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Reconciling Joinder and Consolidation Under the Federal Rules of Civil Procedure and Under the America Invents Act

BNA’s Patent, Trademark & Copyright Journal
December 7, 2012

Kabakoff, Stephen E., Bower, R. Bruce

Article

Authored by R. Bruce Bower and Stephen E. Kabakoff

The Leahy-Smith America Invents Act substantially revised many aspects of U.S. patent law. In one provision, the AIA created a new joinder statute at 35 U.S.C. § 299. This provision was intended to "address[] problems occasioned by the joinder of defendants (sometimes numbering in the dozens) who have tenuous connections to the underlying disputes in patent infringement suits." H. Rep. No. 112-98, Part 1, at 54. To that end, the joinder statute makes it more difficult for a plaintiff to join multiple defendants in a single patent infringement action or to consolidate multiple patent infringement actions for trial. Id.; 35 U.S.C. § 299.

Since taking effect on Sept. 16, 2011, the joinder statute has impacted how patent infringement cases are being filed in federal district courts. Rather than filing a single suit naming multiple defendants, plaintiffs have been filing multiple lawsuits, often in the same court, each accusing a different party of infringing the same patent or patents.

The filing of multiple lawsuits on the same patent or patents since enactment of the joinder statute has created an administrative dilemma for district courts. On the one hand, the multiple suits share common legal issues including, for example, claim construction, validity, and enforceability of the asserted patents, suggesting that adjudicating the related cases in a single action would ease judicial administration and reduce the possibility of inconsistent determinations. On the other hand, consolidating the separately filed lawsuits appears at odds with the joinder statute's stated objective of preventing parties from being joined in a single action "based solely on allegations that they each have infringed the patent or patents in suit." 35 U.S.C. § 299(b).

This dilemma leads to potential conflict between the joinder statute, which is specific to patent cases, and preexisting joinder and consolidation rules Fed. R. Civ. P. 20(a)(2) and 42(a), which apply to all cases. Courts are having to reconcile the new statute and these rules in managing their patent case load, such that defendants accused of infringing the same patent or patents in a district court may find it easier to avoid joinder and have their own lawsuit, but find it harder to avoid pretrial consolidation.

I. Joining Defendants in a Single Patent Infringement Action

One of the primary reasons that Congress enacted the joinder statute was to end "the abusive practice of treating as codefendants [in patent infringement actions] parties who make completely different products and have no relation to each other." 157 Cong. Rec. H.4426 (daily ed. June 22, 2011) (statement of Rep. Robert W. Goodlatte (R-Va.)). Before the statute, some district courts had liberally permitted party joinder under Fed. R. Civ. P. 20(a)(2). See H. Rep. No. 112-98, Part 1, at 55 n.61. Nonpracticing entities, in particular, often took advantage of this rule to sue unrelated parties for infringement of the same patent or patents, resulting in limited opportunities for each defendant to present individualized positions on issues such as infringement, willfulness, damages, and discovery. See, e.g., Wiav Networks LLC v. 3Com Corp., No. 3:10-cv-03448-WHA, at *2 (N.D. Cal. Oct. 1, 2010). The joinder statute was intended to discourage these multidefendant patent actions by imposing heightened requirements for party joinder relative to Rule 20(a)(2).

On their faces, Rule 20(a)(2) and the joinder statute appear to employ different criteria for determining when multiple defendants may be joined in a single patent infringement action. According to Rule 20(a)(2), joinder of defendants requires a two-part analysis. Specifically, joinder is appropriate under this rule if "(A) any right to relief is asserted against [the defendants] jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action." Fed. R. Civ. P. 20(a)(2).

Although similar to Rule 20(a)(2), the language in the joinder statute differs in a couple significant ways. Both Rule 20(a)(2) and the joinder statute permit joinder of defendants who are accused "jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences." The joinder statute, however, additionally includes a requirement that the same transaction(s) or occurrence(s) must relate to "the same accused product or process." 35 U.S.C. § 299(a). And whereas Rule 20(a)(2) permits joinder when any question of "law or fact" is common to all defendants, the joinder statute only permits joinder for common "questions of fact." Id. These differences are emphasized in the table below. 

Rule 20(a)(2)

Joinder Statute

(A) any right to relief is asserted against [the defendants] jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and

(B) any question of law or fact common to all defendants will arise in the action.

(1) any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product or process; and

(2) questions of fact common to all defendants or counterclaim defendants will arise in the action.

