Verizon Successfully Moves to Sever and Stay Patent Infringement Action Based on "Customer Suit Exception"
Plaintiff Micro Enhanced Technology Inc. ("Micro") filed a patent infringement action against Videx, Inc., accusing Videx of infringing six patents. Micro subsequently amended its complaint to add two defendants, Verizon Wireless ("Verizon") and ITC Holdings Corp. ("ITC"), both of whom are customers of Videx. Verizon filed a motion to dismiss and a motion to sever and stay.
As the district court explained, Fed.R.Civ.P. 21 "gives the Court discretion to sever any claim against any party" and that "[c]onsistent with that rule, courts have recognized that when a patentee sues both the manufacturer and its customers, 'litigation against or brought by the manufacturer of infringing goods takes precedence over a suit by the patent owner against customers of the manufacturer.' Speed Spectrum Screening LLC v. Eastman Kodak Co., 657 F.3d 1349, 1357 (Fed. Cir. 2011)." The district court further explained that this doctrine is referred to as the "customer suit exception" and "is based on the recognition that a manufacturer is presumed to have a 'greater interest in defending its actions against charges of patent infringement [than a customer may]; and to guard against the possibility of abuse.' Kahn v. Gen. Motors Corp., 899 F.2d 1078, 1081 (Fed. Cir. 1989); see also Spread Spectrum Screening, LLC v. Eastman Kodak Co., 2010 WL 3516106, at *2-3 (N.D. Sept. 1, 2010) (severing customer defendants and transferring claims against manufacturer under the notion that the customers were 'peripheral' to the infringement allegations)." The district court also noted that district courts have broad discretion to control their dockets by staying proceedings, as long as the stay is not indefinite or otherwise excessive.