Denied Injunction in White Label Dispute Highlights Challenges of Establishing Irreparable Harm

The U.S. Court of Appeals for the Eighth Circuit's recent decision in Revenue Management Solutions, LLC v. Commerce Bank, No. 25-3159 highlights difficulties in establishing irreparable harm when seeking injunctive relief in connection with an allegedly misappropriated white-labeled product. In that case, Revenue Management Solutions (RMS), a technology company that offers a healthcare revenue management software platform, licensed its white-label platform to Commerce Bank, which branded it "RemitConnect."

Several years later, Commerce Bank allegedly began developing a replacement platform, which RMS alleges was developed by reverse-engineering the RMS platform's data processing and output functions. RMS moved for a preliminary injunction on claims for breach of contract and trade secret misappropriation under the Defend Trade Secrets Act and Missouri Uniform Trade Secrets Act, largely identifying its harm as lost profits, price erosion and customer losses.

Judge Stephen Bough of the U.S. District Court for the Western District of Missouri denied the motion, finding that RMS failed to demonstrate irreparable harm. The Eighth Circuit affirmed the district court's denial of the injunction, holding that the evidence demonstrated that even if Commerce Bank reverse-engineered the licensed product, the license agreement contained a pricing schedule that made damages readily calculable. By making damages quantifiable, the pricing schedule undermined RMS' argument that its injuries were irreparable.

The court also rejected RMS' argument that it would suffer irreparable harm through lost customer goodwill and market share. That RMS' product was white-labeled to Commerce Bank proved significant in the court's analysis. Because Commerce Bank marketed the product under its own name, end users were unaware that RMS developed the software. As a result, the court found that RMS could not credibly claim reputational harm, loss of goodwill or consumer confusion. Finally, the court recognized that disclosure of a trade secret alone can constitute irreparable harm but held that RMS had not sufficiently pursued that theory or provided evidence of the harm. Instead, RMS framed its trade secret claim as one of lost profits and competitive disadvantage.

The RMS decision illustrates that companies licensing white-label products may face greater difficulty establishing irreparable harm where the connection between the licensor and the product is often unknown to consumers, weakening common grounds for alleging and proving irreparable harm (e.g., loss of customer goodwill, reputational harm and market impacts). The facts of RMS also demonstrate that proving irreparable harm can sometimes be challenging even when a trade secret is allegedly disclosed and used. Though license agreements often include a stipulation regarding irreparable harm, as in RMS, that stipulation is not dispositive in many jurisdictions. Businesses and lawyers engaged in white-label licensing should therefore consider whether, and to what extent, the RMS decision impacts their standard agreements and overall business strategies where the threat of reverse-engineering a product is inherent in the product's original design.

For questions about this case or how the decision will impact your business, please contact the authors.

Holland & Knight Summer Associate Sandra Edwards also contributed to this blog.