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HOW OHIO STATE WAS ABLE TO TRADEMARK “THE”

If you have ever watched an NFL football game on TV, you have probably heard a player introduce himself as having played college football at “The” Ohio State University. Earlier this week, the United States Patent & Trademark Office granted a US Trademark Registration for THE to The Ohio State University. It seems strange that a trademark could be granted for what is probably the most common word in the English language. Five of the first 72 words in this article are “the”.  Have I just committed five acts of trademark infringement? “The” answer is a resounding “no”. Rights granted to words by the U.S. Trademark Office are limited to the specific goods and/or services specified in the application. As such, it is not unusual for the same word to be registered as a trademark by multiple parties for different goods and services. In fact, I predict that you will see another company be granted a trademark for “The” before the end of 2022. The primary issue is whether such multiple registrations create a likelihood of confusion as to the source of the product or service.

The trademark registration for “The” was not just granted without a fight. Ohio State had to overcome two obstacles on their way to registration. For one thing, they were not the first party to file an application to register “The” in connection with clothing. Fashion designer Marc Jacobs filed his application to register “The” for a line of clothing on May 6, 2019 – three months before Ohio State filed it’s application. Also, the way in which Ohio State originally proposed to use the mark was deemed by the examining attorney at the USPTO to be ornamental, and not indicative of the source of the clothing, which is required for a word to function as a trademark.

HOW CAN TWO TRADEMARK REGISTRATIONS FOR “THE” BE GRANTED FOR CLOTHING?

Ohio State’s trademark registration for “The” for use on and in connection with clothing in Class 25 was granted on June 21, 2022. Marc Jacobs’ trademark application for “The” for use on or in connection with clothing in Class 25 was allowed on October 5, 2021, and will issue as a trademark registration after Jacobs shows proof that he is using the mark in commerce and files a Statement of Use. It is very unusual for the same word or phrase to be registered by two different entities for goods that are so closely related. A closer look at the history of each of “The” applications, however, provides a relative simple answer – the parties agreed that both marks could be registered and that the granting of such rights would not create confusion.

A suspension notice was originally issued in Ohio State’s application. Suspension notices are commonly issued when there is another pending application that would pose grounds for refusal if it were registered as a trademark. So the USPTO suspends the later filed application pending the outcome of the earlier filed one. If the earlier filed application is granted and a trademark registered, the USPTO will usually reject the later filed application at that time. However, in this case, Ohio State intervened in Jacobs’ application by filing a notice of opposition during the processing of Jacobs’ application. After a trademark application has been allowed, but before a registration issues, it is published for opposition in the Official Gazette. That begins a 30 day period where any interested party may file to oppose registration of the mark if such registration would adversely affect use of their own similar mark.

After nearly a year of negotiations, Ohio State and Jacobs entered into a Concurrent Use Agreement in August 2021. A Concurrent Use Agreement is often used by trademark owners to define the line between each other’s markets, and specifically allows for both marks to proceed to registration. In this case, Ohio State amended its original description of the clothing sold under its mark to include language that it only applied to clothing “being promoted, distributed, and sold through channels customary to the field of sports and collegiate athletics”. Similarly, Jacobs amended his original description to limit his trademark to clothing “being promoted, distributed, and sold through channels customary in the field of contemporary fashion”. The Concurrent Use Agreement almost certainly further provided that the opposition would be dismissed, that neither party would seek to oppose or cancel the other’s mark, and that each party specifically consented to the registration of the other party’s trademark. By submitting the agreement to the USPTO, Ohio State was able to overcome the objection to registration of its mark based on the earlier filed application of Jacobs.

