​The statute of limitations to foreclose on a mortgage in New York is six years.  CPLR 213(4).  This seemingly simple rule has created a great deal of confusion as to when the statute begins to run where the mortgage contains an acceleration clause – a provision that upon default, the lender may convert the entire set of payments into a single owed payment, and then foreclose on the mortgaged property.
 
In the recent decision of Freedom Mortgage Corp. v. Engel (2021), New York’s Court of Appeals consolidated four appeals, and issued an opinion in which it clarified the applicable law in various situations.
 
The Court of Appeals emphasized that the decision presented a situation where “the need for clarity and consistency are at their zenith: contracts affecting real property ownership and the application of the statute of limitations.”  In each of the decision, the need for clarity, simplicity and ease of application drove the outcome.
 
This decision is considered a sea-change over prior law, and numerous lenders have moved to reopen cases dismissed on statute-of-limitations grounds.
 
General Principles
 
Many loans have a schedule of payments that stretch over years.  Typically, when the borrower defaults, the loan agreement will provide that the lender has the option to accelerate the loan, meaning to call it in and have the entire balance due.  “Acceleration in this context is a demand for payment of the outstanding loan in full that terminates the borrower’s right to repay the debt over time through the vehicle of monthly installment payments.”  Acceleration is generally an option for the lender, not something that happens automatically. 
 
In 1932, the Court of Appeals held that, to be valid, an election to accelerate must be made by an “unequivocal overt act” that discloses the noteholder’s choice, such as the filing of a verified complaint seeking foreclosure and containing a sworn statement that the noteholder is demanding repayment of the entire outstanding debt.  A clear letter from the lender to the borrow also suffices.  But what is crucial is that the lender make it crystal clear that acceleration is sought.
 
Acceleration has a major effect on the statute of limitations.  When a borrower misses a payment, then the statute only begins to run with respect to the one missed payment; it does not run with respect to the rest of the payments which are not yet due.  Once an acceleration happens, however, the statute of limitations begins to run as to the entire loan.
 
Specific Rulings
 
The Court of Appeals made specific rulings on various situations involving accelerated loans.  In one case, the lender had previously filed foreclosure actions, but had failed to attach the proper documentation, leaving out modifications to the loan agreement that had been made in the interim.  The borrower succeeded in having these actions dismissed.  The Court of Appeals, reversing the Appellate Division, held that the dismissed action did not count as an acceleration, since the action was defective and the lender succeeded in having it dismissed.
 
In another case, the lender sent a default letter to the lender, noting the failure to make timely payments, proposing a cure period, and then stating that the lender “will accelerate” the loan if payments were not made current.  Resolving a split among the Appellate Divisions, the Court of Appeals held that a future-looking “will accelerate” statement is not itself an acceleration, and does not start the statute of limitations running.
 
In the last two cases, the Court considered whether an acceleration can be withdrawn.  The lenders each filed foreclosure actions that constituted an acceleration, but then voluntarily dismissed them.  Overturing decisions of the Appellate Division, the Court of Appeals held that a voluntary discontinuance automatically revokes the acceleration.  “In such a circumstance, the noteholder’s withdrawal of its only demand for immediate payment of the full outstanding debt, made by the ‘unequivocal overt act’ of filing a foreclosure complaint, ‘destroy[s] the effect’ of the election.”
 
The borrower might still avoid the revocation if it can be shown that “the borrower changed his position in reliance on that election by executing a new mortgage.”  It is therefore possible for an acceleration to be irrevocable.  And, of course, if the lender has done other acts of acceleration, such as an acceleration letter, that might require additional acts of revocation.
 
In the few months since the Engel decision, several Appellate Division decisions have relied on it in various circumstances to deny dismissal or summary judgment of foreclosure complaints.
 
The Engel decision, as it expressly explains, is grounded on the notion that lenders need flexibility to determine whether and when to accelerate a loan.  Often, it is in both the lender’s and borrower’s interest not to accelerate, to allow the parties to work out an accommodation. As in many areas of the law, parties are best served when they are clear about what they are doing and what rights they are exercising. 

