Court Severs Defendants in Multi-Defendant Action But Then Consolidates the Severed Cases

August 29, 2012

Plaintiff Oasis Research, LLC ("Oasis") filed a patent infringement action against twelve defendants alleging infringement of four patents. Generally, the patents claim methods for allowing a home computer user to remotely connect to an online service system for external data and program storage in addition to increased processing capabilities in exchange for a fee. Oasis claimed that the defendants infringed the patents-in-suit by providing online backup and storage services.

Defendants asserted that joinder was not proper because Oasis had joined different defendants with different products. In May 2011, the court entered a report and recommendation denying the defendants' motion to dismiss for misjoinder, severance and transfer. The district court adopted the recommendation. After a petition for a writ of mandamus to the Federal Circuit, the Federal Circuit granted the writ, finding that the district court had applied the wrong test and remanded for the district court to apply the correct test: "Since the district court here applied an incorrect test, the district court's ruling must be set aside, and the issues of severance and joinder considered under the proper standard. We therefore grant the petition to the limited extent that we vacate the district court's order denying the motions to sever and transfer, and direct the district court to reconsider those motions in light of the correct test."

On remand, the court analyzed the legal standard for joinder and severance, stating that "[u]nder the 'transaction-or-occurrence' test, the first requirement of Rule 20, the fact that the defendants act independently of each other 'does not preclude joinder as long as their actions are part of the 'same transaction, occurrence, or series of transactions or occurrences.' Id. The existence of a single common question of law or fact is not sufficient to satisfy this requirement. Id. at 1357. The Federal Circuit held that the transaction-or-occurrence test requires a 'logical relationship' between the claims, similar to the transaction-or-occurrence test under Federal Rule of Civil Procedure 13(a) for compulsory counterclaims. Id. at 1357-58 (citations omitted)."

The court then concluded that severance was appropriate under this standard in this case: "In conclusion, the Court finds that the creation of five (5) separate lawsuits is appropriate in this case based on the lack of a logical relationship between the claims against each Defendant. According to the motions before the Court, each Defendant's accused product is different, Defendants are competitors of each other, Defendants worked independently to create their accused products, and there is no aggregate of operative facts that would indicate joinder is appropriate in this case. Under Rule 20, the unrelated Defendants in this case were improperly joined and should be severed into their own cases. Accordingly, the Court ORDERS that claims against the Defendants be severed into separate causes of action as detailed below."

Nonetheless, the court found that consolidation was still appropriate to ensure judicial economy and, therefore, consolidated the severed case. "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. As a result of the Leahy-Smith America Invents Act, plaintiffs now file multiple single-defendant (or defendant group) cases involving the same 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. See Norman IP Holdings, LLC v. Lexmark International, Inc., et al., No.: 6:11-CV-495 (E.D. Tex. August 10, 2012 (Davis, C.J.). Federal Rule of Civil Procedure 42 allows for the courts to better conserve judicial resources via consolidation for certain common issues such as pretrial, Markman, or trial. The Federal Circuit reiterated that this is an available tool when venue is proper and there is a common issue of law or fact. In re EMC, 677 F.3d at 1360.

Based on this reasoning, the court consolidated the cases for efficient case management: "Thus, to permit efficient case management, the Court ORDERS these newly severed actions consolidated with the original filed case as to all issues, except venue, through pretrial only. Additionally, the Court ORDERS the parties to file briefs discussing the effect of consolidating these cases for trial, specifically addressing whether Defendants should be consolidated for trial on issues of invalidity and severed for issues of infringement and damages. Accordingly, Plaintiff shall file its brief within seven (7) days of this order, and Defendants shall file their responsive brief seven (7) days after Plaintiff's brief is filed."

Oasis Research, LLC v. Carbonite, Inc., Case No. 4:10-CV-435 (E.D. Tex. Aug. 15, 2012)

The authors of www.PatentLawyerBlog.com are patent trial lawyers at Jeffer Mangels Butler & Mitchell LLP. We represent inventors, patent owners and technology companies in patent licensing and litigation. Whether pursuing patent violations or defending infringement claims, we are aggressive and effective advocates for our clients. For more information contact Stan Gibson at 310.201.3548 or SGibson@jmbm.com.