Judge: Leonard Davis
Holding: Motions to Dismiss for Improper Joinder or Sever GRANTED in part
This is the opinion everyone has been waiting for - a comprehensive set of rulings on motions to sever in a pre-AIA case with numerous defendants added post-AIA. Eastern District of Texas Chief Judge Leonard Davis granted the motions to sever, and consolidated the actions for pretrial issues, except venue. The individual actions will remain active for venue motions and trial.
The day before the AIA became effective, the plaintiff filed suit against two defendants. Not quite three months later it added one defendant, then six weeks after that it added 22 other defendants. The plaintiff argued that the cases were properly joined under the pre-AIA joinder law, as well as post-AIA. Judge Davis held that under both Rule 20 and the AIA, the defendants were not properly joined under the facts of the case, and accordingly severed them into separate causes of action.
With respect to consolidation, Judge Davis had the following to say:
This Court has limited resources and constantly strives to employ efficient and cost-saving case-management procedures for the benefit of the parties, counsel, and the Court. See WordCheck Tech, LLC v. Alt-N Techs, Ltd., No. 6:10-cv-457 (E.D. Tex. July 20, 2011) (permitting limited early discovery to facilitate early mediation discussion); Parallel Networks, LLC v. Abercrombie & Fitch, No. 6:10-cv-111 (E.D. Tex. Mar. 15, 2011) (employing an early Markman proceeding to efficiently resolve a multi-defendant case). In response to the AIA’s joinder provision, plaintiffs now serially file multiple single-defendant (or defendant group) cases involving the same underlying patents. This presents administrative challenges for the Court and, left unchecked, wastes judicial resources by requiring common issues to be addressed individually for each case. For example, what was once a single motion to substitute parties (or join a plaintiff) becomes multiple motions. See, e.g., Klausner Techs., Inc. v. The Broadvox Holding Co., LLC, No. 6:11-cv-575 (E.D. Tex. June 6, 2012) (order granting motion to substitute plaintiff—over thirty similar motions were filed in related cases). These must each be processed by the Court and staff, including review of the underlying motions and docketing individual orders addressing each motion. More substantive motions, particularly where the same arguments are used in each individual case, present even more difficulties. There, the Court is required to waste time digesting duplicate arguments to ensure that new arguments are not hidden among the plethora of common arguments.
But he noted that Federal Rule of Procedure 42 provides a mechanism for district courts to better conserve judicial resources via consolidation for certain common issues such as pretrial, Markman, or trial, observing that "[t]he Federal Circuit has recently reiterated that district courts may consolidate matters that share a common question of law or fact. See In re EMC, 677 F.3d at 1360; see also C.R. Bard, Inc. v. Med. Components, Inc., No. 2:12-cv-32-TS-EJF, slip op. at 2–3 (D. Utah July 25, 2012) (recognizing that the AIA does not affect a district court’s ability to consolidate related patent cases for pretrial matters)." Accordingly "to permit efficient case management" the Court ordered the newly severed actions consolidated with the original filed case "as to all issues, except venue, through pretrial only."
Motions to Transfer
Judge Davis then held that "[m]otions to transfer venue under 28 U.S.C. § 1404(a) will be considered only as to the defendants in the severed case, not as to all defendants in the pretrial consolidated case." But, in the event that transfer is appropriate, the Court will retain the case through the Markman phase of the proceedings. Once the Markman opinion issues, any pending orders to transfer would become effective. "This serves two important purposes," Judge Davis noted. "First, it conserves judicial resources by requiring only one district court to address the underlying disputed claim terms. The claim construction process requires a thorough understanding of the technology at issue, often demanding a substantial investment of time and energy. It does not make sense for two courts to plow the same ground. Second, this case management approach ensures that the related patent cases proceed initially on a consistent claim construction, thus avoiding inconsistent rulings." Once a case is transferred, the Court observed, of course the transferee court is not bound by the claim construction of this court, and may modify it if it believes it is appropriate. "But, much like a magistrate judge’s recommendation, it is hoped that this court’s claim construction analysis will be of help to the transferee court, whether modified or not."
