district courts may find proper joinder, while some district courts may not. The ultimate question is whether an upstream defendant and downstream defendant have some relationship beyond mere sale of the accused products.
The Southern District of Florida in Omega Patents, LLC v. Skypatrol, LLC132 found proper joinder of a manufacturer and its client because their infringing acts arose from the same series of transactions-or-occurrences.133 The manufacturer sold the client accused products, which then were reconfigured and modified by the client and
127 See id. at *1.
128 See id. (“Plaintiff also alleges that Defendants ‘utilize the same systems and methods in connection with their use and implementation of the accused systems and they have been, and are, utilizing the same methods and series of transactions in connection [with] their
customers’ downloads of VOD content.’”) (citing Compl. ¶¶ 23–24)).
129 See id. at *6.
130 Id.
131 Id.
132 Omega Patents, LLC v. Skypatrol, LLC, No. 1:11-CV-24201-KMM, 2012 WL 2339320 (S.D. Fla. June 19, 2012).
133 Id. at *2.
relabeled as the client’s products.134 The client was assisted with the information and documentation provided by the manufacturer.135 Therefore, the court concluded that
“[i]nherent in this relationship are common questions of fact, such as the nature of the guidance and modifications [the client] provides its users relative to the asserted claims against [the manufacturer], and the design and functionality of the product [the manufacturer] provides to [the client].”136
In MGT Gaming, Inc., the Southern District of Mississippi treated joinder of a manufacturer and its casino client differently from joinder of different manufacturers.137 The court found that one manufacturer made gaming machines and provided the machines to its casino client under an ongoing agreement of revenue sharing and machine maintenance.138 The manufacturer’s offers for sale and sales of the machines to the casino client constituted a series of transactions, and the use of the machines by the casino client under the ongoing agreement constituted a series of related transactions.139 In addition, the court specified some facts in relation to several of the EMC factors.140 First, the infringing acts done by the manufacturer and casino client occurred during the same period and resulted from the mutual agreement.141 Second, the manufacturer and casino client
134 Id.
135 Id.
136 Id.
137 MGT Gaming, Inc., 978 F. Supp. 2d at 659.
138 Id. at 660–61.
139 Id. at 660.
140 Id. at 661 (“In addition, the Aruze Defendants share various factual considerations outlined in In re EMC”).
141 Id. (“[T]he alleged acts of infringement took place during the same time period throughout the Aruze Defendants’ relationship.”). This fact relates to the first EMC factor: “whether the alleged acts of
maintained a manufacturer-user or joint-user relationship, when the manufacturer provided a maintenance service to the casino client.142 Last, the revenue sharing agreement was part of a licensing agreement between the manufacturer and casino client.143 These facts support joinder in relation to the first, second and fourth EMC factors respectively, but the court also discussed the third, fifth, and sixth EMC factors in footnote 11 to disfavor the plaintiff’s position.144 Ultimately, the court held that the transaction–or–occurrence test was satisfied.145
The Central District of California has taken a strict view of an upstream-and-downstream relationship. In
infringement occurred during the same time period.” In re EMC Corp., 677 F.3d at 1359.
142 Id. (“Aruze and Penn allegedly have maintained a relationship as manufacturer and user, or joint users, and Aruze has supported the upkeep of the relevant machines.”). This fact relates to the second EMC factor: “the existence of some relationship among the defendants.” In re EMC Corp., 677 F.3d at 1359.
143 MGT Gaming, Inc., 978 F. Supp. 2d at. at 661–62 (“[T]he alleged revenue sharing agreement that resulted between Aruze and Penn amounts to a licensing agreement.”). This fact relates to the fourth EMC factor: “licensing or technology agreements between the defendants.” In re EMC Corp., 677 F.3d at 1359–60.
144 Id. at 662 n.11 (“As for the other factors, MGT has not directly alleged that the defendants use ‘identically sourced components’ . . . The ‘overlap of the products’ or processes’ development and
manufacture’ does not apply here because Penn had no involvement in the accused machines’ development or manufacture. The case is also unlikely to involve a claim for lost profits given that MGT is a non-practicing entity.”). .”) (quoting Novartis Vaccines & Diagnostics, Inc. V. MedImmune, LLC, No. CIV. 11-084-SLR, 2012 WL 3150524, at *2 (D. Del. Aug. 2, 2012) (quoting Rite-Hite Corp. V. Kelley Co., 56 F.3d 1538, 1548 (Fed. Cir. 1995))).
