The Use of the Laches Defense in 5th Circuit Trademark Litigation

Good Things Do Not Always Come to Those Who Wait:

The Use of the Laches Defense in 5^th Circuit Trademark Litigation

The time-tested adage, “good things come to those who wait,” extols the virtue of patience and has been used throughout pop culture to explain phenomena ranging from love to job prospects.  But in the context of trademark protections, the concept of “waiting” can be fatal to a plaintiff’s claim for relief when a defendant asserts the affirmative defense of “laches.”

Basic Tenets

“Laches” is defined as an inexcusable delay that results in prejudice to a defendant. Abraham v. Alpha Chi Omega, 796 F. Supp. 2d 837, 846 (N.D. Tex. 2011).  The claim can be raised as an equitable defense available for those alleged infringers who lack the requisite “bad faith intent to capitalize on the markholder’s [goodwill].” Bd. of Supervisors for La. State Univ. Agric. &  Mech. Coll. v. Smack Apparel Co., 550 F.3d 465, 490 (5th Cir. 2008).  Thus, to establish a “laches” defense, the defendant has the burden to show: “(1) [plaintiff’s] delay in asserting one’s trademark rights; (2) [plaintiff’s] lack of excuse for the delay, and (3) undue prejudice to the alleged infringer caused by the delay.” Id. at 489-90.  In so analyzing the defense, courts in the Fifth Circuit take a “totality of the circumstances” approach by making factual inquiries regarding “the combined effect of the [p]laintiff’s delay and the prejudice resulting to the [d]efendant[ ].” New Century Fin., Inc. v. New Century Fin. Corp., No. C-04-437, 2005 WL 2453204, at *10 (S.D.Tex. Oct. 4, 2005).  Factual insufficiencies in any one of the three prongs will prove fatal to the defendant’s assertion of the affirmative defense.

The Fifth Circuit has simplified the inquiry by utilizing the more rigid equation of “LACHES = DELAY x PREJUDICE” as a quantitative or mathematical tool to assist the trial court in deciding, as a matter of considerable discretion, whether estoppel by laches is appropriate equitable relief. See Armco, Inc. v. Armco Burglar Alarm Co., 693 F.2d 1155, 1161 (5th Cir. 1982).  Courts will typically combine the Smack Apparel inquiries with regard to elements (1) and (2), and simply bifurcate the analysis so that a plaintiff’s failure to satisfy either element—delay or prejudice—will bar that particular claim.

Delay and Excuse

The first judicial inquiry begins with an analysis regarding the length of time, or delay, in assertion of the plaintiff’s claim for relief.  In the Fifth Circuit, the period of delay for measuring “laches” begins at the time when the plaintiff knew or should have known of the infringement. Am. Rice, Inc. v. Producers Rice Mill, Inc., 518 F.3d 321, 334 (5th Cir. 2008).  The delay period ends when the plaintiff informs the defendant of its objections, for example by filing suit or sending a cease and desist letter.  See Studiengesellshaft Kohle v. Eastman Kodak Co., 616 F.2d 1315, 1328 (5th Cir. 1980).

But, the “[m]ere passage of time[,] even a considerable amount of time[,] will not automatically perfect a claim for such an equitable bar.” New Century Fin., Inc., 2005 WL 2453204, at *10.  While the Fifth Circuit has yet to adopt a bright-line rule, generally the courts will look to analogous state statutes of limitation to aid in determining what length of delay is excusable for purposes of defense of “laches” to a claim of trademark infringement under the Lanham Act. Mary Kay, Inc. v. Weber, 601 F. Supp. 2d 839, 859 (N.D. Tex. 2009) (looking at analogous four-year statute of limitations under Texas state law for period of excusable delay).  Accordingly, periods of inexcusable delay range all over the board, from just a few years to several decades. See Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1082-83 (5th Cir. 1997) (period of twenty years was unreasonable under Texas standard); Abraham, 796 F. Supp. 2d at 856 (period of four years to formally assert claim was unreasonable where plaintiffs were aware of possible infringement for several decades).

