B. 35 U.S.C. § 299 and In re EMC
III. Approaches of the Majority of District Courts 116
COURTS
The transaction-or-occurrence test developed by the majority of district courts is often applied in two scenarios:
competitor and upstream-downstream.80 The competitor
78 Summit 6 LLC v. HTC Corp., No. 7:14-CV-0014-O, 2014 WL 4449821 (N.D. Tex. Sept. 10, 2014).
79 See id. at *16.
80 See, e.g., See, e.g., See, e.g., Broadband iTV, Inc. v. Hawaiian Telcom, Inc., No. CIV. 14-00169 ACK, 2014 WL 5580967, at *5–8 (D. Haw. Oct. 30, 2014); Pipeline Techs. Inc. v. Telog Instruments Inc., No. CV-13-02104-PHX-SPL, 2014 WL 5241719, at *1–3 (D.
Ariz. Oct. 15, 2014); NFC Tech., LLC v. HTC Am., No. 2:13-CV-01058-JRG, 2014 WL 3834959, at *1–2 (E.D. Tex. Aug. 1, 2014);
Star CoLED Techs., LLC v. Sharp Corp., No. 2:13-CV-416-JRG, 2014 WL 1998051, at *1–3 (E.D. Tex. May 15, 2014); Richmond v.
Lumisol Elec. Ltd., Civ. Action No. 13-1944 (MLC), 13-1949(MLC), 1950(MLC), 1951(MLC), 1952(MLC), 1953(MLC), 1954(MLC), 1957(MLC), 1958(MLC), 1959(MLC), 13-1960(MLC), 13-2916(MLC), 2014 WL 1716447, at *1–6 (D.N.J. Apr.
30, 2014) (reversing Richmond v. Lumisol Elec., Ltd., Civ. Action No. 13-1944(MLC), 13-1951(MLC), 13-1953(MLC), 13-1954(MLC), 13-1959(MLC), 2014 WL 457661 (D.N.J. Feb. 4, 2014)); MGT Gaming, Inc., 978 F. Supp. 2d at 657–63; Digitech Image Techs., LLC v. Agfaphoto Holding GmbH, No. 8:12-CV-1153-ODW, 2012 WL 4513805, at *1–4 (C.D. Cal. Oct. 1, 2012); Mednovus, Inc. v. QinetiQ Grp. PLC, No. 2:12-CV-03487-ODW, 2012 WL 4513539, at *1–3 (C.D. Cal. Oct. 1, 2012); Golden Bridge Tech., Inc. v. Apple, Inc., No.
2:12-CV-4014-ODW, 2012 WL 3999854, at *1–3 (C.D. Cal. Sept. 11, 2012); Net Nav. Sys., LLC v. Cisco Sys., Inc., No. 4:11-CV-660, 2012 WL 7827543, at *2Aug. –3 (E.D. Tex. Aug. 22, 2012) report and recommendation adopted, No. 4:11-CV-660, 2013 WL 1309837 (E.D. Tex. Mar. 27, 2013); Motorola Mobility, Inc. v. Apple Inc., Nos.
scenario arises when independent defendants are competitors of each other. The upstream-downstream scenario arises when independent defendants are upstream manufacturers and downstream clients (e.g., users, retailers, resellers, distributors) with respect to each other.
A. Competitor Scenario
“Direct competitors” are unlikely to be jointly sued as defendants81 primarily because it is unlikely to find “the facts underlying the claim of infringement asserted against each [of the] defendant[s to] share an aggregate of operative facts.”82 Nevertheless, if competitors are sued as defendants, as in the competitor scenario, district courts have found misjoinder. In these misjoinder decisions, the competitor
1:10-CV-23580-RNS, 1:12-CV-20271-RNS, 2012 WL 3113932, at *4 (S.D. Fla. Jul 31, 2012); IpVenture, Inc., 879 F. Supp. 2d at 429–30;
Omega Patents, LLC v. Skypatrol, LLC, No. 1:11-CV-24201-KMM, 2012 WL 2339320, at *1–2 (S.D. Fla. June 19, 2012).
81IpVenture, Inc., 879 F. Supp. 2d at 430 (“They are all direct
competitors, which also significantly counsels against their joinder in the same case.”); Motorola Mobility, Inc., 2012 WL 3113932, at *4 (“Moreover, HTC and Motorola are competitors, not collaborators, in the smartphone market.”) See, e.g., Broadband iTV, Inc., 2014 WL 5580967, at *7 (“Additionally, since TWC and HTI are competitors in the cable TV market, joinder may be inappropriate in this case given that ‘sensitive and confidential information’ is ‘likely [to] be revealed in discovery in this matter.’”); MGT Gaming, Inc., 978 F. Supp. 2d at 660 (“As direct competitors with different casino clients, WMS and Aruze’s products never involve the same stream of commerce.”);
Golden Bridge Tech., Inc., 2012 WL 3999854, at *3 (“Defendants are unrelated competitors that design, manufacture, and sell smartphones and other data communication devices.”); Motorola Mobility, Inc., 2012 WL 3113932, at *4 (“Moreover, HTC and Motorola are competitors, not collaborators, in the smartphone market.”);
IpVenture, Inc., 879 F. Supp. 2d at 430 (“They are all direct
competitors, which also significantly counsels against their joinder in the same case.”).
