In a decision that is limited to infringement suits filed prior to the September 16, 2011 date of enactment of the America Invents Act (AIA), the U.S. Court of Appeals for the Federal Circuit, in a case involving 18 cloud storage defendants, has concluded that district courts should stringently apply mis-joinder analysis when the joinder is challenged. In re EMC Corp., Case No. 11-M100 (Fed. Cir., May 4, 2012) (Dyk, J.).
Oasis Research, a company having an office but no personnel in Marshall, Texas, filed suit in the U.S. District Court for the Eastern District of Texas, naming 18 cloud storage companies as defendants. Several of the defendants moved to sever and transfer the claims against them to other venues. The magistrate judge rejected the motions, concluding that the services of all the defendants were not “dramatically different” from each other. Several of the defendants (including EMC) filed a writ to the Federal Circuit seeking a venue transfer.
The Federal Circuit, after noting that § 299 of the AIA has no retroactive affect, analyzed the dispute under the joiner consideration set forth in Fed. R. Civ. P. 20. Under Rule 20(a)(2), defendants can only be joined if the claims against them are asserted “with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences,” and there is a “question of law or fact common to all defendants.” The Federal Circuit rejected Oasis contention that alleged infringement of the same patent supports joinder, although the Court did acknowledge that the claims would raise common questions of claim construction and patent invalidity.
Rather the Court explained that the transaction-or-occurrence test must also be satisfied by showing “a logical relationship between the separate causes of action” against the defendants. As Judge Dyk explained: “[T]he logical relationship test is satisfied if there is substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant. In other words, the defendants’ allegedly infringing acts, which give rise to the individual claims of infringement, must share an aggregate of operative facts.”
The Federal Circuit concluded that the district court's “not dramatically different” standard was inadequate to satisfy Rule 20, as it “seems to require little more than the existence of some similarity in the allegedly infringing products or processes, similarity which would exist simply because the same patent claims are alleged to be infringed.”
In remanding the case to the district court to reconsider whether joinder was appropriate, the Court noted that joinder of independent defendants is only appropriate “where the accused products or processes are the same in respects relevant to the patent.” In cases in which the defendants are not acting in concert, claims should only be joined when “the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts.”
The Court further noted that “[i]ndependently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.” Although the Federal Circuit acknowledged that a district court has considerable discretion in weighing factual considerations such as the relationship among the defendants or joint licensing or technology agreements, in cases where only “a common question of law or fact” is at issue, a lower court should not use its discretion to consolidate. The Federal Circuit also noted the availability of multidistrict litigation under 28 U.S.C. §1407 for claim construction and invalidity challenges. (See IP Update, this issue—In re Bear Creek Technologies). However, it noted that in “a complicated patent litigation” … “a district court would be justified in exercising its discretion to deny joinder ‘when different witnesses and documentary proof would be required.’”© 2013 McDermott Will & Emery