Jurisdiction and Venue in Cases of Intellectual Property and Remedies Available

As discussed earlier in the chapter, most intellectual property cases can only be brought in federal court. See 28 U.S.C. § 1338. The question then becomes: In which federal court should a particular intellectual property action be brought? Since breaches of intellectual property rights often have consequences in many different geographic areas and since there are so many federal courts around the country (there are 94 federal districts and many districts have more than one trial court), the question of the venue in which an action may be brought can be an important and complex one.

EXAMPLE: Joker holds a patent on the process by which a certain gas can be manufactured which could make anybody who breathes it laugh uncontrollably for several minutes. Bozo’s, Inc., a company that manufactures birthday party supplies, manufactures this same gas that Joker holds a patent on and sells this gas in 217 different stores in 38 states. Each time the object is marketed or sold is another violation of Joker’s rights. So, in which federal district should (or can) Joker bring his cause of action against Bozo, Inc.?  

As a general principle, the laws that govern where an action may be brought are quite liberal in that they often allow the plaintiff wide latitude to choose the court in which the action is initially brought. However, federal law limits this discretion when it comes to intellectual property cases. In fact, federal law dictates that copyright and similar actions may only be brought in a district in which the defendant (the party alleged to have committed the violation) resides or “may be found,” while patent infringement actions may be brought where the defendant resides or where he or she “has committed acts of infringement and has a regular and established place of business.” See 28 U.S.C. § 1400.

This distinction was made

“to eliminate abuses caused by previous venue provisions allowing civil patent infringement suits to be brought in any district in which defendant could be served.” -Schnell v. Peter Eckrich & Sons, Inc., 365 U.S. 260 (1961).

In other words, Congress felt that it would be unfair for a person running a business in one geographic area to be called to a completely separate geographic area to face allegations of violating intellectual property rights held there. Other reasons for this rule include

“bringing patent infringement suit to those reasonably convenient to defendant,” -Bradford Novelty Co. v. Manheim, 156 F. Supp. 489  (S.D.N.Y. 1957), and

“to have trial in vicinity where records are likely to be located.” -Gaddis v. Calgon Corp., 325 F. Supp. 16 (N.D. Tex. 1971).

EXAMPLE: Joker holds a patent on the process by which a certain gas can be manufactured that could make anybody who breathes it laugh uncontrollably for several minutes. Joker lives in Salem, Oregon and he did all the work that led to obtaining the patent while in that town. Party Pooper’s Party Supplies store, in Tenafly, New Jersey, sells some gas that can make people laugh uncontrollably without Joker’s permission. Joker wants to bring an action against Party Pooper’s. Because it would be unfair to force Party Pooper’s to travel across the country to defend against this action since Party Pooper’s has no connection to Oregon at all, and because the evidence of the alleged violation would most likely be in New Jersey, federal law would most likely dictate that the action must be brought in New Jersey.

Remedies Available in Intellectual Property Cases

Remedies for particular intellectual property violations will, of course, be discussed more thoroughly in the sections relating to the various types of intellectual property and their enforcement. However, as part of this introductory chapter, it makes sense to outline some of the possible outcomes of a successful enforcement of an intellectual property right. The remedies sought for violations of such rights may include one or more of the following:

1) Injunctive Relief: The most often sought after remedy in intellectual property cases is injunctive relief. This is the term used when a court is asked to issue an order, forcing a party to undertake certain conduct, or, more frequently, desist from undertaking certain conduct.

EXAMPLE: Marty Bozo invents and patents the design for the “Bozo Wave Radio,” that makes all news read on any radio station sound funny. Pitney buys a Bozo wave radio, figures out how it works and begins to market the radio under the name “Pitney Bozo radio.” If Bozo brings an action against Pitney, he may ask that the judge order Pitney to stop producing, marketing and/or selling the radio. This would be a request for “injunctive relief.”

2) Monetary Damages: An infringement against somebody else’s intellectual property rights may naturally decrease the ability of the original holder to maximize profits by cutting into his or her market share. When an infringement does this, the holder of the intellectual property rights may recover whatever lost profits he or she can prove were lost based on the infringement.

EXAMPLE: Continuing the above example, assume that in the first seven years that Bozo marketed his radio, he made profits of $500,000 per year. Then, Pitney committed the infringement described above. During the next year, Bozo’s profits went down to $300,000. Since Bozo will be able to establish a pattern of profits that were made prior to the infringement, he may very well be able to recover the $200,000 in lost profits from Pitney unless Pitney can prove that there was some other reason that Bozo’s profits went down.

3) Profits made by the Infringing Party (“Disgorgement”): Any profits made by the party who committed the infringement can be recovered by the victim of the infringement.

EXAMPLE: If, in the above case, Pitney made $200,000 marketing the “Pitney Bozo radio,” Bozo should be able to recover that $200,000 because the profit was made illegally based on a misappropriation of Bozo’s intellectual property.

Note that remedies #2 and #3 appear to be mutually exclusive. If the infringer pays for the lost profits of the rights holder, that would seem to take the place of relinquishing the profits that he or she made because that payment would be enough to make the victim of the infringement “whole” again.

In each of the above two examples, Pitney is liable to Bozo to the tune of $200,000. However, an application of both remedies would force Pitney to pay $400,000. This would result in a windfall to Bozo, as he would, in effect, be making $700,000 instead of the $500,000 he made in a “normal” year.

Nevertheless, there have been cases in which courts have allowed the application of both remedies in the same case. See Thomas Wilson & Co. v. Irving J. Dorfman Co., 433 F.2d 409 (2d Cir. 1970). In order to prevent this “unfair” assessment of damages, in 1976, Congress amended the law to provide that lost profits could only be collected from the infringing party if those lost profits were “not taken into account in computing the actual damages.” 17 USC § 504. It is important to note that this rule is stated in the copyright laws, though it almost certainly applies to other intellectual property cases as well.

4) Impoundment or destruction of offending materials: This is self-explanatory. The infringing party must surrender to the court any and all materials which are the source of the lawsuit.

5) Criminal penalties: In some cases, infringing on someone else’s intellectual property and/or committing a fraud with regard to ownership or intellectual property can be a crime. See, e.g., 18 U.S.C. § 497.

6) Attorney’s fees and costs: As will be discussed in more detail in later chapters, the rules for many causes of action that arise from alleged breaches of intellectual property rights allow the victim of the breach to recover reasonable attorney’s fees from the person guilty of the infringement.