America Invents Act Impacts Joinder in Patent Infringement Cases

The America Invents Act brought a lot of changes for patent attorneys.  This post will discuss the impact of Section 19 of the Act on joinder of parties in litigation.  The amendments to 35 U.S.C. § 299 provide that joinder of defendants shall not be permitted “solely on allegations that they have infringed a patent or patents in suit.”  This provision was intended to curb the practice of patent suits that named potentially hundreds of defendants en masse simply because the same patent (or patents) was in suit.  The text of the amendment is repeated here:

§ 299. Joinder of parties

(a) JOINDER OF ACCUSED INFRINGERS.—With respect to any civil action arising under any Act of Congress relating to patents, other than an action or trial in which an act of infringement under section 271(e)(2) has been pled, parties 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.

(b) ALLEGATIONS INSUFFICIENT FOR JOINDER.—For purposes of this subsection, accused 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.

(c) WAIVER.—A party that is an accused infringer may waive the limitations set forth in this section with respect to that party.

These changes were effective on of the enactment date of the Act (September 16, 2011) and apply to actions commenced on or after the enactment date.  The effects of this amendment are already seen in a number of litigation filings.  Litigations that would ordinarily name multiple defendants are being filed as separate actions in a single venue.  The joinder issue is then addressed as the cases progress.  For example, last week MacroSolve, Inc. (an Oklahoma company) sued the following defendants in the Eastern District of Texas in separate actions:  Facebook (Delaware corp and headquarters in Palo Alto), Hyatt (Del. Corp. with headquarters in Chicago), Newegg (Del. Corp with office in City of Industry, Calif.), Walmart (Del. Corp with Bentonville, Ark. offices), Yelp (Del. Corp. and offices in San Francisco).  (See EDTX civil actions 6:12-cv-44 to 48 dated Jan. 30, 2012.)

It remains to be seen whether these cases will stay separate, be consolidated, or be transferred.  However, the separate-filing impact of the AIA will have to be taken into consideration when comparing statistics pre-AIA to those produced post –AIA.  Under this filing trend, the number of overall filings may increase, but that has to be compared to the actual number of defendants sued.  Since the matters will be separate as initially-filed, this change may likely allow more frequent transfer of cases to different venues because the original actions are not coupled.  It may also further develop case law interpreting whether cases should be consolidated.

District courts will vary on how to treat joinder.  For example, one case in the Eastern District of Texas is reported where joinder was maintained despite a motion to sever by a defendant.  In Imperium (IP) Holdings, Inc. v. Apple Inc., et. al., 4-11-cv-00163 (TXED January 20, 2012, Order) (Mazzant, M.J.) the court denied a motion to sever by Apple.  The Court appeared to rely on an earlier case upholding the Court’s decision to maintain joinder upon a writ of mandamus.  (Eolas Tech., v. Adobe Systems, Inc., No. 6:09-CV-446, 2010 WL 3835762, at *2 (E.D. Tex. Sept. 28, 2010).  The Imperium (IP) Holidings order states:

 Courts in this District have consistently held that transactions or occurrences satisfy the series of transactions or occurrences requirement of Rule 20(a) if there is some connection or logical relationship between the various transactions or occurrences. Microunity Systems Engineering, Inc. v. Acer Inc., No. 2:10-CV-91, 2011 WL 4591917, at *3 (E.D. Tex. Sept. 30, 2011) (citing Hanley v. First Investors Corp., 151 F.R.D. 76, 79 (E.D. Tex. 1993)). “A logical relationship exists if there is some nucleus of operative facts or law.” Id. Courts have also found joinder proper where Defendants’ allegedly infringing products are not dramatically different and determining Defendants’ liability will involve substantially overlapping questions of law and fact. Oasis Research, LLC v. Adrive, LLC, No. 4:10-CV-435, 2011 WL 3099885, at *2 (E.D. Tex. May 23, 2011) (adopted by Oasis Research, LLC v. Adrive, LLC, No. 4:10-CV-435, 2011 WL 3103972 (E.D. Tex. July 25, 2011)).

Apple argues that this Court should adopt a standard in accordance with various district courts throughout the country that recognize that, “in the context of patent infringement cases, similar acts of infringement do not meet the ‘same transaction’ test simply because multiple parties make or sell similar products alleged to have infringed the same patents.” MOTION at 9 (citing cases from various circuits and districts outside of this district supporting this proposition, or a similar proposition).

However, the Federal Circuit, in an unpublished order on a writ of mandamus, recently upheld this District’s decision in Eolas Tech., Inc. v. Adobe Systems, Inc., No. 6:09-CV-446, 2010 WL 3835762, at *2 (E.D. Tex. Sept. 28, 2010), on exactly the argument presented by Defendants. In re Google, Inc., 412 F. App’x 295, 296 (Fed. Cir. 2011). In Eolas Tech, the plaintiff accused twenty-three unrelated defendants of infringing two different patents, and the Court held joinder was proper, stating, “[a]ll defendants are accused of infringing the patents in suit, and adjudicating infringement will require construing the claims and evaluating the patents’ innovation over the prior art. Thus, determining defendants’ liability will involve substantially overlapping questions of law and fact.” Eolas Tech, 2010 WL 3835762 at *2. The Federal Circuit upheld the decision of the Court not to sever the claims, pointing out that “judicial economy plays a paramount role in trying to maintain an orderly, effective, administration of justice and having one trial court decide all of these claims clearly furthers that objective.” In re Google, Inc., 412 F. App’x at 296. “Further, the district court noted that, in this case, ‘adjudicating infringement…will involve substantially overlapping question of law or fact.’” Id. Therefore, the Court sees no reason to adopt a standard other than the one adopted by the Fifth Circuit, and affirmed by the Federal Circuit.

Of course, this litigation was filed pre-AIA, but the motion to sever was filed and decided post AIA, so perhaps the full impact of the AIA is best measured on cases filed after its enactment date and time will tell.  It will be interesting to see how courts address this change by the AIA.  If courts are too lenient in permitting joinder, then that will effectively nullify the impact of this provision of the AIA, because litigants can file suits separately and then request joinder to bypass the AIA.  If courts are not lenient in permitting joinder, there will be duplications of efforts in litigation that will result in waste and potential for conflicts between findings of district courts.  Regardless, various district courts will have different ways of treating joinder, which will drive the way that patent litigations are filed in the future.