While not formally adopted by the Fifth Circuit, some plaintiffs have attempted to counter questions concerning the period of delay in various district courts by asserting the doctrine of “progressive encroachment” as reason for the delay. See Abraham, 796 F. Supp. 2d at 852-53.  Under this doctrine, delay is justifiable if the infringer began its infringing use in a market outside the trademark owner’s, but later on “directs its marketing . . . efforts such that it is placed more squarely in competition with the [owner].” Id. at 853.  The basis for this doctrine is that “a plaintiff is justified in delaying suit until its legal right has clearly ripened.” H.G. Shopping Ctrs., L.P. v. Birney, No. H-99-0622, 2000 WL 33538621, at *7 (S.D. Tex. Nov. 29, 2000).  In other words, a claim may not ripen until likelihood of confusion is clear, which in turn, might not occur until the infringer increases or expands its use. See id.

The doctrine of progressive encroachment “goes hand-in-hand” with excuse for delay. Abraham, 796 F. Supp. 2d at 852.  In Abraham,the trademark owners, various student campus Greek organizations, argued progressive encroachment as an excuse for their delay. Id..  They argued that the recent placement of infringing products on the infringer’s website was progressive encroachment, and that this expansion of the infringing vendor’s business was “markedly more impermissible” than selling locally through catalogs. Id.  The court said that although “‘normal business growth’” does not alone establish progressive encroachment, some actions, such as purchasing internet keywords on search engines or continuing to expand after the owner objected to the infringer’s use, created a material fact issue. Id. at 853.  But because the doctrine of progressive encroachment has yet to be formally adopted by the Fifth Circuit, plaintiffs must still overcome the  heavy burden to prove valid excuse for unreasonable delays in prosecuting their claim. See Exxon Corp., 109 F.3d at 1082-83 (plaintiff’s delay unreasonable where plaintiff delayed assertion of claim until suffering “reputational injury” based upon Exxon Valdez verdict) .

One final point to note, in situations concerning the possibility of “progressive encroachment,” although the court may be able to enjoin the alleged infringer in current and future endeavors, if the defendant can show established use at a local level, the court may limit the scope of its injunction to permit the defendant to continue use of the mark in that particular local market. See Conan Props., Inc. v. Conans Pizza, Inc., 752 F.2d 145, 154-55 (5th Cir. 1985).

Prejudice

The final element of a “laches” defense is proof of prejudicial harm to the defendant.   To show prejudice, the defendant must show that it “has done something it otherwise would not have done absent the plaintiff’s conduct.” Conan Props., 752 F.2d at 153. It is not enough that one merely “loses what otherwise he would have kept.” Baylor Univ. Med. Ctr. v. Heckler, 758 F.2d 1052, 1058 (5th Cir. 1985).  Notably, because the Fifth Circuit has not formally adopted a minimum period of delay to absolutely bar a plaintiff’s claim, even a short delay can constitute “laches” if the resulting prejudice is overwhelmingly great.  See 6 McCarthy on Trademarks and Unfair Competition § 31:12.

Prejudice can be shown in a number of ways but one of the best ways is by showing that the delay caused the alleged infringer to rely on the holder’s inaction when it “buil[t] up a valuable business around its trademark.” Abraham, 796 F. Supp. 2d at 854.  The Northern District of Texas has said, however, that “‘prejudice’ must constitute more than expenditures in promoting a business.” SeeMarshall v. Fulton, No. 3:08-CV-1921-L, 2011 WL 1630661, at *6 (N.D. Tex. Apr. 29, 2011).  For example, in Exxon Corp., the plaintiff’s claim against Exxon was barred by laches because Exxon, acting in reliance upon the federal registration of its marks and its strict policing of similar marks, had accrued tremendous investment costs and resultant goodwill in the challenged marks while the plaintiff remained quiescent to Exxon’s actions. Exxon Corp., 109 F.3d at 1082-83.  Defendant’s prejudice is limited “to the period prior to notice of another party’s objection” because after receiving such notice, all acts are at the defendant’s own risk. Conan Props., 752 F.2d at 152.

Conclusion

Because trademarks today have become safeguards of business reputations, litigation concerning the rights to those marks will continually remain necessary to the viability of many trademark owners.  While the jurisprudence surrounding the defense of “laches” in the Fifth Circuit provides little in the way of hard deadlines for periods of delay or minimum damage amounts for prejudice, what remains clear is that the case law disfavors those plaintiffs who fail to take a proactive approach in guarding their marks.  As such, defendants who can successfully substantiate a prolonged and established use of the mark and a resulting goodwill from the mark’s use will find the “laches” defense a helpful jurisprudential safeguard.

Tom Jacks is a partner with Chalker Flores, LLP in Dallas, Texas. He concentrates his practice on patent, trademark, copyright and general commercial litigation.  

