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In Mavrix Photo Inc. v. Brand Technologies Inc. (09-56134), the appellate panel agreed that Brand’s contacts with California could not confer general jurisdiction; however, there were sufficient minimum contacts with the state arising out of, or related to, its actions in posting a series of copyright-protected photos belonging to Mavrix to justify the exercise of specific jurisdiction. Brand’s website was deemed to be a popular website with a specific focus on the California-centered celebrity and entertainment industries. The decision emphasized that Brand made money by selling advertising space on its website to third-party advertisers who target California residents. Given the Brand website subject matter and the size/value of the California market to Brand, it was reasonable that Brand “anticipated, desired, and achieved a substantial California viewer base” to justify an exercise of specific jurisdiction.

In CollegeSource, Inc. v. AcademyOne, Inc. (09-56528), CollegeSource accused AcademyOne of having wrongfully reproduced 680 catalogs from its digital collection of 44,000 course catalogs from 3,000 colleges and universities on its websites. The appellate panel found that specific jurisdiction was justified. CollegeSource and AcademyOne were direct competitors in a relatively small industry, and AcademyOne would have known of CollegeSource’s California place of business. AcademyOne downloaded the catalogs and reproduced them on its websites, and these acts were targeted at California, where CollegeSource was based.

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Judge Lynn began the discussion by reporting that Chief Judge Fitzwater just issued Special Order No. 3-287 concerning the Patent Pilot Program. This Order provides that patent cases filed in or transferred to the Northern District of Texas on or after September 1, 2011 shall be assigned according to the civil case assignment procedure in effect in the division where filed. Within 7 days after a patent case is assigned to a district judge, the judge may decline to accept the case and direct that the case be randomly reassigned to a designated patent judge (Judge Lynn, Godbey or Kinkeade). The Order also notes that, except for the designated patent judges, all district judges in the Dallas Division will decline to accept patent cases for at least 1 year after the start of the Patent Pilot Program.

The judges then addressed several issues and questions that have been raised concerning the Patent Pilot Program.

• Uniformity and Predictability. The judges strive to have more uniformity among the designated patent judges in order to make patent cases more predictable as well as to encourage more patent cases to be filed in the Northern District. The judges welcome suggestions about how this might be achieved.

• Efficiency and Trial Timing. The judges noted that while the criminal docket still must take precedence, the designated patent judges plan to coordinate with one another to shuffle trials as needed to keep the patent cases moving and keep trial settings firm. The judges look for input from the attorneys about the time needed to get to trial and how much time will be needed at trial. The judges may be open to early claim construction, mediation, and/or motions for summary judgment as an effort to streamline a case.

• Program Success. The FJC will evaluate the Program by comparing the success rate (% reversal on appeal) for designated patent judges and courts to non-Program judges and courts handling patent cases.

• ND Texas Non-Dallas Divisions. The number of patent cases filed outside of the Dallas and Fort Worth Divisions is small. The judges in the Divisions outside of Dallas can refer any patent cases to a designated patent judge if they choose. Judges Means and McBryde of the Fort Worth Division have indicated that they will retain patent cases assigned to them. Judge O’Connor has been managing the Wichita Falls Division and does not presently intend to retain any patent cases filed in that Division.

• Funding. The judges hope to receive funding to hire an attorney to focus on Markman rulings; however, presently there is no Program funding to do so. Judge Kinkeade has proposed setting up a fund for citizens to anonymously contribute toward funding a patent-focused attorney for the Program.

• Case Management Conferences. The judges believe that Case Management Conferences (CMCs) are the exception rather than the rule and are not normally needed in patent cases.

• Special Masters and Technical Advisors. Special masters are not used that often, and technical advisors will continue to be used on a case-by-case basis.

• Stays Pending Reexamination. Judge Kinkeade noted that stays are being granted more often on the grant of the first reexamination in the Northern District; however, stays are less likely to be granted on additional reexaminations.

• Reliance on Other Courts’ Interpretations of Similar Patent Rules. The judges noted that they may look at how other courts (particularly, the Northern District of California and the Eastern District of Texas) interpret Patent Rules that closely track the Patent Rules of the Northern District but they may not always follow those interpretations.

• Meet and Confer Requirements. The judges noted that while the Northern District has not adopted strict meet and confer requirements prior to filing a discovery motion as the Eastern District has, the certificate of conference is important, and litigants must take their meet and confer obligation seriously. Leaving a message with opposing counsel just prior to filing is not sufficient.

