Monday, December 5, 2011

Injunction Clause

In response to one of my posts, an individual suggested that a better approach would be to use an injunction clause so I thought I should write about that.

An injunction is an order by a court ordering a party to stop doing a specific act. You might want to have a clause that allowed you the right to get an injunction in a number of situations. For example, if you had a confidential disclosure agreement and there was a breach by the receiving party of the confidentiality obligation you might want an injunction preventing further disclosure. If you had licensed intellectual property rights to another party and they were breaching their obligations under the license grant, you might want an injunction preventing further use of those licensed IP rights.

Injunctions are a remedy under the principles of equity that would require a court to find that there would be irreparable harm being caused by the breach and money damages alone would not be adequate. This means that while a contract may include an “injunction clause”, getting an injunction from the court is not automatic. The decision is still up to the judge in the court where the request is made.

Most confidentiality agreements are silent as to damages or remedies. When you are silent as to damages and remedies the types of damages that you may claim are not limited. You can also pursue any remedies available to you under law or equity. The two primary rights available under equity are injunctive relief and specific performance.

Where you have an agreement that grants the use of IP rights, there may be a limitation of liability provision that may limit the types of damages and the types of remedies. It is in this setting that you would want to address the rights to an injunction. It could be done by adding a statement in the license grant that discusses rights in conjunction with a breach of that clause by saying something like: “for any breach of this license grant licensor shall have all remedies available at law or in equity”. It could also be done as a specific clause where the specific causes for seeking an injunction are defined with the right of the licensor to claim injunctive relief if any of those causes occur. That type of clause might also include a right to stop selling items that the licensee might need to further use the intellectual property rights. If it included that, the licensee would probably also want rights under equity so they could look for an order of specific performance if they felt they had not breached the license grant.

The key thing to remember is if you are involved in an activity where you might need equitable relief in the form of an injunction, make sure that the contract doesn’t limit your remedies to only those spelled out in the contract or those available at law. Make if clear that you have the right to seek injunctive relief.

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  1. thank you Jack, this helped me understand more about injunctive relief.

  2. Since equitable relief is always available and granted only at the court’s discretion, why is the clause required. I heard that many judges ignore the clause. The only reasoning I read for using the clause is that some judges don't try to interpret the need for relief. Their attitude is that two consenting adults signed it, so why should they interfere.

  3. Dear Anonymous,
    Yes, you can always seek equitable relief without it. Courts will read contracts to determine the intent of the parties. If the parties have agreed that equitable relief is appropriate because money damages for a breach will not be sufficient, a court will grant it. For example, you hire a company to manufacture your product using your design and the license you provide them is to use it only in production for you. You want injunctive relief to stop using it in violation of the license as using it with other parties or competing against you would cause irreparable harm to your business if it allowed to continue. Pursuing money damages for breach takes time and you want it stopped now.