The Court then had something to say about motions to transfer venue, writing that "this case management approach should not be perceived as an invitation to file motions to transfer venue. In recent years, this Court has expended considerable time addressing venue. [footnotes summarizing venue orders taking up a full page, single spaced and 10 point omitted]."
This Court has many, many issues before it—both criminal and civil—and it carries one of the heaviest patent dockets in the country; yet, venue in patent cases has increasingly become an extremely expensive and time-consuming matter, not only for the Court but for the parties as well. For instance, in a recent set of serially filed cases involving only seven defendant groups, the parties had already expended over $700,000 on venue-related discovery and briefing before the cases were even ready for status conference (i.e., before all defendants had answered the complaint). This Court currently has approximately forty pending motions to transfer venue. If the average cost of discovery and briefing for each of these transfer motions is only $300,000, then approximately $12 million is being spent by the parties on an issue that does not move the ball down the field, but only seeks a new field upon which to play. Finally, some parties have even called courts in this district to essentially “threaten” mandamus if a venue ruling is not issued within the timeframe desired by the parties. This Court manages a very busy docket—as do all courts in this district—with pending motions of varying levels of priority. Criminal cases take first priority because individuals’ freedom is at stake. In the patent context, trials and Markman hearings are a high priority. Venue motions are important, but not any more important than everything else this court has to do. The court rules on these motions as soon as it can. The Civil Justice Reform Act of 1990 was instituted to provide checks on long-pending motions and cases. Courts in this district take their cases seriously and strive to timely address pending motions in an effort to resolve cases promptly. See DIR. OF THE ADMIN. OFFICE OF THE U.S. COURTS, CJRA REPORT 27 (Sept. 30, 2011) (showing only sixteen motions pending for more than six months within the Eastern District of Texas) (available at http://www.uscourts.gov/uscourts/statistics/cjra/2011-09/CJRASep2011.pdf). This Court will address motions to transfer venue as timely as possible, while balancing the many other issues unrelated to venue requiring the court’s attention.
Trial of Severed Cases
"After the Court has issued its Claim Construction Opinion and any Transfer Orders have become effective," the Court concluded, "the Court will solicit the advice of the remaining parties on how to best structure the trial of these cases. Will there be a separate trial as to each severed defendant as to all issues? Do some defendants wish to join together in a consolidated trial? Are there some issues that should be tried first as to some or all parties, such as invalidity or inequitable conduct?" Judge Davis noted that he looks to a number of factors in determining the proper trial plan for complex multiple party and multiple issue patent cases, and while no single factor is dispositive, he has developed following the list of factors to be considered in balancing the equities to all parties involved:
(1) number of defendants;
(2) number of patents;
(3) number of asserted claims;
(4) complexity of the technology involved;
(5) similarity of functionality of accused instrumentalities;
(6) consistency of plaintiff’s damages model against distinct defendants, e.g., single expert report as to all defendants, how distinct is the theory of infringement and damages in the expert report as to individual defendants, etc.;
(7) consistency of defendants’ non-infringement, validity, and damages positions, as exemplified by, among other things, expert reports, e.g., single or multiple experts on non-infringement, single or multiple experts on validity, single or multiple experts on damages, etc.;
(8) collaboration by defendants, e.g. joint defense groups, one firm representing multiple defendants, etc.;
(9) risk of inconsistent results on common issues of fact or law;
(10) risk of jury confusion;
(11) cost of multiple trials to the parties;
(12) the Court’s schedule and resources;
(13) other individualized issues specific to a particular case.
See CEATS, Inc. v. Continental Airlines, Inc., No. 6:10-cv-120 (E.D. Tex. Feb. 14, 2012). Accordingly, all of these issues will be addressed at a later stage of case management when discovery is complete, the number of patents, claim terms and invalidity references has been narrowed, expert reports have been filed, and perhaps experts deposed, the Court noted.