Despite these differences, the U.S. Court of Appeals for the Federal Circuit has recently interpreted the phrase "the same transaction, occurrence, or series of transactions or occurrences" in Rule 20(a)(2) so that, in the context of patent-infringement actions, it is essentially coextensive with the "same accused product or process" and "questions of fact" requirements of the joinder statute, without directly addressing that statute. In re EMC Corp., 677 F.3d 1351, 100 USPQ2d 1539 (Fed. Cir. 2012) (84 PTCJ 54, 5/11/12).

A. "Same Accused Product or Process" Requirement
In In re EMC, the Federal Circuit addressed "under what circumstances is the joinder of independent actors permissible under Rule 20." 677 F.3d at 1357. Prior to the joinder statute, Oasis Research LLC filed a complaint in the Eastern District of Texas alleging that eighteen different companies infringed four of its patents. Id. at 1353. Eight of the defendants moved the district court to sever and transfer the patent infringement claims against them, arguing that they were misjoined because there was no concert of action and, thus, "the claims against them did not arise out of the same transaction or occurrence" as required by Rule 20(a)(2). Id. The court denied their motions. Id. On appeal, however, the Federal Circuit vacated the district court's order and held that the district court had applied an incorrect standard for determining joinder. Id. at 1360.

In analyzing the standard for joinder, the Federal Circuit found that joinder under the federal rules requires that each defendant is accused of infringement based on the same product or process, i.e., the "same accused product or process" requirement in the joinder statute. Specifically, the court held that the transaction-or-occurrence requirement of Rule 20(a)(2) requires a "sameness of the accused products or processes." Id. At 1359. For example, the court held that "[j]oinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent," and that "joinder is not appropriate where different products or processes are involved." Id. In this manner, the Federal Circuit interpreted Rule 20(a)(2) as essentially requiring a "same accused product or process" as recited in the joinder statute.

The Federal Circuit noted, however, that because the timing of In re EMC predated the AIA legislation, it "need not decide whether the sameness test in the new legislation is identical to the sameness test we adopt here for cases not covered by the new legislation." Id. at 1360 n.4. Despite this qualification, district courts have not been applying different "sameness tests" in pre- and post-AIA patent infringement cases. Rather, courts appear to view the In re EMC rationale as applying to joinder under both Rule 20(a)(2) and the joinder statute.

For example, at least one district court recently found that "the In re EMC court's analysis of what constitutes a common transaction or occurrence under Rule 20(a)(2) is persuasive regarding interpretation of the same language in the AIA." Order Granting Defendant Elavon's Motion to Sever at 3, Swipe Innovations LLC v. Elavon Inc., No. 9:12CV-40 (E.D. Tex. Aug. 14, 2012); see also Order at 3 n.4, Smartfit Solutions LLC v. Pacemaster LLC, No. 6:11-CV-487-LED (E.D. Tex. Sept. 27, 2012). Another court observed that "[a]lthough the Federal Circuit has yet to directly address 35 U.S.C. § 299, [the In re EMC decision] explains the requirements for joinder under Rule 20 and prophesizes the reasoning that the Federal Circuit would likely use in the future to address the new statute." Order Granting Motion to Dismiss or Sever for Misjoinder at 4, Digitech Image Technologies LLC v. Agfaphoto Holding GmbH, No. 8:12-cv-1153-ODW (C.D. Cal. Oct. 1, 2012); Order Granting in Part Motions to Sever and Transfer at 3, Golden Bridge Technology v. Apple Inc., No. 2:12-cv- 4014-ODW (C.D. Cal. Sept. 11, 2012).

Indeed, various courts have relied on the Federal Circuit's In re EMC decision when determining issues of party joinder in cases subject to the joinder statute. See, e.g., Order Granting Defendant Elavon's Motion to Sever, Swipe Innovations LLC v. Elavon Inc., No. 9:12CV-40 (E.D. Tex. Aug. 14, 2012); Memorandum Opinion, IPVenture Inc. v. Acer Inc., No. 11-588-RGA (D. Del. July 24, 2012); Order Granting Motion to Dismiss or Sever for Misjoinder, Digitech Image Technologies LLC v. Agfaphoto Holding GmbH, No. 8:12-cv- 1153-ODW (C.D. Cal. Oct. 1, 2012).

