When a multidistrict litigation (MDL) panel ruled against patent holder Droplets Inc. in December, it put the kibosh on Droplets’s efforts to move six patent infringement lawsuits back to the Eastern District of Texas. Droplets had moved to consolidate the suits in an MDL in Texas, but the Judicial Panel on Multidistrict Litigation denied the request, because the cases were at different stages of litigation.
Even if the MDL gambit didn’t work for Droplets, it won’t be the last time patent litigators try the MDL move in the venue dance. The MDL panel, which traditionally hasn’t seen many patent cases, is assuming a greater role in patent litigation.The rise is the combined result of the America Invents Act’s limits on joinder and recent Federal Circuit case law making it easier to transfer cases out of the notoriously sticky Eastern District of Texas. More filings against individual defendants means more cases scattered to multiple jurisdictions and more district court judges potentially ruling on the same complex and technical patents. It all adds up to a sure recipe for pretrial consolidation as an MDL, said lawyers monitoring the trend.
"Are you going to see more MDLs in light of the AIA? Yes," says Yar Chaikovsky, a patent litigator at McDermott Will & Emery. "Once you have cases in three different venues, you have a pretty decent argument for an MDL." It’s not just plaintiffs using the process strategically, Chaikovsky adds. For instance, turning to the MDL panel can be a "get-out-of-jail-free card," he says, for defendants looking for a way out of the Eastern District of Texas, famously viewed as an undesirable jurisdiction to fight patent suits. (See "It’s Not Just About Us.")
In 2011 Congress attempted to rein in patent litigation against multiple defendants with a provision in the America Invents Act that tightened joinder rules. However, splitting up infringement cases has created new problems for parties and judges—problems that pretrial consolidation as an MDL can solve, says Edward Reines, a patent litigator at Weil, Gotshal & Manges and chair of the advisory council for the U.S. Court of Appeals for the Federal Circuit.
"You want consistency, you want judicial economy. You want coordination," he says. "Pre–AIA, plaintiffs were suing 10 companies in one case and putting one or two Texas companies in there, so there would be enough connection to keep the case in Texas. Under the AIA, there’s been more scattering," he says. "But let’s say, each of the 10 cases gets sent to a different court and you have 10 different district judges handling claim construction. That’s not satisfying either."
In the Eastern District of Texas, Chief Judge Leonard Davis has crafted an approach to keep control of the district’s mammoth patent docket in the wake of recent reforms. In Norman IP Holdings v. Lexmark International, Davis’s August order severed some defendants as required by the America Invents Act but consolidated the newly split cases for pretrial issues. "It does not make sense for two courts to plow the same ground," Davis wrote. Davis said he would rule later on transfer motions and stay transfers until after the critical claim construction phase of the case, when judges construe the terms of a patent.
"[Davis's approach is] like a mini–MDL. It applies MDL principles to the AIA’s requirement that all these cases be filed separately," says Matthew Powers of Tensegrity Law Group, a plaintiffs-side law firm. "I think it’s clever." Lawyers who defend clients against nonpracticing entities, or so-called patent trolls, in the Eastern District of Texas had a different take on the Norman IP ruling. One lawyer called the order "a scary thing" for defendants in patent cases.
Congress created the MDL panel in 1968 to determine whether similar civil actions pending in different federal districts should be centralized and transferred to one judge for coordinated pretrial proceedings. The panel consists of seven sitting federal judges from different judicial circuits appointed by the chief justice of the United States. The bulk of matters considered for MDLs are mass tort claims, including product liability suits against drugmakers, where thousands of cases might be filed across the country; another big area involves antitrust cases, such as the massive MDL over alleged price-fixing in the market for thin-screen LCD panels being handled by U.S. District Judge Susan Illston in San Francisco. Patent cases have traditionally been a minor category of cases. Of 284 open MDL dockets, just 18 are patent cases.
But the judges of the MDL panel have been paying attention to recent shifts and seem to be gearing up for more patent-related matters. In November several member judges participated in a forum sponsored by the State Bar of Texas that included topics like "What Patent Litigators Need to Know about MDL" and "To MDL or Not to MDL: Views from the Trenches." Including Droplets, the MDL panel reviewed 11 requests related to patent litigation in 2012 and granted seven. (An additional motion, filed in November, was withdrawn, while another motion filed in December is being briefed.) By comparison, the panel authorized two patent MDLs in 2010 and five in 2011.
Perhaps as expected, plaintiffs seem to be pursuing centralization slightly more often than those sued for infringement. Of the 12 patent MDL petitions in 2012, plaintiffs initiated eight matters, compared to four motions filed by defendants. Notably, in every 2012 case where a patent holder’s request for centralization was granted, the matter was sent to a venue favored by defendants. Powers says the MDL option has benefits that appeal to plaintiffs and defendants in patent cases, depending on the circumstances. "From the plaintiffs’ point of view, you don’t want six different claim construction rulings. It’s a way of consolidating cases," he says. "If you’re a defendant and don’t want to be where you are, it gives you a basis to get in a different court." But it does involve an element of risk, Powers says: "You don’t control which court. You may or may not get to a court you want."