RODNEY GILSTRAP, District Judge.
Before the Court is the briefing on a number of motions to sever and/or transfer, supplemental motions to certain of those motions, and a handful of supplemental notices to various motions
"Under the Rules, the impulse is toward entertaining the broadest possible scope of action consistent with fairness to the parties; joinder of claims, parties and remedies is strongly encouraged." United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 724 (1966) (citing Federal Rules of Civil Procedure ("F.R.C.P.") Rules 2, 18-20 and 42). "[M]otions to sever are governed by Federal Circuit law because joinder in patent cases is based on an analysis of the accused acts of infringement, and this issue involves substantive issues unique to patent law." In re EMC Corp., 677 F.3d 1351, 1354 (Fed. Cir. 2012).
In most patent cases, the joinder of defendants into actions and/or trials is provided for by 35 U.S.C. § 299.
"It is clear that where defendants are alleged to be jointly liable, they may be joined under Rule 20 because the transaction-or-occurrence test is always satisfied." In re EMC, 667 F.3d at 1356 (citing Temple v. Synthes Corp., 498 U.S. 5, 7 (1990)). "Defendants may [also] be joined if `any right to relief is asserted against them jointly, severally, or in the alternative,' [] so an allegation of joint liability is not required.'" Id. "The cases make equally clear that the fact that the defendants are independent actors does not preclude joinder as long as their actions are part of the `same transaction, occurrence, or series of transactions or occurrences.'" Id. "[I]ndependent defendants satisfy the transaction-or-occurrence test of Rule 20 when there is a logical relationship between the separate causes of action." Id. at 1358. "The logical relationship test is satisfied if there is substantial evidentiary overlap in the facts giving rise to the cause of action against each defendant." Id. "In other words, the defendants' allegedly infringing acts, which give rise to the individual claims of infringement, must share an aggregate of operative facts." Id.
"Claims against independent defendants (i.e., situations in which the defendants are not acting in concert) cannot be joined under Rule 20's transaction-or-occurrence test unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts." In re EMC, 667 F.3d at 1359. In addition, "joinder is not appropriate where different products or processes are involved." Id. "Joinder of independent defendants is only appropriate where the accused products or processes are the same in respects relevant to the patent." Id. "Unless there is an actual link between the facts underlying each claim of infringement, independently developed products using differently sourced parts are not part of the same transaction, even if they are otherwise coincidentally identical." Id.
Further, "even if a plaintiff's claims arise out of the same transaction and there are questions of law and fact common to all defendants, district courts have the discretion to refuse joinder in the interest of avoiding prejudice and delay, ensuring judicial economy, or safeguarding principles of fundamental fairness." In re EMC, 667 F.3d at 1360 (citing Acevedo v. Allsup's Convenience Stores, Inc., 600 F.3d 516, 521 (5th Cir. 2010)). "In a complicated patent litigation a large number of defendants might prove unwieldy, and a district court would be justified in exercising its discretion to deny joinder when different witnesses and documentary proof would be required." Id. (citations omitted).
"To be sure, Rule 21, which authorizes a district court to `sever any claim against a party,' provides a district court broad discretion." In re EMC, 667 F.3d at 1355. "Just as when weighing the § 1404(a) factors, however, that discretion must be exercised within the boundaries set by relevant statutes and precedent."
This suit is a suit concerning the infringement and validity of certain U.S. patents. Plaintiff ContentGuard was originally formed as a partnership between Xerox Corporation and Microsoft Corporation
This case was filed as a single action against seven named Defendants. Motorola filed an initial Motion to Sever (Dkt. No. 55) in the middle of February 2014. The Court ultimately carried Motorola's Motion and stated the following:
(Dkt. No. 109, filed April 15, 2014.) Motorola filed its Supplemental Motion to Transfer two months later. Then, at varying intervals, the other Defendants also moved to sever. Apple filed its Motion to Sever and Transfer two days after Motorola filed its Supplemental Motion. One month after Apple filed its motion HTC, Huawei, and Samsung filed their Motion to Sever. One month after the HTC motion was filed, Amazon filed its Motion to Sever. Two and a half months after Amazon filed its motion, Apple filed its supplemental motion. The four motions containing the severance issue that the Court addresses represent approximately sixteen filings, 175 pages of briefing, and 1000 pages of exhibits.
