Roanoke Is Back On The Map

Politico Magazine has published a very good story about the rebirth of Roanoke's downtown and its transformation from a railroad ghost town to a vibrant, outdoorsy, high-tech city.

I have commented before about how the changing economy in cities like Charlottesville and Roanoke would change the legal community as well as the reputation and docket in the Western District of Virginia.  Just as UVa has played a large role in Charlottesville's "innovation" economy, Roanoke's economic growth is fueled in large part by nearby Virginia Tech and its investment in the new medical school and neuroscience institute.  This technology driven growth means that the Western District of Virginia will continue to see more complex business litigation and intellectual property related disputes.

On a personal note, this sentence in the article's lede took me by surprise: "A decade ago, the U.S. Census counted 15 people living in Roanoke's downtown."  It seems I was one of those 15 people.  Actually, it was more than a decade ago, while clerking for Judge Wilson, I lived in a small apartment a couple blocks away from the federal courthouse, close to Center on the Square.  Back then, most people thought I was crazy to live downtown, but now I look like a trendsetter!  

Trade Dress and the Functionality Doctrine: At the Intersection of Trademark and Patent Law

Earlier this week, the Fourth Circuit reversed the dismissal of a Lanham Act claim for trade dress infringement involving a pixel pattern embossed on an absorbent textile-like product used in medical supplies, hygiene products and food packages.  Judge Wilson (Roanoke Division of the Western District of Virginia) had dismissed the trade dress claim because he found the dot pattern to be functional and thus not protectable as trade dress.

Trade dress -- the visual appearance of a product or its packaging that signifies the source of the product to consumers -- is protected under trademark law.  However, if a product feature is determined to be functional, then that feature is not protected by trademark law.  The only way to protect a functional feature of a product's design is under patent law.  A product feature is functional if it is essential to the use or purpose of the product or affects the cost or quality of the product.  To put it simply, a feature is functional if it is the reason the device works as opposed to being merely ornamental.  Sometimes the distinction is difficult to determine.

One of the issues on appeal was the effect of the utility patents that plaintiff had obtained on the same product.  The Supreme Court has held that a utility patent is strong evidence that the features claimed therein are functional, and thus not protectable trade dress.  The plaintiff argued, however, that its utility patents covered the manufacturing process and materials, but did not pertain to a particular embossing pattern, which was the aspect of the product that plaintiff argued was protected as trade dress.  The Fourth Circuit noted that the diagrams on the utility patents show hexagonal shapes, rather than the circular dots or pixels depicted in the trademark. 

Patent

Trademark

The Fourth Circuit found that while the utility patents were evidence of the dots' functionality, they were not dispositive.  The court should look at other factors, such as the availability of functionally equivalent designs.  In light of these factual questions, the Fourth Circuit determined that there was a genuine issue of material fact regarding "whether a specific embossing pattern is the reason the device works or merely an ornamental, incidental, or arbitrary aspect of the device."  Therefore the dismissal was reversed and the case remanded for further proceedings.

The case demonstrates an interesting area of intellectual property law that is at the crossroads of trademarks and patents.

The case is McAirlaids, Inc. v. Kimberly-Clark Corporation, --- F.3d --- (4th Cir. June 25, 2014).

Judge Wilson Dismisses Claim of Defectively Manufactured Tree Stand

In this Western District of Virginia products liability case, the plaintiff alleged he was injured in a fall from a defectively manufactured tree stand while hunting in Floyd County.  Plaintiff's expert claimed that the tree stand may have been defective because of inadvertent introduction of hydrogen into the steel during manufacturing, but both plaintiff's and defendant's experts agreed that there was not enough evidence for them to conclude with any confidence that this had occurred.  Plaintiff argued that his expert's opinion was not final and requested additional discovery, including discovery of third party manufacturers of the tree stand.  Judge Wilson, however, ruled that plaintiff already had adequate time for discovery and only recently asked for additional time to "finalize" expert opinions after defendant had deposed the expert and moved for summary judgment.  The Court stated: "Experts should not be moving targets whose opinions are constantly changing and being supplemented in order to overcome proper pretrial procedures."

The case is  Bambarger v. Ameristep Inc. No. 7:12cv280 (W.D. Va. Nov. 29, 2013) (Roanoke Division).

Johnson v. Federal Home Loan Mortgage Corporation

As previously noted on this blog, homeowners who are in default sometimes file lawsuits against the noteholder or servicer of their mortgage in order to delay or prevent foreclosure.  I have handled a number of these types of cases, on behalf of banking clients.  In July, the Western District of Virginia (Judge Wilson) dismissed one such claim on a motion to dismiss.  See Johnson v. Federal Loan Mortgage Corporation, Case No. 7:12cv00507 (W.D.Va. 2013).

The facts of the case are as follows.  The homeowner alleged that the bank's notice of acceleration was deficient because it failed to include language required by her deed of trust.  The deed of trust said that that the notice of acceleration shall, among other things, "inform Borrower of the right to reinstate after acceleration and the right to bring a court action to assert the non-existence of a default or any other defense of Borrower to acceleration and sale."  According to the homeowner, the notice that she received failed to track this language from the Deed of Trust because it did not notify her of her right to bring a court action.  Therefore, the homeowner alleged that notice of acceleration constituted a breach of contract.

In analyzing this claim, the Court noted that a deed of trust was a contract and that a deficient notice of acceleration could constitute a breach of contract.  Recognizing the difference between a material and nonmaterial breach of contract, however, the Court noted that "immaterial differences in language will not nullify a substantially conforming notice of acceleration."  The Court then ruled that although the notice of acceleration contained different language than what was required in the deed of trust, the notice was in effect the "functional equivalent."  Accordingly, the Court dismissed the breach of contract claim.

This certainly seems like the right result to me.  One of the important distinctions between a material and immaterial breach of contract is that a material breach excuses performance, whereas an immaterial breach does not excuse performance, but only gives rise to a cause of action for damages.  The homeowner did not appear to allege any damages as a result of the different language in the notice of acceleration.  For example, it does not appear that the homeowner alleged that she had a valid defense to foreclosure which she would have asserted in a court action had the notice of acceleration informed her of the right to bring a lawsuit.  Moreover, it appears that the notice of acceleration that was delivered conformed with all of the requirements of Virginia law.

Mortgage Foreclosure Opinions From Judge Wilson and Judge Moon

Borrowers facing foreclosure often attempt to delay or prevent foreclosure by filing lawsuits against the noteholder or servicer of their mortgage.  There have been two recent decisions from the Western District of Virginia dismissing such claims.  In Johnson v. Federal Home Loan Mortgage Corporation, Judge Wilson dismissed a breach of contract claim related to an allegedly defective notice of acceleration.  And in Canterbury v. J.P. Morgan, Judge Moon dismissed a claim for rescission under the Truth in Lending Act.  That opinion is not yet available on the Court's website.  I will write more about these two opinions in separate blog posts.  (DISCLAIMER: I represented J.P. Morgan in the second case referenced above).