ORNAMENTAL USE VS. TRADEMARK USE

Ohio State’s original application was also refused because THE as used on the specimen submitted with the application was deemed to be “merely a decorative or ornamental feature of applicant’s clothing and, thus, does not function as a trademark to indicate the source of applicant’s clothing and to identify and distinguish applicant’s clothing from others.” The size, location, dominance, and significance of a mark as used on the goods are all relevant factors in determining the commercial impression of the applied-for mark. With respect to clothing, consumers may recognize small designs or discrete wording as trademarks, rather than as merely ornamental features, when located, for example, on the pocket or breast area of a shirt. Consumers may not, however, perceive larger designs or slogans as trademarks when such matter is prominently displayed across the front of a t-shirt.

Original Specimen

 

Substitute Specimen

 

In Ohio State’s application, the originally submitted specimen showed the applied-for mark, THE, located directly on the upper-center area of the front of the shirt, where ornamental elements often appear. Furthermore, the mark was displayed in a relatively large size on the clothing such that it dominates the overall appearance of the goods. As such, THE application for registration was refused as it appeared to be used in a merely decorative manner that would be perceived by consumers as having little or no particular source-identifying significance. In other words, consumers would view THE as used on the t-shirt submitted with the application as a decorative or ornamental feature of the shirt, rather than as a trademark to indicate the source of the t-shirt and to distinguish them from others.

Ohio State later submitted a substitute specimen in an attempt to overcome the refusal. As you can see from the photo, the substitute specimen no longer depicted THE in big, bold letters on the front of the t-shirt. Rather, it was depicted on the inside collar area of the shirt where labels denoting the maker/source of the shirt is commonly found. The substitute specimen satisfied the examining attorney at the Trademark Office, and the refusal was withdrawn. As an aside, it is worth noting that when it submitted the substitute specimen, Ohio State did not amend it’s originally alleged date of first use of August 2005. If, as I suspect, they were not using THE in the manner depicted in the substitute specimen in August of 2005, the registration may be susceptible to challenge.

“THE” CONCLUSION

So that is THE story about how THE Ohio State University was granted a U.S. Trademark Registration for THE. Anyone out there want to try and register “A”? If you do, or if you have another common term that you want to register for a product or service, or if you just want to protect your brand before someone else like Marc Jacobs files for protection first, contact us. We are here to help you with all of your branding concerns.

 

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USPTO Adds New Tools for Brand Owners to Challenge Registrations and Applications

The Trademark Modernization Act, which took effect on December 18, 2021, added three new tools for brand owners to remove USPTO trademarks and applications based on inaccurate claims of use in U.S. commerce. The new tools, letters of protest, expungements, and re-examinations, provide a faster, more efficient, and less expensive alternative to a contested inter parties cancellation proceeding previously only available through opposition and cancellation proceedings before the Trademark Trial and Appeals Board (TTAB).

Letters of Protest

A Letter of Protest is a tool that allows a third party to give the USPTO evidence about the registrability of a trademark in a pending application that belongs to another trademark owner. The third party may point out potential issues with a trademark application and make a case for rejection of the application using a Letter of Protest, before a registration is ever issued. There is no limitation on the ground for refusal – any ground upon which an examining attorney could refuse registration can be asserted. The Director is required to act expeditiously on the letter – within 2 months of submission. The Director’s decision is final and non-reviewable, but an unsuccessful challenger can still raise the issue in another proceeding (opposition, cancelation, litigation).

Expungements

While Letters of Protest can be filed during the application phase, Expungements and Re-Examinations are meant to challenge marks that have already been registered.  Any party may request cancellation of some, or all, of the goods or services in a registration because the registrant never used the trademark in commerce with those goods or services. The challenger must request Expungement between three and ten years after the registration date.

To institute an expungement proceeding, the complaining party must conduct a “reasonable investigation” and supply evidence thereof showing that the registered mark was never used for the challenged goods and services. Upon finding of a prima faciecase, the Director will provide notice to the registrant. If no prima facie case is found to exist, the petition is dismissed.

Re-Examinations

Any party may request cancellation of some or all of the goods or services in a use-based registration on the basis that the trademark was not in use in commerce with those goods or services on or before a particular relevant date. For applications that were based on actual use, the relevant date will be the filing date of the application. For applications that were based on intent to use, the relevant date is either: the date that an amendment to allege use was filed; or the date that the deadline to file a statement of use expired, including all approved extensions of time. The challenger must request Re-Examination within the first five years after registration.