This paragraph summarizes the common positions taken by the parties, and the following paragraphs distill the distinct positions taken by Movants in their briefing along with arguments made by their counsel at the Court's hearing on the motions. All of the Movants argue that claims against them should be severed, in different ways, into new cases. Some Movants argue that particular claims against them should be severed into separate actions, while other Movants argue that they should be severed entirely, as a party, from all other Movants. The Movants do universally agree on certain generalities: that the case is complex, that there are different categories of claims, and that trying all of the claims against each Movant in one trial would be unjust. The Movants differ in their legal arguments; in their views of whether anything besides apps (e.g. hardware) is or is not relevant to ContentGuard's claims; and in whether they believe they are properly joined. ContentGuard asserts that joinder is proper under the appropriate legal tests, that hardware is relevant to its case, that the Court should not use its discretion to sever the case, and that, if the Court should sever the case, the newly severed cases should be consolidated for pretrial. ContentGuard also concedes that the case should be tried in separate trials.
Motorola's motion is based solely on 35 U.S.C. § 299. "Motorola proposes that the claims based on the use of the Google Play apps be severed into a separate action, which could then be joined with the action of ContentGuard Holdings, Inc. v. Google Inc., No. 14-cv-61" and that "the claims based on the use of the Amazon apps be severed into a separate action."
At the hearing, counsel shared by Motorola and Google asserted that the case should be severed by claim and then by app. (Dkt. No. 299 at 53, 55:18-21 ("I do believe that the best division here is by claim — by app").) Motorola and Google's counsel argued that the apps run the same on each device and that hardware doesn't matter. (See Dkt. No. 299 at 53:15-54:1.) However, counsel also agreed (in contrast to Motorola's briefing) that the fact that the app might run the same on different hardware did not make the hardware irrelevant and that the Court should not disregard the device manufacturers in considering severance. (See Dkt. No. 299 at 54:2-18.) Counsel also asserted that "the device manufacturers would have to be a part of those [severed] cases" and that "as part of the severance motion, all of the device manufactures, including Motorola, who I represent, recognize that they might be a Defendant then in multiple cases . . . ." (Dkt. No. 299 at 54:17-21.) Counsel also argued that these severances might include the "silos of Google Play, Amazon, [and] iTunes" and that the apps in each silo have "absolutely nothing in common" with each other. (Dkt. No. 299 at 55:2-10.)
The motion of HTC, Huawei, and Samsung ("HTC Movants") is also based solely on 35 U.S.C. § 299. The Court observes that the HTC Movants' briefing does not dispute that they are properly joined regarding the Amazon or UITS claims. Instead of arguing that they are improperly joined in the first instance, the HTC Movants assert that the joinder of additional claims "defies common sense and certainly does not comport with providing defendants the due process to which they are entitled . . . ." (Dkt. No. 200 ("HTC Reply") at 1.) The HTC Movants assert that "even if joinder were not prohibited by Section 299, severance would still be required in this case to prevent the manifest inefficiencies and unfair prejudice to defendants that would result from the combined discovery and trial of the numerous unrelated software `apps', numerous defendants, and numerous patents-in-suit in this case." (Dkt. No. 174 ("HTC Motion") at 7.) The HTC Movants assert that "[a]t a minimum [] this action should be severed such that the claims involving (1) the Google Play apps; (2) the Samsung-Specific Accused Apps and Servers; and (3) the HTC Watch App and Servers are severed into separate actions."
Apple moves for severance under F.R.C.P. Rule 20 ("Permissive Joinder of Parties"); Rule 21 ("Misjoinder and Nonjoinder of Parties"); and 35 U.S.C. § 299 ("Joinder of Parties").
Apple also asserts that 35 U.S.C. § 299 "precludes joinder of defendants who do not make or sell the same products, and defendants may not be joined `based solely on allegations that they each have infringed' the same patents." (Apple Mot. at 2.) Apple's assertion regarding § 299 (recited in full above) is incomplete. Instead of being limited to "defendants who [] make or sell the same products" the statute additionally provides for joinder in instances such as "use" and "importing" and also applies to processes in addition to products:
35 U.S.C. § 299(a)(1).
At the hearing, counsel for Apple asserted that "all of the claims against Apple should be severed into a separate case," apparently arguing that Apple should be severed as a party. (Dkt. No. 299 at 61:4-6.) Apple's counsel then asserted that "the claims against Apple relating to the Amazon apps and the Google apps, as a practical matter, those claims are going to be defended by Google, and they're going to be defended by Amazon, and they're going to play themselves out [in this suit]," seemingly suggesting that some Apple claims would remain in this suit. (Id. at 62:4-8.) Apple also asserted that the versions of third-party apps (e.g. Amazon Kindle) that run on its devices (e.g. iPhones) are specifically authored for its operating system—iOS—and are, therefore, not the same product or process as a version of the app that runs on another system. (Id. at 63:18-23.) Apple also argued that the same app is a different product on each platform that it runs upon.
