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With a great trademark comes great responsibility: San Diego Comic-Con v. Salt Lake Comic Con

Posted in Trademark Law

Author: David Baker

Earlier this month, a jury in San Diego federal court was asked to decide if the use of the trademark “COMIC CON” by Daniel Farr, Bryan Brandenburg, and Dan Farr Productions for a comic book convention held in Salt Lake City constituted an infringement of the trademark “COMIC-CON” (note the distinguishing hyphen) owned by San Diego Comic Convention.  Farr and Brandenburg had organized and presented the Salt Lake City convention under the name “Salt Lake Comic Con” since 2011.  San Diego Comic Convention (or “SDCC”) also asked the jury to award monetary damages totaling $12 million as compensation for damage allegedly done to the “COMIC-CON” trademark by its misuse. 

After hearing testimony and considering the evidence presented at trial, the jury ruled in favor of SDCC and found that the name “Salt Lake Comic Con” (“SLCC”) had infringed the SDCC mark (and that such infringement should stop).  However, the jury awarded SDCC monetary damages of only $20,000.  It may have been difficult for the jury to believe that a trademark for a comic book convention could be worth anywhere near $12 million.

In fact, SDCC has operated an annual comic book convention in San Diego since 1970 and it holds thirty-eight (38) active federal registrations for trademarks associated with the convention that are registered with the U.S. Patent and Trademark Office (the “PTO”).  Principal among these registered marks is “COMIC-CON” (PTO Service Mark Reg. No. 3,219,568), a mark that has been used by SDCC from the beginning in relation to “conventions showcasing comics and comic books as well as other aspects of the popular arts such as graphic arts, science fiction films, fantasy films, and literature.”

As SDCC alleged in its complaint, the “COMIC-CON” marks have been used so extensively and continuously to promote the San Diego convention that “consumers have come to recognize and identify the “COMIC-CON” marks as representative of the quality events and services provided by SDCC.”  Indeed, the San Diego Comic-Con convention has grown so much in popularity over the past five decades that attendance now exceeds 130,000 and many films and television shows, including The Big Bang Theory, often reference the convention as key plot points.

In comparison, other comic conventions like the SLCC convention (and over a hundred others using the name “Comic Con,” including Los Angeles Comic Con convention and New York Comic Con convention) now draw similar attendance numbers but it is generally accepted that they are able to do so, in large part, because of the sustained popularity of the San Diego event.

Somewhat surprisingly, it wasn’t SLCC’s mere usage of “COMIC CON” that triggered the SDCC lawsuit.  What directly led to the filing was a marketing stunt Farr and Brandenburg pulled in 2014 to promote their own convention.  They traveled to San Diego, rented large panel trucks, affixed huge billboards to them inviting viewers to attend SLCC that September, and then drove them back and forth along Harbor Drive in front of the San Diego Convention Center during the July 2014 San Diego Comic-Con convention.

Seemingly left with no other choice (and likely hoping to send a message to other competing comic book conventions misusing the trademarks), SDCC filed suit against Farr and Brandenburg in August 2014 in the U.S. District Court for the Southern District of California (Case No. 14CV1865 AJB JMA) alleging trademark infringement and false designation of origin.

Once the battle was joined, Farr and Brandenburg filed their own cross-complaint and sought to have the “COMIC-CON” trademarks declared “generic” and, therefore, unenforceable.  Genericism occurs when a protectable trademark like linoleum, escalator, or even videotape becomes so associated with a good or service in consumer minds that it stops serving as a source identifier.  And, worse, they become ineffective as a trademark.  Farr and Brandenburg also filed a cancellation proceeding against the “COMIC-CON” mark based on the same genericism argument (which is still pending) in the PTO’s Trademark Trial and Appeals Board.

Unfortunately for SLCC, Farr and Brandenburg’s genericism arguments were inconsistent.  In certain pleadings, they argued that SDCC’s failure to enforce its trademark rights in the face of ever widening third party usage had led to them becoming a generic means of referring to any comic book convention.  And in other pleadings, they argued that trademarks like “COMIC-CON” were generic ab initio, meaning that they were already generic when SDCC started using them in 1970.

In understanding a fundamental flaw in the defense, it is important to understand that the 9th Circuit Court of Appeals (under whose jurisdiction the San Diego court operates) does not recognize genericism ab initio as a matter of law.  So, without any supporting case law from the 9th Circuit, District Court Judge Anthony J. Battaglia ruled against FARR and Brandeburg’s genericism ab initio arguments presented in competing motions for summary judgment in September.  Effectively, this gutted the SLCC defense and set up the November trial that ended with the December 1 jury decision in favor of SDCC.

Why It Matters.  While it remains to be seen what impact the jury’s decision will have on other competing comic book conventions (as of the writing of this post all were still using variations of “comic con” on their websites), there are several important takeaways from the recent court battle.

First, SDCC had little choice but to sue SLCC and to take the case all the way to trial once it had decided the “COMIC-CON” trademark was worth protecting, SLCC was infringing that trademark and SLCC refused to negotiate reasonable settlement terms.  After selecting a strong trademark, there are many things a trademark owner can do to strengthen and protect a trademark but one of the essential things it must do is to force infringers to stop infringing.

Second, now that SDCC has prevailed over SLCC, there is no certainty that the numerous other conventions using the “comic con” trademark as their own will decide to stop and avoid incurring the wrath of SDCC.  In fact, it remains SDCC’s responsibility to pursue each and every other infringer if it intends to fully protect its mark.  Quite simply, there are no “trademark police.”  The law places the responsibility for enforcement on the trademark owner.

Third, the case serves as an important reminder that trademark litigation can be very, very expensive with no guarantee of a sizable monetary recovery.  Precise numbers for the attorney’s fees, expert witness fees, and assorted litigation expenses on both sides have not been made public, but before the case even went to trial the SLCC organizers looked to online fundraising to try and raise more than a million dollars to cover their own fees and costs.

And whether it was Voltaire, Stan Lee, or Spiderman’s Uncle Ben who first said, “With great proper comes great responsibility,” San Diego Comic Convention knew that the same logic applies to great trademarks and it acted accordingly.

Contingent Patent Ownership is Not Sufficient for Federal Court Jurisdiction

Posted in Patent Law

There is no federal court jurisdiction for disputes involving patents where the claimant does not actually own the patents. The possibility that one might own a patent, if a contingent future event occurs, is not enough. This seems like an obvious rule, but it ended up before the Federal Circuit Court of Appeals. 

