In a recent clash between the First Amendment and the Lanham Act, which governs US trademark law, the Supreme Court has ruled in favor of free speech.  On June 19, the court affirmed the decision the Federal Circuit that a trademark can be registered for a name even if the name offends certain individuals or groups.
 
The case, Matal v. Tam, began when an Asian-American tried to trademark his band name as “The Slants” – a term which is derogatory to Asian-Americans.  Tam has said that his intention was to “reclaim” the term and subvert its derogatory use.
 
Nonetheless, the U.S. Patent and Trade Office (PTO) denied his application, referring to Section 2(a) of the Lanham Act, which provides that no trademark may be registered containing “matter which may disparage or falsely suggest a connection with persons, living or dead, institutions, beliefs, or national symbols, or bring them into contempt, or disrepute.”
 
Tam appealed the constitutionality of the Lanham Act wording to the Federal Circuit, which ruled that the disparagement clause in the Lanham Act violated the free speech principles embodied in the First Amendment.
 
Commercial speech is subject to relaxed constitutional analysis under the Supreme Court’s Central Hudson test..  Although the Court was not certain that the action involved “commercial speech,” the Court held that even if the Central Hudson test applied, none of the situations in which speech may be limited under Central Hudson applied in the case of Tam and his band.
 
The PTO also attempted to argue that granting a trademark was a form of “government speech,” implying official endorsement or imprimatur over the offensive content.  The Court rejected the application. 
 
Another issue raised by the PTO was that the patent registration system is federally funded, and thus regulations around “government subsidy” might apply.  However, as the Federal Circuit had previously determined, the registration system is actually fully supported by fees from trademark holders such as Tan, who paid $275 to trademark his band name.
 
Ultimately, the Supreme Court found that the PTO’s decision to deny Tam’s trademark violated the principle of “viewpoint discrimination” – restricting speech to favor some viewpoints or ideas at the expense of others.  As Justice Alito pointed out in his majority decision, “The name ‘The Slants’ not only identifies the band but expresses a view about social issues.”
 
A similar appeal involving the Washington Redskins football team is currently pending in federal court.  Evoking the Lanham Act’s disparagement clause, trademark protection for the team’s name was cancelled in a lower court decision because the term Redskins is offensive to Native Americans.  Now, despite the objections of members of the Navajo people, it seems likely that the Redskins decision will be reversed in light of this Supreme Court ruling in Matal v. Tam.
 
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Choosing a favorable jurisdiction in which to bring suit is known as “venue shopping.”  Since 1988, plaintiffs in patent lawsuits have had almost free rein in choosing jurisdiction.  But a recent Supreme Court ruling in TC Heartland LLC v. Kraft Foods Group Brands LLC, No. 16-341(S. Ct. May 22, 2017) has changed the legal landscape, severely limiting the possible venues for patent lawsuits against domestic corporations.
 
The venue statute for patent cases, 28 U.S.C. § 1400, provides that “any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has regular and established place of business.” 
 
At the same time, the venue statute governing general lawsuits allows a plaintiff to bring an action in “any judicial district in which any defendant resides” and further provides that a corporation “shall be deemed to reside, if a defendant, in any district in which such defendant is subject to personal jurisdiction with respect to the civil action in question.”  (28 U.S.C. § 1391(a), (c).)  
 
Before the recent Supreme Court decision, district courts have routinely interpreted the general venue statute to apply to patent cases  , thus allowing the term “residence” to be construed broadly.  This broader construction of “residence” has allowed plaintiffs to bring infringement actions in any jurisdiction in which the defendant’s products were sold.  Practically speaking, this meant a deluge of patent cases in jurisdictions like the Eastern District of Texas which is known to work fast and be plaintiff-friendly.
 
In the Kraft Foods v. TC Heartland case, Kraft Foods brought a patent infringement suit in Delaware, its state of incorporation, concerning products that TC Heartland distributed for sale in Delaware.  TC Heartland, however, argued that, because it had no “regular and established place of business” in Delaware and did not “reside” in Delaware under § 1400(b), the Delaware court lacked jurisdiction. 
 
Agreeing with TC Heartland, the Supreme Court clarified that, for domestic corporations, the term “resides” in §1400 is limited  to defendant’s state of incorporation. As a result, a patent infringement lawsuit against a domestic corporation must now be brought either in its state of incorporation or where the defendant has committed acts of infringement and has a regular and established place of business.
 
