Rush to Judgment: New Dis-Joinder Rules and Non-Practicing Entities

On Thursday, September 15, 2011, at least 54 new patent cases were filed – accusing over 800 corporate entities of patent infringement. These numbers represent an all-time-high for a single day filing. In Thursday’s filings, the average complaint accused 16 entities of patent infringement. Those numbers are indicative of a trend over the past few years to accuse multiple parties of infringement within a single lawsuit.

Thursday’s highs are not random. On Friday, September 16, 2011, President Obama was scheduled to, and did actually, enact a major patent reform package known as the Leahy-Smith America Invents Act (H.R. 1249). One provision of the new law strips courts of their power to join multiple defendants in a single lawsuit simply based upon the fact that the defendants are all alleged to infringe the same patent.

[A]ccused 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.

Under the new law, joinder of multiple defendants is still possible, but “only if” the right to relief against all the parties (1) “aris[es] 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) is based on common questions of fact.

This dis-joinder provision applies to all cases filed on or after the September 16 date of enactment and it is likely that it is the dis-joinder provision that led to the massive filings. As Kyle Jensen of PriorSMArt wrote:

The uncertainty caused by patent reform produced a flood of litigation these last two weeks, which has made our alerts more voluminous than is typical. Last Thursday 54 new patent cases were opened nationwide against a total of 804 named defendants (based on cases that have hit CM/ECF, some might not have). That is an all-time record for both statistics by my count.

Plaintiffs in the most recent filings include non-practicing entities such as LVL Patent Group; GeoTag; Innovatio IP Ventures (not IntellectualVentures); InMotion Imagery; LVL purchased its patents from CyberFone – those patents had been up for auction in an Ocean Tomo auction but then privately changed hands in 2011. Likewise, InMotion’s patents were purchased at an Ocean Tomo auction. Innovatio obtained its patents from Broadcom.

Using information from PACER and LEXMACHINA, I created my own chart below of the number of cases filed in July, August, and September 2011.

The bulk of these new filings are in the usual venues of E.D. Texas (15%), Delaware (13%), C.D. California (9%), N.D. Illinois (8%), and N.D. California (6%). However, there is also a surprising diversity in that in the past 80 days, thirty-three jurisdictions have seen five or more new patent complaints or transferred cases. One potential impact of the new dis-joinder rules is a greater jurisdictional diversity, however, that result is not guaranteed.

The dis-joinder provisions were put in place as a hurdle for non-practicing entities alleging infringement across an industry. However, I have spoken with a number of in-house counsel that are a bit worried about the new joinder rules. In particular, the mass-defendant-litigation provides potential cover for in-house counsel and may smooth settlement because the plaintiffs rarely want to try more than two defendants before a single jury.

 

 

38 thoughts on “Rush to Judgment: New Dis-Joinder Rules and Non-Practicing Entities

  1. See other earlier comments, the de-joinder rule is unlikely to have any real impact on how patent trials are conducted. It will only add an additional motion step up front.

  2. This new spate of suits indicates that 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.

  3. As an aside, it it a Rush To Judgment that Judge Ward of the EDTX is happily dismissing false marking suits right and left, sua sponte, with leave to replead “in the event Plaintiff can prove it has suffered a “competitive injury” and it can satisfy the other requirements under the statute”?

  4. “everybody else in these threads spells “handwave” as “handwaive”

    I’ve only seen it a couple of times, but each time I did, I took it to mean that the person was voluntarily doing without their hands.

    I must admit, though, that I am mystified as to why one would want to forego their hands.

  5. No it does not. The new joinder statute specifically excludes “an action or trial in which an act of infringement under section 271(e)(2) has been pled…” 271(e)(2) refers specifically to the Hatch-Warman/ANDA infringement provision.

  6. What I don’t understand is why everybody else in these threads spells “handwave” as “handwaive”. Is that how it is spelt by everybody, in the USA today? Or is it a clever play on words that is going over my head?

    Or is it just a quirk of one person who is operating here under a plethora of pseudonyms?

  7. (e.g. on a intermittent windshield wiper, or whatever people invent these days)

    These days people invent virtual intermittent windshield wipers for virtual cars. That way you can have a video game with car’s racing in the rain. And you can choose the color of the windshield wiper by entering a value using a game controller device. And you can share your choice of windshield wipers with a friend playing the game on a shared network.

    Oops, I probably should have filed on that. No time now, though. The stewardess just told us to put away our electronics.

  8. Availed itself? Do you mean minimum contacts based on internet advertising that is ignored by the free users of the website? Offends TNFPSJ in my book, but obviously results can vary depending on the venue.

  9. by making facebook.com available for use, and used, by persons in said District.

    Well, then, let’s see what the facebook provision is that a user agrees to:

    15. Disputes
    1. You will resolve any claim, cause of action or dispute (claim) you have with us arising out of or relating to this Statement or Facebook exclusively in a state or federal court located in Santa Clara County. The laws of the State of California will govern this Statement, as well as any claim that might arise between you and us, without regard to conflict of law provisions. You agree to submit to the personal jurisdiction of the courts located in Santa Clara County, California for the purpose of litigating all such claims.

  10. The trolls would try to sue Facebook in ED Texas even if the website wasn’t available in Texas.

    After all, trolls love bananas. They also love attorneys who can cry on the stand when such theatrics are needed. As for Texas juries, well, let’s just note that it’s hard to shake a stick in Texas without hitting a creationist in his/her intelligently designed eyeball.

  11. This may not be so anti-NPE as people think it is.

    Perhaps not, but it certainly bodes ill for a hypothetical sole inventor who has a single patent (e.g. on a intermittent windshield wiper, or whatever people invent these days) that is being infringed by many companies in an entire industry, each with its own design.

