Editorial Note: This article is a portion of a larger work by Andrew Baluch titled Patent Reform 2014, modified here for purposes of publication on IPWatchdog.com. Baluch’s article is a comprehensive review of pending legislation developments in Congress, the Executive Branch, the Courts and the States.
Patent legislation currently pending in Congress contains several controversial provisions. One of those provisions, which finds both proponents and opponents, is the provision to mandate the joinder of “interested parties.”
Those in favor of moving the U.S. patent litigation system to a loser-pays fee-shifting regime are usually also in favor of mandatory joinder, so that fee awards against a losing patentee can be collected against the “true” entity that may be hiding behind the plaintiff patentee. Opponents of the rule point out that it could lead to unwilling and unnecessary joinder — a point raised particularly by universities and venture capitalists who fear they may be hauled into costly patent litigation against their will if their licensees/startups ever need to enforce their patent rights in court. Still others point to the fact that these joinder provisions would only apply to patent cases — and only against plaintiffs — and would thus create a litigation process unique to patents in district courts. Furthermore, district court judges would lose most of their existing broad discretion to determine whether the facts truly warrant joinder in each unique case.
The House has already passed legislation (Rep. Goodlatte’s H.R. 3309) that includes mandatory joinder. What follows is a comparison of legislative proposals relative to joinder of interested parties.
Sen. Cornyn’s S. 1013 was introduced in May 2013, and Reps. Jeffries/Farenthold’s H.R. 2639 was introduced in July 2013. Both bills would require a court, upon a defendant’s motion, to join in the patent litigation any exclusive licensee or other party with the right to enforce the patent, if the defendant shows that the plaintiff’s interest in the patent is limited primarily to asserting the patent in litigation. In this way, multiple parties who hold an interest in a patent would be joined as co-plaintiffs in the same suit against an accused infringer.
Rep. Goodlatte’s second discussion draft (circulated September 2013) would require joinder, upon a defendant’s motion, of (1) any assignee of the patent, (2) anyone with the right to enforce or sublicense the patent, and (3) anyone with a “direct financial interest in the outcome of the action, including the right to any part of an award of damages or any part of licensing revenue.” This joinder provision applies if the defendant shows that the plaintiff has no substantial interest in the patent other than asserting the patent in litigation.
Rep. Goodlatte’s H.R. 3309, which passed the full House in December 2013, contains a similar joinder provision as his second discussion draft, with additional features shown in the chart below.
Notably — while each of the above bills would require joinder of related plaintiffs — joinder of multiple defendants would still be generally prohibited under the America Invents Act of 2011. This is because the AIA provides in 35 U.S.C. § 299 that joinder of defendants is permitted only if the infringement involves the “same transaction, occurrence, or series of transactions” and the same “questions of fact common to all defendants”.
Neither Sen. Leahy’s S. 1720 (introduced November 2013) nor Sen. Hatch’s S. 1612 (introduced October 2013) contains a joinder provision.
If mandatory joinder is to become law, the same legislative language needs to pass both the House and Senate. Thus, attention should now be focused on the differences and similarities of the Goodlatte (House-passed) and Cornyn (Senate-introduced) bills, whose joinder provisions are shown below.
A comparison of the Goodlatte and Cornyn joinder provisions is shown below.
Goodlatte – H.R. 3309 [passed]
Cornyn – S. 1013 [introduced]
|Applies to any civil action arising under any Act of Congress relating to patents in which fees and other expenses have been awarded under 35 U.S.C. § 285 to a prevailing party defending against an allegation of patent infringement.||Applies to any civil action arising under any Act of Congress relating to patents.|
|Court shall join an “interested party” upon defendant’s motion if the prevailing party shows that the nonprevailing party has no substantial interest in the subject matter at issue other than asserting such patent claim in litigation.||Court shall join an “interested party” upon defendant’s motion if the defendant show that the interest of the plaintiff in any patent identified in the complaint, including a claim asserted in the complaint, is limited primarily to asserting any such patent claim in litigation.|
|Defines “interested party” as a person, other than the party alleging infringement, that—(A) is an assignee of the patent, (B) has a right, including a contingent right, to enforce or sublicense the patent, or (C) has a “direct financial interest” in patent, including the right to any part of an award of damages or any part of licensing revenue.||Defines “interested party” as—(1) a person other than the party alleging infringement, that—(A) owns or co-owns the patent, (B) is the assignee of the patent, (C) is an exclusive licensee to the patent, or (2) any person with a direct financial interest in the outcome of the action, including a right to receive proceeds, or any fixed or variable portion thereof.|
|Excludes from “interested party” definition—(i) an attorney or law firm providing legal representation in the civil action if the sole basis for the financial interest of the attorney or law firm in the patent or patents at issue arises from the attorney or law firm’s receipt of compensation reasonably related to the provision of the legal representation, or (ii) a person whose sole financial interest in the patent or patents at issue is ownership of an equity interest in the party alleging infringement, unless such person also has the right or ability to influence, direct, or control the civil action.||Excludes from “interested party” definition an attorney or law firm providing legal representation in the action if the sole basis for the financial interest of the attorney or law firm in the outcome of the action arises from an agreement to provide that legal representation.|
|Court may deny motion to join if—(A) the interested party is not subject to service of process, or (B) joinder would deprive the court of subject matter jurisdiction or make venue improper.||Court may deny motion to join if—(A) the interested party is not subject to service of process, or (B) joinder would deprive the court of subject matter jurisdiction or make venue improper.|
|Notice must be given to the interested party by the moving party within 30 days after the date on which the interested party has been identified in the initial disclosure. The notice must identify the action, the patent and relevant pleadings, and inform the interested party that it may be made subject to paying an award of fees under § 285.||[No such provision]|
|Court shall deny motion to join if—(i) the interested party did not timely receive the required notice; or (ii) within 30 days after receiving the notice the interested party renounces, in writing and with notice to the court and the parties to the action, any ownership, right, or direct financial interest that the interested party has in the patent or patents at issue.||[No such provision]|
About the Author
Andrew S. Baluch is a registered patent attorney and special counsel with the Washington, DC office of Foley & Lardner LLP. He is also a Professorial Lecturer in Law at the George Washington University Law School where he teaches international and comparative patent law. Previously, Mr. Baluch served in the White House office of the Intellectual Property Enforcement Coordinator (IPEC) and before this as expert legal advisor to the Undersecretary of Commerce for Intellectual Property and Director of the U.S. Patent & Trademark Office. He also previously served as a law clerk in the U.S. Court of Appeals for the Federal Circuit. He can be reached at firstname.lastname@example.org.