John Sokatch is a 3L law student at Southern Methodist University and a law clerk with Chalker Flores, LLP in Dallas, Texas. 

 

 

WHAT IS A RETAINER AGREEMENT?

A retainer agreement is a legal contract between a law firm (or attorney) and the client by which the client agrees to hire the law firm for particular legal services.  The retainer agreement provides a detailed description of the parties to the agreement, the scope of legal services to be performed, the rules and manner in which those services will be performed, and a recitation of the agreed-upon fee arrangement between the parties.  Generally speaking, the law firm will require the client to review the agreement, sign the agreement if there are no changes to be made, and return the executed agreement along with a retainer fee (or deposit) to the law firm before any legal services are performed on a particular matter.

Authored by: Scott A. Meyer and John Sokatch

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Chalker Flores, LLP provides business, corporate, litigation and intellectual property legal services to individuals, inventors, entrepreneurs, start-ups, spin-offs, universities, research institutes, and small to large public and private companies and businesses.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4040 or info@chalkerflores.com.  Please follow us on Twitter at @chalkerflores.

Rep. Paul Seeks Assistance from United Nations in Acquiring RonPaul.com from Loyal Supporters

In a seemingly ironic series of events, former U.S. Congressman and three-time presidential candidate, Rep. Ron Paul, has turned to, of all places, the United Nations, an international organization repeatedly criticized by Rep. Paul throughout his political campaigns, for assistance in acquiring the domain name rights of two websites bearing his own namesake: <RonPaul.com> and <RonPaul.org>.  Even more surprising may be the fact that the Respondents in this case appear to be ardent grassroots supporters of Rep. Paul who initially created the websites during Rep. Paul’s 2008 presidential campaign.

The World Intellectual Property Organization (“WIPO”), one of the seventeen specialized agencies of the United Nations, permits trademark owners to file complaints against domain-name registrants for purposes of obtaining relief or resolving disputes in matters concerning the registration and ownership of domain names.  For example, oftentimes, the Uniform Domain-Name Dispute-Resolution Policy (“UDRP”) procedures will be used to combat cybersquatting or situations where an individual will register a domain name with the bad faith intent to profiteer from the goodwill associated with another’s trademark by selling the rights to the mark owner at an inflated price.

On February 7, 2013, Rep. Paul filed his complaint against several unknown Respondents generally alleging in accordance with UDRP requirements that:

1)      The domain names are identical or confusingly similar to Ron Paul’s RON PAUL trademark;

2)      The registrants have no rights or legitimate interests in the domain names; and

3)      The registrants have registered and are using the domain names in “bad faith.”

The complaint further requests that the two domain names be transferred to Rep. Paul without any form of compensation to the current registrants.

While the complaint fails to allege any federal registrations of the RON PAUL mark, Rep. Paul’s complaint, instead, claims common-law rights to the RON PAUL mark by virtue of its use in the United States and in association with Rep. Paul’s “books, articles, public appearances, and political commentary.”  Even though UDRP procedures do not require successful claimants to obtain federal registrations of their marks, such evidence can be helpful in establishing the complainant’s ownership of the mark.  Notably, a search on the Trademark Electronic Search System (“TESS”) reveals that the rights to a RON PAUL mark once held by the Ron Paul Consulting Company were abandoned in November of 2009 due to a failure to file a Statement of Use of the mark.

Additionally, the complaint alleges a lack of any evidence that the Respondents have actually used the two domain names “in connection with a bona fide offering of goods and services,” that the Respondents only registered the two domain names for the purposes of “selling them to [Rep. Paul] for more than [Respondents’] out-of-pocket costs,” and that “the domain names are being used to sell Ron Paul merchandise by third party vendors which competes directly with [Rep. Paul].”

Many reports indicate that the domain owners initially made an offer to sell the domain name <RonPaul.com> to Rep. Paul prior to his filing of the complaint for $848,000.  The owners subsequently reduced their offer to only $250,000 and were even willing to throw in the rights to <RonPaul.org>.

To date, it does not appear that the Respondents have answered the Complaint or made any further efforts to settle or resolve the matter outside of the UDRP process.

Authored by: Scott A. Meyer and John Sokatch, March 9, 2013.

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Chalker Flores, LLP provides business, corporate, litigation and intellectual property legal services to individuals, inventors, entrepreneurs, start-ups, spin-offs, universities, research institutes, and small to large public and private companies and businesses.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4040 or info@chalkerflores.com.  Please follow us on Twitter at @chalkerflores.