  12. Even if Defs just use invalidity as a defense, plaintiffs will move to consolidate for pre-trial since there is now a common set of facts related to the invalidity defense in the separate actions. In ED Tex, I would expect pre-trial joinder would be granted.

    So the end result is that if you sue 30 defendants in ED Tex, there will be 30 different trials, although the case is litigated as one case until case. 30 different trials probably means spreading out the trials over parts of a year. In some ways, that is Defendant friendly. In others it is Plaintiff friendly as you may obtain verdicts against some of the Defendants before the trial of others, and Plaintiffs may get settlement leverage over the latter Defendants on the basis of the earlier verdicts.

    This may not be so anti-NPE as people think it is.

  13. It never mattered? You are kidding yourself (And need to take a Civ Pro class) if you don’t think Facebook has availed itself of being sued in the Eastern District of Texas by making facebook.com available for use, and used, by persons in said District.

  14. Anony = patent troll luvvah.

    Like all the sockpuppets who post here. Why is that?

    Asked again, because I didn’t get an answer the first time.

  15. handwaivey shill

    You’ve never stated who you think I’m shilling for, Shillywilly.

    I’d love to know. Please tell us, Shillywilly.

  16. Like all the sockpuppets who post here. Why is that?

    LOLZ,

    says the biggest handwaivey shill ever seen on these boards…

    Like you don’t have an agenda, Malcolm?

  17. Can’t the defendants solve this problem by simply not filing a DJ for invalidity counterclaim? Invalidity works just fine as a defense. If you must file a counterclaim, limit it to a DJ for non-infrngement.

  18. Does this affect joinder of defendants in Hatch-Waxman/ANDA cases? Will drug companies be forced to sue each one individually?

  19. Let me fix that for you:

    Troll files separate suits against many defendants in troll friendly forum.

    Defendants respond with counterclaims of invalidity.

    Defendants also move to transfer.

    Troll moves to join cases for pretrial purposes and opposes motions to transfer to scattered districts across the country.

    Court grants joinder for pretrial purposes, denies motions to transfer.

    Defendants (still) wind up stuck in troll friendly forum.

    The only silver lining is that unrelated or competitor defendants may not have to stand trial together. But then that’s why the troll friendly fora are so unpopular: because of those massive trials where Apple, Google, and Microsoft had to stand side-by-side in front of a jury. Not because eleven out of twelve defendants settled before or immediately after the Markman.

  20. This shows the REAL problem with this provision of the America Invents Act: it’s really going to destroy plaintiff’s choice of forum.

    Anony = patent troll luvvah.

    Like all the sockpuppets who post here. Why is that?

  21. “I don’t think the dis-joinder will work. Here’s what I expect to be the new sequence:
    1. Troll sues 20 defendants individually in the same court (ED of Texas or D of Delaware).
    2. Each defendant asserts invalidity as counterclaim
    3. Troll motions court for joinder of all 20 defendants in same action since there is now a common set of acts relating to validity in the 20 separate actions.
    4. After costly motion practice, all D’s are joined in single action.
    5. Continue as we have been doing before the “dis-joinder” provision was enacted.”

    What you say makes a lot of sense. There is a flaw though. The disjoinder is also about forum non conveniens. Pre “America Invents,” you sue an entire industry, including one of such industry based in ED Tex, all in ED Tex.

    Now post America Invents you sue them in individual suits. When you sue, say, Facebook in ED Tex, they’ll move to transfer for forum non conveniens. If you haven’t noticed, ED Tex is granting more transfer motions these days. Facebook will win and the suit against them is in ND Cal. (Ouch for plaintiffs).

    This shows the REAL problem with this provision of the America Invents Act: it’s really going to destroy plaintiff’s choice of forum. It’s not going to matter anymore that people use Facebook in East Texas, which allows plaintiffs to bring suit against them there. These cases with them only as single def brought by an NPE will get transferred out on forum non conveniens.

    So honestly, unless your business is based in East Texas, don’t see why in-house counsel is fretting except for potentially less “joint defense funds.” The Facebook’s of the World are going to love transfer to ND Cal, while the Motorola’s will jump for joy with transfers to ND Ill.

  22. I don’t think the dis-joinder will work. Here’s what I expect to be the new sequence:
    1. Troll sues 20 defendants individually in the same court (ED of Texas or D of Delaware).
    2. Each defendant asserts invalidity as counterclaim
    3. Troll motions court for joinder of all 20 defendants in same action since there is now a common set of acts relating to validity in the 20 separate actions.
    4. After costly motion practice, all D’s are joined in single action.
    5. Continue as we have been doing before the “dis-joinder” provision was enacted.

  23. Seems like D is avoiding poasting us up some roastin about that decision. We’re all saving up our energy for when it lands.

  24. This “disjoinder” provision is really what the FRCP require — Judges in the Eastern District of Texas, for the most part, just ignored the joinder provisions of the FRCP finding that because patent cases are complicated, all defendants should be joined. The cure to that, of course, is that you can always consolidate cases for pretrial purposes — to deal with common issues like claim construction, etc. However, separate trials should still be the rule where the facts are not common and, more importantly, a plaintiff must file and pay a new filing fee for each lawsuit. Most districts did not allow trolls to do what they were doing in Texas, ie to sue everyone in an industry even though the players were competitors and did not cooperate at all in their allegedly infringing acts.

  25. public relations

    settling under the radar

    board relations, “see, we’re all sued; it wasn’t just me who green lit this.”

  26. , the mass-defendant-litigation provides potential cover for in-house counsel

    I’m shocked that this benefit of ala carte joining of defendants under the old rules was not extolled previously. Or if it was, I missed it.

    More details please, e.g., “potential cover” for what behavior exactly?

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