Whether a transaction, occurrence, or series of transactions or occurrences satisfies the "same accused product or process" requirement of Rule 20(a)(2) and the joinder statute is fact dependent. For example, in IPVenture Inc. v. Acer Inc., the court found that "[t]he fact that [the accused products] generally have the same components and the same functionalities does not mean that they are 'the same in respects relevant to the patent.'" Memorandum Opinion at 4, IPVenture Inc. v. Acer Inc., No. 11-588-RGA. The court also found that the accused products' compliance with an industry standard alone, without a connection between the standard and the alleged infringement, was not enough "sameness" to support joinder of the defendants. Id. at 5.

In another post-AIA case, the court did not permit joinder of a manufacturer and a retailer of the same accused product. Order Granting Motion to Dismiss or Sever for Misjoinder at 6-7, Digitech Image Technologies, No. 8:12-cv-1153-ODW. The court reasoned that the requirement of a "same accused product or process" was not satisfied because a sale of the accused product from the manufacturer to the retailer was not part of the same transaction, occurrence, or series of transactions or occurrences as a subsequent downstream sale of the product by the retailer. Id.

It is unclear how courts may apply the "same accused product or process" requirement of Rule 20(a)(2) and the joinder statute in other situations, such as where defendants are accused of contributing different parts to the same accused product, or where defendants manufacture or sell different models or versions of the same accused product. But after In re EMC, the analysis of those situations should be the same under either Rule 20(a)(2) or the joinder statute.

B. "Questions of Fact" Requirement
Although Rule 20(a)(2) specifies that joinder is permissible when "any question of law or fact common to all defendants will arise in the action" unlike the joinder statute, the Federal Circuit interpreted the transaction-or-occurrence requirement in Rule 20(a)(2) as limiting party joinder to defendants that share common "questions of fact" in patent cases. As a result, the Federal Circuit has interpreted this passage of Rule 20(a)(2) to be the same as codified in the joinder statute. 35 U.S.C. § 299(a).

More particularly, the Federal Circuit held that "[c]laims 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," i.e., each joined defendant shares common questions of fact. In re EMC, 677 F.3d at 1359. The court also recognized that defendants acting in concert necessarily share common questions of fact, finding that "[i]t is clear that where defendants are alleged to be jointly liable, they may be joined under Rule 20 because the transaction-or-occurrence test is always satisfied," i.e., they share the requisite operative facts. Id. at 1356. The Federal Circuit identified several "factual considerations" that may be used to judge whether there is a commonality of operative facts among several defendants.1 Id. at 1359-60.

In addition, the Federal Circuit's interpretation of Rule 20(a)(2) precludes party joinder based solely on common questions of law relating to the fact that multiple defendants are accused of infringing the same patent. Id. at 1357 ("In the present context 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"). This interpretation of Rule 20(a)(2) is codified in Section (b) of the joinder statute. 35 U.S.C. § 299(b).

In short, the Federal Circuit's interpretation of Rule 20(a)(2) in In re EMC corresponds with the new joinder provisions in Sections (a) and (b) of the Joinder Statute. While the court expressly did not address or interpret the joinder statute, it appears unlikely following In re EMC that circumstances could arise satisfying the joinder statute but not Rule 20(a)(2) or vice versa. As a result, recent cases from district courts have not distinguished joinder under the joinder statute and Rule 20(a)(2).2 And, likewise, courts have not had to decide whether the joinder statute directly conflicts with and/or supersedes Rule 20(a)(2) in patent infringement cases.3

II. Consolidating Patent-Infringement Cases

Rule 42(a) governs when multiple patent-infringement cases may be consolidated in a single action. This rule broadly states that "[i]f actions before the court involve a common question of law or fact, the court may . . . consolidate the actions." Fed. R. Civ. P. 42(a). In contrast, the Joinder Statute more narrowly requires that "parties that are accused infringers may . . . have their actions consolidated for trial" "only if" the same limitations for joinder are satisfied, i.e., the "same accused product or process" and common "questions of fact" requirements discussed above. Unlike Rule 20(a)(2), the Federal Circuit has not interpreted Rule 42(a) to indicate whether its scope is coextensive or conflicts with the joinder statute.