To institute an re-examination proceeding, the like an expungement proceeding, the complaining party must conduct a “reasonable investigation” and supply evidence thereof showing that the registered mark was not used in U.S. commerce as of the “relevant date.” The “relevant dates” at issue all involve sworn statements that the marks were being used in commerce. As such, re-examination proceedings aim to address registrations that were obtained through false statements.  However, re-examination proceedings also apply to registrations that include innocent misstatements or misunderstandings about what is required for “use” in commerce.

How Can Brand Owners Use These New Tools?

How will these new, more cost effective tools be utilized by brand owners? Here are a few scenarios that we anticipate:

Company A has come up with a Brand Name for its hot new product, and is really excited about the Brand Name.  Before launch, Company A commissioned a trademark clearance search to make sure that Brand Name was available for use in connection with the goods associated with the new product. Unfortunately, the search came back with a nearly identical registered mark that was registered for nearly identical goods four years ago. Company A, however, has been in business for years and has never seen any products offered in the marketplace under the registered mark.  Since the mark was registered four years ago, it falls within the time frame for either an Expungement (3-10 years after registration) or a Re-Examination (0-5 years after registration).  A good strategy would be for Company A to have its attorney conduct a “reasonable investigation” to determine if grounds exist for filing an Expungement or Re-Examination.  If an Expungement or Re-Examination is successful, the path for Company A to register Brand Name can be cleared.

Company B is the owner of Registered Trademark. Company B’s attorney employs a watch service to monitor for applications for marks that may conflict with its Registered Trademark.  The watch service identified a New Trademark Application that is similar to Company B’s mark and is used for some similar goods that Company B is considering expanding its Registered Trademark to cover.  Rather than waiting for the New Trademark Application to be examined and possibly approved for publication, Company B can file a Letter of Protest to present it’s case for refusal of the New Trademark Application before it may be approved for publication.

How Can We Help You?

If you are an attorney interested in learning more about the impact of the Trademark Modernization Act, Rick Martin is teaching a live video webinar on Detangling The Trademark Modernization Act on February 28, 2022 at 10:00 am CST.

If you are a brand owner trying to figure out how to best protect your brand, we are here to help. Contact us to see how we can use these new tools to help you strengthen and protect your valuable brand.

 

 

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AVOID COSTLY BRANDING MISTAKES

The following story is fictional.  The names and places have been changed to protect the innocent and naive.  However, the scenario depicted occurs frequently (see our other posts – Damsel In Distress and A Juicy Tale, involving real live situations), and can be easily prevented.

The story of Nonna’s Kitchen (fictional)

As a child, Maria loved to cook.  She was a proud third generation Italian-American.  Her grandparents immigrated from the town of Varese in the Italian Alps to the United States in 1946 after the end of World War II.  They settled in the small town of Clinton, Indiana where Maria’s grandfather worked as a coal miner. Maria’s grandmother, her “Nonna” was an amazing cook.  Maria would spend hours in the kitchen cooking with her Nonna and learned many of her best recipes. After graduating from culinary school at the prestigious Sullivan University School of Culinary Arts in Louisville, Kentucky, Maria moved to Nashville, Tennessee and opened her own restaurant in the Hillsboro Village area near Belmont University and Vanderbilt University.  To honor her grandmother, who had passed away during Maria’s last year of culinary school, she named her new restaurant “Nonna’s Kitchen”.

The restaurant was an overnight success!  It seemed like the people of Nashville couldn’t get enough of the savory pasta dishes that Maria had been cooking with her Nonna since she was a little girl.  The restaurant was full almost every night.  After five years in operation in Nashville, Nonna’s Kitchen was mentioned by Giada De Laurentiis on the Food Network.  After that, things went crazy! Maria was approached by a group of angel investors who wanted to partner with her to franchise her restaurant nationwide.  It seemed like everything was falling into place and Maria’s wildest dreams of sharing Nonna’s Kitchen with all of America were about to come true.  But Maria was about to discover that some branding mistakes made by her early on could stand in the way of making her dream a reality.

