Thursday, September 15, 2011, one day before the Leahy-Smith America Invents Act (H.R. 1249) became a law, was a historic date in its own right. At least 54 new patent cases were filed across the district courts – accusing over 800 corporate entities of patent infringement. These numbers represent an all-time-high for a single day filing and are directly linked to the new Joinder of Accused Infringers law. Here is the Section 299 of H.R. 1249 verbatim:
‘(a) Joinder of Accused Infringers- With respect to any civil action arising under any Act of Congress relating to patents, other than an action or trial in which an act of infringement under section 271(e)(2) has been pled, parties that are accused infringers may be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, or counterclaim defendants only if (1) any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising 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) questions of fact common to all defendants or counterclaim defendants will arise in the action. (b) Allegations Insufficient for Joinder- For purposes of this subsection, accused 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.
In effect, Section 299 categorically disallows plaintiffs to bring multiple defendants under a single lawsuit, solely because the defendants are alleged to infringe on the same patent claims.
Under the new law, joinder of multiple defendants is possible only if the right to relief against all the parties (a) arises 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 (b) is based on common questions of fact.
In reality, the act essentially hits back on the increasing number of Non Practicing Entities (a.k.a. NPEs) which have been suing corporations right, left and center.
Lawsuit venues have traditionally been driven by the plaintiff’s choice and convenience.
Notably, the Eastern District of Virginia and the Eastern District of Texas are particularly plaintiff-friendly. These ‘rocket docket’ courts boast of a shorter-than-average time to trial and fewer dispositions through summary judgment, making them ideal for NPEs. In fact, a PricewaterhouseCoopers study indicates that in Virginia, non-practicing entities will succeed more than 64% of the time in lawsuits filed in that venue. In the Texas court, those patent holders will succeed 42% of the time overall.
Typically, NPEs sue a large number of defendants in a single lawsuit in such rocket docket courts. The court would allow the joinder provided it has jurisdiction over all the defendants, which in the case of large corporations it usually does. Cost constraints and convenience on the part of defendants is frequently overlooked, especially if the plaintiff can show that a majority of the defendants are based in and around that particular district.
Such atmosphere increasingly corners practicing corporations and puts an undue pressure on the market as well as the state of technology, and the act packs a good punch to deter such litigation. It will not only increase litigation cost but also put the patents-in-suit under greater and repetitive invalidity review. Unfortunately, though, the act creates the same kind of disadvantage for the good kind of NPE’s, namely individual inventors and research firms.
Another under-rated impact of the new joinder law has been the surprising jurisdictional diversity in the past 80 days; 33 district courts have seen five or more new patent complaints. The statistics highlight yet another important aspect of the act. H.R. 1249 will not only help defendants have greater control on the litigation venue but it will also act as a much-needed load balancer for courts neck deep in cases even though the sheer number of litigations across the country is expected to increase significantly.
In the end, the act is essentially a trade-off which levels the field for corporations against patent trolls; however, at the cost of individual inventors, small business owners and research firms. And it would be very interesting to see how each of these entities cope with the restrictions and how their solutions mold the legal landscape in the coming decades.
(Featured image source: https://creativecommons.org/licenses/by-sa/2.0/)