Emily Billig

Emily R. Billig is an associate in Baker Donelson’s Baltimore office. Contact Emily at ebillig@bakerdonelson.com.

The United States Supreme Court’s May decision in TC Heartland LLC v. Kraft Foods Group Brands LLC was widely seen as a limitation on the jurisdictions in which a patent owner can file infringement claims. That decision set off a minor scramble among patent owners to find suitable and accessible alternative forums. More recently, a district court decision has swung the pendulum in the other direction and could potentially preserve the ability of patent owners to choose their own venue, including one so-called “rocket docket” in the Eastern District of Texas.

Despite its relatively rural environs, the Eastern District of Texas has historically been the most popular venue for patent litigation filings in the United States, collecting more than 38 percent of new case filings in 2016. The Eastern District of Texas is favored by many patent owners due in part to factors such as the “rocket” pace of the district’s litigation timetable and the experience of many members of the district’s bench with the complex issues arising in such cases. U.S. District Judge Rodney Gilstrap alone was assigned more than 20 percent of all patent cases filed in U.S. federal district courts in 2016, and has handled more than 4,000 patent infringement lawsuits since taking the bench in the U.S. District Court for the Eastern District of Texas in 2011.

In TC Heartland, however, the Supreme Court threatened to throw a wrench in the ability of districts such as the Eastern District of Texas to accept a disproportionate amount of patent lawsuits by interpreting one specific provision of 28 U.S.C. § 1400(b), the “sole and exclusive” venue provision for patent infringement actions. Section 1400(b) reads that a patent owner can only bring an infringement claim “in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business.” The TC Heartland decision interpreted the first clause of § 1400(b), holding that a defendant “resides” only in its state of incorporation. As a result, the number of new patent suits filed in the Eastern District of Texas dropped by an estimated 18 percent in the immediate aftermath of the TC Heartland decision, while the number of new patent suits filed in Delaware, where the bulk U.S. entities are incorporated, approximately doubled.

Now, however, a decision authored by Judge Gilstrap out of the Eastern District of Texas has interpreted the other clause of § 1400(b), allowing suits to be filed in districts where the defendant “has committed acts of infringement and has a regular and established place of business,” a provision of § 1400(b) that didn’t receive very much attention until the Supreme Court’s relatively restrictive decision in TC Heartland. However, Judge Gilstrap’s ruling appears to re-inject some flexibility back into the venue statute.

The case is Raytheon Co. v. Cray Inc., filed by patent owner Raytheon Company, a Delaware corporation, against Cray, Inc., a Washington corporation headquartered in Washington but with a (now former) sales executive who kept a home office in Athens, Texas. In determining that Cray was eligible to be sued in the Eastern District of Texas, despite not being incorporated in Texas, Judge Gilstrap outlined four flexible factors to be used in ascertaining whether a defendant “has a regular and established place of business” under the statute: (1) physical presence, (2) defendant’s representations, (3) benefits received and (4) targeted interactions with the district.

Under the first factor, any physical presence by the defendant in the district in question, including the presence of retail stores, warehouses and/or employees, weighs in favor of finding that the defendant “has a regular and established place of business.” Under the second factor, the extent to which a defendant represents, internally or externally, that it has a presence in the district, can lead to a finding that the venue is proper for the defendant in the district in question. The third factor looks at the extent to which a defendant derives benefit from its presence in the district, including but not limited to sales revenue: “significant” revenue earned by the defendant in the district in question would tip the balance in favor of a finding that the defendant has a regular and established place of business there sufficient to be sued in that jurisdiction. Finally, the fourth factor considers the extent to which a defendant interacts in a”targeted way” with existing or potential consumers, users or entities within the district, including offering localized customer support, the existence of ongoing contractual relationships and “targeted marketing efforts” in the district.

Although no single one of the factors outlined by Judge Gilstrap is always determinative, it’s clear that a company’s acts of placing a billboard on a Texas highway or having a distribution warehouse in the district involve a much more tenuous attachment to a given district than incorporating a business there. Of course, Judge Gilstrap’s decision is not binding on other districts, but patent owners and other entities should keep aware of how this post-TC Heartland jurisprudence develops in order to exercise whatever control may be available to them to sue or be sued in a venue of their choosing.

On July 1, 2017, an important grace period terminated for Canada’s Anti-Spam Law (CASL), which initially took effect on July 1, 2014. The beginning of this month marked the end of the two-year grace period for entities to rely on “implied consent” as a basis for sending commercial electronic messages to potential customers, donors, clients or the like. Going forward, entities will need to obtain express consent from all email recipients, or expunge “stale” contacts to avoid potential violations of CASL. A private right of action against offenders that was also set to become available on July 1, 2017 has been put on hold indefinitely subject to Canadian government review.

CASL applies to U.S. companies, including U.S. non-profit corporations, that send email or other electronic messages to recipients in Canada, whether or not the entity is actually aware that one or more recipients is in Canada. This post points out CASL requirements through the lens of a U.S. non-profit, but all companies with geographically wide customer bases or email distribution should review CASL requirements to ensure that they comply before the end of the grace period this weekend.

