E.D. Texas Applied Wrong Standard for Joinder of Patent Defendants: Fed. Circuit

Eight of eighteen defendants named in a complaint for patent infringement sought a writ of mandamus directing the Eastern District of Texas to sever and transfer claims against the respective defendants to various district courts.  The Federal Circuit partially granted the writ, directing the district court to "determine whether the claims 'aris[e] out of the same transaction, occurrence, or series of transactions or occurrences,' Fed. R. Civ. P. 20(a), under the correct legal standard."  In re EMC Corp., Misc. Docket No. 100 (Fed. Cir. May 4, 2012).

The patents at issue were generally directed to cloud computing services that all defendants were alleged to offer in one way or another.  The defendant petitioners argued that “because there was no concert of action, the claims against them did not arise out of the same transaction or occurrence, as required by Rule 20 of the Federal Rules of Civil Procedure.”  The plaintiff's counter-argument was simply that patent claims covered a wide range of technologies and the defendants all offered “similar” services that were alleged to infringe the patent claims.

The magistrate judge had held that the claims all arose out of the same transaction or occurrence “because the accused services were 'not dramatically different.'”  The magistrate judge also noted that severance would require trial of the same issues, e.g., claim construction, invalidity, etc. in a multitude of venues.

Chief Judge Rader's opinion first noted that Federal Circuit, and not Fifth Circuit, law applied because the question of joinder implicated substantive patent law issues.  Judge Rader then concluded that mandamus was an available remedy because if joinder was improper, the defendants had no other means of obtaining relief before their cases were tried together.  Further, the mandamus petition was not covered by the new anti-joinder provision in the America Invents Act, 35 USC § 299, because that provision was not retroactive.  Therefore, this decision will govern only cases filed before the America Invents Act became effective.

The Court then turned to the question of whether severance was appropriate under Federal Rule of Civil Procedure 21, noting that courts typically looked to the definition of persons who may be joined in Rule 20 when considering motions to sever.  Rule 20 could be satisfied by a “joinder of claims arising from a 'series of transactions or occurrences'—a single transaction is not required.”  Further, defendants who are separate and independent actors can be joined so long as their alleged conduct is part of the same occurrence or series of occurrences.  However, courts have generally agreed 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.”  Likewise, by analogy, the “logical relationship” test for compulsory joinder of counterclaims under Rule 13 was similar to the “same transaction or occurrence” test.

Here, “the 'not dramatically different' standard used by the district court” required no more than that accused products be similar enough to infringe the same patent claims.  The district court's standard was not consistent with the foregoing great weight of authority requiring a “logical relationship” to find claims arose from the “same transaction or occurrence.”  As the Federal Circuit explained:

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. But the sameness of the accused products or processes is not sufficient. 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. To be part of the “same transaction” requires shared, overlapping facts that give rise to each cause of action, and not just distinct, albeit coincidentally identical, facts. 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, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.

A final coda should give pause to anyone inclined to overstate the impact that this case may have on patent infringement suits filed before the America Invents Act took effect.  The Federal Circuit advised that “the district court should keep in mind that even if joinder is not permitted under Rule 20,” it “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.'  Fed. R. Civ. P. 42(a).”  Moreover, and particularly interestingly in light of the Judicial Panel on Multidistrict Litigation's recent opinion in In re Bear Creek Technologies, Inc., the Federal Circuit also noted that “[c]ommon pretrial issues of claim construction and patent invalidity may also be adjudicated together through the multidistrict litigation procedures of 28 U.S.C. § 1407.”

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