By Jason Rantanen
In re Katz Interactive Call Processing Patent Litigation (Fed. Cir. 2011)
Panel: Newman, Lourie, Bryson (author)
Patent litigation is often an astonishingly complex affair. As proof, one need look no further than In re Katz, an opinion that demonstrates both the heavy burden that patent infringements suits can place on the courts, and the remarkable job that trial and appellate courts do in dealing with those suits. This post will discuss the CAFC's ruling regarding trial court claim selection procedures in complex patent infringement actions; a subsequent post will focus on the CAFC's review of the summary judgment rulings.
At the core of In re Katz resides the relatively simple concept of a patent holder asserting its patent rights against a group of alleged infringers. In this instance, however, the patent rights consisted of "a total of 1,975 claims from 31 patents" asserted against "165 defendants in 50 groups of related corporate entities." Slip Op. at 6. Although initially filed in Delaware and Texas, the Judicial Panel on Multidistrict Litigation transferred the actions to the Central District of California for coordinated pretrial proceedings before Judge Klausner.
In an effort to manage the vast numbers of claims and infringement allegations, Judge Klausner imposed limitations on the number of claims to be addressed in the litigation. The court "ordered Katz initially to select no more than 40 claims per defendant group, and after discovery to narrow the number of selected claims to 16 per defendant group." Slip Op. at 7. Katz was further limited to a total of 64 claims to be asserted against all defendants, although the court included a proviso that Katz could add new claims if they "raise[d] issues of infringement/validity that [were] not duplicative of previously selected claims." Id. at 7. Katz sought to sever and stay the disposition of all the unasserted claims, contending that the limitations violated its due process rights. The district court denied Katz's motion, and after granting summary judgment in the defendants' favor on the selected claims, Katz appealed.
On appeal, the Federal Circuit affirmed the district court's ruling on the motion to sever and stay, implicitly approving the court's claim selection procedure. Focusing primarily on Katz's argument that the claim selection procedure violated its due process rights with respect to the unasserted claims, the CAFC held that the district court appropriately allocated to the patent holder the burden of showing that the issues raised by the new claims were not duplicative. "When the claimant is in the best position to narrow the dispute, allocating the production burden to the claimant will benefit the decision-making process and therefore will not offend due process unless the burden allocation unfairly prejudices the claimant’s opportunity to present its claim." Slip Op. at 11. Here, Katz identified no errors in the district court's initial assessment, which revealed that the patents contained many duplicative claims. Thus, it was efficient and fair to allocate the burden to Katz. Furthermore, because Katz made no effort to identify any claims raising non-duplicative issues, the district court acted appropriately in denying Katz's motion.
Typical of several recent Federal Circuit decisions, the opinion includes a cautionary note. "In approving the district court’s procedure, we do not suggest that a district court’s claim selection decisions in a complex case such as this one are unreviewable." Rather, the panel comments that its holding is directed at broad assertions that courts may not impose claim selection requirements:
Katz chose to make the “all or nothing” argument that the entire claim selection process was flawed from the start and that it is impermissible to give the judgments effect as to the unselected claims regardless of Katz’s failure to make any showing as to the uniqueness of any of those claims. That sort of global claim of impropriety is unpersuasive. In complex cases, and particularly in multidistrict litigation cases, the district court “needs to have broad discretion to administer the proceeding.” In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217, 1232 (9th Cir. 2006).
Slip Op. at 14.