The case is First Data Corp. v. Inselberg  (Fed. Cir. 9/15/17).  The defendants were Eric Inselberg, an inventor, and his company, Inselberg Interactive, LLC.  Inselberg Interactive owned several of the inventor’s patents.  In connection with a loan transaction in which Interactive borrowed money from Frank Bisignano, Interactive gave Bisignano a security interest in the patents.  After Interactive defaulted on the loan, Interactive was required to, and did, enter into an assignment agreement with Bisignano. Interactive assigned all of its rights in the patents to Bisignano.  Bisignano then became the CEO of First Data Corp.

Several years later, Inselberg told Bisignano that First Data was infringing the patents and did not have a license. Inselberg demanded that First Data either buy the patents or license them, contending that the assignment Interactive had made to Bisignano was not valid. Bisignano then licensed the patents to First Data. Inselberg continued to assert that First Data was infringing the patents. Inselberg’s counsel sent Bisignano and First Data a draft complaint that Inselberg stated he intended to file in state court, alleging that Inselberg owned the patents and could sue First Data for patent infringement.

Bisignano and First Data jumped the gun and filed suit in the federal district court for the District of New Jersey.  The complaint sought a declaratory judgement that Bisignano owned the patents and that the license to First Data was valid. The complaint also sought a declaratory judgement that First Data did not infringe the patents because Bisignano owned the patents and had licensed them to First Data.

Inselberg and Interactive filed suit in New Jersey state court, seeking a declaratory judgment that they owned the patents because the assignment to Bisignano was invalid. Bisignano and First Data answered the complaint and filed counterclaims seeking a declaratory judgement of noninfringement of the patents and of invalidity of one of the patents. The defendants then removed the state court action to federal court, relying on the district court’s jurisdiction over patent cases.

In the federal court action, Inselberg and Interactive moved to dismiss Bisignano and First Data’s complaint and their counterclaims in the removed action, and sought remand of the state law claims.

The district court granted the motion to dismiss on the grounds that the federal court had no jurisdiction because there was no federal question. The district court found that Inselberg and Interactive had conceded that Bisignano owned the patents by seeking to invalidate the assignment agreement in their state court complaint, and, therefore did not own the patents. The district court held that Inselberg and Interactive did not have a claim for patent infringement and would not have such a claim unless they obtained ownership of the patents under their state law claims. Thus, the patent claims were contingent on the outcome of Inselberg and Interactive’s state law claims.

On appeal, the Federal Circuit affirmed the district court’s order dismissing Bisignano and First Data’s federal claims and remanding the state law claims. The court held that there was no federal question jurisdiction because Inselberg and Interactive did not, and could not, assert a threat of infringement against First Data as Inselberg and Interactive did not own the patents. In addition, the court held that Bisignano and Frist Data had no standing to assert their declaratory judgement claims.  For similar reasons, the court also held that Bisignano and Frist Data’s claims were not ripe for adjudication because all of the claims were based on a contingent future event, the state court awarding ownership of the patents to Inselberg and Interactive.

 

 

Federal Circuit Clarifies Waiver of Venue Issue in Light of TC Heartland, but Issues Still Remain For District Courts to Address

Posted in Patent Law

The U.S. Supreme Court’s May 22, 2017 ruling in TC Heartland v. Kraft Foods held that personal jurisdiction alone does not convey venue for patent cases under the patent venue statute.  Previously, the Court of Appeals for the Federal Circuit and the United States district courts had interpreted the patent venue statute, 28 U.S.C. §1400(b), to allow plaintiffs to bring a patent infringement case against a domestic corporation in any district court where there is personal jurisdiction over that corporate defendant.  Specifically, the patent venue statute provides that “[a]ny civil action for patent infringement may be brought in either 1) the judicial district where the defendant resides” or 2) “where the defendant has committed acts of infringement and has a regular and established place of business.”  But, TC Heartland, held that a domestic corporation resides only in its state of incorporation for purposes of the patent venue statute, and not just anywhere it is subject to personal jurisdiction as had previously been the case. 

Following TC Heartland, corporate defendants filed a flurry of motions to dismiss for lack of venue or, in the alternative, to transfer cases.  Corporations argued they had been improperly sued in venues where they had no regular and established place of business, and where they are not incorporated and thus did not reside.  But, the Supreme Court’s ruling in TC Heartlandled to confusion as to whether such challenges could be made in on-going cases where the defendant had not previously raised the issue of improper venue.  Specifically, Federal Rule of Civil Procedure 12(h)(1)(A), provides for waiver, based on the incorporated terms of Rule 12(g)(2), when a defendant omits an available venue defense from an initial motion to dismiss.  This confusion led to widespread disagreement among District Courts on the issue.

However, in In re Micron Tech, Inc., No. 2017- 138, 2017 WL 5474215 (Fed. Cir. Nov. 15, 2017) (“In re Micron”) the Federal Circuit recently clarified that TC Heartland was a change-of-law relevant to waiver under Rule 12(g)(2) and (h)(1)(A).  The Federal Circuit held that TC Heartlandchanged the controlling law such that at the time of an initial motion to dismiss, before the Supreme Court decided TC Heartland, a venue defense based on TC Heartland’s interpretation of the venue statute was not “available,” thus making the waiver rule of Rule 12(g)(2) and (h)(1)(A) inapplicable.  In other words, the venue objection was not available until the Supreme Court decided TC Heartland because, before then, it would have been improper given controlling precedent, for a district court to dismiss or to transfer for a lack of venue.

In further explaining its reasoning, the Federal Circuit first noted “[t]he crucial condition for Rule 12(g)(2) to apply, and hence for the unmade venue objection to be waived under Rule 12(h)(1)(A), is that the venue defense had to be ‘available to the [defendant]’ when the defendant made the initial Rule 12(b) motion.”  The Federal Circuit continued, “[w]here controlling law precluded the district court, at the time of the motion, from adopting a defense or objection and on that basis granting the motion, it is natural to say, in this context, that the defense or objection was not ‘available’ to the movant.  The law of precedent is part of what determines what law controls. The language ‘was available’ focuses on the time of the motion in the district court, not some future possibility of relief on appeal, thus pointing toward how the district court may permissibly act on the motion at the time—i.e., where the motion is for dismissal, whether it can dismiss the case and thereby avoid wasting resources on continued litigation. Because what Rule 12(g)(2) addresses is the omission of a defense or objection from an initial motion for one of the forms of relief specified in the Rule, subsection (g)(2) is naturally understood to require the availability of that relief at the time of the initial motion (here, dismissal based on improper venue).”

