Act One: Picture the Scene
Your client is named as a defendant, together with a host of other companies, in a patent action filed in federal district court. You find yourself defending the action with unrelated companies – companies with whom your client has nothing in common but for the patents at issue. To make matters worse, the co-defendants are some of your client’s most formidable competitors, further complicating defense strategy and discovery issues.
You’re likely situated in the Eastern District of Texas, home to what is considered one of the most plaintiff friendly patent districts in the U.S. (although the District of Delaware’s popularity is rapidly on the rise).
To complicate matters, imagine the plaintiff filed its patent action prior to the effective date of the Leahy-Smith America Invents Act (AIA), so the AIA Joinder of Parties provision aimed at curbing the joining of unrelated patent defendants doesn’t apply.
If this scene sounds familiar, you’re not alone. In anticipation of passage of the AIA Joinder of Parties provision (about which we wrote in February), filings involving multi-defendant cases spiked dramatically before the provision became law last September.
This left the parties involved in the cases, as well as courts hearing them, in a pickle. Because the AIA Joinder of Parties provision is not retroactive, in light of the new provision, what standard should now be used to test whether joinder of multiple defendants is proper in cases filed before its effective date?
Act Two: Enter the Federal Circuit
The answer to that question arrived on May 4, when the Federal Circuit issued a precedent setting opinion which clarified the ground rules for joinder of unrelated defendants in actions filed prior to the effective date of the AIA Joinder of Parties provision.
The Federal Circuit opinion, In Re EMC Corp., was issued after eight of eighteen defendants named in an infringement action brought by Oasis Research LLC filed a petition for writ of mandamus seeking to direct the lower court to sever and transfer claims against them to various district courts around the country. (Defendants’ attorneys invoked this savvy strategy – the petition for a writ of mandamus - after a magistrate judge denied their motions for severance and transfer.)
In this case of first impression as to whether a petition for writ of mandamus can be used to test a lower court’s discretion in ruling on motions to sever and transfer, the Federal Circuit spelled out ground rules for determining when defendants in a pre-AIA case can be properly joined.
Act Three: To Join on Not to Join – That is the Question
Relying primarily on the requirements of FCRP Rule 20 (since the case was filed prior to the effective date of the AIA Joinder of Parties provision), the Federal Circuit held that joinder of independent defendants is appropriate only “where the accused products or processes are the same in respects relevant to the patent.”
Incidentally, this language is strikingly close to the AIA Joinder of Parties language, which states that accused infringers may be joined in one action as defendants, only if the right to relief arising out of the same transaction or occurrence “relat[es] to … the same accused product or process.”
The Federal Circuit further held that sameness of the accused products or processes is not, by itself, enough, stating, “Claims against independent defendants … cannot be joined under Rule 20’s transaction-or-occurrence test unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts.” The court concluded there must be “an actual link between the facts underlying each claim of infringement” determined by “pertinent factual considerations” to be weighed at the discretion of the district court.
Act Four: Reading Between the Lines
A disclaimer: While recognizing the newly enacted AIA Joinder of Partier provision, the court made clear it was refraining from interpreting the statute. Its decision specifically governs cases filed prior to the passage of the AIA Joinder of Parties provision.
However, some noteworthy dicta may provide clues to the future of multi-defendant patent cases:
1. A petition for writ of mandamus is indeed available as a remedy for a party seeking to test a lower court’s discretion in ruling on motions to sever and transfer. (Patent attorneys take note – creativity scores points).
2. Improper joinder deprives defendants of “meaningful opportunity to present individualized defenses on issues such as infringement, willfulness, and damages because each defendant will have limited opportunity to present its own defense to the jury.” (Rules learned in grade school still apply - play fair).
3. The “not dramatically different” standard utilized by the Eastern District of Texas in determining whether patent claims arise out of the same transaction or occurrence is the wrong test. (When a court gets this direct on an issue - which it seldom does - pay attention.)
4. Even if joinder is not permitted under FRCP 20 or otherwise, a district court has discretion to consolidate cases for trial under FRCP 42 and for pretrial issues through the multidistrict litigation panel. (A judge can pretty much do whathe or she wants.)
The Final Act
The court was careful not to pen itself in, noting, above all else, district courts have wide discretion to refuse joinder “in the interest of avoiding prejudice and delay, ensuring judicial economy, or safeguarding principles of fundamental fairness.”
In the end, the Federal Circuit granted the defendants’ petition, vacated the lower court’s order denying the motions to sever and transfer, and sent the case back to the Eastern District of Texas, directing it to apply the correct legal test.
Beginning of a New Era?
With enactment of the AIA, many in the legal field are watching to see how the Joinder of Parties provision will change the rules of the game. Certainly along the way there will be some hiccups – and maybe even some clues to the future - regarding how to employ fair and consistent treatment of joinder in patent cases.
Do you think In Re EMC Corp. marks the beginning of a less plaintiff-friendly era in patent law?