• Markman Hearings. There remains no standard rule regarding the need for a live Markman hearing.

• Transfers to the Northern District. The judges are not aware whether patent cases transferred to the Northern District of Texas from other districts will by default be transferred to the Dallas Division.

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Judges Lynn, Godbey and Kinkeade will be the 3 judges from the Northern District of Texas participating in the Patent Pilot Program. They have graciously agreed to participate in a panel discussion sponsored by the Dallas Bar Association at the Belo Mansion on July 26, 2011 at noon. This panel discussion is open to the public. During the panel discussion, the judges are expected to address some of the questions and concerns that have been raised about the Program.

Patent practitioners have been asked to provide comments and ask questions about this new Program and its implementation in the Northern District of Texas. If you have questions or concerns about the Program, those questions/concerns may be sent to the following email address: PatentPilotProgram@dbaip.com.

Make plans to attend the panel discussion on July 26 if you are interested in learning more about this Program. Also, if you have questions or concerns, please email them to the email address above for consideration by the judges. Questions/concerns should be sent prior to July 26 to allow for consideration by the participating judges before the panel discussion.

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The panel of ND Tex judges will include:

• Chief District Judge Sidney Fitzwater (facilitator)
• District Judge Sam Lindsay
• District Judge Jane Boyle
• Chief Bankruptcy Judge Barbara Houser
• Magistrate Judge Jeff Kaplan

In addition to the above, other judges and court officials will be in attendance.  The event, cosponsored by the Federal Bar Association and the Dallas Bar Association Judiciary Committee, is free except for the cost of lunch and parking.

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As a participant in the Patent Pilot Program, patent cases filed in the N.D. Tex. will first be randomly assigned to all district judges, regardless whether such judges have been designated to hear patent cases. If a judge who is randomly assigned a patent case is not among the designated patent judges, then that non-designated judge may decline to accept the patent case. That patent case will then be randomly assigned to one of the N.D. Tex. district judges designated to hear patent cases.

In the Northern District of Texas, the district judges designated to hear patent cases are:

• Judge David Godbey (Dallas)
• Judge Ed Kinkeade (Dallas)
• Judge Barbara Lynn (Dallas)

In addition to the N.D. Tex., other districts selected to participate in the Patent Pilot Program are:

• Eastern District of New York
• Southern District of New York
• Western District of Pennsylvania
• District of New Jersey
• District of Maryland
• Northern District of Illinois
• Southern District of Florida
• District of Nevada
• Eastern District of Texas
• Western District of Tennessee
• Central District of California
• Northern District of California
• Southern District of California

To learn more about the Patent Pilot Program and selection of the Northern District of Texas, please see: “District Courts Selected for Patent Pilot Program”

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In Poly-America, L.P. v. Stego Industries, L.L.C., Civil Action No. 3:08-cv-2224 (May 18, 2011), Poly seeks damages, injunctive relief, and a judgment declaring that Stego’s trademark of the color yellow applied to polyethylene plastic sheeting used in the construction industry as a vapor barrier and vapor retarder (i) should not have been registered under the Lanham Act, (ii) is not entitled to trade dress protection, and (iii) was fraudulently procured. Prior to the lawsuit, Poly manufactured yellow vapor barrier in response to a request from a customer. After being threatened with a lawsuit by Stego, Poly decided not to sell yellow sheeting, and instead chose to file the lawsuit. Stego argued that the lawsuit was brought in bad faith, making it an exceptional case permitting it to recover reasonable attorneys’ fees under Section 35 of the Lanham Act if it was the prevailing party. Poly claimed that Section 35 does not apply because this case does not concern “a violation of any right of the registrant of a mark registered in the Patent and Trademark Office,” but rather that Poly is entitled to recover its attorneys’ fees as damages under Section 38 of the Lanham Act upon proof of its fraudulent procurement claim. Alternatively, if Section 35 does apply and Poly proves its fraudulent procurement claim by clear and convincing evidence, Poly argued that the Court should award Poly its attorneys’ fees under Section 35.