Importantly, however, the Federal Circuit limited its holding to only waiver under Rule 12(g)(2) and h(1)(A), and said there are still circumstances in which a district court can find that a defendant has forfeited its venue defense.  “[T]hat waiver rule, we also conclude, is not the only basis on which a district court might reject a venue defense for non-merits reasons, such as by determining that the defense was not timely presented.”  For example, “nothing in the Federal Rules of Civil Procedure would preclude a district court from applying other standards, such as those requiring timely and adequate preservation, to find a venue objection lost if, for example, it was not made until long after the statutory change took effect.”  Thus, the Federal Circuit concluded, “it clear that, apart from Rule 12(g)(2) and (h)(1)(A), district courts have authority to find forfeiture of a venue objection.”  Moreover, the Federal Circuit also made clear it was not exploring the contours of timeliness outside Rule 12(g)(2) and (h)(1)(A), or how to assess what constitutes consent to venue, or what if any other considerations could justify a finding of forfeiture even when the defendant has not waived its objection under Rule 12(g)(2) and (h)(1)(A).  In other words, the Federal Circuit limited its holding and left a number of open issues for District Courts.

Indeed, in Intellectual Ventures II LLC v. FedEx Corporation et al, 2-16-cv-00980 (TXED November 22, 2017, Order), a District Court in the Eastern District of Texas has already found that defendants waived their venue defense through litigation conduct in light of In Re Micron, and denied defendants’ motion to dismiss plaintiff’s patent infringement action for improper venue.  In reaching its decision, the District Court first noted that the Federal Circuit in In re Micron “explained that district courts possess an inherent power to find a venue objection forfeited based on conduct or other circumstances.”  The District Court then reasoned that “it was not until a few days after their IPR petitions were denied and more than two months after [TC Heartland LLC] was decided that Defendants finally sought to dismiss this case for improper venue.”  The District Court continued that In re Micron “does not invite defendants who have substantially engaged in a case to reassert an abandoned defense once it becomes convenient or advantageous for them. . . . Moreover, before TC Heartland was decided . . . Defendants sought to transfer this case to the Western District of Tennessee under § 1404 rather than § 1406. This is particularly significant because a motion under § 1404 is premised on venue being proper in the transferor court whereas a motion under § 1406 reflects an objection to the current venue as being improper.”  Accordingly, the District Court concluded that Defendants’ venue objection has been waived based on their own conduct, the judicial resources already expended in this case by the Court, the prejudice to Plaintiff in reopening a dormant venue dispute simply because it has become convenient for Defendants to litigate the issue now, and in light of all of these considerations taken together.

In sum, although In Re Micron clarified waiver of venue under Rule 12(g)(2) and (h)(1)(A) in light of TC Heartland, there are still a number of issues that need to be worked out at the District Court level.  And, it is likely there will be differing application across District Courts until more of these issues are worked out.

Would Glue Maker’s Trademark Claim Stick Against Pot Strain

Posted in Copyright Law

According to cannabis folklore, cannabis cultivators in 2010, Josey Whales and Lone Watie  created a strain of marijuana that was so sticky, Mr. Whales, during a phone call, commented that the plant made his hands “stick to things like Gorilla Glue.”  From that, Whales and Watie came up with a name of their strain – Gorilla Glue#4.   Since that time, the strain has won numerous competitions and has become extremely popular with consumers.  Whales and Waite formed GG Strains, LLC which certified and authorized select cultivators around the country to market cannabis as “Gorilla Glue #4”; they operated the website <gorillaglue4.com> which sold clothing and other merchandise; and they applied to register certain trademarks with the state of Colorado which incorporate GORILLA GLUE. 

Apparently, the Ohio-based Gorilla Glue Company became aware of the existence of the Gorilla Glue Strain in late 2016.  Not surprisingly, the Gorilla Glue Company was not pleased.  In March, 2017 the Gorilla Glue Company sued GG Strains, LLC for trademark infringement and trademark dilution.  In October, 2017 the parties settled the dispute and, as a condition of settlement, GG Strains must transition away from “Gorilla Glue” as a strain brand name.  This rebranding is not inexpensive; GG Strains estimates it will cost $250,000 to rebrand.

While we will never know the outcome of this case, it is interesting to look into what the outcome could have been had GG Strains mounted a defense.

Under section 43 of the Lanham Act, infringement occurs when the use by one party of a mark is likely to cause confusion, or to cause mistake, or deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship or approval of his or her goods, services, or commercial activities by another person.  Under the Ninth Circuit’s ruling in AMF Incorporated v. Sleekcraft Boats, the determination of “likelihood of confusion” is made by examining the following factors:  1) the strength of the mark; 2) the proximity of the goods; 3) the similarity of the marks; 4) the evidence of actual confusion; 5) the marketing channels used; 6) the type of goods and the degree of care likely to be exercised by the purchaser; 7) the defendant’s intent in selecting the mark; and 8) likelihood of expansion of the product line.  This line of analysis is similar for most jurisdictions.

Strength of the Marks

Generally, arbitrary and fanciful marks are entitled to wide protection while marks that are suggestive are entitled to a restricted range of protection.  Where a suggestive mark is the subject of a suit, infringement will be found only if the marks in question are very similar and the goods are closely related.

While the word “Glue” is merely descriptive of glue, “Gorilla” certainly is not.  As such, the mark would be considered a strong mark – either arbitrary or only slightly suggestive.  As a strong mark, it is entitled to a wider degree of protection.

Relatedness of the Goods/Services

For related goods, the danger is that the public will mistakenly assume there is an association between the producers of the related goods, even though no such association exists.  Where the goods are complementary and the public is more likely to make such an association, the less similar in appearance the marks need to be to support a finding of likelihood of confusion.

How related are marijuana and marijuana products to glue?   In general, it is not common for a single manufacturer to sell both products.  Further, both products are not sold in the same type of stores and do not have any discernable overlap in consumer groups.  If the goods or services in question are not related or marketed in such a way that they would be encountered by the same persons in situations that would create the incorrect assumption that they originate from the same source, then, even if the marks are identical, confusion is not likely. See, e.g., Coach Servs., Inc. v. Triumph Learning LLC, 668 F.3d 1356, 1371, 101 USPQ2d 1713, 1723 (Fed. Cir. 2012).  Due to the unrelated nature of the goods, this factor would not favor a finding of confusion.