The decision will have immediate consequences.  Courts in East Texas will probably see far fewer patent cases, despite still being the likely home for suits brought against foreign corporations..  On the other hand, courts in jurisdictions that are home to disproportionate numbers of corporations, such as Delaware and California, may be swamped with patent litigation over the coming months.

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We often recommend mediation to our clients – it often helps to resolve lawsuits quickly and efficiently.  However, there are some important issues to be aware when referring clients to mediation.  Most of these center around the mediation confidentiality agreement (MCA).
 
Obviously, mediation would not work without assuring confidentiality.  But often, parties sign away rights without realizing it when they sign an MCA.  That’s why it’s important before signing any MCA to ask questions about confidentiality and privilege:
 

• What level of confidentiality does the MCA ensure?
• What level of privilege does the MCA provide?
• What level of admissibility is there for information divulged during mediation?

 
All these questions revolve around the nature of mediation: the process must be confidential, but if it is too well-shielded from the court system, then parties may be barred from using potentially valuable information following the mediation process.
 
The highest-profile example in recent years was a settlement agreement between the Winklevoss twins, Internet entrepreneurs who sued Facebook, claiming that during mediation owner Mark Zuckerberg had misled them about the value of their shares.  The court ruled that the Winklevosses’ information about the alleged fraud was inadmissible because it had emerged during protected mediation proceedings.
 
It’s crucial to understand exactly what is and is not permitted under the MCA.  As an attorney, you may even be barred from disclosing certain information to aid your client later on down the line if it was originally shared within the framework of mediation.
 
Different standards for confidentiality apply from state to state, so don’t make assumptions about which standard will apply.  Before entering any type of mediation, understand the protections extended automatically by virtue of the jurisdiction, as well as the specifics of the MCA. 
 
One useful change to a “standard” mediation agreement is to remove clauses referring to mediator conduct.  These often prevent attorneys from protecting their clients’ best interests in the event that the mediator fails to uphold professional standards.
 
None of this changes the value of mediation to save clients vast amounts of time and trouble.  Confidentiality will always be an essential part of mediation.  However, attorneys recommending mediation should be aware of jurisdictional rules, as well as of opportunities to modify a boilerplate confidentiality agreement to maximize clients’ rights and preserve potential future claims if any issues remain unresolved following mediation.
 
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Things have changed when it comes to getting paid.  Originally, depositing a partial payment meant you accepted that payment as full compensation.  But following changes in the Uniform Commercial Code (UCC), most courts today – including New York’s Court of Appeals – let creditors deposit a partial payment while still pursuing efforts to collect what they’re owed as long as they take steps to deposit the check “under protest.”

The older law placed creditors in a terrible bind.  A vendor, perhaps a website designer, might deliver services – let’s say a completed, working website – and bill her client for the agreed-upon $1,500.  The client, either believing the work wasn’t worth that much, or misunderstanding the terms of the bargain, might send payment for only $900. 

Under the common law, just as on a game show, this vendor would have had to ask herself the tough question:  Should I accept partial payment now, knowing that might be all there is – or keep trying to collect, knowing I might end up with nothing?  The former would have required her to accept a $600 loss for work she’d already done – but the alternatives were often untenable as well.

Even more unfair, vendors who were less legally aware did not realize that accepting partial payment meant forfeiting further payment down the line.  Clearly, the situation was ripe for change.

Today, under UCC Section 1-207, the simplest way for creditors to protect their rights is by endorsing a check with the comment “without prejudice” or “under protest” on the back before depositing it.  (Other payment types, such as cash or bank transfer, are more complex – please consult an attorney.)

However, many courts originally held that the UCC provision only applied to goods, rather than services.  So unless the website designer was offering computer hardware for sale as well, she might still have been out of luck.

In 1985, the Court of Appeals put that issue to rest and determined that any partial payment is subject to the rules of disputed payments, whether the parties were buying and selling goods or services.  See Horn Waterproofing Corp. v. Bushwick Iron & Steel Co., Inc., 66 N.Y.2d 321 (1985). 

This single change to the UCC has vastly simplified commercial transactions, both for goods and for services.  But awareness is still a barrier:  if you don’t know the law, you won’t realize the importance of endorsing checks under protest.  In this case, knowledge is power.  Just a few quick words stamped or written on the back of a check could make all the difference when it comes to collecting what you’re owed.

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