In practice, courts in post-AIA patent cases have typically been applying Rule 42(a)—rather than the joinder statute—as their basis for consolidating pretrial proceedings of potentially case dispositive issues, such as claim construction and summary judgments. See, e.g., Consolidation Order at 2, ROY-G-BIV Corp. v. ABB Ltd., No. 6:11-CV-622-LED (E.D. Tex. Oct. 1, 2012)4; Order Consolidating Cases for Pretrial Purposes and Granting Defendants' Motions to Dismiss Plaintiff's Second and Third Claims for Relief at 5, Medsquire LLC v. Compulink Business Systems Inc., No. 2:11-cv-10122-JHNPLAx (C.D. Cal. May 16, 2012); Order Consolidating Cases for Pretrial Purposes Up to and Including Claim Construction at 4, Ameranth Inc. v. Pizza Hut Inc., No. 3:11-cv-01810-JLS-NLS (S.D. Cal. Oct. 4, 2012); cf. Memorandum Decision and Order at 3; C.R. Bard Inc. v. Medical Components Inc., No. 2:12-cv-00032-TS-EJF (D. Utah July 25, 2012) (post-AIA case denying consolidation based on Rule 42(a)); Memorandum and Order at 1, PB&J Software LLC v. Acronis Inc., No. 4:12-CV- 690-SNLJ (E.D. Mo. Oct. 10, 2012) (same).

Although courts have been applying Rule 42(a) for pretrial consolidation, such consolidation also must satisfy the requirements of the joinder statute. As a general rule, Congress may enact a federal statute that supersedes or modifies a prior inconsistent federal rule, provided that the congressional intent is clear.5 See, e.g., 1 JAMES WILLIAM MOORE, MOORE'S FEDERAL PRACTICE – CIVIL § 1.06 (3d ed. 2012). In this case, the legislative history indicates that Congress intended the later-enacted joinder statute to address "consolidation under Rule 42." H. Rep. No. 112-98, pt. 1, at 54. This suggests a congressional intent that the new joinder statute supersede or modify the consolidation provisions under Rule 42(a). This is further supported by Sen. Jon L. Kyl's (RAriz.) comments regarding the joinder statute, noting that "[i]f a court that was barred from joining defendants in one action could instead simply consolidate their cases for trial under rule 42, [the joinder statute's] purpose . . . would be undermined." 157 Cong. Rec. S5429 (daily ed. Sept. 8, 2011) (statement of Sen. Kyl).

To reconcile the different requirements for consolidation under the Joinder Statute and Rule 42(a), at least one court reasoned that "the America Invents Act remains silent on pre-trial consolidation" and concluded that "the AIA does not affect the authority of a court to order pre-trial consolidation of related patent cases" under Rule 42(a). Memorandum Decision and Order at 2, C.R. Bard Inc. v. Medical Components Inc., No. 2:12- cv-00032-TS-EJF (D. Utah July 25, 2012) (emphasis in original). Others have similarly noted that "courts that consolidate multiple, single-defendant cases will be able to do so only for pretrial purposes, as the AIA Joinder Provision strictly precludes 'consolidation for trial.'" Maya M. Eckstein et al., The (Unintended) Consequences of the AIA Joinder Provision, AIPLA Spring Meeting Course Materials, Austin, Texas, May 10-12, 2012, at 11. Thus, courts in post-AIA patent cases that have consolidated pretrial proceedings under Rule 42(a) have—at least implicitly—interpreted the term "consolidation for trial" in the Joinder Statute as permitting pretrial consolidation.

The recent surge of consolidations of pretrial proceedings in post-AIA cases is consistent with pretrial consolidations commonly employed in multidistrict patent litigations. For instance, the federal Multidistrict Litigation statute permits "consolidated pretrial proceedings" "[w]hen civil actions involving one or more common questions of fact are pending in different districts." 28 U.S.C. § 1407(a). The U.S. Judicial Panel on Multidistrict Litigation routinely relies on this statute to centralize related patent cases for consolidation of pretrial issues only. See, e.g., Transfer Order, In re: TR Labs Patent Litigation, No. 2396 (J.P.M.L. Oct. 1, 2012); Transfer Order, In re: Body Science LLC Patent Litigation, No. 2375 (J.P.M.L. Sept. 10, 2012); Corrected Transfer Order, In re: Maxim Integrated Products Inc. Patent Litigation, No. 2354 (J.P.M.L. June 11, 2012); see also Memorandum and Order at 3 n.1, PB&J Software LLC v. Acronis Inc., No. 4:12-CV-690-SNLJ (E.D. Mo. Oct. 10, 2012).

The U.S. Judicial Panel on Multidistrict Litigation has found that "[t]he plain meaning of the AIA's joinder provision simply does not implicate Section 1407 transfer" with respect to its authorization to centralize multiple patent actions for "consolidated pretrial proceedings." Transfer Order at 3, In re: Bear Creek Technologies Inc. Patent Litigation, No. 2344 (J.P.M.L. May 2, 2012). Whereas "Section 299(b) [the Joinder Statute] focuses on consolidation for trial," "Section 1407 [the Multidistrict Litigation Statute] applies to pretrial proceedings, which necessarily must conclude before an action proceeds to trial." Id. Accordingly, the current practice of consolidating patent cases for adjudication of pretrial issues only does not appear to conflict with similar pretrial consolidations used in multidistrict litigations.

