Where a patentee sues multiple unrelated parties in a single case, accused infringers have had mixed success in advancing misjoinder arguments. In In re EMC Corporation, et al., Misc. 100 (Fed. Cir. May 4, 2012), the Federal Circuit addressed the pre-America Invents Act ("AIA") Rule 20 standard for joinder in patent cases. In its opinion, the Federal Circuit held that (1) mandamus is an available remedy for a district court's refusal to sever, (2) Federal Circuit law applies to joinder issues, and (3) joinder requires more than an assertion of a common patent againstsimilar products or processes. The court also noted that consolidation of defendants under Rule 42 or through MDL procedures may still be permissible even if joinder is improper.
On August 30, 2010, Oasis Research sued 18 defendants for patent infringement in the Eastern District of Texas. The patents-in-suit generally concerned off-site computer data storage, and Oasis Research alleged that all 18 defendants offered services that "provide online backup and storage for home or business computer users." Slip Op. at 3.
Arguing misjoinder, certain defendants moved to sever and transfer their respective claims. The magistrate judge denied the motion to sever, finding that (1) the issuesof validity, claim construction, and scope of the patents werecommon to all defendants and (2) the claims arose from the same transaction, occurrence, or series of both because "the accused services were 'not dramatically different.'" The district court adopted the magistrate's findings. The movants filed a petition for writ of mandamus with the Federal Circuit. Id. at 4.
Mandamus Is Proper Vehicle to Address Joinder Issues in Patent Cases
Recognizing that this was an issue of first impression, the Federal Circuit found that mandamus was available to challenge the denial of a motion to sever because the movant lacked an adequate remedy on appeal. Slip. Op. at 5. In reaching this decision, the court reasoned that if joinder was improper, the defendants would not "have a meaningful opportunity to present individualized defenses on issues such as infringement, willfulness, and damages because each defendant will have limited opportunities to present its own defense to the jury." Id. at 7.
Federal Circuit Law Applies to Joinder Issues in Patent Cases
The Federal Circuit also held that its, rather than regional circuit, law applied to the motion to sever "because joinder in patent cases is based on an analysis of the accused acts of infringement, and this issue involves substantive issues unique to patent law." Slip Op. at 5. The court noted that applying Federal Circuit law was particularly appropriate because "Congress has recently adopted a special statute governing joinder in patent cases." Id. at 6. Accordingly, the court rejected the district court's "not dramatically different" standard.
The Rule 20 Joinder Standard Requires More Than a Common Patent and Similar Products
In adopting a new standard, the Federal Circuit looked to Rule 20 for guidance. Slip Op. at 8. Rule 20 requires "(1) the claims against [the defendants]must be asserted 'with respect to or rising out of the same transaction, occurrence, or series of transactions or occurrences,' and (2) there must be a 'question of law or fact common to all defendants.'" Id. at 9 (citing FED. R. CIV. P. 20(a)(2)). The court noted that a common question of law or fact alone is insufficient. Id. at 11. In other words, asserting the same claims of the same patent does not alone satisfy the joinder requirements.
The court then addressed the same transaction-or-occurrence requirement. Id. at 13. The court found that similarity of the accused products alone is not sufficient. Specifically, "independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical." Instead, the following factors must be considered along with product similarity:
1. Whether the alleged acts of infringement occurred during the same time period;
2. The existence of some relationship among the defendants;
3. The use of identically sourced components;
4. Licensing or technology agreements between the defendants;
5. Overlap of the products' or processes' development and manufacture; and
6. Whether the case involves a claim for lost profits.
The court vacated the district court's denial because it inappropriately relied on the "not dramatically different" standard and directed it to reconsider the motion even if joinder is appropriate under these factors.
Consolidation or MDL May Still Be Applicable
The court also noted that even if joinder is improper, a district court may, in its discretion, consolidate cases for pretrial and trial under Rule 42. Additionally, "claim construction and patent invalidity may also be adjudicated together through the multidistrict litigation procedures of 28 U.S.C. § 1407." Slip Op. at 16. Both of these procedures potentially apply to pre- and post-AIA cases. In fact, the United States Judicial Panel on Multidistrict Litigation recently found the AIA did not alter its authority to centralize pretrial issues in patent cases. In re Bear Creek Tech., Inc., MDL No. 2344 at 2 (May 5, 2012).
Conclusion and Practice Considerations
The opinion restricts joinder in pre-AIA patent cases, but given the passage of the AIA, the EMC Corporation opinion will have limited applicability going forward. The most pertinent lesson to be learned is the court's reminder that parties may use MDL procedures even when joinder is improper. Given this reminder and the MDL Panel's opinion, more patentees asserting claims against multiple defendants may use MDLs to consolidate claim construction and invalidity issues in the future.