Similarity of the Marks

Similarity of the marks is tested on three levels: sight, sound, and meaning.  Each must be considered as they are encountered in the marketplace.  Although similarity is measured by the marks in their entirety, similarities weigh more heavily than differences.

It is not necessary that every word of a trademark be appropriated in order for there to be an infringement.  Where the marks are exactly the same and the goods are competitive, infringement is almost always found.  Where there are differences between the marks, those differences must be looked at in tandem with the similarities or differences in the goods or services.  Where the goods or services are directly competitive, the degree of similarity required to prove a likelihood of confusion is less than in the case of dis-similar goods or services.

Here both parties use the words “Gorilla Glue.”  However, because GG Strains incorporates “Gorilla Glue” into a logo that is unique and different from that of the Gorilla Glue Company, this factor may tend to favor a finding of no likelihood of confusion.

Evidence of Actual Confusion

Evidence that use of the two marks has already resulted in consumer confusion is persuasive proof that future confusion is likely.  Where a plaintiff is able to introduce evidence of actual confusion, it’s likely the court will find infringement.  Since we have no facts which show actual confusion, this factor is neutral in our analysis.

 

Marketing Channels

Convergent marketing channels increase the likelihood of confusion.  This is because likelihood of confusion is not determined in a vacuum; it is determined by the context that a customer perceives the marks in the marketplace.

The Gorilla Glue Company uses all media platforms to market its product.  It runs advertisements on television, radio and in print, and also uses the Internet.  While it’s not clear the extent to which GG Strains markets its products, it does have a website.

Intent

Evidence showing that the defendant intended to incorporate elements of the plaintiff’s mark favors a finding of likelihood of confusion.  Courts presume that the defendant can accomplish his purpose: that is, that the public will be deceived.  Here it is alleged that GG Strains adopted the use of “Gorilla Glue” due to the sticky quality of its cannabis.

Likelihood of Expansion

Inasmuch as a trademark owner is afforded greater protection against competing goods, a “strong possibility” that either party may expand his business to compete with the other will weigh in favor of finding that the present use is infringing.  When goods are closely related, any expansion is likely to result in direct competition.  Here, it is not likely that either party will begin producing competing products.

If this case had moved forward, based only on the information in the complaint, I suspect that the Gorilla Glue Company would have had difficulty with its trademark infringement claim.  Given the differences in the marks themselves, and primarily based on the unrelated nature of the goods, it is reasonable to conclude that a trier of fact would find consumer confusion not likely.

However, the Gorilla Glue Company would likely have had success on its dilution claim.  Under Section 43(c) of the Lanham Act, dilution can exist where there is an “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.”  In determining whether a mark is likely to cause dilution, the court will consider: (i) The degree of similarity between the mark or trade name and the famous mark; (ii) The degree of inherent or acquired distinctiveness of the famous mark; (iii) The extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv) The degree of recognition of the famous mark; (v) Whether the user of the mark or trade name intended to create an association with the famous mark; and (vi) Any actual association between the mark or trade name and the famous mark.

There is a lesson to be learned for the burgeoning legal cannabis industry.  The strain brands that incorporate the marks of others (like Girl Scout Cookie), once thought to be “clever” or “humorous”,  are not likely be viewed similarly by the mark owners.  The likelihood that disputes will evolve into lawsuits will only escalate as more states legalize recreational use of cannabis.

USPTO Finalizes Rule for Privileged Communications in Trials Before the PTAB

Posted in Copyright Law, Legal Info, Patent Law

The Leahy-Smith America Invents Act (“AIA”) provided for trials before the Patent Trial and Appeal Board (“PTAB”) of the United States Patent and Trademark Office (“USPTO”) in inter partes reviews, post-grant reviews, the transitional program for covered business method patents, and derivation proceedings.  While patent agents are registered to practice before the USPTO, they are not attorneys.  Therefore, it has been unclear whether attorney-client privilege prevents discovery in PTAB proceedings of communications between these non-attorney agents and their clients.  Addressing this ambiguity, the USPTO just issued a final rule for trial practice before the PTAB that explicitly protects communications between patent agents or foreign patent practitioners and their clients.  The amended rule becomes effective December 7, 2017. 

Under U.S. Federal law, clients generally can rely on attorney-client privilege to protect communications with their attorneys.  The USPTO, however, allows registered patent practitioners, including patent attorneys and non-attorney patent agents, to prepare and prosecute patent applications and appear before the PTAB.  The USPTO explains “[r]egistered patent practitioners are individuals who have passed the USPTO’s registration exam and met the qualifications to represent patent applicants before the USPTO.”  Registered patent practitioners have met “the requirements of 37 CFR § 11.7, including the legal, scientific, and technical qualifications, as well as good moral character and reputation.”  Specifically, a patent attorney is an attorney who has met these requirements, whereas a patent agent is a non-attorney who has met these requirements.

Thus, the question arose as to whether communications between patent agents, who are not attorneys, and their clients are protected from discovery in PTAB proceedings.  To address this and related questions, in February 2015, the USPTO held a roundtable on domestic and international issues related to privileged communications between patent practitioners and their clients.  This process included a request for comments as to whether privilege should apply to communications between patent applicants or patent owners and their U.S. patent agents or foreign patent practitioners.  Some participants “noted the rules regarding privilege for U.S. patent agents and foreign practitioners in PTAB discovery proceedings were difficult to discern” given the lack of an explicit rule.  Instead, “[w]hen an issue arises before [the] PTAB, Administrative Law Judges make legal determinations as to which communications may be protected from disclosure on a case-by-case basis, based on the Federal Rules of Evidence and common law.”

Taking the various comments it received into consideration, the USPTO issued a final rule on privilege for trials before the PTAB, which will be added as 37 CFR §42.57.  The rule “recognizes that privilege issues will be treated the same for agents as for attorneys within their scope of authorized practice.”  By extending privilege to patent agents, the USPTO recognized that “clients deserve the same protections regardless of which type of authorized … provider they choose.”

It was also noted that “some foreign jurisdictions rely entirely or almost entirely on non-attorney patent agents,” which means “[i]n such jurisdictions, hiring an attorney to handle patent matters can be difficult or impossible.”  The final rule addresses client’s communications with foreign jurisdiction practitioners and protects them from discovery in PTAB proceedings “regardless of whether that jurisdiction provides privilege or an equivalent under its laws.”  It is important to note, however, the final rule “does not have extraterritorial effects.”  The rule does not affect how foreign courts treat communications with U.S. and foreign practitioners.  Whether a foreign court treats those communications as privileged is entirely under the control of the foreign jurisdiction.

