Federal Circuit Sets Standard for Joinder in Multidefendant Patent Cases

For cases filed before enactment of the America Invents Act, the Federal Circuit Court of Appeals has clarified that unrelated defendants may be joined together in a single patent case only if claims are based on the same product or process.

In recent years, large multidefendant patent cases have become increasingly common, with dozens or even hundreds of defendants joined together in a single action. This phenomenon has raised concerns about the fairness of requiring defendants to stand trial together when they have no relationship to each other and may even be fierce competitors. Such concerns prompted Congress to address joinder in the recently enacted America Invents Act (AIA), under which defendants cannot be joined together in the same patent case unless they are accused of making or using "the same accused product or process." However, for cases that were already pending when the AIA was passed in September 2011, there was still uncertainty about the standard that should be applied to determine whether multiple defendants could properly be sued in a single action. The Federal Circuit has now answered that question in In re EMC Corp., Misc. Docket No. 100 (May 4, 2012).

Background

In EMC, the plaintiff had sued 18 different companies for infringing the same family of patents, all relating to online backup services. The defendants sought to sever the claims into separate actions, but the U.S. District Court for the Eastern District of Texas denied the motion because the accused products and services were "not dramatically different" from each other. EMC then petitioned the U.S. Court of Appeals for the Federal Circuit for a writ of mandamus (a request that a superior court review and reverse the final decision or order of a lower court). Last Friday, the appellate court granted the petition, vacating the denial of the defendants' motion and remanding the case with instructions for the district court to reconsider the motion under the correct standard.

Federal Circuit Decision

The Federal Circuit began by noting the aforementioned concerns that the defendants in this case "will not have a meaningful opportunity to present individualized defenses on issues such as infringement, willfulness, and damages because each defendant will have limited opportunities to present its own defense to the jury." The court then proceeded to clarify the standard that should be used to avoid such problems:

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. In addition to finding that the same product or process is involved, to determine whether the joinder test is satisfied, pertinent factual considerations include whether the alleged acts of infringement occurred during the same time period, the existence of some relationship among the defendants, the use of identically sourced components, licensing or technology agreements between the defendants, overlap of the products' or processes' development and manufacture, and whether the case involves a claim for lost profits.

The court also, however, took care to point out that district courts have "considerable discretion" not only in how they apply the relevant factors but also in their ability "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.'"

Implications

For multidefendant patent cases filed before the AIA was enacted, it will now be easier for defendants to get the claims severed into separate actions, but it remains to be seen how great the practical impact of that will be if the separate cases are then consolidated for purposes of discovery and/or trial.