Unilaterally-Issued “Covenant Not to Sue” May Divest Trademark Claimants of Article III Standing

According to the recent Supreme Court ruling in Already, LLC v. Nike, Inc., __U.S.__, 133 S. Ct. 721 (2013), a broadly-drafted, unilaterally-issued “Covenant Not to Sue” may now provide defendants with alternative measures to combat cancellations of their federally-registered trademarks.

In July of 2009, Nike, Inc. (“Nike”) filed a complaint against Already, LLC d/b/a Yums (“Yums”) generally alleging claims of trademark infringement of the design of Nike’s Air Force 1 shoe product line.  Known for its distinctive stitching and numerous color combinations, Nike had originally obtained the registration for the Air Force 1’s shoe design in June of 2008 (U.S. Reg. No. 3,451,905).  In response, Yums filed a counter-claim by challenging the validity of the mark’s registration and seeking cancellation.

Four months later, Nike delivered to Yums a comprehensive “Covenant Not to Sue,” whereby Nike “unconditionally and irrevocably covenant[ed] to refrain from making any claim(s) or demand(s) . . . against [Yums] . . . on account of any possible cause of action based on or involving trademark infringement, unfair competition, or dilution, under state or federal law . . . relating to the [Air Force 1 mark] based on appearance of any of [Yums’] current and/or previous footwear product designs, and any colorable imitations thereof . . ..”  Nike also dropped the remainder of its claims against Yums.

Amid investors’ prospective concerns for potential lawsuits from Nike and fear of tarnishment of its reputation in the shoe industry, Yums ignored Nike’s efforts to dismiss the matter in its entirety and continued to maintain its counter-claims to cancel Nike’s design mark.

But according to Nike’s attorneys, Yums’ federal claims had been rendered moot vis-à-vis Nike’s unilateral “Covenant Not to Sue”—i.e., Yums no longer possessed Article III standing as there was no longer a “case” or “controversy” between Nike and Yums.  Yums countered with evidence of investor concerns and statements that Nike had intimidated other retailers into refusing to carry Yums’ products, but to no avail.  The district court dismissed Yums’ counter-claims and the issue was appealed up to the Supreme Court.

Reviewing the issue in light of the “voluntary cessation” doctrine, the Court determined that the breadth of Nike’s unconditional and irrevocable Covenant sufficiently demonstrated that it “could not reasonably be expected” to resume its enforcement efforts again Yums.  In other words, once Nike asserted that it would permit Yums to produce all of its existing footwear designs, or any “colorable imitations” of the Air Force 1’s design, such assurances made it “absolutely clear” that Nike would no longer seek to enforce its mark against Yums.

As a result, the Court held that Yums lacked any “legally cognizable interest in the outcome” of the litigation and that the district court had been divested of subject-matter jurisdiction over Yums’ cancellation proceedings.  The Court additionally noted, however, that in any future trademark proceedings Nike would be bound by the Covenant’s broad language; therefore, Nike was precluded from initiating any suit against Yums for alleged infringement unless the shoe was “an exact copy or counterfeit version of the Air Force 1 shoe.”

Authored by: John C. Sokatch and Scott A. Meyer

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services to individuals, inventors, entrepreneurs, start-ups, spin-offs, universities, research institutes, and small to large public and private companies and businesses.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4021 or by email at info@chalkerflores.com.  Please follow us on Twitter at @chalkerflores.

Second Circuit Finds No Copyright Infringement of Sit-Com Modern Family

In July of 2010, Martin Alexander filed suit for copyright infringement against several defendants in U.S. District Court (S.D.N.Y.) based upon allegations that defendants’ creation, distribution, production, and broadcasting of the nationally-acclaimed tv show, Modern Family, violated his rights under the Copyright Act, 17 U.S.C. § 101 et seq., and other state law claims.

Alexander alleged that the characters and plots from Modern Family were largely copied from the pilot episode (“Treatment”) of Alexander’s proposed television series entitled Loony Bin.  Specifically, Alexander focused upon alleged similarities from scenes depicting children’s birthday parties where things go wrong, coping with odd family issues and therapy sessions, as well as distinct character and physical traits between the two shows’ main characters.

Although the defendants conceded that Alexander held a valid copyright for Looney Bin and they had access to “Treatment,” the District Court dismissed Alexander’s Complaint upon the grounds that no “substantial similarity” existed between Modern Family and the protectable elements of Loony Bin.