CASL applies to any electronic message sent to a recipient in Canada if that electronic message qualifies as a Commercial Electronic Message (CEM). A CEM is a message that encourages participation in a commercial activity. CEM includes all types of electronic messages including email, text messages, or audio or video messages sent electronically. By way of example, the following types of electronic messages commonly sent by non-profits may qualify as CEM: (1) emails or other electronic messages soliciting donations; (2) emails or other electronic messages soliciting ticket sales to a paid fundraising event; (3) emails or other electronic messages soliciting sponsorship; (4) emails or other electronic messages soliciting new members, or participation in events; (5) emails or other electronic messages advertising another entity’s commercial products or services; or (6) electronic newsletters or event updates including any of the above types of messaging.

For any emails or other electronic messages which may fall into any of the above categories of CEM, or any other type of messaging that can reasonably be characterized as “encourage[ing] participation in commercial activity,” and which may be sent to a recipient in Canada, the sender should ensure that the message complies with the following consent and content requirements.

Consent Requirements for CEM

Prior to sending any CEM that may be transmitted to a recipient in Canada, the sender should receive and document consent from each recipient of the message in one of the following forms:

A) Express consent (g., electronic mailing list subscribers):

This could be in the form of recipient sign-up for an electronic mailing list or listserv. In order to serve as express consent, all of the following conditions must be present:

  1. An indication at the time of sign-up that the sender is seeking the recipient’s consent to send the recipient future emails/electronic messages;
  2. Notice of an unsubscribe option or other statement indicating that the recipient can withdraw their consent to receive future emails;
  3. The sender’s legal name and mailing address;
  4. Either a website, email address or phone number at which the sender can be reached.

B) Implied consent (g., recent donors):

This would exist if the recipient and the sender have an “existing business relationship.” However, implied consent only lasts for two years from the end of the most recent “business relationship” and must be renewed after that timeframe if the sender wishes to continue to send CEM to these recipients. Prior to July 1, 2017, implied consent did not have a time limit; that is, an entity could send CEM to its entire list of former customers, donors, or volunteers regardless of how long the relationship had been “stale.”

By way of example, implied consent may be found for any recipient that has:

  1. Made a donation to the sender/non-profit within the past two years;
  2. Paid a registration fee for an event held by the sender/non-profit within the past two years;
  3. Volunteered for the sender/non-profit within the past two years;
  4. Purchased products or services from the sender/non-profit within the past two years; and/or
  5. Entered into a contract with the sender/non-profit within the past two years.

Content Requirements for CEM

Any CEM that may be transmitted to a recipient in Canada must include the following:

  1. An unsubscribe mechanism;
  2. The sender’s legal name and mailing address; and
  3. Either a website or email address at which the sender can be reached.

Yesterday, the Supreme Court of the United States handed down a landmark trademark decision that will pave the way for those with so-called “offensive” or disparaging trademarks to secure federal trademark registration for those marks. To date, the poster child for “disparaging” trademarks has been the Washington Redskins football team, whose name and logo have been the subject of increasingly vocal challenges by Native Americans and others as an offensive stereotype against Native Americans. (Ironically, even the members of the band The Slants, whose lawsuit eventually paved the way for the Redskins to maintain trademark registrations for the team name, were allegedly against the team’s use of the arguably offensive name.)

The case decided yesterday by the Supreme Court originated in 2011 when The Slants, an Asian American rock band, tried to obtain federal trademark registration for their band name. The U.S. Patent and Trademark Office (USPTO) rejected The Slants’ application, citing evidence that the term “slant” is disparaging to Asian Americans. As an arm of the Federal Government, the USPTO is not subject to many of the First Amendment’s restrictions on the regulation of government speech – this is known as the government-speech doctrine. With respect to federal trademark registration, the Lanham Act, enacted in 1946, includes a restriction known as the “disparagement clause,” which prohibits federal registration for a trademark “which may disparage … persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.” Thus the USPTO has, although somewhat inconsistently, refused federal registration for trademarks that it deems to meet this subjective criteria.

Simon Tam, lead singer of The Slants, appealed the USPTO’s decision and the fight eventually made its way to the Supreme Court, where yesterday the Court found the so-called disparagement clause to be unconstitutional as a violation of the Free Speech Clause of the First Amendment. In so doing, the Court rejected the USPTO’s argument that federal trademark registrations fell under the government-speech doctrine. Even though federal trademark registrations are issued by the USPTO, the Court reasoned, “[t]he Federal Government does not dream up these marks, and it does not edit marks submitted for registration.” In other words, “[i]f the federal registration of a trademark makes the mark government speech, the federal government is babbling prodigiously and incoherently … saying many unseemly things … [and] unashamedly endorsing a vast array of commercial products and services.”

The other primary argument advanced by the USPTO in favor of the constitutionality of the disparagement clause was that trademarks are a form of government subsidy. This argument was also rejected by the Court, which contrasted federal trademark registration, for which the applicant pays a fee to the government, to previously-disputed forms of government subsidy, involving instances where the government paid cash or cash equivalents to individuals.