82 In re EMC Corp., 677 F.3d at 1359.
relationship between the defendants is the key factual concern.
A plaintiff must assert some link among different claims against different competitor defendants for a joinder of claims. A common approach is to assert some facts supporting the third EMC factor (the use of identically sourced components) or the fourth EMC factor (licensing or technology agreements between the defendants). However, these misjoinder cases demonstrate that these two EMC factors are weak factors.
In three 2012 cases, each of the plaintiffs tried to assert some similarity among the defendants’ products. In IpVenture, Inc. v. Acer, Inc.,83 the plaintiff based joinder on the allegation that different accused products use the same components and comply with the same industry standard.84 Nevertheless, the District of Delaware held that this allegation alone is not enough to support joinder of claims.85 The plaintiff failed to allege any “connection between the industrial standard and alleged infringement.”86 The court also considered that the defendants are all direct competitors, and recognized it as a factor that “significantly counsels against their joinder in the same case.”87 Thus, the court held that the infringement claims against the defendants’ products do not share an aggregate of operative facts.88
83 IpVenture, Inc., 879 F. Supp. 2d 426.
84 See id. at 430.
85 See id.
86 Id.
87 Id.
88 See id. (noting that the IpVenture plaintiff’s approach focuses on the third EMC factor: “the use of identically sourced components,” but, the District of Delaware did not discuss the third EMC factor in the reasoning).
In Motorola Mobility, Inc. v. Apple Inc.,89 the plaintiff asserted that the defendants hold a membership of the Open Handset Alliance (“OHA”) that is a form of joint development of the Android software.90 The Southern District of Florida followed a pre-AIA decision of the Northern District of Illinois,91 which held, “[s]imply being a member of an industry organization does not indicate that Defendants have jointly designed, developed, manufactured, marketed, or sold their Accused Products.”92 Because the OHA was found to be merely an organization promoting products and services based on the Android system,93 the Southern District of Florida held that the connection based on the OHA is “too tenuous.”94 The court found that the defendants are “competitors, not collaborators, in the smartphone market.”95 Ultimately, the court held that the plaintiff does not satisfy the AIA joinder clause by merely alleging the defendants are members of an industry association promoting products and services that “use the Android platform” infringing the same patent.96
89 Motorola Mobility, Inc. v. Apple Inc., No. 1:12-CV-20271-RNS, 1:10-CV-23580-RNS, 2012 WL 3113932 (S.D. Fla. Jul 31, 2012)..
90 See id. at *4.
91 Body Sci. LLC v. Boston Sci. Corp., 846 F. Supp. 2d 980 (N.D. Ill.
2012) (applying Rule 20 to the pre-AIA lawsuit).
92 Id. at 989; see also Motorola Mobility, Inc., 2012 WL 3113932, at
*4.
93 See Motorola Mobility, Inc., 2012 WL 3113932, at *4.
94 See id.
95 See id.
96 See id.
In Golden Bridge Tech., Inc. v. Apple, Inc.,97 the plaintiff argued that the defendants’ products use one of two baseband processors designed and manufactured by two different third-party suppliers.98 Nevertheless, the Central District of California found misjoinder because the defendants did not “have any relationship relating to the accused products or infringement of the [patent-in-suit].”99 The court based its decision on several facts. First, the defendants were “unrelated competitors.”100 Second, no evidence showed that the accused products are identical or that the defendants “collaborated in any manner to infringe the [patent-in-suit].”101 Third, Infringement of the patent-in-suit required other components to work with the alleged baseband processor.102 Fourth, the plaintiff was a non-practicing entity, which cannot theoretically claim lost profits.103
After Golden Bridge Tech., Inc., the Central District of California disregarded whether competition existed between defendants. In 2012, the Central District of California in Mednovus, Inc. v. QinetiQ Group PLC104 found misjoinder of different distributors of the same
97 Golden Bridge Tech., Inc. v. Apple, Inc., No. 2:12-CV-4014-ODW, 2012 WL 3999854 (C.D. Cal. Sept. 11, 2012).
98 See id. at *1.
99 Id. at *3.
100 See id.
101 See id.
102 See id.
103 See Golden Bridge Tech., Inc., 2012 WL 3999854, at *3. This consideration echoes the sixth EMC factor “whether the case involves a claim for lost profits.”