On appeal to the Second Circuit, the Court of Appeals noted that “the appropriate inquiry is whether the copying of protectable elements ‘is quantitatively and qualitatively sufficient to support a finding of infringement.’”  Alexander v. Murdoch, No. 11-4291, slip op. at 3 (2d Cir. Nov. 14, 2012).  The Court of Appeals further acknowledged that application of the test, as applied to television shows, requires an examination of “the similarities in such aspects as the total concept and feel, theme, characters, plot, sequence, pace and setting.”  Id.

The Court of Appeals ultimately affirmed the District Court’s dismissal of Alexander’s claims by determining that Loony Bin and Modern Family only shared concepts “at the most general level,” as the “specific overlapping character traits and plot aspects identified by Alexander reflect superficial and de minimus details . . .; involve general abstractions insufficiently developed to merit protection . . .; or are ‘standard[ ] in the treatment of [the] given topic’ of modern family life, and are therefore unprotectable scènes à faire.”  Id. at 3-4.

Authored by: Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services to individuals, inventors, entrepreneurs, start-ups, spin-offs, universities, research institutes, and small to large public and private companies and businesses.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us at 214-445-4040.  Please follow us on Twitter at @chalkerflores.

Websites’ Terms of Use Agreement Traps

In response to the steady increase in online shopping and cyber-transactions, several website owners have resorted to implementing more precarious measures to increase website activity while still protecting the website’s legal interests.  Generally, “Terms and Conditions” of use for the website are accepted by forcing the user to manually click an “I Agree” or “Accept” button—a method termed in the industry as “Clickwrap” agreements.  This method of acceptance has been highly criticized for the manner in which it seemingly misleads consumers into accepting terms of which they are not fully aware.

More recently, however, many online shoppers have been forced to deal with a newer form of terms acceptance known as “Browsewrap” agreements.  Unlike the more readily-apparent “Clickwrap” agreements, “Browsewrap” agreements allow website owners to indiscreetly cache the content of such agreements somewhere on the website, which then become accessible only by clicking on the hidden hyperlink.

These “Browsewrap” agreements recently came under heavy judicial scrutiny when the online shopping website Zappos.com attempted to compel arbitration in a lawsuit with several customers whose online accounts had been hacked.  See In re Zappos.com, Inc., Customer Data Security Breach Litigation, Civ. No. 3:12-cv-00352-RCJ-VPC (D. Nev. Sept. 27, 2012).  Zappos.com’s “Disputes” section, which was buried within the site’s “Browsewrap” agreement, permitted Zappos to compel arbitration in the event a dispute arose between the website and the purchaser.

Despite the broad and liberal federal policy favoring arbitration, the District Court of Nevada maintained that “arbitration is a ‘matter of contract,’ and no party may be required to submit to arbitration [in] ‘any dispute which he has not agreed so to submit.’”  Id. (quoting Howsam v. Dean Witter Reynolders, Inc., 537 U.S. 79, 79 (2002).

In finding for the plaintiffs, the court struck down the arbitration provision because (1) the purchasers were never prompted to accept those terms and conditions, and (2) the provision permitted Zappos to unilaterally change the terms, thereby rendering the contract illusory.  The court’s ruling reinforced the notion that, notwithstanding the increased popularity of buying and selling on the Internet, such paradigmatic shift may not overcome even the basic principles of contractual formation (i.e., offer, acceptance, meeting of the minds, and consideration).  As such, the Zappos.com opinion appears to have essentially negated the enforceability of “Browsewrap” agreements, barring evidence that the user actually possessed constructive knowledge of their existence and terms of use.

Authored by: Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-866-0001.  Please follow us on Twitter at @chalkerflores.

New Rule Proposals for Expedited Lawsuits in Texas

In 2011, the Texas Legislature passed HB 274 which, in part, mandated that the Texas Supreme Court promulgate rules for expedited actions.  The intent behind HB 274’s mandate was to facilitate more efficient and speedier resolutions of lawsuits involving disputed amounts of $100,000 or less.