In rendering its decision, the Court held as unconstitutional a provision that has been a fundamental aspect of trademark law for more than 70 years. It’s a victory for free speech advocates, and although it has the potential to open the floodgates for federal registration of marks that some or most may deem offensive, it does not impact the right to actually use those marks in commerce, which right has existed for decades and will continue for the foreseeable future.

The cost of filing and maintaining federal trademark registrations with the USPTO just got lower.  On January 17, 2015, the PTO announced a $50 per class reduction in initial filing fees for trademark applications filed under the “TEAS Plus” program, while simultaneously introducing a new “TEAS Reduced Fee” (a.k.a. TEAS RF) program at the former TEAS Plus rate, but with less strict filing requirements. (more…)

The process of creating “link relationships” between documents and personal profiles used by Facebook®, LinkedIn®, and other social media platforms came under fire in October 2012 via a patent infringement suit filed by technology company Bascom Research, LLC.  Facebook®, LinkedIn®, and three other network software companies were named as defendants in that suit.  More than two years later, and in the wake of the seismic ruling issued by the U.S. Supreme Court in Alice Corp. v. CLS Bank Int’l, Bascom’s challenge came to an unsuccessful end when the U.S. District Court for the Northern District of California determined that Bascom’s patents for the linking technology were invalid as being drawn to abstract ideas. (more…)

On September 25, 2014, the Internet Corporation for the Assigned Names and Numbers (ICANN) granted the application of fTLD Registry Services (FRS) to operate a new Top Level Domain (TLD) exclusively for the banking industry: .bank. When general registration for the new TLD opens next year, banks and other members of the banking community will be able to operate through custom websites such as Local.bank, as opposed to the traditional LocalBank.com. To avoid the internet land rush for .bank extensions expected during the general registration window, banks with federally registered trademarks can get a 30-day head start towards TheirTrademark.bank by applying (and paying) for a spot on ICANN’s Trademark Clearinghouse registry. (more…)

We’re all familiar with video games involving computer-generated depictions of real-life athletes; they are a multi-billion dollar industry.  Under pressure from consumers to make such games more and more realistic, software companies like Electronic Arts, Inc. have mined team rosters to allow gamers to field virtual versions of their favorite sports teams: a virtual Peyton Manning with the same height, weight, jersey and number, skill set and even facial features as the real Peyton Manning can be fielded alongside the rest of the virtual Denver Broncos®.  The NFL Players Association receives roughly $35 million annually from EA to compensate NFL players for consumers’ ability to tackle a virtual Tom Brady with a virtual Terrell Suggs.  Video games depicting college athletes and teams similarly utilize the likenesses and characteristics of those athletes.  Unlike the pros, though, student athletes are not paid for this.

That is, until last week, when a class-action suit brought by several NCAA athletes settled against the last remaining defendant, the NCAA, for $20 million.  Last week’s settlement followed a $40 million payout by EA and the Collegiate Licensing Co., the organization authorized to manage licensing rights on behalf of NCAA institutions. (more…)

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Just a few short months after the house passed the Innovation Act, HR 3309 (now before the Senate Judiciary Committee), a bill pointedly aimed at curbing the practices of non-practicing entities, or patent trolls, as reported earlier on this blog, the Supreme Court has now issued two decisions not as deliberately aimed but nonetheless injurious to the patent troll business model.

Yesterday, Justice Sotomayor delivered two nearly unanimous decisions of the Court (available here and here) that collectively lower the hurdle for prevailing defendants to obtain attorneys’ fees against the plaintiff.  The previous standard, oft implemented by the Federal Circuit, the federal Court of Appeals for patent cases, required “material inappropriate conduct” or both “subjective bad faith” and “objective[] baseless[ness]” on the part of the plaintiff in bringing the case before fees could be awarded against it.  Such conduct is commonly complained of by those targeted by patent trolls, entities named for their practice of acquiring patents in the hopes of collecting damages through infringement lawsuits, but is rarely punished.  Small businesses and individuals who are sued by patent trolls often pay a fee to settle the case rather than incur the expense and exposure of litigation.  Yesterday’s dual Supreme Court decisions may change that. (more…)

Pushing Patent Trolls Into the Light of Day: Congress Attacks the Practices of Non-Practicing Entities

HiResThe Innovation Act, H.R. 3309, was overwhelmingly passed by the House (325-91) last week.  The Senate version seems poised to pass soon, and the White House is reportedly also in favor.  The legislation was introduced by House Judiciary Committee Chair Bob Goodlatte (R-VA) to address the growing problem of non-practicing entities (NPEs), a.k.a “patent trolls.”

Patent trolls are so named for their practice of acquiring patents that they have no intention of bringing to the market.  Instead, trolls demand damages or licensing fees from unsuspecting businesses, sometimes including consumers, who use a device or method allegedly covered by the troll’s patents.  The Patent Examiner reports that Innovatio IP Ventures, which claims to have a portfolio of patents covering wifi technology, sues businesses such as Caribou Coffee and Panera Bread for providing wifi in their businesses. The trollish penchant for “shell” companies makes it nearly impossible to determine who owns the patents at issue. (more…)