The Federal Circuit Directs the Eastern District of Texas to Reconsider Motions to Sever
May 30, 2012
by Glenna L Gilbert
On petition for a writ of mandamus, the Federal Circuit recently directed the Eastern District of Texas to reconsider motions to sever in light of the test for joinder set forth by the Federal Circuit in In re EMC Corp., Misc. No. 100 (Fed. Cir. May 4, 2012).
Petitioners in In re EMC Corp. were eight of eighteen companies named as defendants in a single complaint filed by Oasis Research LLC. Oasis asserted method claims from four patents, all of which dealt with off-site computer data storage. The defendants were all alleged to have offered services that provide online backup and storage for home or business computer users. Defendants moved to sever and transfer the claims against them, arguing that because there was no concert of action, the claims against them did not arise out of the same transaction or occurrence, as required by Rule 20 of the Federal Rules of Civil Procedure.
The magistrate judge in the Eastern District of Texas denied defendants’ motions, finding that the claims arose out of the same transaction, occurrence, or series of transactions or occurrences because the accused services were not dramatically different.
The Federal Circuit disagreed with the test used by the magistrate judge. The Federal Circuit held that independent defendants satisfy the transaction-or-occurrence test of Rule 20 when there is a logical relationship between the separate causes of action. The logical relationship test is satisfied if there is substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant. The Court found that the “not dramatically different” standard used by the district court “seems to require little more than the existence of some similarity in the allegedly infringing product or processes, similarity which would exist simply because the same patent claims are alleged to be infringed.”
The Court further held that joinder is not appropriate where different products or processes are involved. Joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the asserted patents. But the sameness of the accused products or processes is not enough for joinder. Claims against independent defendants do not satisfy the same transaction-or-occurrence test unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts. “Unless there is an actual link between the facts underlying each claim of infringement, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical.”
Accordingly, the Federal Circuit set aside the district court’s order denying defendants’ motions to sever and transfer, and directed the district court to reconsider the motions in light of the “correct test” for joinder. In so holding, the Court made it clear that: (1) it was not deciding whether the new joinder provision at 35 U.S.C. § 299 changes the test for joinder of defendants in patent infringement actions, and (2) the Court’s approach to the new provision is not dictated by In re EMC Corp. The new statute under the America Invents Act allows joinder of independent defendants whose acts of infringement involve “the same accused product or process.” The Federal Circuit explained that it need not decide in In re EMC Corp. “whether the sameness test in the new legislation is identical to the sameness test [it] adopt[ed in this case] for cases not covered by the new legislation.”
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