The Court identified cases in the Fifth Circuit that have awarded Section 35 attorneys’ fees to the prevailing party in exceptional cases, regardless whether it was the plaintiff or the defendant that succeeded on the merits. The fee-shifting provision of Section 35 can be invoked when either party’s conduct constitutes bad faith, even if the prevailing party is not the registrant of the mark. The fact that Poly initiated this declaratory judgment action to invalidate Stego’s trademark does not stop the Court from finding this to be an exceptional case upon a showing by Stego that Poly brought this action in bad faith. Similarly, Poly could invoke Section 35’s fee-shifting provision if it prevails and is able to show by clear and convincing evidence that this is an exceptional case as contemplated by the statute. Because only a “prevailing party” may recover attorneys’ fees, the issue did not need to complicate the trial on the merits. The Court will determine whether this is an exceptional case, within the meaning of Section 35’s fee-shifting provision, only upon a motion by the prevailing party after trial.

Further, Section 35 specifically “permits rather than mandates an award of fees” – thereby giving the Court discretion to determine on a case-by-case basis whether an award of fees is warranted – whereas Section 38 “commands that a person who procured registration of a mark by false or fraudulent means ‘shall be liable for any damages sustained in consequence thereof.’” Thus, reading Section 38 to prohibit recovery of attorneys’ fees as damages would not have “the perverse effect of incentivizing parties like Stego to mislead the PTO to issue trademarks” because in addition to being potentially liable for damages, a party who defrauds the PTO may be ordered to pay the attorneys’ fees of a party who prevails in an action to invalidate the fraudulently procured trademark. Accordingly, Poly cannot recover attorneys’ fees as damages under Section 38 of the Lanham Act.

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Judge Fitzwater spoke on the impact of John Adams’ roles of political activist, philosopher, lawyer and president on the creation of the American government and the protection of American society. He discussed Adams’ unpopular defense of a British officer and soldiers allegedly responsible for civilian deaths in the notorious “Boston Massacre.” He focused on how Adams’ efforts demonstrate adherence to the rule of law and defense of the rights of the accused, even in cases where the clients and the matters may be unpopular and/or controversial.

Judge Fitzwater provided several examples of lawyers defending unpopular causes since Adams’ time, including:

• The 1846 “insanity” defense of William Freeman by William Seward, later Lincoln’s Secretary of State; Samuel Leibowitz’s defense of nine black Alabama teenagers, the Scottsboro Boys, accused of rape in the 1930s;
• The representation of Terry Nichols in the 1995 Oklahoma City bombing case; and
• Contemporary efforts by lawyers to represent Guantanamo detainees in the global war on terrorism.

Judge Fitzwater concluded by noting that the law has certainly evolved since Adams’ time, but the principles on which citizens derive and exercise their rights remain the same.

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Judge Fitzwater’s denial of the motion to dismiss found that the claims of direct and indirect infringement are supported by the following pertinent facts alleged in the amended complaint:

• Direct Infringement –
  • Defendant produces and sells using an infringing method (the Court noted the method was fully described in the complaint);
  • Defendant either uses or directs, controls, or instructs a third party who uses every element of the infringing method;
  • Defendant describes and advertises the accused method on its website; and
  • Defendant has actual knowledge of the patent at issue.

• Inducement of Infringement –
  • Defendant uses or sells methods claimed in the patent at issue in the accused application or directs or controls third parties who perform the claimed method; and
  • Defendant has actual knowledge of the patent at issue and continued to sell its infringing application willfully.

• Contributory Infringement –
  • Defendant sells a product, method, or system that is a component designed for use in the infringing manner; and
  • Defendant has sold software tools and instructions to aid in the use of the application.

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The Northern District of Texas is eligible for participation in the Patent Pilot Program because: (a) for calendar year 2010, the N.D. Tex. was one of the top 15 district courts in terms of number of patent infringement complaints filed; and (b) the N.D. Tex. adopted local patent rules in 2007. The Administrative Office of the U.S. Courts is expected to select the participating districts by June 4, 2011.

If chosen by the Administrative Office to be one of the six district courts participating in the Patent Pilot Program, Chief Judge Fitzwater will designate the following judges to hear patent cases:

• Senior Judge Royal Furgeson (Dallas)
• Judge David Godbey (Dallas)
• Judge Ed Kinkeade (Dallas)
• Judge Barbara Lynn (Dallas)
• Judge Terry Means (Fort Worth)

Procedurally, a patent infringement case would be randomly assigned to all district judges, regardless whether such judges have been designated to hear such cases. A judge who is randomly assigned a patent case and is not among the designated judges may decline to accept the case. In that circumstance, the case is then randomly assigned to one of the district judges designated to hear patent cases.

If selected to participate in the Patent Pilot Program, this is yet another indication that the Northern District of Texas will continue to solidify its prominence as a favored forum for patent litigation.

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