Interplay
could satisfy a judgment in the event Bethesda prevails on the
merits.
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Third, Bethesda argues that irreparable harm may be
presumed at the preliminary injunction stage in a copyright case
once the plaintiff has shown a likelihood of success on the
merits. At one time, federal courts, including this circuit,
presumed irreparable harm in copyright cases once the plaintiff
established probable likelihood of success on the merits. See,
e.g., In re Microsoft Corp. Antitrust Litig., 333 F.3d at 536;
Lexmark Int’l, Inc. v. Static Control Components, Inc., 387 F.3d
522, 532-33 (6th Cir. 2004); Elvis Presley Enters. v. Passport
Video, 349 F.3d 622, 627 (9th Cir. 2003); 2 Random House, Inc. v.
Rosetta Books LLC, 283 F.3d 490, 491 (2d Cir. 2002). In 2006,
the Supreme Court declared such presumptions inappropriate.
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (2006).
Instead, courts are to apply the “well-established principles of
equity” and grant injunctive relief only after a plaintiff
satisfies the traditional four-factor test. Id. at 391.
Although eBay concerned a patent dispute, the Supreme Court
observed that its approach was “consistent with our treatment of
injunctions under the Copyright Act,” noting that the Court “has
consistently rejected invitations to replace traditional
2
The Ninth Circuit later held that the presumption no
longer was valid. See Flexible Lifeline Sys., Inc. v. Precision
Lift, Inc., __ F.3d __, __, 2011 WL 3659315, at *9 (9th Cir.
2011).
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equitable considerations with a rule that an injunction
automatically follows a determination that a copyright has been
infringed.” Id. at 392-93.
Bethesda seeks to distinguish eBay as a permanent
injunction case, inapplicable to its request for a preliminary
injunction. Bethesda relies on the distinction between
preliminary and permanent injunctions, noting that a permanent
injunction requires a showing of irreparable harm whereas a
preliminary injunction requires only a likelihood of irreparable
harm. Bethesda argues that copyright infringement is likely to
result, thereby meeting the preliminary injunction standard, due
to the intangible nature of copyrights. Bethesda relies on our
decision in Christopher Phelps & Associates, LLC v. Galloway,
492 F.3d 532 (4th Cir. 2007), as support for its position.
The Supreme Court’s decision in eBay rested on
principles of equity. See eBay, 547 U.S. at 391-92. Despite
the differences between preliminary and permanent injunctive
relief, the same equitable principles undergird courts’
authority in each posture. The differences are therefore
insufficient to warrant a presumption of irreparable harm with
respect to preliminary injunctions but not permanent
injunctions. See Amoco Prod. Co. v. Vill. of Gambell, 480 U.S.
531, 544-46 & n.12 (1987) (rejecting presumption of irreparable
harm upon violation of environmental statute and finding no
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significant difference between preliminary and permanent
injunction standards); Winter v. Natural Res. Def. Council,
Inc., 555 U.S. 7, 24 (2008) (“A preliminary injunction is an
extraordinary remedy never awarded as of right.”). The Courts
of Appeals to consider this question have held that eBay applies
to permanent and preliminary injunctions with equal force.
Flexible Lifeline Sys., Inc., __ F.3d at __, 2011 WL 3659315, at
*7-*9; Voice of the Arab World, Inc. v. MDTV Med. News Now,
Inc., 645 F.3d 26, 34 (1st Cir. 2011); Salinger v. Colting, 607
F.3d 68, 77 (2d Cir. 2010). We agree with this conclusion.
Bethesda points to our observation in Phelps &
Associates that “[i]rreparable injury often derives from the
nature of copyright violations, which deprive the copyright
holder of intangible exclusive rights.” Phelps & Assocs., 492
F.3d at 544. Bethesda argues that this language supports a
rebuttable presumption because irreparable harm is likely to
result from copyright infringement. However, this reading of
Phelps & Associates is impermissibly broad. Following eBay, we
ruled that “[i]nsofar as Phelps & Associates suggests that it is
entitled to injunctive relief, we reject the argument.” Id. at
543. We then analyzed the circumstances surrounding the
infringement and concluded that Phelps & Associates had
demonstrated irreparable harm. Id. at 544. Our conclusion was
not based on the intangible nature of the copyright alone, as
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such reasoning would lead to the very presumption that eBay
prohibits, but on the circumstances surrounding the
infringement.
Lastly, Bethesda argues that the district court
misapplied the legal standard for preliminary injunctive relief
by requiring Bethesda to identify with particularity each
element of the copyrighted works being infringed and the
resulting specific, tangible harm. We disagree with Bethesda’s
characterization of the district court’s reasoning. Our review
of the record leads us to conclude that the district court did
not demand the high degree of particularity that Bethesda
claims; rather it required that Bethesda demonstrate copyright
infringement “that can be stopped or needs to be stopped before
it causes irreparable harm to [Bethesda].” (J.A. 409). The
district court found unconvincing Bethesda’s claim that its
alleged loss of intangible rights in the copyrighted material
alone established irreparable harm because “[t]here is no
evidence that the development has been made public to anybody.
It is an internal development project. There can be no launch
of an MMOG by Interplay without express permission from
Bethesda.” (J.A. 419). We conclude that the district court
applied the proper standard. To the extent that Bethesda argues
the nature of its intangible rights are such that the district
court should have inquired no further than whether Interplay
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infringed Bethesda’s copyright, this position has been resolved
to the contrary by the Supreme Court’s decision in eBay.
Based on the foregoing, we affirm the order of the
district court. We deny Bethesda’s motion to file a
supplemental appendix. We dispense with oral argument because
the facts and legal contentions are adequately presented in the
materials before the court and argument would not aid the
decisional process.
AFFIRMED
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