The following highlights of the proposed rules regarding expedited actions will be available for comment through February 1, 2013, and will take final effect on March 1, 2013:

Tex. R. Civ. P. 169 (new)

• Would mandate the “expedited actions process” to apply in all causes of action where the claimant seeks monetary relief of $100,000 or less (excludes lawsuits seeking non-monetary relief).
• Would cap the amount recoverable under the expedited actions process to $100,000.
• Would allow removal from the expedited actions process only with “good cause” or upon filing of an amended or supplemental pleading seeking relief (i) other than monetary relief or (ii) in excess of the $100,000 limit.
• Would limit the entire trial process (i.e., jury selection, opening statements, presentation of evidence, direct and cross-examination of witnesses, and closing arguments) to a total of 5 hours.
• Would preclude the court from ordering parties to engage in alternative dispute resolution (such as mediation), unless the parties previously consented to such a process by agreement or contract.
• Would prohibit challenges to expert testimony unless requested by the party sponsoring the expert.

Tex. R. Civ. P. 190.2 (amended)

• Discovery period would run from time the suit was filed until 180 days after the first discovery request is served on a party.
• Would restrict the total time for examination and cross-examination of witnesses in oral depositions to 6 hours.  Time could be increased to 10 hours on agreement by the parties.
• Would limit written discovery to 15 requests for interrogatories, 15 requests for production, and 15 requests for admissions.
• Would permit a party to submit additional disclosure requests of all documents, electronic information, and tangible items that the disclosing party has in its possession, custody, or control and may use to support its claims or defenses.  Such additional requests would not count against a party’s requests for production.

Authored by: Scott A. Meyer and John Sokatch.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4021.  Please follow us on Twitter at @chalkerflores.

Leahy-Smith America Invents Act Imposes Changes to U.S. Patent Process

Signed into existing law by President Barack Obama on September 16, 2011, the Leahy-Smith America Invents Act (“AIA”) presents the greatest change to the patent statute in over half a century.  Most notably, the AIA aligns our patent system most other developed countries by shifting our patenting system to the “First-to-Invent” system, as well as creates several new post-grant patent review processes among other changes.  The following provides a brief summary of the changes soon to be or already in effect under the new patent regime.

Sweeping Changes to the Patent Examination Process

New First-Inventor-to-File System—Starting early next year for those patent applications filed on or after March 16, 2013, the AIA will transition to the “First-Inventor-to-File” system (or “FITF”)—a major shift from the old regime which previously awarded patents to the “First-to-Invent” (or “FTI”) the claimed subject matter.

Under the new FITF system, the first inventor to file an application will receive a one-year grace period for prior art disclosures made publicly available for one year or less before the effective filing date.  These early disclosures may also serve to inoculate the patent from third-party prior art during the period from the disclosure to the patent’s effective filing date (up to one full year).

The new definition of prior art consists of patents and printed publications that describe the claimed invention or instances where the claimed invention was in public use, on sale, “or otherwise available to the public before the effective filing date.”  Therefore, public availability is now a prerequisite for all prior art.  But the AIA removes previously incorporated geographic limitations, as it is no longer a requirement that knowledge, use, or sales occur within the United States.

Moreover, patent applicants are now permitted to rely on common ownership or joint research agreement provisions to overcome rejections under 35 U.S.C. § 102.

Supplemental Examination—Section 35 U.S.C. § 257 provides for a new post-issuance, supplemental examination procedure for patentees beginning on September 16, 2012, that can be used to “consider, reconsider, or correct information believed to be relevant to the patent.”  Within three months after the receipt of request, the USPTO will make a determination by issuing a certificate indicating whether or not a substantial new question of patentability is present.  If so, then the USPTO will institute an ex parte reexamination proceeding.  This new process is already in effect as of September 16, 2012, and applies to any patent issued on, before, or after the effective date.

Prioritized Examination—A patent applicant may now opt for prioritized examination, which will accord special status during prosecution before the USPTO, with the specific goal of providing a final determination of patentability within twelve months after receiving prioritized status.  Requests for prioritized examination will be limited to 10,000 requests per year, subject to adjustments by the USPTO.

Creation of New Interpartes Proceedings

New “Inter Partes” Review—The AIA introduces the new “inter partes review” process as a replacement for the previously implemented inter partes patent reexamination.  This new process will be conducted by the Board to review the patentability of one or more claims in a patent upon the grounds permitted by §§ 102 and 103.  Unlike the former inter partes reexamination, a petition for inter partes review begins with a third-party filing of a petition after the later of the termination of a post-grant review or nine months following issuance of the patent.  The USPTO will grant a petition for inter partes review upon a determination that there is a “reasonable likelihood that the petitioner would prevail with respect to at least 1 of the claims challenged in the petition”—a new standard which replaces the previous “substantial question of patentability” standard previously employed for inter partes reexaminations.