About a month after the mention by Giada, Maria received a letter from an attorney in New York City.  The letter advised her that his client was the owner of a U.S. Trademark Registration for the mark Nonna’s Kitchen.  They had been operating an Italian restaurant also called Nonna’s Kitchen in the Little Italy neighborhood of New York City for over a decade.  On the advice of their attorney, they registered the mark Nonna’s Kitchen with the U.S. Trademark Office shortly after opening.  The U.S. Trademark Registration granted them exclusive rights to use the name Nonna’s Kitchen for restaurant services in the United States.  After the mention by Giada, the owners of the New York Nonna’s Kitchen received several calls from confused patrons who believed Giada was referring to their restaurant.  The cease and desist later was sent shortly after.

How to avoid costly branding mistakes

Maria was heartbroken.  She had spent five years and thousands of dollars building her Nonna’s Kitchen brand.  Now it looked like all of that brand building was wasted and she would have to change the name of her restaurant.  What could she have done to prevent this?

Vet you chosen name by conducting a Trademark Clearance Search

When adopting a name for a new product or service, the first thing that anyone should do is conduct a trademark clearance search. A trademark clearance search is a systematic search for registered or unregistered (common law) marks that: (1) are the same or similar to the mark you wish to use; (2) are being used by others anywhere in the country; (3) are being used for the same or similar product or service; and (4) would likely cause confusion in the mind of the customer. While there are resources available for you to conduct a trademark clearance search on your own, it is better to leave the searching, and the determination of whether there is a liklihood of confusion to skilled trademark attorney.  Had Maria conducted a trademark clearance search prior to adopting the name Nonna’a Kitchen, she almost certainly would have been aware of the existence of the previous trademark registration for Nonna’s Kitchen.  Armed with that information, Maria could have chosen another name that still honored her grandmother, but didn’t infringe on another’s registered trademark.

Register your Mark and Register it Early!

Let’s assume for a moment that the owners of the New York Nonna’s Kitchen did not register their mark with the U.S. Trademark Office.  Under this scenario, Maria may still be entitled to obtain registration of Nonna’s Kitchen with the U.S. Trademark Office.  However, if the New York Nonna’s Kitchen was in operation before the filing of Maria’s trademark application, they may still be entitled to continue using the mark, but their use would be limited to the geographic area of prior use. So, effectively, with her U.S. trademark registration, Maria would be entitled to use the Nonna’s Kitchen name throughout the United States with the exception of New York City, where the New York Nonna’s Kitchen would retain rights as a senior user. Had she filed for registration before the New York Nonna’s Kitchen begain operation, she would have been able to block their usage too.  By registering the mark early, Maria would be entitled to exclude any other uses of the mark Nonna’s Kitchen that don’t pre-date the filing of her trademark application.  This is a huge benefit for someone with a potentially national brand!

Enforce your Registered Mark!

The owner of a U.S. trademark registration has a legal duty to police the marketplace for infringement of its trademark.  If the owner fails to police the mark, it risks losing the protection granted by the trademark registration.  Affordable trademark watch services are available to search for unauthorized uses of your mark as well as attempts to register the same or similar marks.  Many instances of infringement are unintentional and, more often than not, can be resolved without the need for expensive litigation. 

Invaluable Protection for your Brand

The protection provided to your brand by a U.S. Trademark registration can be worth millions.  What is the value of the golden arches logo to McDonald’s? The value of the swoosh to Nike? Marks that achieve such iconic status are probably worth millions of dollars.  But, like you, they started somewhere.  For Steve Jobs and Apple Computers, it was in a garage.  Imagine if Jobs had not taken action to protect the Apple marks?  Protect your brand before it’s too late!  Contact us to see how we can help!

