Accused infringers who share Groucho Marx's membership philosophy won't mind that, when it comes to joinder, it just got harder to get in with the in-crowd. In In re EMC Corporation, the Federal Circuit overruled a district court decision that allowed the joinder of unrelated defendants in a patent infringement action because the accused systems were "not dramatically different." Instead, the EMC court said joinder of unrelated infringers is governed by a logical relationship test which requires that there be a substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant. The result? Motions to sever and transfer just became patent law's best new place to make frenemies.
The patents at issue in EMC covered methods for allowing home computer users to connect remotely to a fee-based on-line data storage and processing system. Patent holder Oasis Research filed a single complaint in the Eastern District of Texas that alleged patent infringement against eighteen individual companies. According to Oasis' complaint, all the defendants provide some kind of infringing system of on-line back-up storage and services.
Eight of the eighteen defendants brought a motion to sever and transfer. They 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 magistrate judge who first heard the motion disagreed. The magistrate found that common questions predominated for all defendants on validity, claim construction and the scope of the involved patents, and that joinder was proper because the alleged infringing services the defendants provided were "not dramatically different." Adopting the magistrate's findings, the district court denied the defendants' motion.
Those defendants then sought review on a writ of mandamus. Accepting review, the Federal Circuit said the district court's test was wrong because the existence of a single common question of law or fact is insufficient to satisfy the transaction or occurrence requirement of Rule 20.
Instead, the EMC court said independent defendants satisfy the transaction-or-occurrence test of Rule 20 only when there is a logical relationship between the separate causes of action. To meet the logical relationship test, there must be substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant and the allegedly infringing acts giving rise to those individual claims must share an aggregate of operative facts. Additionally, 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. The court did say though that even if joinder isn't appropriate, district courts still have considerable discretion to consolidate cases for discovery and trial.
The Federal Circuit made clear, however, that its ruling only applied to cases filed before the passage of the recently enacted America Invents Act. That Act provides that accused infringers may be joined in one action as defendants (or have their actions consolidated for trial) only if the allegations of infringement arise out of the same transaction or occurrence, or series of transactions or occurrences relating to the making, using, and/or importing of the same accused products or processes. The Federal Circuit explained that while the petitioning defendants argued that joinder would be improper under both the old rules and the new America Invents Act rules, they properly refrained from arguing that the Act controlled in this case. As the court explained, nothing in the Act dictated that it be given retroactive effect.
Still, parties on either side of an America Invents Act joinder dispute will surely try to friend the EMC decision. Plaintiffs trying to keep defendants in the same circle will need to focus on overlapping facts and situations where the defendants are somehow related or using similar parts in their products. Keeping that ol' gang together will be a lot harder though if the defendants don't meet up under the decision's logical relationship test. To avoid a complete accused infringer unfriending, plaintiffs may have to fall back on MDL provisions to try to consolidate discovery and issues as much as possible. On the other hand, accused infringers may find snobbery the best way to avoid joinder by pointing out that, when it comes to the other co-defendants, the claims asserted against them are, well, just N.O.K.D. (Not Our Kind, Dear).
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