Bar News - June 15, 2012
Intellectual Property Law: Severance Of Patent Litigation Defendants in a Post-AIA Legal Landscape
By: Zachary Gates
On September 16, 2011, President Barack Obama signed into law a monumental bill known as the Leahy-Smith America Invents Act ("AIA"). The AIA represents the most significant amendment of this country’s patent laws since 1952. Many articles have been devoted to the AIA over the past nine months, and perhaps that is a reflection of the many drastic changes it portends for patent prosecutors and litigators over the coming years as various provisions go into effect. Section 19(d) of the AIA (codified at 35 U.S.C. § 299), though, bears some consideration; that provision restricts joining multiple defendants in patent infringement and related declaratory judgment actions. Although seemingly portending a paradigmatic shift in patent litigation, Section 299 has in a matter of short months –through illustrative court orders – been rendered somewhat more benign.
Under pre-AIA jurisprudence, whether a plaintiff’s suit against multiple defendants could survive a motion for severance for misjoinder under Fed. R. Civ. P., Rule 21 (brought by the extant defendants) or a motion to amend the complaint (brought by the plaintiff(s)) was wholly left to the discretion of the presiding federal judge, who would weigh the circumstances in view of the permissive joinder rule set forth at Fed. R. Civ. P., Rule 20(a)(2). Over the years, some courts specifically exercised their discretion with an eye to limiting these cases, whereas others, like the Eastern District of Texas, largely welcomed them. In an effort to curtail what was perceived by some people as a scourge on the federal judiciary’s limited resources, and to create some facial uniformity across the various districts, reformers introduced Section 299.
Section 299(a) "effectively codifies current law as it has been applied everywhere outside the Eastern District of Texas." 157 Cong. Rec. S5429 (daily ed. Sept. 8, 2011). To that end, three important qualifications gleaned from case law interpreting Rule 20(a)(2). First, the identical transaction(s) or occurrence(s) shared by the defendants must now "relat[e] to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process," which language derives from 35 U.S.C. 271(a), the statute providing a right of action against direct patent infringement. The commonality among the defendants seemingly must go to the heart of the alleged acts of infringement. Second, the questions common to the defendants must be ones of fact alone, as compared to Rule 20(a)(2), which also contemplates shared questions of law; previously, some courts had viewed the common questions of invalidity raised by multiple defendants as sufficient to warrant joinder. Finally, according to Section 299(b), allegations that each defendant has infringed the same patent – albeit in a different way, perhaps – standing alone will be insufficient to permit joinder.
The plaintiffs’ bar nationwide took note. On September 15, 2011, the day prior to the AIA’s signing, a handful of plaintiffs across the country filed at least 51 multiple-defendant patent lawsuits, 19 alone of which got filed in the Eastern District of Texas. Given Section 299, no one questioned their motives, although their reliance on a clear distinction based solely on when a complaint was filed has proven to be not as concrete as hoped. Compare Genetic Tech. Ltd. v. Agilent Tech., Inc., No. 11-cv-01389, 2012 U.S. Dist. LEXIS 39666, *11 n. 2 (D. Colo. Mar. 23, 2012) (severance granted; "Although [co-defendant] correctly states that the AIA applies only to cases filed on or after September 16, 2011, the Court views the AIA as persuasive authority."), and Cyberfone Sys., LLC v. Cellco Partnership, 2012 U.S. Dist. LEXIS 60045 (D. Del. Apr. 30, 2012) (declining severance in 21 related cases, all of which were filed at 11 p.m. on Sept. 15, 2011; "Given that all parties share the same discovery and motion deadlines, the cases will progress to trial on parallel tracks and the court will address in due course how trial will be managed. The court declines to sever any parties at this juncture").
Concerns that multiple-defendant lawsuits would become extinct may have been somewhat exaggerated – court decisions over the past nine months suggest that these cases will survive in some form. As a preliminary matter, Section 299 on its face does not facially apply to a number of instances, including: (1) Section 271(e)(2) Hatch-Waxman litigation involving Abbreviated New Drug Applications; (2) per Section 299(c), cases in which defendants agree to be joined with other defendants (which arrangement may be motivated by the cost-sharing afforded under joint defense agreements, an attractive tactic to offset the rising cost of patent litigation); and (3) as noted, cases filed prior to September 16, 2011. For any case falling in any one of these categories, the possibility of multiple defendants coexisting in one action remains undisturbed.
