Friday, 8 June 2012

Consolidation of Multiple Patent Infringement Lawsuits into a Single Lawsuit

One of the common practices employed by plaintiffs in patent infringement suits to reduce litigation costs is to consolidate multiple defendants in a “single lawsuit” as opposed to filing a “separate lawsuit” against each defendant. This practice of consolidation has been often critiqued by industry observers who have attributed the increase in patent litigation in the recent years to this practice. If you observe the litigation suits filed in the various district courts in the United States, you will observe two parallel, yet completely tangential stories. While some plaintiffs are consolidating multiple defendants in the same lawsuit in some specific district courts, other plaintiffs are filing separate lawsuits for each defendant when the trail is happening in other district courts. Surprisingly enough, I found out that the process of consolidating multiple defendants in a single lawsuit is not straight-forward. 

Traditionally, the consolidation of multiple defendants in a single lawsuit was allowed only when any right to relief is asserted against the defendants jointly, severally or when the infringement of the accused product arises out of the same transaction, occurrence or series of transaction (299 (a)). In addition to the above factors, the consolidation was allowed when questions of fact common to all defendants or counterclaim defendants will arise in the action (299 (b)).

The first clause of section 299 is also known as “same transaction or occurrence” test which was used by courts for deciding on consolidation of defendants. However, it has been observed based on case studies that different courts have different interpretation of the “same transaction or occurrence” test. For example, when multiple defendants are accused of infringing the same patent through different acts of infringement, some courts have allowed for consolidation stating that there is a definite logical or relational dependency in the acts thereby satisfying the test while other courts have refused to allow consolidation stating that different acts of infringement does not satisfy the “same occurrence or transaction” test. The second clause of section 299 is not as twisted as the first clause as courts found out that question over the validity of patent claims were common to all accounts (read: acts) of infringement. With the enactment of the Leahy-Smith America Invents Act (AIA), few amendments were made to Section 299 to bring clarity to the overall process of consolidation. Post AIA, the defendants cannot be consolidated into one suit for trial solely based on allegations that each defendant has infringed the patent(s).  

The AIA act will certainly bring down the number of multi-defendant lawsuits, however, it may result in an increase in the number of lawsuits that would translate into added burden and load on the courts. Moreover, there may be still ways to beat the system and reduce the costs. For example, plaintiffs may file a patent infringement lawsuit covering the same patent in different district courts against different parties thereby forcing the courts themselves to consolidate the lawsuits into one single lawsuit. Even if the lawsuits are filed in the same court, the judges themselves may consolidate the lawsuits during the trial.


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