Further, the USPTO acknowledged that under Federal law, attorney-client privilege generally protects not only communications between an attorney and the client, but also 1) communications between an attorney and the client’s representative, 2) communications between the client and an attorney’s employee or assistant, and 3) communications between multiple attorneys working for the same client.  Paragraph (c) of the final rule was added to “clarify that the scope of coverage will be the same for practitioners as for attorneys under these types of scenarios and any other situations.”

For further details, see https://www.federalregister.gov/documents/2017/11/07/2017-24190/rule-on-attorney-client-privilege-for-trials-before-the-patent-trial-and-appeal-board

 

 

Say Cheese: Stock Photos, Non-Exclusivity & Copyright Infringement

Posted in Copyright Law

The Ninth Circuit recently addressed an issue as to who may pursue claims for copyright infringement concerning stock photos in the case DRK Photo v. McGraw-Hill Global Education Holdings, LLC, et al. (Sept. 12, 2017).  Apparently there has been a rise in copyright infringement claims involving stock photos and the Ninth Circuit was called upon to determine whether the non-exclusive licensing agent for stock photos had standing to pursue a claim for copyright infringement. 

The case involved a stock photography agency, DRK, which markets and licenses photos taken by others.  DRK has a collection of hundreds of thousands of “stock photos” and licensed a number of its photos to McGraw-Hill for use in its text books and other publications from 1992 to 2009.

DRK typically entered into a “Representation Agreement” with photographers to license their photos. One form of the representation agreement was for DRK to (1) act as the “sole and exclusive agent” to license the subject photos; and (2) another form of agreement that appointed DRK as a “non-exclusive agent” to license such photos.  Most of the agreements that DRK entered into with photographers were of the non-exclusive variety and these were the ones as issue in the Ninth Circuit’s case.

In 2008, DRK began to attempt to copyright the photographs in its collection.  To assist it with doing so, DRK had its photographers enter into “copyright assignment, registration and accrued causes of action agreements” (“Assignment Agreements”) that purported to assign all copyrights and legal title in the images to DRK for the purpose of completing the copyright registration of the photos and resolving any infringement claims brought by DRK, after any copyright interest in the photographs would revert back to the photographer.   DRK acknowledged that the purpose of these assignment agreements was to affect a transfer of any copyright interest to it so that it could pursue its copyright enforcement efforts.  In fact, DRK admitted that it had no intent to use these interests for any purpose other than pursuing copyright infringement actions.

After DRK sued McGraw-Hill in May 2001 asserting claims for copyright infringement, among others, McGraw-Hill moved for summary judgment as to some of these claims arguing that DRK lacked standing to pursue copyright infringement claims.  The District Court agreed with McGraw-Hill and granted it summary judgment, finding that DRK was not the legal or beneficial owner of the copyrights at interest and thus had no standing to sue.  DRK appealed this decision to the Ninth Circuit.

The Ninth Circuit began by recognizing that section 501(b) of the Copyright Act sets forth the requirements for standing to bring a lawsuit for copyright infringement:  “The legal or beneficial owner of an exclusive right under a copyright is entitled, subject to the [registration] requirements of section 411, to institute an action for any infringement of that particular right committed while he or she is the owner of it.”  DRK argued that it had standing to sue for copyright infringement with regard to the photos as either a legal or a beneficial owner of the subject copyrights. The Ninth Circuit examined each of these claims in turn and rejected both of them.

As to DRK’s claim that it had legal ownership in the photos’ copyrights, it recognized the well-settled rule that “a mere `non-exclusive license’ does not constitute a `transfer of copyright ownership’ and therefore cannot confer standing to assert an infringement claim.”  DRK claimed that it had legal ownership rights in the copyrights because of the Representation and Assignment Agreements.  First, DRK argued that the Ninth Circuit had previously held that a stock photograph agency had standing to bring copyright infringement claims in the case Minden Pictures, Inc. v. John Wiley & Sons, Inc., that was decided in 2015. The Ninth Circuit rejected this argument by concluding that DRK misread the extent of that case, given that what was at issue in the Minden case was an agreement that gave Minden “sole and exclusive” rights with respect to the licensing of the photographs.  The Ninth Circuit distinguished the Representation Agreement at issue in the DRK case by noting that they did not give DRK exclusive rights and lacked “any limitation whatsoever on the photographer’s authority to contract with other licensing agents.”  Thus, the non-exclusive license was insufficient to grant standing to DRK to pursue infringement claims.

DRK next argued that it became a legal owner of the copyrights by virtue of the Assignment Agreements. The Ninth Circuit likewise rejected this argument relying on its 2005 decision in Silvers v. Sony Pictures Entertainment, which held that the assignee of an accrued claim for copyright infringement could not maintain a copyright infringement claim if it had no legal or beneficial interest in the copyright itself.  The Ninth Circuit noted that all of the acts of infringement occurred prior to DRK’s entering into the Assignment Agreements and that even following the execution of the Assignment Agreements, the photographers retained the right to market and sell the covered photographers themselves and through other agents.  In essence, the Ninth Circuit concluded that the Assignment Agreements merely conveyed a “right to sue” to DRK that failed to comply with the Copyright Act; and thus failed to confer standing to pursue infringement actions under the Copyright Act.

Next, DRK argued that it had standing to sue because it was the beneficial owner of the subject copyrights.  The Ninth Circuit recognized that it had not been called upon to fully explore the extent of who may qualify as a beneficial owner and declined to do so in the DRK case.  In essence, DRK was arguing that the Representation and Assignment Agreements, while maybe not making it the legal owner of the copyrights at issue, rendered it a beneficial owner.  The Ninth Circuit concluded that this was nothing but an “end run” around the Copyright Act ruling that “to hold that DRK is a beneficial owner simply on the very basis that it cannot be deemed the legal owner would effectively negate our holding in Silvers and render portions of section 501(b) superfluous.”

Circuit Judge Marsha Berzon concurred in the Court’s ruling solely on the basis that she recognized that Silvers remained good law in the Ninth Circuit and thus, compelled the conclusion reached by the Court.  She wrote in her concurrence, however, that she continued to believe that Silvers was wrongly decided and that the Court should be more pragmatic in determining who had standing to pursue claims for copyright infringement.  Judge Berzon found it significant that DRK is authorized to license photographs on behalf of the photographers and has a “substantial interest” in how the photos it licenses should be used.  This should be sufficient in her view to confer standing for DRK to pursue copyright infringement claims.

