Like anglers fishing with dynamite, most non-practicing entities, a.k.a. patent trolls, would prefer to target as many defendants as possible in individual patent infringement suits. Multi-defendant cases mean less expense for plaintiffs, and more settlement-inducing headaches for defendants.
That tactic is mostly history now, thanks to anti-joinder rules in the America Invents Act. But because the joinder provisions don’t apply retroactively, there’s still the pesky issue of what do about the flood of multi-defendant cases brought by NPEs just before the AIA became law last September. An East Texas patent fight between an NPE called Lodsys and a host of major IT players could help point the way, with major implications for both plaintiffs and defendants.
In a motion filed on Monday, Lodsys’s lawyers at Kelley Goldfarb Gill Huck & Roth and The Davis Firm urged U.S. District Judge Rodney Gilstrap in Marshall, Tx., to reject a bid by Hewlett-Packard to extract itself from a multi-defendant case that Lodsys brought in February 2011. Gilstrap had already rejected a motion to sever by HP back in March, but HP and its lawyers at DLA Piper urged Gilstrap to reconsider in May, right after the U.S. Court of Appeals for the Federal Circuit handed down a key ruling on the joinder question in a case called In Re: EMC. On July 13 defendant Lexmark and its lawyers at Hayes Bostock & Cronin also filed a motion to sever Lodsys’s claims, again citing EMC. “Surrounded by a circus of other, competing interests, Lexmark’s ability to develop an individual defense is being frustrated,” they wrote.
As we reported, the Federal Circuit held in the EMC case that, to join diverse defendants in an infringement complaint filed pre-AIA, a plaintiff must show that there is “substantial evidentiary overlap in the facts giving rise to the cause of actions against each defendant.” The court largely sided with EMC Corporation and its lawyers at Orrick Herrington & Sutcliffe, who argued that an NPE called Oasis Research shouldn’t be allowed to lump EMC in with other defendants in the same patent suit. That ruling was blow to the hundreds of patent-holders that raced to file infringement complaints before President Obama signed the AIA into law on Sept. 16, 2011. According to Patently-O, 54 new patent cases were filed on Sept. 14, 2011 alone, naming an average of 16 defendants. That’s an all-time high for a single day.
EMC didn’t get everything it wanted, however. It had urged the appeals court to adopt the same joinder standard Congress did in the AIA: accused infringers may be joined in one action only if they sell “the same accused product or process” or, in the alternative, are jointly and severally liable. Instead, the court adopted its less-rigid “substantial evidentiary overlap” test, and put forth a non-exhaustive list of factors judges should weigh in making that determination. The Federal Circuit also made clear that, even where the test isn’t met, district court judges have discretion to join defendants for purposes of discovery, claim construction, and even trial.
In Monday’s brief opposing HP’s motion, Lodsys’ lawyers argued that the analysis Gilstrap used in March when he refused to sever HP from the case is consistent with the EMC decision, so there is no need for him to now reconsider his ruling. Lodsys also seized on the Federal Circuit’s emphasis on judicial discretion, writing that “even if HP’s request for reconsideration is granted, and even if HP is ultimately severed, the severed action against HP and the remaining defendants should be consolidated for discovery and trial.”
Judges may choose to view the “substantial evidentiary overlap” standard set forth by the Federal Circuit as functionally identical to the “same product or service’ test put forth by Congress, or they may push the limits of their discretion to keep holdover multi-defendant cases intact. Lodsys’s complaint against HP (which also names Canon USA, Samsung Electronics, and Brother International, among others) wasn’t filed during the rush to the courthouse before the AIA became law. But Gilstrap’s forthcoming opinion on HP’s renewed motion to sever will undoubtedly influence judges hearing those cases. As the chief judge in the patent litigation-clogged Eastern District of Texas, Gilstrap’s ruling is likely to carry a lot of weight.
Because Gilstrap is new to the bench, It’s tough to predict how he will come down. (Neither Lodsys counsel Chris Huck of Kelley Goldfarb nor DLA Piper’s Brian Erickson, who represents HP, returned calls seeking comment on the joinder spat.) Gilstrap’s predecessor John Ward, who stepped down last year, was known to be territorial about his docket, frequently rejecting requests by defendants to sever claims against them and transfer cases to other jurisdictions.
East Texas has long been viewed as a plaintiffs-friendly district, especially for so-called patent trolls, but defense verdicts there aren’t as uncommon as they once were thought to be. Wielding the Federal Circuit’s EMC ruling, the Lodsys defendants could test that reputation even further.
This article originally appeared in The Am Law Litigation Daily.