While each of these exemptions from the new law may see some application, the broadest type of omission from Section 299’s reach may be the result of the words "for trial" being included after "consolidated" in subsection (a). That qualification will allow plaintiffs, faced with severed defendants across multiple actions in the same district, to nonetheless harmonize discovery, claim construction and other pretrial stages of a case – in essence, everything but trial. See, e.g., Pinpoint Inc. v. Groupon, Inc., No. 11-C-5597, 2011 U.S. Dist. LEXIS 139183 (N.D. Ill. Dec. 5, 2011) (Section 299 did not apply to case filed before the AIA’s passage, but "[t]his district’s prevailing approach is in accord with the Leahy-Smith America Invents Act," thus severing defendants, but noting that court "would have no objection to an agreement among the parties that would allow for the coordination of overlapping discovery to avoid duplication"); Brandywine Communications Tech., LLC v. Apple Inc., No. 6:11-cv-1512, 2012 U.S. Dist. LEXIS 20708 ("[A] recommendation to sever these claims is in full accord with the [AIA.] . . . While the Court finds joinder to be inappropriate, it acknowledges Plaintiff’s concern regarding a unified approach to issues of claim construction and validity of the same Patent. These concerns, however, can be addressed by coordinated case management of the cases with respect to the resolution of truly identical issues, while allowing each Defendant to pursue their defense as they see fit."); Lektron, Inc. v. GE Lighting, Inc., No. 11-cv-413 (N.D. Okla. Mar. 30, 2012) (Section 299, though not strictly applicable, "supports the Court’s holding" for severance, although determining that "all four cases will be consolidated for purposes of claim construction, and the current schedule, including the . . . claim construction hearing, and briefing deadlines shall apply to all four cases"); World Wide Med. Tech. LLC v. Core Oncology, Inc., No. 4:11-cv-614 (N.D. Fla. Apr. 11, 2012) (severing all defendants, but ordering that "[b]ecause it appears that common questions of law are involved in these eight patent infringement cases, the cases shall be consolidated for the purpose of pre-trial matters pursuant to Fed. R. Civ. P. 42(a)").
There are, though, post-AIA cases that buck the idea of coordination, particularly where severance is followed by transfer to multiple districts (i.e., an implicit denial of pretrial consolidation). See, e.g., Body Science LLC v. Boston Scientific Corp., No. 11-C-03619, 2012 U.S. Dist. LEXIS 30948, *21 (N.D. Ill. Mar. 6, 2012) (granting severance, and transferring four of five defendants to four other districts; "Because the court has already concluded that Defendants were misjoined, and because consolidation will not promote judicial economy or efficiency, it exercises its discretion and declines to consolidate the cases.") (citation omitted); Brandywine Communications Tech., LLC v. AT&T Corp., No. 6:12-cv-283, 2012 U.S. Dist. LEXIS 66116 (M.D. Fla. Apr. 25, 2012) (transferring previously severed defendant; "As for judicial economy, although Plaintiff refers to the other three cases involving the same patents-in-suit pending in this Court, this argument is largely foreclosed by the America Invents Act, 35 U.S.C. § 299(b)."). However, whatever succor defendants may have found in the Body Science and Brandywine decisions may prove to be short-lived. Largely, the pragmatic allure of pretrial coordination means that advocates for Section 299’s passage may have won the battle, but not the war.
Two recent decisions bear out this point. The Federal Circuit’s opinion, In re EMC Corp., Misc. No. 100, 2012 U.S. App. LEXIS 9159 (Fed. Cir. May 4, 2012), though "only govern[ing] a number of cases that were filed before the passage of the new joinder provision," id. at *11, nevertheless contained this instructive dicta: "In exercising its discretion [to sever], 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.’" Id. at *24. While the latter part of this statement – regarding consolidation for trial – is admittedly foreclosed by Section 299(b), the first part about consolidation for discovery is not. At least one court has since taken that idea to heart. See Investpic, LLC v. SAS Institute, Inc., No. 10-cv-1028, 2012 U.S. Dist. LEXIS 67564 (D. Del. 2012) (citing In re EMC Corp. and granting severance, but ordering case against severed defendant be "consolidate[d] for all purposes, other than having a joint trial, with the case against the rest of the defendants").
Even if a co-defendant succeeds in severance and transfer, the continued availability of multidistrict litigation under 28 U.S.C. 1407 looms large. "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." In re EMC Corp., at *24. An exquisite opinion issued by an MDL panel -- on which this Bar’s U.S. District Judge Paul Barbadoro sat – only two days prior to In re EMC provided even more support for this principle. See In re: Bear Creek Tech., Inc., (‘722) Patent Litigation, MDL No. 2344 (J.P.M.D.L. May 2, 2012) ("We find that the America Invents Act does not alter our authority to order pretrial centralization of this litigation."). Space limitations preclude a more thorough discussion of Bear Creek, but it is definitely worth a read.
Whether a plaintiff or a defendant, a litigant must remember that Section 299 is only the beginning of the analysis. Severance from an action likely will not be the end of the story.
Zachary Gates is an intellectual property litigation attorney with Burns & Levinson in Boston. This article reflects the personal views of the author.