145 See id. at 662.
Digitech Image Techs., LLC v. Agfaphoto Holding GmbH,146 the plaintiff sued forty-five defendants who can be divided into manufacturers and of retailers.147 The infringing products were digital cameras.148 One manufacturer defendant moved for severance from retailer defendants as well as other manufacturer defendants, and the court agreed.149 While the court did not separate the reasoning for retailers from the reasoning for manufacturers, it did consider the alleged transactions as different transactions.150 With respect to the manufacturer-retailer scenario, the court observed that “the only instances involving the ‘same accused product’ are the transactions for an individual camera (or camera model) within the commerce stream.”151 But, the court held that “these transactions within the commerce stream do not constitute the same transaction or series of transactions.”152 Considering that the patent liability of a manufacturer is different from that of a retailer,153 the court found that a sale from the manufacturer
146 Digitech Image Technologies, LLC v. Agfaphoto Holding GmbH, No. 8:12-CV-1153-ODW, 2012 WL 4513805 (C.D. Cal. Oct. 1, 2012).
147 Id. at *1.
148 See id.
149 Id. at *1, *5.
150 See id. at *3.
151 Id.
152 Id. at *3.
153 See id. at *4 (“[The retailer’s] patent liability arises from its sale (or offer for sale) of the [manufacturer’s] camera to an end-user. This is entirely different from [the manufacturer’s] liability, which arises from its sale (or offer for sale) of its camera to [the retailer] (and others).”). See Mednovus, Inc., 2012 WL 4513539, at *3 (“Taking this analysis further, when Invivo or ETS-Lindgren sells an infringing Ferroguard product from Metrasens (and by extension, QinetiQ) to an end-user (presumably an institution), this is a third transaction.
to one retailer is a different transaction from a sale from such retailer to an end user.154 Therefore, the defendants did not share an aggregate of operative facts.155 The joinder of the manufacturer and its retailers was improper.156
While the Central District of California does not consider merely selling accused products from a manufacturer to a retailer as a basis for proper joinder of the manufacturer and retailer, the District of Arizona has disapproved joinder based on a retail contract without actual sales. In Pipeline Techs. Inc. v. Telog Instruments Inc.,157 the plaintiff based joinder on an agreement between the manufacturer defendant and retailer defendant under which the retailer defendant is required to “‘solicit orders for and promote the sale of’ the alleged infringing devices offered by [the manufacturer defendant].”158 The court held that such allegation is not enough.159
Although adopting a proposition that “one manufacturer defendant (the upstream defendant) and one retailer defendant (the downstream defendant)—can be properly joined pursuant to § 299 where the upstream defendant provides the product to the downstream defendant,”160 the District of Arizona distinguished the
Specifically, Invivo’s and ETSLindgren’s patent liability arises from its sale (or offer for sale) of the Ferroguard products to an end-user.
This is entirely different from Metrasens’s liability, which arises from its sale (or offer for sale) of its Ferroguard product to Invivo.”).
154 Id. at *4.
155 Id.
156 Id. at *5.
157 Pipeline Techs. Inc., 2014 WL 5241719.
158 Id. at *2 (internal quotation marks omitted).
159 Id.
160 Id. (quoting Richmond, 2014 WL 1716447, at *3)).
present case from the proposition because the manufacturer here did not provide accused products to the retailer.161 In addition, the court considered the solicitation and promotion of the accused products by the retailer as a different transaction from the manufacturing and selling of the accused products by the manufacturer.162 The court even held that the manufacturer’s “sales constitute separate transactions, whether completed with or without the assistance of a sales solicitor or promoter.”163 Furthermore, the court found that the retailer’s affiliated sales are a fraction of the manufacturer’s total sales of the accused products.164 Therefore, the court held that the plaintiff failed to meet the transaction-or-occurrence test.165
IV. APPROACH OF THE EASTERN DISTRICT OF TEXAS
Without clear guidance from the Federal Circuit, district courts are developing the case law for applying § 299. While the legislative history and the In re EMC Corp.
decision both consider the Eastern District of Texas as a minority view,166 the Eastern District of Texas continues to permit joinder of independent defendants. Thus, this article treats the Eastern District of Texas differently from other district courts.
161 Id.
162 Id.
163 Id. Pipeline Techs. Inc., 2014 WL 5241719, at *2.
164 Id.
165 See id.
166 See, e.g., In re EMC Corp., 677 F.3d at 1359 (implying that the Eastern District of Texas’ practice is a minority view); H.R. REP.NO. 112–98, pt.1, at 55 n.61 (2011).