104 Mednovus, Inc. v. QinetiQ Grp. PLC, No. 2:12-CV-03487-ODW, 2012 WL 4513539 (C.D. Cal. Oct. 1, 2012).
manufacturer.105 The court’s analysis began by assuming that the accused products are the same.106 While admitting that “the only related transactions between these entities are those transactions within the commerce stream,”107 the court nevertheless held that “these transactions within the commerce stream do not constitute the same transaction or series of transactions.”108 Without asking whether those distributors are competitors, the court concluded that a transaction between the manufacturer and one distributor is different from a transaction between the same manufacturer and the other distributor.109
In 2013, the Southern District of Mississippi in MGT Gaming, Inc. v. WMS Gaming, Inc.110 found misjoinder of different gaming machine manufacturers, misjoinder of one manufacturer’s different casino clients, and proper joinder of each manufacturer and its casino clients.111 The court dealt with the competitor scenario and the upstream-downstream scenario concurrently.112 Regarding the manufacturer defendants, although the plaintiff did not assert that the
105 See id. at *2–3.
106 See id. at *2 (“Even assuming that each Defendant was infringing on the same products”).
107 Id.
108 Id.
109 See id. (“For instance, when Metrasens sells ETS-Lindgren a Ferroguard Ferromagnetic Detection System, that is one transaction.
When Metrasens sells Invivo a Ferroguard Entry Control System, that is a second transaction. These two sales have nothing to do with each other-other than involve different products in the Ferroguard line.”).
110 MGT Gaming, Inc. v. WMS Gaming, Inc., 978 F. Supp. 2d 647 (S.D. Miss. 2013).
111 See id. at 651.
112 See id. at 659
defendants relate to the same products,113 the court did not end its analysis. The court held that the plaintiff did not pass the transaction-or-occurrence test.114 The court considered the manufacturer defendants as “direct competitors with different casino clients.”115 The court considered that one manufacturer of gaming machines had no relationship with a transaction involving a second manufacturer, who made and licensed its gaming machines to its client.116 Therefore, the court held that both manufacturers’ products do not
“involve the same stream of commerce.”117 Regarding the casino defendants, the court found misjoinder because they have “no relationship to each other beyond the allegation that they have infringed the same patent.”118 The court also recognized the casino defendants as direct competitors and further commented that a “[d]irect competitor may not be joined in the same action because their acts do not arise out of the same transaction or occurrence and they do not share an ‘aggregate of operative facts.’”119
In 2014, the District of New Jersey finally provided an operative standard for determining whether joinder of competitors is proper. In Richmond v. Lumisol Elec. Ltd.,120
113 See id. (“MGT’s claims against WMS and Aruze do not relate to the same accused products.”).
114 See id. at 660.
115 Id. MGT Gaming, Inc., 978 F. Supp. 2d at 660.
116 Id.
117 Id.
118 Id. at 662.
119 Id. Id. (quoting IpVenture, 879 F. Supp. 2d at 430).
120 Richmond v. Lumisol Elec. Ltd., Civ. Action No. 13-1944(MLC), 1949(MLC), 1950(MLC), 1951(MLC), 1952(MLC), 1953(MLC), 1954(MLC), 1957(MLC), 1958(MLC), 13-1959(MLC), 13-1960(MLC), 13-2916(MLC), 2014 WL 1716447 (D.N.J. Apr. 30, 2014).
the court followed the prevailing view of other district courts121 and held that “direct competitors may not be joined in a patent infringement action pursuant to § 299, absent allegations of concerted action.”122 Alternatively, the court held that “competitors, absent a conspiracy, are not part of the same transaction.”123 The court further discussed a manufacturer-importer-retailer scenario and concluded that joinder of different importers is inappropriate, even though the same manufacturer sells the same products to the same retailer through those different importers.124 Finally, by applying this conspiracy-or-concert test, the court found misjoinder because the competitor defendants were “not alleged to have acted in concert.”125
The approach of the District of New Jersey was adopted later in the same year by the District of Hawaii in Broadband iTV, Inc. v. Hawaiian Telcom, Inc.126 In Broadband iTV, Inc., two cable television operators were
121 See id. at *5 (citing MGT Gaming, Inc., 978 F. Supp. 2d at 658–59, 663; Digitech Image Techs., LLC, 2012 WL 4513805, at *3; Omega Patents, LLC, 2012 WL 2339320, at *2).
122 Id.
123 Id.
124 See id. (“For example, where the same manufacturer sells the same accused product to two importers who then sell to the same retailer, there are multiple streams of commerce and multiple transactions: (1) manufacturer A to importer A to retailer A; and (2) manufacturer A to importer B to retailer A. The two importers—who are competitors—
are not part of the ‘same transaction,’ as demonstrated by this example.”).
125 Id. at *6.
126 Broadband iTV, Inc. v. Hawaiian Telcom, Inc., No. CIV. 14-00169(ACK), 2014 WL 5580967 (D. Haw. Oct. 30, 2014). The District of Hawai’i quoted some propositions of the conspiracy-or-concert test made by the Richmond court before analyzing the joinder issue. See id. at *5–6.
sued jointly.127 While the plaintiff asserted that both operators used the same method and system to operate their television services,128 the District of Hawaii did not mention the sameness test but rather focused on the competition relationship between these two defendants.129 Because of no allegation that the defendants “have acted in concert or conspired together,”130 the court concluded that the infringement by these two defendants does not arise out of the same transaction or occurrence.131
B. Upstream-and-Downstream Scenario