Post-Grant Review—The AIA creates new a process that allows for any person, including third parties, to petition for review of a patent upon any invalidity theory under § 282(b)(2) and (3) within nine months of the grant or issuance of a reissue of a patent.  Under this post-grant review process, a party challenging the validity of a patent must overcome a rebuttable presumption of patentability by demonstrating that it is more likely than not that at least one of the claims challenged is unpatentable.  In response to any challenge for review, the patent owner will then have one opportunity to amend the claims, as well as additional opportunities to amend allowed claims with the consent of the petitioning party.  This process is now in effect as of September 16, 2012.

Transitional Program for Business Method Patent Review—The AIA creates a special transitional program for business method patent review which reviews the patentability of one or more claims in a covered business patent.  This program will last for eight years following its recent date of effectiveness starting on September 16, 2012, and is limited to “covered business method patents,” which the AIA defines as those certain patents that claim a method or apparatus for performing operations “used in the practice, administration, or management of a financial product or service, except that the term does not include patents for technological inventions.”

Derivation Proceeding—The newly implemented derivation proceeding allows the USPTO to make a determination as to whether “(i) an inventor named in an earlier application derived the claimed invention from an inventor named in the petitioner’s application, and (ii) the earlier application claiming such invention was filed without authorization.”  Derivation proceedings will take effect on March 16, 2013.

Impact on Fees and Practices before the USPTO

Inclusion of Oath and Declarations—35 U.S.C. § 115 now requires the inventor or joint inventor to include with its application an oath or declaration that (i) the application was made or was authorized to be made by the affiant or declarant, and (ii) that such individual believes himself or herself to be the original inventor or an original joint inventor of the claimed invention in the application.  Likewise, the AIA permits those persons to whom the inventor has assigned, or is under an obligation to assign the invention, or who otherwise shows sufficient proprietary interest in the matter, to include in his or her application for a patent an executed agreement  in lieu of filing these statements in a separate oath or declaration.

USPTO Fees—As of September 26, 2011 and in conjunction with the creation of a new Fee Setting Authority, the AIA will increase many USPTO fees by as much as 15%.  The entire list of updated fees is available at http://www.uspto.gov/main/faq/index_feefaq_p.html.

Micro Entities—The AIA establishes a new “micro entity” status for certain patent applicants, which will be distinct from the “small entity” definition found under 35 U.S.C. § 41(h)(1).  The micro entity status, which was made available as of September 16, 2011, will entitle such applicants to a 75% discount on USPTO fees under § 10(a).

Electronic Filing Incentive—The AIA will now essentially penalize applicants by imposing an additional fee of $400 ($200 for small entities) for each original patent that is not filed electronically.

Satellite USPTO Offices—The AIA authorizes the USPTO to open three satellite offices within the first three years of its enactment.  The USPTO states that the purpose of this authorization is to “increase outreach activities, enhance employee retention, improve recruiting, decrease application backlog, and improve examination quality.”

Amendments to Litigation Matters

Misjoinder of Defendants—Under the amendments to the AIA, merely infringing the same patent will no longer be proper grounds to join potential defendants.  Instead, a patent owner may join multiple parties in a single patent infringement lawsuit only if: (i) a cause of action arises out of the same transaction, occurrence, or series of transactions or occurrences, and (ii) there exists questions of fact common to all defendants or counterclaim defendants.

False Marking Claims—The AIA removes the qui tam provision from the false marking statute and now limits standing and damages for filing false marking lawsuits to only those parties that suffer a competitive injury as a result of the alleged false marking.  Damages may now only be collected from the time the alleged infringer was put on notice of another’s patent, which includes marking a product or service with the corresponding patent number.

New “Prior Commercial Use” Defense—For those patents issued on or after September 16, 2011, the new “Prior Commercial Use” defense now exempts certain subject matter from a finding of patent infringement if the claimed subject matter is “a process, or consisting of a machine, manufacture, or composition of matter used in a manufacturing or other commercial process.”  To qualify for the defense, the party asserting the defense must establish, by clear and convincing evidence, that the prior commercial use occurred at least one year before the earlier of the effective filing date or an inventor’s disclosure that establishes a prior art grace period.

Repeal of the “Best Mode” Defense—The AIA removes the previously recognized defense to patent infringement claims for failure of a patent to disclose the best mode to practice the claimed invention.  Instead, an examiner may simply reject an application for an inventor who fails to disclose the best mode during prosecution of the application.

