WLF Legal Opinion Letter

Court Imposes Stricter Test For Joinder Of Patent Suit Claims

By Beth Z. Shaw
June 22, 2012 (Vol. 21 No. 13)

In In re EMC Corporation, the United States Court of Appeals for the Federal Circuit vacated an Eastern District of Texas ruling on severance and joinder of multiple defendants in a patent infringement case. The Federal Circuit directed the district court to reconsider the motions in light of a correct test for joinder under Rule 20 of the Federal Rules of Civil Procedure. The correct test, the court held, requires that underlying acts of infringement be part of the same transaction. Independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.

The defendants in the case offer services that provide online computer backup and storage. The defendants sought orders to sever and transfer the claims against them to more appropriate venues, arguing that the claims did not arise out of the same transaction or occurrence, as required by Rule 20.

The district court had adopted the magistrate judge's finding that there was nothing improper about maintaining these claims in one action in the Eastern District of Texas, holding that "[c]laim validity, claim construction, and the scope of the four patents . . . are questions common to all Defendants in this case."  Oasis Research, LLC  v. ADrive, LLC, No. 4:10-CV-435, 2011 WL 3099885, at *3 (E.D. Tex. May 23, 2011). Moreover, the claims "ar[ose] out of the same transaction, occurrence, or series of transactions or occurrences," according to the magistrate judge, because the services were "not dramatically different." Id. at *2. 

Recently, Congress addressed the issue of joinder in patent cases in section 19 of the Leahy-Smith America Invents Act, which was signed into law just days after the mandamus petition in In re EMC Corp. was filed. See Leahy-Smith America Invents Act, Pub. L. No. 112-29, sec. 19(d), sec. 299, 125 Stat. 284, 332-33 (2011) (to be codified at 35 U.S.C. sec. 299) (providing in relevant part that accused infringers may be joined in one action as defendants or have their actions consolidated for trial only if the allegations of infringement "aris[e] 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").    

The new provision is not retroactive, however, and applies only "to any civil action commenced on or after the date of the enactment of th[e] Act."  Leahy-Smith America Invents Act sec. 19(e), 125 Stat. at 333. After noting this fact, the Court proceeded to thoroughly examine the origins of Rule 20 and the history of joinder in patent cases. The Federal Circuit determined that the mere fact that infringement of the same claims of the same patent is alleged does not support joinder, even though the claims would raise common questions of claim construction and patent invalidity. The court noted that other district courts other than the Eastern District of Texas have generally agreed in cases involving patent, copyright, and trademark law.

The defendants' acts that give rise to the individual claims of infringement must share an "aggregate of operative facts." In rejecting the district court's test (which required merely that the services are "not dramatically different"), the Federal Circuit explained that the district court's test appeared to require little more than the existence of some similarity in the allegedly infringing products or processes, which is not enough for joinder.

The Federal Circuit held that joinder is not appropriate where different products or processes are involved. Instead, joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent. Yet, importantly, the sameness of the accused products or processes is still not sufficient for joinder. Claims against independent defendants (that is, 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, and not just distinct, although coincidentally identical, facts. 

In other words, even the sameness of the accused products is not enough to establish that claims of infringement arise from the "same transaction." Unless there is an actual link between the facts underlying each claim of infringement, the Federal Circuit explained, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.  

In addition to finding that the same product or process is involved, factual considerations to establish joinder include: whether the alleged acts of infringement occurred during the same time period, the existence of some relationship among the defendants, the use of identically sourced components, licensing or technology agreements between the defendants, overlap of the products' or processes' development and manufacture, and whether the case involves a claim for lost profits. 

The Federal Circuit noted that improper joinder raises issues of fairness, because improper joinder prevents defendants from a meaningful opportunity to present individualized defenses on issues such as infringement, willfulness, and damages.

In concluding the opinion, however, the Federal Circuit noted that even if joinder is improper under Rule 20, a district could consolidate cases for discovery and trial under Rule 42 where venue is proper and there is only "a common question of law or fact."  Fed. R. Civ. P. 42(a). The Federal Circuit also noted that common pretrial issues of claim construction and patent invalidity may also be adjudicated together through the multidistrict litigation procedures of 28 U.S.C. sec. 1407. Further, the Federal Circuit observed that a district court may also exercise discretion to deny joinder even when Rule 20 is satisfied, for example because in a complicated patent litigation a large number of defendants might prove unwieldy, such as when different witnesses and documentary proof would be required. 

The court did not decide whether the America Invents Act's joinder provision at 35 U.S.C. sec. 299 changes the test for joinder of defendants in patent infringement actions, and explained that the court's approach to the new provision is not dictated by this case.

While the patent bar must await another case that results in decision on the sameness test in the new legislation, defendants may likely avoid joinder under Rule 20 based on the current sameness test, which requires a much higher burden of proof for plaintiffs to join multiple defendants who have not acted in concert--even if those defendants have developed similar or "coincidentally identical" products or services.

Beth Z. Shaw is an attorney in the Washington, D.C. law firm Brake Hughes Bellermann LLP.