Patent Infringement Litigation: The End Of Multi-Defendant Cases?

In the old days, after finding infringers of your client’s patent you could file one lawsuit against all infringers in the Eastern District of Texas, knowing that it was highly unlikely that your defendants would be able to successfully obtain a severance of your claims.  In some instances, literally hundreds of defendants would be sued in one case.  Courts in the Eastern District of Texas had held that joinder in patent cases was appropriate where the accused products were not “dramatically different,” which was an easy standard to meet.  See, e.g., MyMail, Ltd. v. Am. Online, Inc., 223 F.R.D. 455, 457 (E.D. Tex. 2004).

Those days are over.  The America Invents Act contained a new joinder provision, codified at 35 U.S.C. § 299, that reads:

[P]arties that are accused infringers may be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, or counterclaim defendants only if— (1) any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process; and (2) questions of fact common to all defendants or counterclaim defendants will arise in the action. . . .  [A]ccused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.

(Emphases added.)  (Defendants may waive these limitations.)

Accordingly, after the effective date of the AIA (September 16, 2011), defendants may be joined only if they engage in conduct with respect to the “same accused product or process.”  For example, a manufacturer, distributor, and retailer of an infringing product could be joined together, but not defendants who independently manufacture different infringing products.

But what about those cases that were filed before September 16, 2011?  (A large number of multi-defendant cases were filed in the Eastern District of Texas immediately before the effective date of the AIA.)  They are likely subject to severance under the Federal Circuit’s recent decision in In re EMC Corp., 677 F.3d 1351 (Fed. Cir. 2012).  There, the Federal Circuit held that “the mere fact that infringement of the same claims of the same patent is alleged does not support joinder, even though the claims would raise common questions of claim construction and patent invalidity.”  Id. at 1357.  Instead, “independent defendants satisfy the transaction-or-occurrence test of Rule 20 when there is a logical relationship between the separate causes of action.  The logical relationship test is satisfied if there is substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant.”  Id. at 1358.  The Federal Circuit overruled the “not dramatically different” standard used in the Eastern District of Texas.  Id. at 1359.  In summary, the Federal Circuit held:

We agree that joinder is not appropriate where different products or processes are involved. Joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent. But the sameness of the accused products or processes is not sufficient. Claims against independent defendants (i.e., situations in which the defendants are not acting in concert) 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. To be part of the “same transaction” requires shared, overlapping facts that give rise to each cause of action, and not just distinct, albeit coincidentally identical, facts. The sameness of the accused products is not enough to establish that claims of infringement arise from the “same transaction.” Unless there is an actual link between the facts underlying each claim of infringement, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.

Id. at 1359.

But there may be a silver lining in In Re EMC for the patent holder, since “[i]n exercising its discretion, the district court should keep in mind that even if joinder is not permitted under Rule 20, the district court has considerable discretion to consolidate cases for discovery and for trial under Rule 42 where venue is proper and there is only ‘a common question of law or fact.’  Common pretrial issues of claim construction and patent invalidity may also be adjudicated together through the multidistrict litigation procedures of 28 U.S.C. § 1407.”  Id. at 1360.

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