09.15.2011 The Joinder Provision in the Patent Reform Act: Leveling the Playing Field Against Multi-Defendant NPE Suits
A new season is under way and some of the rules have changed. For years, defendants have been forced to play together in unscheduled away games on the Non-Practicing Entities’ (“NPE”) home field. That should no longer be the case. The recently enacted Leahy-Smith America Invents Act is significant, not just for its change to patent applications and procedures, but for those sections addressing patent litigation.
Section 19 of the Act limits the ability of plaintiffs to join multiple defendants in infringement actions. This Section is effective immediately, applying to all patent cases filed on or after the date of enactment. Joinder is no longer permitted simply on the basis that defendants infringed the same patent(s). Rather, accused infringers may be joined in one action “only if” there is an allegation of joint and several liability or that the infringement arises out of the same transaction or occurrence and common questions of fact. Although the Act codifies Federal Rule of Civil Procedure 20, it goes further by specifying that accused infringers “may not” be joined in one action based solely on allegations that they infringed the patent(s) at issue.
Accordingly, patent plaintiffs may still join in one suit defendants handling the same allegedly infringing product, such as manufacturers, distributors or resellers in a supply chain. But plaintiffs should not be able to join defendants selling or distributing different products based only on plaintiffs’ allegations that each of these products separately infringes the patent(s).
The effect is significant in patent litigation against NPEs, as previously such plaintiffs have paid one filing fee to sue dozens of defendants in the same suit in the same forum. As a result, multi-defendant suits in the last ten years have exploded, particularly in forums perceived as plaintiff friendly. Further, the previous ease of joining defendants resulted in suits against smaller and smaller retailers where they could be herded together in remote venues and forced to settle on unfavorable terms.
The new joinder rule should therefore give defendants new pages in their playbook, including a greater chance of sustaining their motions to transfer venue. For instance, in suits with multiple defendants, where the defendants are located throughout the country, it is often difficult to establish that one forum is convenient to all parties – a location convenient to one or two may clearly be inconvenient to many others. In such cases, courts often conclude that the forum selected by the plaintiff is just as convenient to all parties. In suits against a single defendant, however, the transfer question is a choice between plaintiff’s forum, often a venue with a limited connection to the underlying matter, and the defendant’s forum, where the majority of documents and witnesses relating to the purported infringement should reside.
A few caveats are worth mentioning. It is unclear how courts will consolidate separate cases litigating infringement on the same patent, as the Act should not alter Multi-District Litigation, at least for purposes of managing discovery. Courts, for example, could conclude that issues concerning claim construction and the validity of a patent are best handled by one court. But the new Act may make that harder to justify. In some instances, defendants prefer consolidated cases to pool their resources. The Act, however, allows defendants to waive the rule if they prefer to remain in a consolidated case.
So, while many had hoped for greater measures to stem the tide of patent litigation, the new joinder rule should help level the playing field and give the defense new ways to tackle the expansion of multi-defendant suits.
Should you have any questions, please contact Robert C. Van Arnam at 919.981.4055 or or any other member of the Williams Mullen Intellectual Property Team.