Further Studies Regarding AIA Changes to be Conducted by the USPTO

The AIA further directs the USPTO to conduct on-going studies regarding how these changes are being implemented, as well as other patent policies and practices.  The studies will focus primarily on innovation, competitiveness in the United States, and access to capital for small business investment.  The USPTO will then report back to Congress within four years from the date of enactment of the AIA and include any further recommendations for changing patent laws and regulations.

Source: USPTO.gov, “Leahy-Smith America Invents Act Implementation,” available at http://www.uspto.gov/aia_implementation/index.jsp (last visited November 23, 2012).

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact us 214-445-4021.  Please follow us on Twitter at @chalkerflores.

“Best Coffee in America” – Not Trademark-Worthy

Widely recognized by its rounded orange and pink logotype, Dunkin’ Donuts—through its holding company DD IP Holder LLC—filed an application on September 26, 2012 to trademark the slogan “Best Coffee in America.”  U.S. Trademark Application Serial No. 85,739,062 (filed Sept. 26, 2012).  The world-renowned breakfast and coffeehouse chain based out of Canton, Massachusetts sought to use the phrase in connection with its “restaurant services, café services, snack bar services, and fast-food services” (IC 043).  In support of its application, Dunkin alleged the mark had acquired distinctiveness, or secondary meaning, stemming from its alleged five years of use in commerce since April of 2006.

But on November 9, 2012, the USPTO issued an office action rejecting Dunkin’s application on the grounds that the slogan was “merely laudatory and descriptive of the alleged merit of [Dunkin’s] services and the goods featured therein.”  In its rejection, the examiner found Dunkin’s “informational slogan [to be] nothing more than a claim of superiority and [ ] highly laudatory and descriptive of the quality of the coffee featured in [Dunkin’s] restaurants, cafes, and snack bars . . ..”

The examiner supported his decision by citing to similar instances where the USPTO had, likewise, denied applications for slogans utilizing superlatives to describe their products.  For example, in 1999 the Federal Circuit affirmed the USPTO’s denial of Boston Beer Co.’s attempt to register the slogan “the best beer in America” for its line of Samuel Adams beers and ales.  See In re Boston Beer Co. Ltd. P’ship, 198 F.3d 1370 (Fed. Cir. 1999).

According to the examiner, expressions, such as “Best Car in America,” “Best Hotel in the State,” and “Best Restaurant in Town,” are all slogans more aptly categorized as mere “puffery.”  Consequently, “such claims of superiority should be freely available to all competitors in any given field to refer to their products or services,” subject to any limitations imposed by truthful advertising and unfair competition.

Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please us at 214-866-0001.

Authored by: John Sokatch, January 13, 2013.

Dallas Litigation Attorney Thomas G. Jacks AV Rated By Martindale-Hubbell® Peer Review Ratings™

The law firm of Chalker Flores, LLP is pleased to announce that one of its partners, Thomas G. Jacks, has been honored by Martindale-Hubbell with the prestigious AV^® Preeminent™ rating.  The highest honor offered by Martindale-Hubbell, the preeminent rating is designed to acknowledge both ethics and quality of work in the legal field.

The Martindale-Hubbell^® Peer Review Ratings™ are an objective indicator of a lawyer’s high ethical standards and professional ability. To achieve the AV Preeminent rating, a lawyer must receive a top rating in five categories from attorney peers.  The categories include the attorney’s legal knowledge, analytical abilities, judgment, communication ability and legal experience.  Mr. Jacks was ranked and succeeded in receiving a rating of the highest level of professional excellence.

Mr. Jacks focuses his practice on patent, trademark, copyright, and business litigation matters. His experience also includes prosecuting and defending commercial general liability claims related to construction, farm, motor vehicle, and premises liability matters.  He is licensed in Colorado, Mississippi and Texas.

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Chalker Flores, LLP provides intellectual property, business, corporate and litigation legal services of the highest quality.  Founded by Dr. Edwin Flores and Daniel Chalker, additional partners include Scott Meyer, Chainey Singleton and Tom Jacks.  The lawyers of Chalker Flores, LLP provide big-firm expertise with boutique service and pricing.  Clients include individual inventors, start-ups, spin-offs, major national universities, research institutes and medium to large corporations.

If you would like more information about Chalker Flores, LLP, or to schedule an appointment please contact Eileen Cortez at 214-445-4026.