On May 4, 2012, the Federal Circuit issued a blow to all Non-Practicing Entities who had filed multi-defendant cases in an effort to avoid the joinder requirements of the Leahy-Smith America Invents Act (“AIA”). More specifically, the Federal Circuit held that joinder is not appropriate in multi-defendant patent infringement cases where the only commonality is the alleged infringement of the same patent(s). The decision effectively extends the ban on multi-defendant patent cases to those filed before September 16, 2011, when the AIA was enacted.
The decision is the result of the Federal Circuit granting a writ of mandamus filed by EMC and joined by petitioners Iron Mountain, Carbonite, Go Daddy, Pro Softnet and Oracle. The decision addressed the incorrect joinder test used by the Eastern District of Texas and directs the district court to reconsider severance under the “correct test.”
The Eastern District of Texas applied an incorrect transaction-or-occurrence test, finding joinder proper because the accused services were “not dramatically different” and that questions of validity and claim construction are questions common to all defendants.
Under the correct test, the courts must look to Fed. R. Civ. P. 20 for guidance, which states that defendants may be joined only if (1) claims asserted against them arise out of the same transaction or occurrence, and (2) there is a common question of law or fact. Independent defendants satisfy this test, particularly Part 1, when there is a substantial evidentiary overlap in the facts, not law, giving rise to the cause of action. When different products and processes are involved for each defendant, the accused products are not part of the same transaction unless there is a link between the facts of each infringement claim. Therefore, joinder is improper where the only commonality among the defendants is the alleged infringement of the same patent.
We agree that joinder is not appropriate where different products or processes are involved. Joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent…Claims against independent defendants (i.e., situations in which the defendants are not acting in concert) cannot be joined under Rule 20’s transaction-or-occurrence test unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts.1
1 Slip Op., p. 15.
On remand, the district court may consider the following additional factors to find sufficient links between the accused products and processes:
- Did the infringement occur during the same time period?
- Was there some relationship between the defendants?
- Did the defendants use identically sourced components?
- Were there licensing or technology agreements between the defendants?
- Was there overlap of the development and manufacturing between defendants?
- Was there a claim for lost profits?
The opinion gives the district court discretion to centralize the actions for the purposes of judicial efficiency even if joinder is not permitted under Rule 20. The district court can 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” such as claim construction and validity.
Oasis Research, LLC, a non-practicing entity, asserted four patents against 18 companies in the Eastern District of Texas. Oasis Research, LLC v. Adrive LLC, No. 4:10-cv-435 (E.D. Tex.). The case was filed on August 30, 2010, before the enactment of the AIA. The asserted patents all relate to online backup and storage. The defendants all alleged offer services that provide online backup services. The defendants filed motions to sever and transfer to various venues. The district court denied the defendants’ motions, reasoning that the plaintiff’s patent claims satisfy the transaction-or-occurrence test of Rule 20.
The full text of the opinion is here.