 

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DELTA SUES MARRIOTT FOR TRADEMARK INFRINGEMENT OVER DELTA HOTELS

Atlanta, GA – Earlier this month (March 2020), Delta Airlines filed suit against Marriott International for trademark infringement and dilution over Marriott’s use of DELTA trademarks as part of its U.S. expansion of it’s Canadian Delta Hotel chain.  In court documents, Delta claims that “Marriott has embarked upon a calculated strategy of not only gratuitously using the name DELTA for its DELTA HOTELS chain of hotels in the United States, but also has adopted a sans-serif font and dark blue color scheme for its DELTA HOTELS business that closely mimics the font and color scheme used by Delta” (see photo).  Delta further claims that Marriott has opened numerous “airport hotels” under the Delta Hotels name and is marketing that brand to airline travelers leading consumers to believe that the hotel chain is somehow associated with Delta Airlines.

Delta claims to be the leading airline in the world by total revenue, serving 200 million people every day.  Delta also claims to be a leader in related travel services such as hotel bookings, credit card rewards programs, and hospitality services.  Delta also partners with other companies in virtually every industry, including hotels, credit card providers, entertainment venues and stadiums, sports teams and charitable organizations.  According to Kantar, in its 2020 BrandZ report on the Top 100 Most Valuable US Brands, Delta’ Airlines’ DELTA brand is among the 100 most valuable brands in the United States.  In its complaint, Delta frames the dispute broadly as one involving the “travel industry” as opposed to airlines and hotels.

Marriott acquired the Delta Hotel chain, which had previously operated only in Canada, in 2015.  After the purchase, Marriott began expanding the Delta Hotel chain into the United States.  Marriott also made significant changes to the design of it’s logos – adopting a sans serf font, dispensing with a stylized, curling “D” design in favor of a straight “D” design, and changing to a darker blue color. Delta claims that all of these changes were intentionally designed to make the Delta Hotel marks much closer to the Delta Airlines marks, almost guaranteeing confusion when the Delta Hotels began operating in the United States.  Since the purchase in 2015, Marriott has also opposed registration of several DELTA marks filed by Delta Airlines with the United States Trademark Office.  Those oppositions continue to work their way through the system.  Marriott has also filed over 70 applications around the world to register “DELTA” as a trademark on its own.  All of this indicates that Marriott is taking a very aggressive approach to expansion of what to most in the United States is probably a previously unknown hotel chain brand.

Without the benefit of seeing Marriott’s answer to the complaint (it’s not due yet), it is difficult to understand what Marriott is thinking with its rapid and aggressive expansion of the Delta Hotel brand.  With a multitude of other hotel brands under its umbrella, from Ritz Carlton and St. Regis to Fairfield and Townplace Suites, surely there is an existing U.S. branded hotel that aligns with the level of service provided by Delta Hotels in Canada.  Marriott will almost certainly spend tens of thousands of dollars in attorney fees defending this suit, and if it loses, it could be rebrand, pay damages and possibly attorney fees to Delta.  It will be interesting to see how Delta responds to the complaint.

Has someone misappropriated your brand?  Are you starting out with a new business, venture, product or service and want to have some assurances that you won’t have to rebrand later due to an unseen infringement?  We are here to help.  Contact us to see how we can give you the peace of mind you deserve before you move forward.