III. Conclusion

The new joinder limitations in the joinder statute and the Federal Circuit's recent interpretation of Rule 20(a)(2) in In re EMC Corp. should enable defendants to successfully challenge joinder more easily in patent cases subject to the AIA. On the other hand, courts have recently found that the joinder statute "has resulted in a significant increase in the number of 'serially' filed patent cases" that burdens the courts' dockets. See, e.g., Consolidation Order at 1-2, ROY-G-BIV Corp. v. ABB, Ltd., No. 6:11-CV-622-LED (E.D. Tex. Oct. 1, 2012). For purposes of judicial economy and case management, courts appear to construe the joinder statute such that its restrictions on consolidated actions "for trial" do not preclude consolidation of pretrial issues under Rule 42(a), consistent with multidistrict litigations. Consequently, defendants in post-AIA cases accused of infringing the same patent or patents in a district court may find it easier to avoid joinder, but harder to avoid pretrial consolidation.

While the joinder statute's effects on joinder and consolidation are apparent, it is less clear how well the statute is realizing its objectives. The willingness of district courts to consolidate related patent cases for pretrial proceedings arguably has not changed the pre-AIA status quo leading up to trial, other than increasing the plaintiff's costs for filing multiple complaints rather than a single complaint and possibly responding to several pre-consolidation motions. The fact that plaintiffs continue to sue multiple defendants in separate lawsuits suggests that these increased costs have not been a significant deterrent. The effectiveness of the joinder statute also may be diminished by plaintiffs who sue multiple defendants with a strategy of settling before trial, thus only desiring to participate in the consolidated pretrial proceedings.

On the other hand, for those consolidated proceedings that are later severed and proceed as separate trials, it remains to be seen if the joinder statute's restrictions on "consolidation for trial" will effectively dissuade plaintiffs from incurring the costs of multiple trials on the same patented technology and preserve defendants' ability to benefit from individualized positions in separate trials.

Endnotes
1 The Federal Circuit found that "to determine whether the joinder test is satisfied, pertinent factual considerations include [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." In re EMC, 677 F.3d at 1359—60.

2 Although its legislative history indicates that the joinder statute "legislatively abrogates the construction of Rule 20(a)" adopted in a minority of jurisdictions, H.Rep. No. 112-98, pt. 1, at 55 n.61, the Federal Circuit's subsequent interpretation of Rule 20(a)(2) in In re EMC suggests that this rule is coextensive with the joinder statute, avoiding the need for conflict-of-law analysis.

3 Where a later-enacted federal statute is inconsistent with a federal rule, "the statute takes precedence and is deemed to supersede or modify the conflicting rule, provided that the congressional intent is clear. If it is unclear, the courts will strive to construe the statute in harmony with the rule to the extent possible." 1 JAMES WILLIAM MOORE, MOORE'S FEDERAL PRACTICE – CIVIL § 1.06 (3d ed. 2012).

4 The district court in the Eastern District of Texas, in particular, has been notably active in consolidating related post- AIA cases for adjudication of pretrial issues other than venue.

5 Conversely, the Rules Enabling Act, 28 U.S.C. §§ 2071- 2077, allows the Supreme Court to promulgate "rules of practice and procedure" that supersede prior inconsistent federal statutes, provided that "[s]uch rules shall not abridge, enlarge or modify any substantive right." 28 U.S.C. § 2072(b); Henderson v. United States, 517 U.S. 654, 656 (1996). Supersession under the Rules Enabling Act, however, does not apply to the joinder statute because the joinder statute was enacted after Rules 20(a)(2) and 42(a) went into effect. Moreover, the Federal Circuit has found that "joinder [and implicitly consolidation] in patent cases is based on an analysis of the accused acts of infringement, and this issue involves substantive issues unique to patent law." In re EMC, 677 F.3d at 1354. By this rationale, supersession under the Rules Enabling Act would not apply to these substantive—rather than procedural—issues in the joinder statute.

Reproduced with permission from BNA’s Patent, Trademark & Copyright Journal, Vol. 85, No. 2092, 12/7/2012. Copyright © 2012 The Bureau of National Affairs, Inc. (800-372-1033) www.bna.com. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.