America Invents Act Exercises “Con-Troll” Over Patent Litigation

A great deal of attention has been directed to provisions of the recent Leahy-Smith America Invents Act and the provisions of the act directed to first inventor to file, post grant review, and other such changes to U.S. Patent Law. This attention is much warranted as these represent some of the most significant changes to U.S. Patent Law in recent history.

At least one other provision of the act, however, which appears to be receiving significantly less attention, is likely to have a substantial impact upon the manner in which many patents will be enforced following enactment.

The America Invents Act adds to 35 U.S.C., Chapter 29, new section 299 as follows:

(a) JOINDER OF ACCUSED INFRINGERS. -With respect to any civil action arising under any Act of Congress relating to patents, other than an action or trial in which an act of infringement under section 271(e)(2) has been pled, parties that are accused infringers may be joined in one action as defendants or counter claim defendants, or have their actions consolidated for trial, or counterclaim defendants only if-

(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.

(b) ALLEGATIONS INSUFFICIENT FOR JOINDER. – For purposes of this subsection, accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.

(c) WAIVER. – A party that is an accused infringer may waive the limitations set forth in this section with respect to that party.

Thus, except for actions based upon, i.e., ANDA filings, parties may be joined as defendants in an action for infringement only if they may be liable jointly, separately, or in the alternative with respect to common acts or events and questions of fact common to all defendants will arise in the action. This provision appears to effectively put an end to what has become an all-to-common mode of wholesale patent enforcement by patent-owning organizations referred to politely as “non-practicing entities.”

New section 299 is not likely to have much impact upon patent enforcement among and between business entities competing in any particular industry. Such patent enforcement is normally targeted against one or a small number of select defendants. It had become fairly standard practice, however, for non-practicing entities (NPEs) to file patent infringement actions against a veritable laundry list of defendants. The collectively-accused defendants may or may not be members of a common industry; they may or may not make, use, sell or offer a similar product or service; they may or not be competitors of one another. Often enough, defendants in such wholesale enforcement actions have little more in common than the fact that they stand commonly accused of infringing the same patent. Nevertheless, with an almost-too-casual ease, any patent owner could bring together virtually any disparate group of patent infringement defendants based upon nothing more than an allegation that each had infringed.

To be sure, joinder of defendants in a common action has often been a reasonable measure properly utilized in litigation concerning patents and other causes where reasonable efficiencies were realized, common or closely related factual questions pertained to all defendants, and joinder otherwise made good sense. The emergence of non-practicing entities as significant players in what might be regarded as an industry dedicated to patent litigation has, however, taken reason and common sense out of consideration, whereby joinder of defendants was frequently little more than a tool of convenience for those entities whose primary purpose for existing is to enforce patents.

Until September 15 of this year it was a trivial matter for any patent owner to herd any number of defendants into a single action, and to thereby pursue simultaneously and efficiently claims against all. The joinder of multiple defendants, at times, may have presented an opportunity for defendants to cooperate in defense of the action and gain efficiencies of their own. The burdens and problems often imposed on the inappropriately joined defendants were anything but trivial, however.

Until September 15, 2011 a patent owner could bring together any number of defendants, in differing circumstances, residing in different places, offering different products or services, in an action in a single forum chosen for the convenience of the patent owner and, typically, for its perceived favorable disposition toward patentees. The choice of forum might have made little sense with respect to any one or more defendants. However, given the often disparate considerations relating to the defendants collectively, it was not often that any defendant or sub-group of defendants could obtain an otherwise appropriate transfer to a different venue, or that any defendant could obtain severance of the action and transfer to a different venue. With no individual venue likely being particularly appropriate for all of the collective defendants, the default would often be to permit the action to remain in the ill-suited venue originally chosen by the plaintiff.

Joinder of numerous defendants in a common infringement action, for the benefit and convenience of the patent owner, is additionally a measure by which the patent owner may effectively limit the lights of each defendant to adequately defend its individual interests A patentee, having joined numerous (often dozens or more) defendants in a single suit for its own economy and convenience, will typically seek and most often obtain procedural rulings whereby the defendants are required to act in concert with respect to many aspects of the litigation mostly for the benefit and convenience of the plaintiff. For example, in discovery, defendants may be required to act in concert in various ways, serve collective discovery requests, may be collectively limited in the number of discovery request that may be served, the number of depositions that may be taken, etc. Ironically, having elected to take action against many parties for its own convenience and benefit, the patentee can then whine (successfully in most instances) that it should not be burdened with having to deal with so many discovery requests, so much procedure, so many parties and the defensive measures that may be taken by each of them individually.

