By Dennis Crouch
In re Toyota Motor Corp (Fed. Cir. 2014)
AVS – an Acacia company – sued Toyota for patent infringement in the Eastern District of Texas. As part of the litigation strategy, AVS included Gulf States Toyota – a large Texas-based dealer/distributor as a co-defendant. The AIA limited joinder of multiple unrelated defendants in a single infringement action. However, here joinder of these defendants appears proper because the manufacturer and distributor are both dealing in the same infringing products – Toyota vehicles.
Although venue is “proper”, Toyota argues that E.D. Texas is an inconvenient forum under 28 U.S.C. §1404(a) and that a better venue is E.D. Michigan, both because of the location of witnesses and because that court has previously adjudged the patent in question. That proposal wouldn’t exactly work because the Michigan court apparently has no personal jurisdiction over Gulf States. Thus, Toyota and Gulf States collectively argued that the case against the franchisee (Gulf States) should be severed and stayed pending outcome of the Toyota case. District Court judge Schneider rejected those proposals – finding that the case would not be moved to Michigan even if Gulf States were not a defendant and that therefore there was no cause to either transfer or sever.
On Mandamus, the Federal Circuit has vacated the district court denial – holding instead that (1) absent Gulf States as a defendant, the case against Toyota should be transferred to Michigan; and (2) therefore the district court should reconsider the request for severance-and-stay on remand.
This decision seemingly serves as the Federal Circuit’s first pass at addressing retailer/customer lawsuit concerns that are at the heart of legislative patent reform initiatives. The proposed legislation would provide a right to stay customer lawsuits while the current law seemingly only provides that such a stay can occur at a district court’s discretion. The provision most on point is likely Fed. R. Civ. Proc. 42(b) that calls for a district court to hold separate trials on various issues or claims “for convenience, to avoid prejudice, or to expedite and economize.”