The recently passed CARES EXTENSION ACT made several important changes to procedures in the Trademark Office and in federal court.   While some are favorable to trademark owners, others are meant to clear the Trademark Register of deadwood registrations that are not being used. 

Among other things, the new law establishes procedures to expunge the register of marks that have never been used for the goods and services listed (a growing problem with foreign-based registrations); a new basis for cancellation (the mark was never used for some or all of the listed goods and services); a procedure to provide information on a pending application that would be a basis for denial; and restoration of a presumption that trademark infringement creates irreparable harm.

The new law has several different features, not all of which are related.  It not only presents opportunities for both trademark owners and potential trademark infringers, but also presents new challenges and potential pitfalls.

Presumption of Irreparable Harm – Federal courts traditionally presumed that a showing of likelihood of confusion also meant that irreparable harm, a requirement for a preliminary or permanent injunction, should be presumed.  This is because the harm from infringement – confusion as to who makes the goods, and likely affect on good will – are difficult to quantify, and thus do not lend themselves to money damages.

But in a patent case eBay v. MercExchange (2006) the Supreme Court held that there is no presumption of irreparable harm.  Many courts applied that in trademark and copyright cases to mean that there is no presumption of irreparable harm as well.  The new law restores the presumption for trademark cases.

The new law will not likely have a major effect on litigation.  In the vast majority of cases, trademark owners have been able to show irreparable harm without a presumption.

But what trademark owners must be wary of is delay.  The presumption of irreparable harm is rebuttable. Before eBay, one of the most common ways to rebut the presumption was to show the trademark owner delayed.  This is particularly the case for preliminary injunctions; in one often cited Second Circuit case, a delay of only six weeks was enough to rebut the presumption.  So if a trademark owner wants an injunction, it should move quickly to stop the problem.

Expungement Procedures  -- The new law creates two ex parte expungement procedures, one directed to domestic registrations, the other to registrations based on foreign registrations.  Both allow any party to submit a petition to expunge a registration, along with evidence that the mark has never been used in commerce.  The Director of the Trademark Office reviews the petition, and if warranted, initiates a procedure, on notice to the trademark owner, that the registration may be cancelled.

This addresses a problem that has arisen in recent years involving fictitious registrations for marks that are never actually used.   Many such registrations have been obtained by foreign registrants, particularly from China and India.  The motivation seems to be Amazon, which requires a trademark registration in order to register as a merchant.

Parties who actively sell on Amazon often encounter such registrations as blocking their names, and the new procedures will be a way to expeditiously deal with the problem.

Third Party Submissions In Pending Applications
The new law also formalizes what previously was called a letter of protest.  If there is a pending application, anyone may submit evidence relevant to a possible refusal. The Director reviews it, and can include it in the examination file.

This can be an efficient and inexpensive way to oppose pending applications, without the expense and time of a formal opposition or cancellation procedure before the TTAB.  This is a good reason why trademark owners should use a monitoring service to be alerted to pending applications that may come too close to their trademarks.

Non-Use As A New Basis For Cancellation
The new law enacts a new basis for cancellation.  At any time after three years after registration, if one can show that the mark has never been used in commerce for all or even some of the listed goods, the registration is cancelled.  Unlike abandonment, intent is not a defense – no matter the owner's intent, if the mark has never been used, the registration can be cancelled.

This new section is a potential landmine for foreign registrations.  It is common practice in Europe to register for dozens or even hundreds of goods and services, intending to use the mark for only a few.  These registrations are then used to obtain U.S. registrations under either Section 44 of the Trademark Act or through the Madrid Protocol.  But the owner only uses the mark for a few of the listed goods and services.

Under this new basis for cancellation, the entire registration could be cancelled in that circumstance.  So foreign registrants must carefully consider the scope of their registrations, and omit any goods and services they do not intend to use. 