The ability of any defendant to act unilaterally in a multi-defendant action is often restricted severely, with or without any ruling by the court. This applies not only to discovery, but to other procedural and substantive aspects of an action. Given the vagaries of issue presentation and resolution –by the court or by a jury – defense of any action calls for presentation of a cohesive defensive position, generally or with respect to any particular matter or issue. With multiple defendants, having various and different accused products, differing business interests, and a host of other personal factors which may impact their views of the litigation in vastly different ways, it is often unrealistic to expect that multiple, purportedly-aligned parties can come to a consensus about how to defend a litigation. Joint defendants herded together at the whim of the patent owner are left to devote inordinate amounts of time and resources to an effort to devise a common, acceptable approach to defending against the charges of infringement. Such effort may not be successful. If defendants do reach a consensus, agreement to a common approach most often involves compromise which limits the ability of individual defendants to protect their own interests in the way that they see most fitting. It may be extraordinarily difficult, or out of the question entirely, for any individual defendant to raise issues, take positions, or otherwise deviate from some common theme or approach.

That’s the way it was until September 15, 2011. The rules have now changed. With limited exceptions, actions for patent infringement will have to be brought individually against parties allegedly infringing by their respective individual actions or activities. Under the provisions of 35 U.S.C. § 299, there will be little, if any opportunity for patent owners (NPEs or others) to join unrelated parties as defendants in any action asserting a patent.

The economics of mass patent enforcement have changed. A patent owner will no longer be able to casually sue a multitude of parties with a single filing, participate in proceedings in a single action in a single venue likely convenient only for the plaintiff, and thereby expeditiously pursue a recovery against numerous disparate parties. Actions will have to be filed individually against each accused infringer. The patent owner will have to participate in, contend with and address procedural and substantive aspects of each action.

It might be expected that individual actions against individual accused entities will have to be brought in venues more appropriate to the respective accused parties. Otherwise, an action against an individual defendant will be more likely subject to transfer to a more appropriate venue if the defendant seeks transfer, without the baggage of numerous other defendants anchoring an action in an ill-suited forum chosen by the patent owner.

Each defendant accused in a separate action for a patent infringement will be free to defend the action in the manner believed most suitable to that defendant’s accused products, business interests, or any other factor that may influence the defendant’s strategy. No longer will patent owners be unjustly rewarded for herding together numerous accused parties by being handed a de facto ability to limit the manner in which each may pursue a defense of the charges.

A patent owner will be required to defend its patent against each and every defendant chosen for enforcement. A single verdict that a patent has not been proven invalid will not suffice against numerous parties that the patentee elected to join together. Rather, each defendant will have, at least in great measure, an individual opportunity to prove that an asserted patent is invalid, even if it was not proven invalid in a proceeding against another party.

From the point of view of potential defendants, is there a downside to this change? Although joinder of numerous defendants in a single infringement action would often give rise to substantial difficulties, as discussed above, it is also correct that joint defendants in a single action could at times cooperate with one another to achieve efficiencies and reduce costs in ways that did not adversely impact their ability to defend. Thus, the joinder of defendants sometimes could work in favor of the defendants. Section 299(c) provides that an accused infringer may waive the limitations of the section. Thus, it would appear that defendants could seek to consolidate their actions in defense of common charges of infringement, either for all purposes or for limited purposes (i.e., pretrial proceedings), when they perceive that it is in their interests to do so.

It remains to be seen how courts will respond when, for example, a patent owner files several identical actions against different parties in the same court at the same or substantially the same time. Courts notoriously prefer to engage in procedures that realize what are perceived to be efficiencies in use of the time and resources of the court. It remains to be seen what “procedural” devices may be attempted or used by trial courts in an effort to gain efficiencies without running afoul of the statute’s prohibition against joining unrelated defendants “in one action” or for trial.

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2 comments so far.

  • [Avatar for patent enforcement]
    patent enforcement
    September 26, 2011 10:40 pm

    The new disjoinder rules may indeed be sorely needed. At least now no one can say that Congress isn’t doing anything to address the patent troll issue. Even though it’s likely not enough to resolve the problem, at least it seems to be a step in the right direction.
    http://www.generalpatent.com/blog

  • [Avatar for Bob Matthews]
    Bob Matthews
    September 19, 2011 04:31 pm

    Only time will tell if section 299 will really have an impact on joinder issues. The statutory language that joinder will not be available if “based SOLELY on allegations” that a defendant has infringed the patent(s) in question, 299(b); see also H.R. Rep 98(I), 112th Cong, 1st Sess., 2011 WL 2150541, at *64 (2011) (“New § 299 also clarifies that joinder will not be available if it based solely on allegations that a defendant has infringed the patent(s) in question.”), does not appear to preclude joinder where a district court determines that the various accused products of the joined defendants have what the court considers to be a sufficient degree of technical relatedness so that they are the “same.” In such an instance the joining would not be based “solely” on the fact that the same patent is allegedly infringed. Hence, section 299 in practice may only prohibit joinder where the accused products of the defendants are drastically different; a scenario more likely to exist if the defendants come from different industries as the author cogently suggests. A lot will depend on how the the courts construe the word “same” in subparagarph (a)(1). Does it mean the same physical product or only a product that from a technology view point can be considered to be the “same”? If “same” gets a broad statutory construction, 299 might not prohibit the practice, as exemplified in MyMail, Ltd. v. America Online, Inc., 223 F.R.D. 455 (E.D. Tex. 2004) and its progeny, that permits liberal joinder so long as the accused technology of the various defendants is not “so different that determining infringement in one case is less proper or efficient than determining infringement in multiple cases.”