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Inspection Management Systems, Inc. v. Open Door Inspections, Inc., et al.

On a motion for a preliminary injunction in a breach of contract action, the court held that a provision in the parties’ licensing agreement that provided that its breach would constitute irreparable harm was insufficient to obtain a preliminary injunction, and that the plaintiff had to show actual irreparable harm. The court stated that the court itself must determine whether irreparable harm exists, and, in this case, the court concluded that the plaintiff offered no evidence of irreparable harm and denied the plaintiff’s motion for a preliminary injunction.

According to the plaintiff, the defendant registered to use the plaintiff’s web site and agreed to abide by the web site’s End User Licensing Agreement (EULA), which prohibited a registered user from disclosing any information on the web site to any non-registered user for a period of three years. The licensing agreement also provided: “You further agree that in the event you breach this agreement, IMS Inc. will suffer irreparable harm.”

The plaintiff alleged that the defendant let a non-registered user use the defendant’s logon to access and copy the plaintiff’s software and moved for a preliminary injunction. (In the first amended complaint, the plaintiff deleted his claims for copyright and trademark infringement because the plaintiff’s application for copyright registration had not yet issued.)

In the Ninth Circuit, a plaintiff seeking a preliminary injunction must demonstrate either: 1) a combination of probable success on the merits and a likelihood of irreparable injury; or 2) that serious questions are raised and the balance of hardships tips sharply in favor of granting the requested injunction. According to the court, courts have consistently identified a showing of likely irreparable harm as the single most important prerequisite for the issuance of a preliminary injunction.

In this case, the court held that the plaintiff offered no evidence of irreparable harm other than the language in the licensing agreement. “Plaintiff cannot rely on the contractual provisions of the EULA to show irreparable harm. Instead, the court must make an independent determination of whether such harm is present.” The court relied on decisions from the Second and Tenth Circuit, and an unpublished decision from the Ninth Circuit in which the court said it knew of no authority which allows a petitioner seeking injunctive relief to meet its burden on the issue of irreparable injury solely by referring to such a contractual provision.” See International Association of Plumbing and Mechanical Officials v. International Conference of Building Officials, 1996 WL 117447 (9th Cir. 1995).