Patent reform’s most significant change may have been embedded in one of the least talked-about provisions. When President Obama signed AIA into law this past September, a provision immediately took effect banning the practice joining more than one company in the same lawsuit unless all were responsible for producing or selling “the same accused product or process.” Prior to the AIA, patent owners regularly grouped companies, ranging from just a few, to over 100, in the same lawsuit.
While the practice may seem extreme and unreasonable to the untrained eye, multi-party litigation was actually the inevitable result of a combination of factors. First, a large number of patents asserted in this manner broadly relate to technologies used to interconnect people, companies, devices, information etc. Given the ubiquity of technology and endless disparity in hardware/software combinations, connecting and communicating in the modern world necessarily requires a healthy amount of cooperation, resulting in adoption of a countless array of identical or nearly identical technologies. Second, the expense of patent litigation leads many patent owners to look for opportunities to reduce costs. By pursuing multiple enforcement targets simultaneously, patent owners can consolidate common issues like claim construction, validity and enforceability. In addition, the multi-party route gives enforcement targets with the most at stake the opportunity to bring their arguments to the forefront. Third, pursuing enforcement targets serially exposes the patent owner to potential litigation, as the presence of an ongoing enforcement campaign has been used as grounds to pre-emptively sue patent owners.
Nevertheless, the new law prohibits multi-party lawsuits, leading many patent owners to resort to a strategy evidently perceived as the next-best alternative: the simultaneous filing of multiple lawsuits. In the months since AIA became law, patent owners like Webvention, DataTern and Macro Solve filed more than 10 nearly simultaneous lawsuits, primarily in the same court. Others, like Joao Control, have spread a modest number of suits (typically one or two in any given week) over a several week period.
While some patent owners are busy burning up the court docket, others are committed to the multi-party litigation model. Chrimar Systems, owner of technology alleged to be used in Power over Ethernet IP telephones, asked a Delaware court to join five unrelated companies (Cisco, HP, 3Com, Avaya and Extreme Networks) in a single lawsuit. Chrimar’s complaint, filed by members of McKool Smith’s DC office, argues that each of the named defendants’ infringing products practice IEEE 802.3af or 802/3at standards, resulting in infringement of Chrimar’s patent. In addition, Chrimar alleges that each defendant “was involved or maintained an active role in the same transactions, occurrences … that resulted in the setting of those standards by the relevant IEEE committees.”
Chrimar’s filing strategy has yet to be tested, let alone challenged. Nevertheless, the Delaware court may likely be the first to interpret the new law. Not to be outdone, East Texas will also get a bite at the post-AIA multi-defendant apple. On December 22, Consolidated Work Station Computing, LLC (“CWSC”) named 17 different companies in a single Tyler, Texas-based lawsuit. The suit, filed by lawyers at Houston-based Antonelli, Harrington & Thompson, LLP, argues that companies like Acer, HP, McAfee, Fujitsu, CDW and Tiger Direct (among several others) are properly joined together by applying lesser-known corollary to the transitive property‘s application to post-AIA joinder (i.e., if A may be joined with B, and B may be joined with C, then A may be joined with C).
Specifically, CWSC accuses the defendants of selling or offering to sell “a large number of overlapping blade server products.” The CWSC filing makes no mention of industry standard-based cooperation among the parties. Instead, the patent owner pins its hopes on an overlapping combination of blade server manufacturers and retailers. The complaint refers to numerous examples, such as retailer CDW being responsible for selling Fujitsu, HP and McAfee servers. Assuming the defendants press the issue, CWSC will likely argue that, HP is properly joined with CDW because each stands accused of selling the same products. Similarly, CDW is properly joined with Fujitsu for the same reason, leading ultimately to the conclusion that HP and Fujitsu are properly joined in the same suit.
Both the McKool and Antonelli firm rely on interpretations of the new joinder provision that breathe at least some life back into multi-party case management. Chances are strong that at least a few companies will be convinced to challenge each patent owner over an ultimately inconsequential issue. Fortunately for legal scholars everywhere, we are only a couple of years away from having a very expensive answer to a question nobody cared about until a few months ago.