Charlottesville as a "Hotbed for Innovation": Fastest Growing Area in US for Venture Capital Funding

Where a court is located often determines the type of cases that it hears.  For example, the "Rocket Docket" of the Eastern District of Virginia hears a large number of patent and technology-related cases both because of the speed at which it dispenses justice and also the many technology companies in Northern Virginia--not to mention that the Patent and Trademark Office is a few blocks away from the Alexandria courthouse.

The Western District of Virginia, however, is not traditionally known for its patent docket or technology-related cases.  When I clerked for Judge Wilson in Roanoke, one of the biggest cases the court heard that year was a RICO conspiracy involving (alleged) moonshiners in Franklin County.  Growing up in nearby Lynchburg, I often heard Franklin County referred to as the "moonshine capital of world."  While the homemade distillation of spirits certainly involves some measure of technology, that RICO trial was certainly not a technology-based case.  At the time, it was not surprising that the court heard more moonshining cases than patent cases.

All of that may be about to change, however, given the recent growth of tech start-ups in the region.  This growth is largely fueled by the universities--the University of Virginia, Virginia Tech and James Madison University--located in Charlottesville, Blacksburg and Harrisonburg.

According to an article in today's Daily Progress, the Charlottesville area is the fastest growing area in the country for venture capital investment since 2010.  The largest investments were in technology companies, many of which got their start from academic research associated with UVa.  The article explains:

The Center for Innovative Technology also was involved with most of the companies receiving venture capital funding.  The center works to promote the technology industry around the state, and since 2004 it has invested seed money in numerous technology and life-science companies around the state, including local biotechnology and semiconductor companies.
...
As the market in Charlottesville has grown, [the center's investment director] said, word is spreading that it's a good place for tech startups -- it has a high concentration of talented people, a nice location and access to a major university...

The number of local companies receiving venture capital funding has increased 55 percent annually since 2010, and the amount of investment dollars pumped into the Charlottesville market has increased by $157 million.

This type of growth--fueled by the confluence of nearby universities, public-private partnerships, low taxes and livable communities--reminds me of the success of North Carolina's Research Triangle Park.  Womble Carlyle's early commitment to technology led us to open an office in RTP in the 1990s.  As a law firm, we have seen first hand how a technology driven economy can transform a region, including its courts and legal market.  Let's hope the same thing (without the traffic, of course) is happening here in Charlottesville.

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).

Defendant Who Defeated Preliminary Injunction And Obtained Dismissal For Failure To Prosecute Is Not A "Prevailing Party" In Patent Case

The "prevailing party" in a patent case is entitled to attorney fees from the losing side under 35 U.S.C. 285.  However what constitutes a "prevailing party" sometimes can be difficult to determine.  Judge Moon recently held that a defendant who defeated a motion for preliminary injunction and obtained a dismissal of all claims for failure to prosecute was not a "prevailing party" despite the defendant's success.  The lawsuit, filed in the Charlottesville Division of the Western District of Virginia, involved patent infringement of a pocketed bra design.  The court's rational for denying the motion for fees was based upon existing precedent regarding similar circumstances.  A plaintiff who obtains a preliminary injunction is not a "prevailing party" because preliminary injunction proceedings are a necessarily abbreviated inquiry into the merits of a case.  Therefore, the court concluded that if a plaintiff who obtains a preliminary injunction is not a "prevailing party" then it logically follows that a defendant who defeats a preliminary injunction is similarly not a "prevailing party."  Also, the court's subsequent dismissal, without prejudice, of plaintiff's claims for failure to prosecute was not an adjudication on the merits and therefore did not confer "prevailing party" status.  The case is styled Robinson v. Bartlow, No. 3:12cv024 (W.D.Va. 2014).