Amazon also moves for severance under F.R.C.P. Rules 20 and 21 and 35 U.S.C. § 299. (See Amazon Mot., Dkt. No. 205 at 2-3.) Amazon's Motion asserts that "the Court should sever ContentGuard's claims with respect to the accused Amazon apps, devices, and content delivery systems." (Id. at 7; Amazon Reply., Dkt. No. 222 at 4.) To the Court's surprise, Amazon's proposed order enacts a materially different severance—separating the case in five different ways—than the single method of severance discussed in the body of Amazon's motion.
In arguing for severance, Amazon's Motion only asserts that one of the six defendants— Huawei—is improperly joined because Amazon does not have an agreement to provide Amazon apps to that defendant.
See
At the hearing, Amazon's counsel confirmed that joinder would be appropriate except for Huawei. (Dkt. No. 299 at 35:17-23.) Amazon's counsel asserted that there was not enough information in the complaint to make a clear severance determination. (See Dkt. No. 299 at 36:7-9 ("there's any number of variations that can be put together to try to determine whether or not there's direct infringement, induced, and contributory"); 36:18-21 ("looking at the complaint, whether it's the initial complaint or the second amended complaint, Your Honor, I don't think you are going to find the appropriate guidance to make a decision with respect to severance").) When asked, Amazon's counsel also asserted that the severance issue was a party issue and not a claim issue:
(Dkt. No. 299 at 36:18-21.). When asked why it was a party issue, Amazon responded as follows:
(Id. at 37:22-38:2.) Amazon's position appears to be that Amazon would prefer to address the case from a software only perspective and to exclude the hardware (of other third parties) from its case.
The Court has invested significant time in trying to resolve this issue. That four out of six defendants moved separately for severance across 175 pages of briefing and that the Movants presented the Court with different, competing, theories of how (and why) the case should be severed and what was or was not relevant in the severance determination (e.g. hardware and app operating system) substantially complicated the Court's efforts to develop a coherent understanding of the severance issues. While the Movants' differing views (and the Movants' lack of specificity regarding their severance positions) prevent the Court from describing a possible severance that they would each agree to, the Movants, generally, ask the Court to create at least two cases containing every defendant and some number of other cases (perhaps four) containing between one and all but one of the defendants.
Having completed its review of the briefing and the record, the Court's analysis does not find that the movants are improperly joined as parties under 35 U.S.C. § 299 and F.R.C.P. Rule 20. The Court finds that the briefing and record reflect that, under multiple theories of infringement, there are common questions of fact; that there are actual links between those facts; and that the "same transaction, occurrence, or series of transactions or occurrences" is being accused. The Court observes that the majority of the Movants appear to also share the Court's conclusion. From the Court's review of the briefing, four of the six defendants—Motorola, Samsung, HTC, and Huawei—do not directly dispute that they are properly joined as parties (even though as discussed below they do dispute the joinder of certain claims), and that another defendant—Amazon—only disputes the joinder of one party out of six: Huawei.
Apple and Amazon additionally assert that severance is improper under F.R.C.P. Rule 21. Such assertion is wholly conclusory and neither party provides the Court with any substantive argument under that Rule. Apple's briefing provides no specific argument as to Rule 21 and only references Rule 21 in its initial assertion of that Rules and as part of two citations. Amazon only mentions the Rule three times: once in its initial assertion of the Rule, once as part of a citation, and in a conclusory statement that "the Court should sever this case under Federal Rule of Civil Procedure 21." The Court, therefore, finds Apple's and Amazon's briefing unpersuasive that the Court should sever the case under Rule 21.
While Movants do not substantively dispute that they are properly joined as parties under certain theories of infringement, they do dispute, at length, whether additional claims against them should be joined in this action. A serious complication for the Court is that the Movants argue their issues of claim joinder under provisions covering the joinder of parties—not under those provisions covering the joinder of claims. To the extent the Movants have argued for discretionary severance, the Court will address the Movants issues as largely a request for claim-based severance.
Movants have asserted that judicial efficiency would be increased if the Court were to discretionarily sever this action. The Movants present no clear explanation of how splitting this case into multiple cases (some of which would apparently include the same or nearly the same defendants) promotes judicial efficiency. Absent a clear explanation to the contrary, the more likely outcome seems to be that more cases with more overlapping defendants would generate the opposite result: a multiplication of complexity and a decrease in efficiency.
