by Christopher W. Kennerly
The new joinder and consolidation provisions contained in the Leahy-Smith America Invents Act (Pub. L. No. 112-29) raise a number of strategic issues-and they are likely to result in a significant geographic redistribution of patent cases.
Patent plaintiffs have overwhelmingly favored certain venues, such as the Eastern District of Texas. This stems, in part, from certain districts' former liberal interpretation of the permissive joinder rule (F.R. Civ. P. 20), under which a plaintiff could join multiple defendants in a single lawsuit by accusing them of infringing a common patent. (See Better Educ., Inc. v. Einstruction Corp.
, 2010 WL 918307 (E.D. Tex. Mar. 10, 2010).) The new rules are Congress's attempt to rein in forum shopping in these cases.
Leahy-Smith, which took effect in September of 2011, effectively abrogates the expansive interpretation of this rule in patent cases. A plaintiff can no longer join defendants based solely on allegations that they infringe a common patent. Instead, the plaintiff must demonstrate a "common question of law or fact" as well as a true "transaction or occurrence" between the defendants, which must be more than infringement of the same patent. Congress also narrowed the consolidation rule in patent cases. (See 35 U.S.C. § 299(b).)
Although the Eastern District of Texas continued applying its pre-act interpretation to cases filed before the statue's effective date (see Imperium (IP) Holdings, Inc. v. Apple, Inc.
, 2012 WL 461775, *3 n.2 (E.D. Tex. Jan. 20, 2012)), the Federal Circuit has held that this interpretation constitutes an abuse of discretion. (See In re EMC Corp.
, 677 F.3d 1351 (Fed. Cir. 2012).) With regard to cases filed after the statute's effective date, one court has found that the new provisions do not forbid joinder of two defendants when the same accused product is at issue and one defendant provided the product to the other. (See Omega Patents, LLC v. Skypatrol, LLC
, 2012 WL 2339320, at *2 (S.D. Fla. June 19, 2012).) Another court held that the above scenario is sufficient for joinder even if there is no commonality between the defendants with regard to additional accused products. (See Motorola Mobility, Inc. v. Tivo, Inc.
, 2012 WL 2935450, at *2 (E.D. Tex. Jul. 18, 2012).)
The new rules offer a number of potential benefits to patent defendants. For example, a defendant can move for misjoinder and attempt to transfer its resulting individual case to a more convenient district. That strategy could be advantageous, resulting in more favorable procedural rules, regional law, and jury pools, along with the economic and possible strategic benefit of litigating closer to home. But there is a downside. A severed defendant will likely still need to coordinate its defenses with the other original defendants, wherever their cases end up being litigated, which could add to the complexity and overall cost of litigation.
A defendant can also move for misjoinder but leave the resulting individual case in the same district. Although this eliminates the potential benefits of transfer, it also makes defense coordination simpler and more cost-effective.
Remember also that a defendant can accept consolidation for pretrial purposes but still move for a separate trial. This may present the best of both worlds: the efficiencies of pretrial consolidation without the potential prejudice from having individual liability issues tried along with those of other, potentially dissimilar defendants.
Strategy for Plaintiffs
Although the rules offer new options for the defense, plaintiffs still generally retain a powerful advantage: They get to select the venue where the battles will be fought. To effectively leverage this, a plaintiff should take care to choose a forum it can credibly argue is convenient for the defendants as well, even if the chosen district would not otherwise be the plaintiff's first choice. Otherwise a plaintiff risks a ruling that its case-or parts of it relating to certain defendants-should be transferred to a less favorable forum. In every case, a smart plaintiff will group defendants on a basis that offers more foundation than mere alleged infringement of a common patent.
More than ever, parties to patent cases need to carefully consider their pre- and post-filing strategies. Over time, certain courts-including perhaps several in California-will see a significant change in their patent dockets as cases migrate to the districts most defendants call home.
Chris Kennerly heads the intellectual property department in the Palo Alto office of Baker Botts.