 

 

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Love and Litigation – Swarovski accused of Copyright Infringement of “Two In One Heart” Pendant Design

In December 2017, Galatea Jewelry filed suit against Swarovski in a California Federal Court alleging infringement of its copyrighted jewelry design entitled TWO IN ONE HEART. The TWO IN ONE HEART design was created in 2009 by Galatea principal Chi Huynh to “capture his vision of love as a union of two individuals, at once both separate and together, with an optical illusion of a single heart comprised of two overlapping hearts formed from the same continuous loop of metal.” Galatea claims that it began selling its TWO OF ONE HEART design in 2010, and that beginning in around January 2016, Swarovski began selling its infringing design. The two designs are depicted below:

Galatea

Swarovski
   

While the Swarovski design is not identical to the copyrighted Galatea design, Galatea alleges that Swarovski merely (1) horizontally flipped the Galatea design shown above left; (2) removed the existing diamonds; (3) covered a larger portion of the design with crystals; and (4) tapered the points and rounded the edges as follows:

 

In general, copyright infringement occurs when a copyrighted work is reproduced, distributed, performed, publicly displayed, or made into a derivative work without the permission of the copyright owner. Of primary concern where copyrights are concerned, is whether or not there was “copying” of the work. In theory, if two people create the exact same work completely independent from one another, there can be no copyright infringement. Copying can be proven by direct evidence (an admission, etc.) or circumstantial evidence.  Circumstantial evidence of copying requires a showing of “substantial similarity”: (1) access by the alleged infringer to the copyrighted work and (2) similarity of the alleged infringing work to the original copyrighted work. While Galatea does not claim that it had any direct dealings with Swarovski, it does claim that Swarovski had access to the the TWO IN ONE HEART design through Galatea’s catalog, retail jeweler network and website as well as through various trade shows.

Assuming copying can be proven, a plaintiff must next demonstrate that it was the copyrightable elements of their design that were copied. This requires removing the ideas, scenes-a-faire (commonplace themes), facts, and public domain materials from the alleged infringing work. In the affirmative defenses raised by Swarovski in its answer filed in January 2018, the defense of Non-Copyrightable Material is asserted. Presumably, Swarovski is relying upon the scenes-a-faire doctrine, under which the courts will not protect commonplace elements of a work. Sequences of events which necessarily flow from a common theme or commonplace ideas where the elements of the work are indispensable or are standard in the treatment of a certain idea are considered to be scenes-a-faire and are not protectable under copyright law. For example, a court has held that a motion picture about the South Bronx would need to feature drunks, prostitutes, vermin, and derelict cars to be perceived as realistic, and therefore a later film that duplicated these features of an earlier film would not infringe. Scenes-a-faire are still entitled some level of protection, although it is relatively thin. Where scenes-a-faire are concerned, a plaintiff must prove that the infringing design is “virtually identical” to the copyrighted design.

So how does a jewelry designer or artist protect himself or herself against infringers? The first step is to identify what intellectual property protections are available. Jewelry designs, for the most part, are capable of being protected by copyright. Copyright protection attaches upon creation of the work. The designer should clearly mark each piece of jewelry with the appropriate copyright notice to place potential infringers on notice of his/her claim to protection under copyright laws.

In addition, design patent protection may be available for some jewelry designs. Design patents protect the ornamental features and overall design of an invention. Unlike copyrights, infringement of a design patent may be found in the absence of any proof of copying, so long as an ordinary observer who is familiar with the prior art would conclude that the allegedly infringing article is “substantially similar” to the patented design.

A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. While they normally would not be used to protect the jewelry design itself, trademarks can be used to distinguish the name of the design, or line of designs from others. For example, Galatea use the trademark Two of One Heart™ to identify its line of jewelry related to the copyright registration.

Once the intellectual property has been properly identified, steps must be taken to protect it. Under U.S. Patent Law, a design patent application must be filed within one year of the first public sale, use or disclosure of the invention or the inventor forfeits the ability to secure patent protection. Trademarks may be protected under common law without the need for a federal registration. However, there are several benefits to securing a federal trademark registration, including nationwide protection and incontestability of the mark after a certain period of time. Lastly, as discussed above, copyright protection begins upon creation of the work, but registration provides the owner with a number of additional benefits, including the right to sue alleged infringers in Federal Court.

Lastly, after protections are secured, the designer must enforce his/her rights. While there is not necessarily a duty to actively seek out potential infringers, a copyright or patent owner who turns a blind eye to infringing activity is in danger of having his or her intellectual property rights diminished or extinguished.