Attorneys representing companies that are involved in the stock photography industry may want to revisit any applicable licensing agreements regarding stock photos to determine whether or not their client will have standing to pursue copyright infringement claims concerning the photos in their catalogues.

 

James Kachmar is a shareholder in Weintraub Tobin Chediak Coleman Grodin’s litigation section.  He represents corporate and individual clients in both state and federal courts in various business litigation matters, including trade secret misappropriation, unfair business competition, stockholder disputes, and intellectual property disputes.  For additional articles on intellectual property issues, please visit Weintraub’s law blog at www.theiplawblog.com

Can Patent Owners Buy Sovereign Immunity?

Posted in Patent Law

The latest issue in the patent world is one no one would have expected – sovereign immunity.

How did this issue arise? Allergan, the company that makes the dry-eye drug Restasis, has employed an aggressive strategy in attempting to protect its $1.5 billion market by selling its Restasis patents to a Native American Tribe.  In September, Allergan sold the patents to the Saint Regis Mohawk Tribe in New York.  Because the Tribe is a sovereign nation, it can claim sovereign immunity from suits in federal court under the 11th Amendment.  The validity of Allergan’s Restasis patents had been challenged by Mylan and several other generic drug manufacturers in the United States Patent and Trademark Office’s Patent Trial and Appeal Board (PTAB) in inter partes review (IPR) proceedings.  (An IPR is like a mini trial, in which both the patent owner and the challenger participate).  Immediately after acquiring the patents, Saint Regis moved to dismiss the IPRs on the grounds that the Tribe has sovereign immunity.  The PTAB has yet ruled. 

Allergan brought this problem upon itself.  Allergan sued Mylan and several other generic drug manufacturers in the federal district court for the Eastern District of Texas for infringement of its Restasis patents.  The trial judge in that case is a judge on the Federal Circuit Court of Appeals who is sitting in the district court.

As is typical in patent infringement suits, the defendants filed IPRs in the PTAB, challenging the validity of Allergan’s patents.  The PTAB instituted the IPRs and began the process.  Final oral argument was set for September.  About one week before the hearing, Allergan announced that it had sold its Restasis patents to Saint Regis.  In that deal, Allergan sold six of its Restasis patents to Saint Regis and licensed them back.  Allergan obtained an  exclusive license for all FDA-approved uses, leaving Saint Regis with the rights to the patents for educational purposes.   After the deal was done, Saint Regis asserted sovereign immunity in the IPRs and sought to have the IPRs dismissed.

This move by Allergan triggered a firestorm from the generic drug manufacturer defendants, other drug companies, and Congress.  The defendants contended that Allergan’s deal with Saint Regis was a sham, and will harm consumers who need access to less expensive generic drugs that are of the same quality as the patented drugs.  In Congress, Senator Claire McCaskill has already introduced a bill to preclude Native American Tribes from asserting sovereign immunity in PTAB proceedings.  Senator McCaskill and other Senators have stated that Allergan’s tactic is anticompetitive and an attempt to improperly further the monopoly on its patents.

Meanwhile, in the district court, Allergan moved to add Saint Regis as a joint plaintiff, clearly trying to demonstrate that the deal is not a sham and that Saint Regis really is the patent owner.  In connection with this motion, Saint Regis agreed that it would waive its sovereign immunity for purposes of the litigation.  Not surprisingly, the defendants opposed Allergan’s motion.

Interestingly, the district court has now ruled, after holding a bench trial in early September, that four of Allergan’s patents are invalid as obvious.  In his decision, the judge was very concerned about Allergan’s deal with Saint Regis, stating that the deal was essentially an attempt to “rent” the sovereign immunity of a sovereign nation. The court said that sovereign immunity should not be a commodity that private companies could purchase to avoid proper challenges to their patents.

What will happen next?

  • How will the district court rule on Allergan’s motion to add Saint Regis as a joint plaintiff? The courts ruing will depend on how many rights Allergan transferred to Saint Regis.  If Allergan transferred substantial rights, the court could find that Saint Regis is the patent owner, and grant the motion.  However, based on the court’ statements in its decision on invalidity, it appears that the court may deny the motion. Either way, because the district court judge is a Federal Circuit judge, his decision could affect how the Federal Circuit will rule when the issue comes before it.
  • How will the PTAB rule on Saint Regis’ motion to dismiss the IPRs on the grounds of sovereign immunity?  Some experts believe that if the district court denies Allergan’s motion to add Saint Regis as a plaintiff in the litigation, the PTAB will conclude that Saint Regis is not really the patent owner and does not need to be a party to the IPRs, and will proceed with the IPRs despite Saint Regis’ claim of immunity.  Others think that the PTAB will decide that sovereign immunity does not apply in PTAB proceedings because these proceedings are not the same as federal court litigation.  Alternatively, it is possible that the PTAB will grant Saint Regis’ motion because in several prior cases, the PTAB has dismissed IPRs against state universities on sovereign immunity grounds.  However, even of the PTAB decides that sovereign immunity does apply, it might rule against Saint Regis if it determines that Saint Regis licensed all substantial rights back to Allergan.
  • How will the PTAB rule on the validity of Allergan’s patents in the IPRs? The PTAB will make its decision based on the legal standards that apply in IPRs, which are different from those that the district court applied in the litigation.  In addition to determining the validity of the patents that the district court invalidated, the PTAB will have to decide the validity of two patents that the district court did not invalidate.
  • What will Congress do about the 11th Amendment immunity in these situations? Several Senators have described Allergan’s deal as a loophole that needs to be closed.  If Congress is serious about taking on drug companies and reducing prescription drug costs, this bill may be a winner.

Thus, it seems that Allergan’s strategy has a lot of problems.  After Allergan announced its deal in September, other drug companies began considering the same strategy.  Given the way things have turned out so far, however, these companies may now be reluctant to jump on the bandwagon.

 

Allegan’s Restasis Patents Invalidated by a Federal District Court Even After Transfer to Native American Tribe and Sovereign Immunity Claim.

Posted in Patent Law

In Allergan, Inc. v. Teva Pharmaceuticals USA, Inc. et al, Case No. 2:15-cv-1455-WCB (EDTX October 16, 2017 Order), a Federal District Court recently invalidated several patents covering Allergan’s dry-eye drug Restasis.  The ruling is notable because these are the same six patents Allegan just weeks ago transferred to the Saint Regis Mohawk Native American tribe in an effort to shield them from review at the Patent Trial and Appeal Board (“PTAB”).  This controversial transfer in an attempt to protect the patents from inter partes review at the PTAB via the tribe’s sovereign immunity received sharp criticism from generic drug manufactures and some in Congress.  Sovereign immunity, however, was not argued in District Court action.

