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A district court can limit the number of patent claims it considers in an infringement case as long as the process doesn’t unfairly hamper the plaintiff’s case, the U.S. Court of Appeals for the Federal Circuit has ruled. The Federal Circuit’s Feb. 18 ruling in In re Katz Interactive Call Processing Patent Litigation upheld a Central District of California judicial process that narrowed patent claims in a multidistrict litigation from 1,975 to 64. The MDL stems from 25 cases that Ronald A. Katz Technology Licensing LP filed against 165 defendants in 50 groups of related companies. Katz Technology Licensing alleged that the companies infringed 31 patents related to interactive call processing and call conferencing systems. The Federal Circuit appeal involves 14 patents related to interactive call processing systems. Katz has also filed 28 other cases that have been added to the MDL but that are not part of the Federal Circuit appeal. District Judge R. Gary Klausner of the Central District of California initially limited Katz to 40 claims per defendant group, to be narrowed to 16 per group after discovery. Klausner then directed that the total claims against all defendants could not exceed 64. He also ruled that Katz could add other claims if they “raise[d] issues of infringement/validity that [were] not duplicative” of the earlier selected claims. Katz added new claims, bringing the total to nearly 100, but they did not exceed 16 per group, according to the Federal Circuit ruling. Klausner ultimately denied Katz’s motion to sever and stay the nonselected claims. According to the Federal Circuit ruling, “Katz contended that the court’s requirement that it select particular claims violated its due process rights because the court’s order could result in decisions having a preclusive effect on non-selected claims regardless of whether those claims presented distinct issues of invalidity or infringement.” Klausner rejected that argument. The Federal Circuit opinion, written by Judge William Bryson, concluded that Katz “has failed to demonstrate that the allocation of burdens in the claim selection procedure adopted by the district court unfairly prejudiced it by creating a significant risk that Katz would be erroneously deprived of property rights in unselected claims.” Judges Alan Lourie and Pauline Newman joined the ruling. Bryson explained why the panel agreed with the lower court’s due process analysis: “Based on its initial determination that the asserted patents contained many duplicative claims, it was both efficient and fair to require Katz to identify those unasserted claims that, in Katz’s view, raised separate legal issues from those raised by the asserted claims. In light of Katz’s failure to make, or even attempt to make, any such showing, it was reasonable for the district court to deny Katz’s motion to sever and stay the disposition of all of the unselected claims.” The Federal Circuit also affirmed several of the lower court orders, vacated others and remanded the case back to the district court. It affirmed the district court’s ruling that three claims in two patents were invalid because they are indefinite. It also affirmed a ruling that numerous claims from two other patents were invalid because they were obvious. Finally, it affirmed a summary judgment finding that the call center system of one of the defendants, U.S. Bank, does not infringe a key claim of one of the patents. The Federal Circuit vacated the lower court’s ruling that seven claims of four different patents were indefinite. It then vacated the district court’s order that another claim of a fifth patent was invalid. Later in the opinion, the Federal Circuit vacated a summary judgment ruling that U.S. Bank’s accused call center systems do not infringe claims of two patents. It also vacated a ruling for American Airlines, another defendant, concerning its alleged infringement of one claim in one patent on the grounds that the lower court’s “summary judgment on Katz’s new theory was inappropriate.” David Segal, a partner in the an Irvine, Calif., office of Los Angeles-based Gibson Dunn & Crutcher, said that the Federal Circuit ruling provides important guidance because it’s not uncommon for patent cases to involve large numbers of patent claims even outside the MDL process. Segal was part of the Gibson Dunn appeal team that represented and argued for all the defendants in the appeal. He also represented Cablevision Systems Corp. at the lower court. “Courts need some reasonable process to allow the case to be efficient and effectively managed and fairly litigated,” Segal said. “What’s important about this decision is that it’s the first precedential Federal Circuit opinion that expressly recognizes that some claim selection procedure was necessary to manage the litigation. It concluded that the procedure adopted by this court adequately protected the parties’ rights as well as the needs of the judicial system.” Four defendant companies also had additional legal representation. Peter Ayers, an Austin partner at Dallas-based McKool Smith, represented American Airlines Inc. in the appeal. He said that the Katz decision is significant because it gives “broad discretion to district courts to manage their dockets efficiently in these complex patent cases.” “Judge Klausner did a magnificent job balancing Katz’s property rights with his need to bring some kind of order to the chaos,” Ayers said. “The structure that he came up with and the limits that he set and the safety value really showed great wisdom on his part. I think the Federal Circuit recognized that.” Christopher Ruhland, a Los Angeles litigation partner at Orrick, Herrington & Sutcliffe, represented DHL Express (USA) Inc. in the appeal. He said: “We could spend the rest of our lives litigating Katz’s claims,” if the district court didn’t narrow the process. “It doesn’t make sense when there’s a process for the plaintiff to select good claims. If you can’t find any good claims within a certain limited number then you probably don’t have any good claims at all.” Finnegan, Henderson, Farabow, Garrett & Dunner of Washington represented FedEx Corp. Services Inc. and Foley & Lardner represented U.S. Bank and its parent U.S. Bancorp. Attorneys at both firms declined to comment. FedEx and U.S. Bancorp did not return calls for comment. Katz’s lawyers at Palo Alto, Calif.-based Cooley did not return calls for comment. Katz issued a statement by e-mail indicating that the company looks forward to pursuing its claims against the defendants involved in the appeal on remand and against other defendants in the MDL proceeding that was effectively stayed by the district court because of the appeal. The statement noted that “the final judgments entered in favor of all defendant-appellees have been vacated.” The statement also asserted that “Katz never sought to assert nearly 2,000 claims” and proposed a limit of 20 asserted claims per defendant group in the MDL proceedings. “The due process issue raised by Katz on appeal arose out of the district court’s imposition of a limit of no more than 64 total claims across all defendants, who numbered over 100 at the time, and requirements imposed on Katz that restricted Katz’s ability to substitute or add claims,” said Katz in the statement. Sheri Qualters can be contacted at [email protected].

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