A jewelry designer should seek the advice of a qualified intellectual property attorney to guide him/her through the process of identifying, protecting and enforcing his/her rights. While it may not seem too difficult to do it yourself, simple errors in that process can undermine protection. At Martin IP Law Group, we take the time to work with designers, artists and inventors to build the best plan to protect their valuable property. Contact us today to see how we can help you.

THERE IS NO PLACE LIKE HOME FOR THE HOLIDAYS (AND FOR YOUR PATENT INFRINGEMENT LAWSUIT)

Prior to 2017, a patent plaintiff seeking to enforce it’s patent against an alleged defendant infringer was allowed to “forum shop” for the most plaintiff friendly court to file its patent infringement lawsuit. The Eastern District of Texas has long been the favorite venue of plaintiffs and “patent trolls” for filing patent infringement lawsuits. At one time, more than 40 percent of patent lawsuits were filed in the Eastern District of Texas courts, and nearly 25% of all patent cases nationwide were presided over by a single judge in Marshall, Texas.

All of that changed in May of this year when the U.S. Supreme Court held that the patent venue statute (28 USC 1400(b)) requires that, in most instances, an action for infringement be brought against an alleged corporate infringer “only in its State of incorporation.” TC Heartland LLC v. Kraft Foods Group Brands LLC, 137 S.Ct. 1514 (2017). The decision was a major victory for startups and small companies who now no longer run the risk of being hauled into court in a distant forum simply because someone in that jurisdiction may have viewed their website or purchased their product. The case was also a huge blow to the restaurant and hotel industry in East Texas towns like Marshall and Tyler where litigants and lawyers frequently traveled for hearing before the District Courts, and the plethora of patent-holding companies that purchase patents for the purpose of squeezing quick settlements out of other companies and are “headquarted” in or “reside” in Marshall and Tyler.

Only a month after the landmark TC Heartland decision a Judge from the Eastern District of Texas issued a decision that arguably expanded the Supreme Court’s ruling, and, if adopted, may have stemmed the flow of patent cases out of the Eastern District. In that case, the District Court applied a four-factor test for determining whether the defendant had a “regular and established place of business” in the district. The District Court’s application of that four-factor test concluded that Cray did in fact have a “regular and established place of business” in the Eastern District of Texas based solely on the fact that two sales employees of Cray worked from their homes within the district.

That decision was appealed to the Federal Circuit, where, in September, the four-factor test of the Eastern District was struck down in favor of a narrower three-prong test for determining if venue is proper. Specifically, in In re Cray, the Federal Circuit found that:
“(1) there must be a physical place in the district;” (i.e. an actual business location of the defendant where business is conducted)
“(2) it must be a regular and established place of business;” (i.e. more than just sporadic or irregular business activity) AND
“(3) it must be the place of the defendant” (i.e. a place that the defendant corporation, not its employee, exercises control over).
Not surprisingly, after application of the three-prong test, the Federal Circuit found that the two employees working from their home for Cray did not meet the standard.

The Federal Circuit sent the case back to the Eastern District for a determination of the proper venue for transfer. Cray is a Washington corporation with its principal place of business located there. It also maintains facilities in Bloomington, Minnesota; Chippewa Falls, Wisconsin; Pleasanton and San Jose, California; and Austin and Houston, Texas. Interestingly, Cray requested transfer to Wisconsin (Chippewa Falls) and Raytheon is now requesting transfer to the Western District of Texas (Houston, Austin). Given that Cray admittedly has offices in both places and did not seek transfer to its home office in Washington, it will be interesting to see in which one of Cray’s “homes” the case ends up.

As we approach the holiday season, small business owners can take comfort in knowing that the chances of having to defend an allegation of patent infringement anywhere other than their home turf is small indeed. If you, or your small business have concerns about potential liability for patent infringement, contact our team to discuss how to position yourself for the best defense. Happy Holidays!

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