The District Court dispute is a Hatch-Waxman Act case that relates to a condition known as “dry eye” and a pharmaceutical product known as “Restasis” that is intended to address that condition.  Restasis is an emulsion consisting of various components, including the active ingredient cyclosporin A, an immunosuppressant, which is dissolved in castor oil, a fatty acid glyceride.  Restasis, which is manufactured by plaintiff Allergan, Inc., is protected by six related patents, “the Restasis patents.”  Generic drug manufacturers Teva Pharmaceuticals USA, Inc.; Akorn, Inc.; Mylan, Inc.; and Mylan Pharmaceuticals, Inc., that wish to manufacture and sell bioequivalent drugs having the same components as Restasis challenged that the patents asserted by Allergan are invalid in defense to a patent infringement suit filed by Allergan.

Since this was a Hatch-Waxman Act case, the case was tried to judge and not a jury.  Thus, it was up to the court to make the factual determination as to the validity of the patents.  In determining the validity of the patents, the court found “that the prior art does not describe the Restasis formulation with sufficient specificity to satisfy the test for anticipation,” meaning no single reference invalidated any of the patents.  However, the court also found that “in view of all the evidence, including the prior art, the evidence of unexpected results, the evidence of objective considerations, and the motivation to combine the prior art references of Sall and the Ding I and Ding II patents, the Court concludes that the defendants have satisfied their burden of showing by clear and convincing evidence that the asserted claims of the Restasis patents would have been obvious.”  In other words, the court found the patents invalid on obviousness grounds, meaning multiple pieces of prior art in combination – and with a motivation to combine them- disclosed all limitations of the asserted patent claims.

Viewed from a broader perspective, the Court summarized from the evidence from the case as follows: “There is no doubt that Allergan has invented a useful and successful pharmaceutical product. It has been richly rewarded for that invention in large measure because it was able to get patent protection for the invention in 1995 when the Ding I patent issued. Allergan had 20 years of patent protection for its invention and ultimately for Restasis, the commercial embodiment of that invention, which was clearly covered by Ding I.

Although Allergan kept continuation applications alive for some years after Restasis was approved by the FDA, it ultimately conceded to the PTO in 2009 that the claims of the continuation applications that were directed to the Restasis formulation would have been obvious in light of the Ding I patent. However, in 2013, a few months before the expiration date of the Ding I patent, Allergan returned to the PTO, withdrew its concession of obviousness, and renewed its effort to obtain further patent protection for Restasis. Allergan’s theory in prosecuting the new applications was that the Restasis formulation, although falling within the scope of the Ding I patent, surprisingly produced exceptionally good results, so much so that the particular formulation for Restasis was entitled to patent protection even though that formulation fell within the scope of the ranges of values disclosed and claimed in Ding I. Allergan persuaded the examiner to issue the patent by way of a presentation that was more advocacy than science. The presentation suggested that the Restasis formulation resulted in efficacy levels up to eight times as great as would be expected based on studies of the formulations disclosed in the Ding I patent. In fact, a closer examination of the results of the clinical studies on which Allergan relied makes it clear that the presentation to the PTO substantially overstated the difference between the clinical results obtained with the Ding formulations and the clinical results obtained with the Restasis formulation. The actual clinical results, interpreted properly, show no significant difference in efficacy between the Restasis formulation and the 0.1% formulation that was Example 1D of the Ding I patent.

At trial, Allergan presented essentially the same theory—that the Restasis formulation produced results that were unexpected in light of the prior art—albeit without urging upon the Court the evidence that Allergan had presented to the PTO. In so doing, Allergan has had to deal with the problem that a considerable amount of highly pertinent prior art had accumulated by the 2003 priority date of the Restasis patents. Not only does the Ding I patent pose a problem for Allergan, but the papers by Sall and Stevenson revealed a great deal of information about the studies on which Allergan relies to make its unexpected results case.”

Thus, in light of this evidence, the Court concluded that Allergan is not entitled to renewed patent rights for Restasis in the form of a second wave of patent protection based on the extensive amount of pertinent prior art and the Court’s factual assessment of Allergan’s showing of unexpected results.  The Court therefore held that while Allergan has proved by a preponderance of the evidence that the defendants have infringed the asserted claims of the Restasis patents, the defendants have proved by clear and convincing evidence that the asserted claims of the Restasis patents are invalid for obviousness.

In sum, and while Allegan may appeal this ruling from the district court, the outcome of which is hard to predict, for now its Restasis patents were found invalid even after all the hassle Allegan went to protect them by assigning them to the Saint Regis Mohawk tribe.

Google May be a Verb, but Verb Use Alone Does Not Constitute Genericness

Posted in Copyright Law, Cyberspace Law, Legal Info, Web/Tech

Just Google it. Can you Google the score? Have you Googled the restaurant’s reviews? These are all common phrases in today’s internet-reliant society, and it’s entirely due to the creation of Google and its widespread success. By all measures, this should be a good thing for Google. Its company’s primary trademark, Google, has become such an integral part of society that it is now ingrained in our everyday vocabulary as a verb, and even further ingrained in our everyday usage. But for a company with valuable intellectual property rights in its Google trademark, its everyday usage in a general sense, meaning to perform an internet-based search, whether through Google or another search engine, could prove disadvantageous at some point in the future.

In fact, Google recently is currently dealing with an appeal involving these issues after a pair of individuals registered more than 700 domain names incorporating the word Google, including googlejxholdings.com, googleadam.com, and googlekellyclarkson.com. In response to these filings, Google filed a complaint with the National Arbitration Forum, claiming likelihood of consumer confusion and cybersquatting. The arbitration panel agreed with Google and transferred the domain names to Google. In ruling on the dispute, the panel found the domains confusingly similar to Google’s federally registered trademarks, and stated that the registrant had no legitimate interest in the domains and had registered them in bad faith.

Shortly after the arbitration panel issued its ruling, an individual who co-owned some of the domain names that the above-mentioned registrant was required to transfer to Google filed a lawsuit against Google in the United States District Court for the District of Arizona, attempting to cancel Google’s marks on the ground that they have become generic due to everyday verb usage. The registrant eventually joined the lawsuit as a plaintiff.

