Much ado about nothing?

much-ado-about-nothing-picture

Kenneth R. Adamo asks that question about the new joinder rules in the America Invents Act.

As part of the America Invents Act (AIA), effective 16 September 2011, Congress added 35 USC §299 (A), (B) to the United States patent law. Ostensibly, the provision was designed to “even the odds” between non-practicing entities (NPEs) and multiple accused infringers, by controlling and limiting the conditions under which multiple parties could be joined together all in one case, through trial, as defendants. Eighteen months of experience with the provision, however, shows that “more is less” in this area, as it is throughout much of the US patent litigation system.

The new joinder provision

Title 35, Section 299 provides: JOINDER OF ACCUSED INFRINGERS – [P]arties that are accused infringers may be joined in one action as defendants 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. ALLEGATIONS INSUFFICIENT FOR JOINDER – For purposes of this subsection, accused infringers may not be joined in an action or trial as defendants or counterclaim defendants based solely on allegations that they each have infringed the patent or patents in suit.

Applying the provision

In sum, to date 35 USC§299 has been applied by the trial courts in the following ways:

• Plaintiffs have switched to serially filing cases, each with one defendant, in the same court/venue. The same patent(s) are in issue in each case.
• Courts, exercising the authority to efficiently manage their dockets, including under F.R. Civ. P. 42(a), are consolidating serially filed cases for pretrial purposes.
• The landscape is otherwise virtually identical to the pre-AIA days through all pretrial proceedings.

The problem to be cured

A long-favored NPE tactic was to sue multiple parties in a single action where the only characteristic common between the defendants was that they all made or sold products that were being accused of infringing the same patent(s). One multi-defendant case streamlined litigation: plaintiff patent owner did not have to bear the cost and burden of managing multiple concurrent or phased lawsuits, in different jurisdictions or before different judges, with potentially inconsistent results.

Defendants were forced to bear the transaction costs of coordinated action and making strategic decisions in the litigation as a group, even though – by virtue of each
defendant making different products – all members were not necessarily identically situated with respect to the issue of infringement or, on some occasions, invalidity either. Defendants attempted to counter these problems by forming joint defense groups to pool resources and take advantage of the ability to divide the workload on common tasks, such as invalidity defenses. Those groups present(ed) their own challenges, however.

Pre-AIA law

The US Court of Appeals for the Federal Circuit (Federal Circuit) has considered whether pre-AIA multi-defendant cases were severable based on improper joinder. In In re EMC Corp., 677 F.3d 1351, 1356 (Fed. Cir. 2012), a post- AIA filed case applying pre-AIA law, several common defendants filed a mandamus petition seeking severance and transfer. The defendants argued that they shared nothing in common other than being accused of infringing the same patents, such that joinder violated F.R.Civ. P 20, which provides that parties may be joined in a single action if:

• The claimed right to use arises out of the same transaction or occurrence and
• Any question of law or fact common to all defendants will arise in the action.

The trial court denied defendants’ motion. The Federal Circuit vacated the trial court’s decision, and directed application of the correct test for joinder under Rule 20. Id. at 1360. Significantly, the Federal Circuit concluded that “independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.” Id. at 1359. While careful to note that new 35 USC §299 was not being applied or construed, one would expect a similar result when that issue presents itself to the court in the §299 context.

What did Section 299 do?

Section 299 essentially codified the majority interpretation of F. R. Civ. P. 20 under pre-existing law, overruling the broader read applied particularly by the Eastern District of Texas. (E.D. Tex) See EMC, 677 F.3d at 1359. Most courts read F. R. Civ. P. 20(a)(2) as requiring that defendants in a patent infringement action must have engaged in related ….click here to subscribe and read the whole article

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Ken Adamo, Kirkland & Ellis, USA

Ken is a partner in the Intellectual Property group in Kirkland’s Chicago and New York offices. His practice focuses on all areas of intellectual property law, particularly including patent, copyright, unfair competition, trade secrets, and related antitrust matters.