The Eastern District of Texas became a magnet for patent infringement litigation partly because its judges permitted sprawling multi-defendant cases, ensuring settlement-inducing headaches for patent troll targets. Both Congress and the U.S. Court of Appeals for the Federal Circuit recently clamped down on multi-defendant cases, but a new day isn’t exactly dawning for defendants already ensnared in East Texas patent litigation.
Consider a Sherman, TX, infringement suit that Oasis Research LLC brought against a gaggle of Web storage companies, including EMC Corporation and Iron Mountain, back in August 2010. U.S. Magistrate Judge Amos Mazzant declined to sever Oasis’s claims in May 2011, before the Federal Circuit forced him to reconsider in May 2012. On Thursday, Mazzant responded by agreeing to break up Oasis’s claims [PDF] against the 7 remaining defendants, only to consolidate the newly severed cases for all remaining pretrial issues. The judge also delayed a ruling on long-pending motions by the defendants to transfer the claims against them out of the state.
“The severance will have little impact on the case” given the consolidation order, said Craig Smith, a patent litigator at Lando & Anastasi who’s not involved in the case. “The consolidated cases will be managed like a single unsevered case.”
Mazzant’s ruling was likely influenced by an Aug. 10 ruling [PDF] by Leonard Davis, the chief judge in the district. Davis granted motions to sever a case that Norman IP Holdings, LLC brought against more than 20 companies, including Lexmark International Inc. and Xerox Corporation. But like Mazzant, he reconsolidated the severed cases for pretrial purposes.
Davis wrote that he’d soon rule on pending motions to transfer filed by some of the Norman IP defendants. But even if he agrees to transfer some of the defendants to other jurisdictions, he ruled, the transfer orders won’t go into effect until after the crucially important claim construction phase of the case. (East Texas practitioner Michael Smith has a great run-down of Davis’s opinion here).
The new developments are “remarkable” considering how forcefully Congress has opposed plaintiffs lumping together defendants in patent cases, said Craig Smith. Last year’s much-touted patent reform, the America Invents Act, decreed that defendants in patent cases can only be joined in a single action if they are involved in making, using, offering to sell or selling the same accused product or service. The joinder provision was a direct response to district court judges, including a few in East Texas, who refused to sever multi-defendant cases in which the defendants had little in common besides being accused of infringing the same patent.
The joinder provision of the AIA didn’t apply retroactively, however, so patent plaintiffs rushed to the courthouse to file multi-defendant infringement complaints before President Obama signed the AIA into law in September 2011. The same month, EMC and its lawyers at Orrick Herrington & Sutcliffe appealed a February 2011 decision by Judge Mazzant denying their motion to sever the Oasis case. In their writ of mandamus to the Federal Circuit, they urged the court to adopt the “same product or service” test–or something similar–for pre-AIA cases as well.
When the Federal Circuit finally issued its mandamus ruling in May 2012, it didn’t quite give EMC what it wanted, as we reported here. The appellate court agreed with EMC that defendants shouldn’t be joined into one case just because they allegedly infringe the same patent. But the court rejected the rigid “same produce or service” standard in favor a more flexible test, which focuses on whether there is “substantial evidentiary overlap in the facts giving rise to the cause of actions against each defendant.” The court 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. (While that ruling only applies to pre-AIA cases, it’s worth noting that judges can similarly consolidate post-AIA case under Rule 42 of the Federal Rules of Civil Procedure.)
A few weeks ago, we pondered whether East Texas judges would take full advantage of the discretion afforded them by the Federal Circuit. These new rulings suggest that they are doing just that.
“This type of consolidation runs contrary to the spirit of the AIA joinder provision,” said Bijal Vakil, head of White & Case’s Silicon Valley office, who represents Iron Mountain in the Oasis case. Vikal added, however, that he’s “pleased that [Mazzant] reconsidered the joinder issue following the Federal Circuit decision.”
It’s worth noting that not all East Texas judges have caught consolidation fever. On Thursday Judge Michael Schneider, who sits in Tyler, severed [PDF] a massive multi-defendant suit brought by Geotag, Inc. into 54 separate cases. The case is unusual, in that Geotag brought suit against one defendant three days before the AIA went into law, and then later amended its complaint to name more than 50 additional defendants. Schneider decided to apply the AIA joinder provision, but he noted in a footnote that he would have severed the case under the Federal Circuit’s pre-AIA approach as well.
Unlike Mazzant and Davis, Schneider didn’t consolidate the cases. But he reiterated that he would designate a “lead defendant” for briefing and claim construction purposes. One defendant, J. Crew Group Inc., had strongly opposed the lead defendant approach, arguing in a recent motion that it “impinges on the due process rights of unrelated co-defendants, including their rights to make their own defenses and choose their own counsel.”
In his ruling in the Norman IP case, Judge Davis suggested that judges in the district are simply reacting to new challenges thrown up by Congress’s reforms. “In response to the AIA’s joinder provision, plaintiffs now serially file multiple single-defendant (or defendant group) cases involving the same underlying patents. This presents administrative challenges for the Court and, left unchecked, wastes judicial resources by requiring common issues to be addressed individually for each case,” wrote Davis. “This court has limited resources and constantly strives to employ efficient and cost-saving case-management procedures for the benefit of the parties, counsel, and the Court.”
This article originally appeared in The AmLaw Litigation Daily.