The plaintiffs moved the District Court for summary judgment, claiming that it was indisputable that the public used the word Google as a verb and “verb use constitutes generic use as a matter of law.” The District Court found in favor of Google, determining that the Google mark was not generic. As an example of another legitimately registered trademark often used as a verb to describe a category of activity, Judge Stephen M. McNamee cited the Photoshop trademark. Judge McNamee discussed how, much like Google, people often use Photoshop to refer to something aside from Adobe’s trademarked product. Judge McNamee further remarked that “It cannot be understated that a mark is not rendered generic merely because the mark serves a synecdochian ‘dual function’ of identifying the genus of services to which the species belongs.”

Still unsatisfied, the plaintiffs petitioned the 9th Circuit for review. In an opinion written by Circuit Judge Richard Tallman, the 9th Circuit reiterated Judge McNamee’s findings and once again acknowledged that the mere use of a word as a verb is insufficient to show genericide. But apparently the opinions of Judge McNamee and Judge Tallman are still not enough for these plaintiffs. They have now petitioned the Supreme Court for review.

The petition for review calls the 9th Circuit’s decision “dangerous” for holding that the use of a trademark as a verb is irrelevant to the determination of whether it has become generic. It also states that the decision is in conflict with the opinions of various experts who have stated that trademarks are proper adjectives, which should not be used as verbs. According to the petition, “[u]nchecked indiscriminate verb usage of trademarks could, and will, lead to a reality where the public can no longer recall that the verb derives from a trademark, while simultaneously allowing the trademark to exist on the principal register in perpetuity[.]” Finally, the petition states that public appropriation of Photoshop, Xerox, and other marks is something to be encouraged, as it is an example of how language is a dynamic, living being, meeting the needs of speakers.

It would be interesting to see how the Supreme Court would rule on this matter, but given that the Supreme Court only grants review to a select number of cases, I suspect we will not find out. This is especially true given that neither the 9th Circuit nor the District Court stated that verb use is irrelevant to the analysis, as it is represented in the petition, but simply that verb use alone is insufficient to demonstrate genericide. However, stranger things have happened.

Federal Circuit Clarifies Venue Requirements for Patent Cases

Posted in Patent Law

Until the U.S. Supreme Court’s May 22, 2017 ruling in TC Heartland v. Kraft Foods, the Court of Appeals for the Federal Circuit and the United States district courts had interpreted the patent venue statute, 28 U.S.C. §1400(b), to allow plaintiffs to bring a patent infringement case against a domestic corporation in any district court where there is personal jurisdiction over that corporate defendant.  The Supreme Court’s TC Heartland ruling, however, clarified that personal jurisdiction alone does not convey venue for patent cases under the patent venue statute.  But that clarification led to confusion as to how to interpret the venue statute itself.  The Federal Circuit just addressed that confusion in In re Cray Inc. 

Specifically, the patent venue statute provides that “[a]ny civil action for patent infringement may be brought in either 1) “the judicial district where the defendant resides” or 2) “where the defendant has committed acts of infringement and has a regular and established place of business.”  Prior to TC Heartland, courts had found that a domestic corporation resides in any judicial district where the corporation is subject to personal jurisdiction, and thus venue was proper in those districts.  In TC Heartland, the Supreme Court limited venue under the first prong explaining that a corporation only resides in its state of incorporation.  For plaintiffs wishing to sue corporations in judicial districts outside the defendant’s state of incorporation, the TC Heartland ruling shifted the focus to the second prong of the patent venue statute.  The second prong states that a domestic corporation can be sued for patent infringement “where the defendant has committed acts of infringement and has a regular and established place of business.”

Following TC Heartland, defendants filed a flurry of motions to dismiss for lack of venue or, in the alternative, to transfer cases.  Corporations argued they had been improperly sued in venues where they had no “regular and established place of business.”  But what is a “regular and established place of business”?  Prior to the TC Heartland ruling, venue was typically shown under the first prong based on where a corporation resides, so the courts had not really dealt with the requirements for a “regular and established place of business” under the second prong of the venue statute.  Now courts were forced to address this issue and different courts were coming to different conclusions, which led the Federal Circuit to address this issue in response to Cray’s petition for a writ of mandamus.

Cray’s petition arose from Judge Gilstrap’s venue ruling in Raytheon Co. v. Cray, Inc. (“Transfer Order”).  More specifically, Raytheon filed a patent infringement action against Cray in the Eastern District of Texas.  Cray is a Washington corporation.  Cray did not rent or own property in the Eastern District of Texas but allowed two employees to work remotely from their homes in that district.  One of those employees was a “sales executive” with sales in excess of $345 million over approximately seven years.  That employee received reimbursement for cell phone charges, internet fees, and mileage related to his work for Cray.  The employee, however, did not store products or product literature in his home.  Further, he was never paid for use of his home as a business office.  Cray moved to transfer the case for lack of venue arguing that it did not reside in the district and did not maintain a regular and established place of business in the district.

In his Transfer Order, Judge Gilstrap not only found venue proper in the Eastern District of Texas but also went on “‘[f]or the benefit of’ other litigants and counsel to set out four factors for inquiries into what constitutes a regular and established place[] of business ‘in the modern era,’ including physical presence, defendant’s representations, benefits received, and targeted interactions with the district.”

The Federal Circuit reversed stating that “[a]lthough the law was unclear and the error understandable, the district court abused its discretion by applying an incorrect legal standard, which we now clarify in this opinion.”  The Federal Circuit explained that its “analysis of the case law and statute reveal three general requirements” for whether a corporation has a “regular and established place of business” in a judicial district.  These requirements include:  “(1) there must be a physical place in the district; (2) it must be a regular and established place of business; and (3) it must be the place of the defendant.

The Federal Circuit further explained that while the “‘place’ need not be a ‘fixed physical presence in the sense of a formal office or store,” “there must still be a physical, geographical location in the district from which the business of the defendant is carried out.”  A test that encompasses virtual spaces or electronic communications would improperly expand the venue statute.  Further, “the mere fact that a defendant has advertised that it has a place of business or has even set up an office is not sufficient; the defendant must actually engage in business from that location.”  In addition, for a business to be “regular and established,” the activity cannot be sporadic or transient in nature.  Further, “[t]he defendant must establish or ratify the place of business.  It is not enough that the employee does so on his or her own.”  Therefore, an employee that merely works from home does not necessarily create venue in the district.

It is now clear that personal jurisdiction and venue or two separate requirements for patent infringement cases.  Further, in many instances, plaintiffs will have significantly fewer options for the districts where they can bring patent infringement cases against domestic corporations under the patent venue statute.