Movants also argue that the case should be severed along manufacturer-retailer lines. For example, Apple argues that it is just a downstream retailer or distributor of the apps of other defendants. The problem with Apple's analogy (that it is merely a retailer of a third-party's product) is that elements of Apple's products appear to be part of the infringement analysis for those third-party products. The Court does not find that the facts and infringement theories of the case fall within (or even near) the traditional lines of manufacturer-retailer.
The Movants have also raised concerns regarding discovery. The Court's issue with Movants discovery concerns is that, while Movants have generally articulated concerns regarding the complexity of litigation, the Movants have failed to provide the Court a clear explanation of how discovery would be substantively different (or simplified) if this case were severed.
The Movants also raise the issue of potential prejudice from trying all claims in one trial. The Movants concerns of potential prejudice at trial are shared by the Court, and were voiced by the Court in its order on Motorola's Motion before any of the present motions were filed. ContentGuard has also stated that it too believes that the claims should be tried in separate trials. (See Dkt. No. 299 at 46:3-5 ("We [(ContentGuard)] don't believe that the case could be resolved in one trial. There — there will be probably several trials.").) The Court has determined that it will use its discretionary powers under F.R.C.P. Rule 42(b) to order separate trials.
While the Court would strongly prefer, at this point, to resolve this issue and to announce how the case would be divided for trial, the record before the Court, including the Movants' briefing, is presently insufficient to make such critical and complex determinations.
After much consideration, the Court has determined that the best time for this proceeding is likely after the close of expert discovery but before pretrial proceedings commence in full. At that point, the case should be substantially narrowed and the theories of the case will be fully determined. The Court hereby ORDERS a hearing on the issue of separate trials at 1:30 p.m. on Wednesday, June 3, 2015. The Court also ORDERS the parties in this case and the parties in Case No. 2:14-cv-61 to meet and confer (with lead and local counsel present) and to file a joint proposal or proposals for separate trials if warranted by noon on Thursday, May 28, 2015. The Court further ORDERS the same parties to meet and confer (with lead and local counsel present) on the issue of separate trials immediately in advance of the Court's hearing. To the fullest extent possible, the Parties' proposal should provide a clear and agreed trial plan to the Court. To the extent any such proposal includes particular claims being separated for trial, the Court expects that the defendants being separated into such trials will be explicitly defined and that the claims to be separated will be clearly defined, such that there will be no subsequent questions whether or not a particular claim was or was not tried to complete disposition. The Court also directs that the Parties' Joint proposal address and account for potential procedural issues that may result from such severed trials. The Court also directs the Parties, as they meet and confer, to consider all options for the efficient trial of this case, including whether trying more issues in fewer but longer trials would be effective.
For the reasons set forth above, the Court hereby
The Court hereby
(a) Joinder of Accused Infringers — With respect to any civil action arising under any Act of Congress relating to patents, other than an action or trial in which an act of infringement under section 271 (e)(2) has been pled, parties that are accused infringers may be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, only if—
(b) Allegations Insufficient for Joinder.— For purposes of this subsection, accused infringers may not be joined in one action as defendants or counterclaim defendants, or have their actions consolidated for trial, based solely on allegations that they each have infringed the patent or patents in suit.
(c) Waiver.— A party that is an accused infringer may waive the limitations set forth in this section with respect to that part
(a) In General. A party asserting a claim, counterclaim, crossclaim, or third-party claim may join, as independent or alternative claims, as many claims as it has against an opposing party.
(b) Joinder of Contingent Claims. A party may join two claims even though one of them is contingent on the disposition of the other; but the court may grant relief only in accordance with the parties' relative substantive rights. In particular, a plaintiff may state a claim for money and a claim to set aside a conveyance that is fraudulent as to that plaintiff, without first obtaining a judgment for the money.
(a) Persons Who May Join or Be Joined.
(b) Protective Measures. The court may issue orders—including an order for separate trials—to protect a party against embarrassment, delay, expense, or other prejudice that arises from including a person against whom the party asserts no claim and who asserts no claim against the party.
Misjoinder of parties is not a ground for dismissing an action. On motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party.
(Dkt. No. 205-1.)
(a) Consolidation. If actions before the court involve a common question of law or fact, the court may:
(b) Separate Trials. For convenience, to avoid prejudice, or to expedite and economize, the court may order a separate trial of one or more separate issues, claims, crossclaims, counterclaims, or third-party claims. When ordering a separate trial, the court must preserve any federal right to a jury trial.