Tucked away in the CARES ACT of 2021 is a new provision of the Copyright Act, that instructs the Copyright Office to establish a Copyright Claims Board. The Claims Board will be empowered to hear claims of copyright infringement of up to $30,000.  The new system, which is voluntary, provides for a much more streamlined procedure in exchange for limiting damages and attorney’s fees.

The Copyright Office has a year to implement the new tribunal.  Both copyright owners and those who are frequent targets of infringement claims should begin preparing now for what may become a popular way to resolve small claims.

Need For Small Claims Tribunal
Federal courts have exclusive jurisdiction over copyright claims.  With the explosion of social media, the number of claims of use of copyrighted content, particularly images, has similarly exploded.  Federal courts are not well equipped to deal with such claims; the typical damages are small, while federal litigation can be complex, protracted and expensive.

A typical case involves a celebrity finding a photograph of herself at an event or restaurant and posting it to her Instagram account.  Or, a business comes across a photograph of a celebrity wearing or using its product, and posts it to its website to promote the product.  In both cases, the photographer then sues for copyright infringement.  The Copyright Act allows statutory damages of up to $30,000 per work, or up to $150,000 per work if willful, plus attorney’s fees, so the photographer often can threaten significant damages.  On the other hand, federal litigation can be involved and expensive, and fees have to be paid up front, or the case taken on contingency.

So Congress enacted the Copyright Alternative in Small-Claims Enforcement Act of 2020, which directs the Copyright Office to establish the Copyright Claims Board.

Features Of The Claims Board
The Claims Board will have several limits on what it can do:

• Voluntary – no one is required to litigate before the Claims Board.  Claimants may still bring their infringement cases in federal court.  And the respondents have 60 days to opt-out and have the case reviewed in federal court instead.
• Limited damages – the limits are $15,000 per work and total damages of $30,000.
• Limited Attorney’s Fees – Only for bad faith filings, and even then limited to $5,000, other than “exceptional cases.” 
• No finding of willful infringement – that issue is beyond the Claims Board’s jurisdiction.
• Limited Discovery – no oral depositions.  Written discovery is allowed.  The Board has the discretion to hear oral testimony. 
• Limited judicial review – once a decision is rendered, either party may request reconsideration and then review by the Register of Copyrights.  After that, a party can seek review in federal court, but only on very limited grounds: “fraud, corruption, misrepresentation or misconduct.”

The new law also allows for those accused of infringement to request a declaratory judgment of non-infringement.  And, it provides for default if a responding party fails to answer or opt-out in the 60-day period.

The Claims Board does not have the power to issue an injunction, but the parties can agree that the Claims Board has the power to determine that certain infringing activities cease.

In short, the Claims Board is purely voluntary, and has much more limited powers than federal courts.  It is designed to be a much quicker and less expensive way of solving  small copyright disputes.

It is better to think of the Claims Board as a specialized arbitration panel, with arbitrators who have experience in copyright law.  In fact, Congress encouraged referrals to the Claims Board by federal courts.  Federal law requires federal courts to use alternative dispute resolution procedures for almost every case; the new law emphasizes that the Claims Board qualifies.  One should expect federal judges to encourage (read pressure) litigants to avail themselves of this option.

What Should Interested Parties Be Doing To Prepare?
For copyright owners, early registration is critical.  The Claims Board, like federal courts, may only hear claims where the work is registered (or where the Copyright Office has refused registration).  It is not enough to have an application on file. 

Furthermore, statutory damages are limited to half the permitted amount where the infringement began before registration.

So for copyright owners, registering early, and continuing to register new works, is sound policy.

​For those using others’ content, especially those regularly posting content created by others to their websites or social media accounts, good policy is to review the content and its origin to ensure that one is not posting infringing content.  The fact that something was posted somewhere on the internet does not make it free for the taking.  A bit of due diligence now can avoid heavy damages later. 

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.
 
Image Credit

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.

Image Credit