Thursday, September 15, 2011

Unintended Consequences from Patent Reform- Joinder and the Race to the Courthouse

One of the many features of the America Invents Act, is a new statute addressing joinder in patent cases. (Added as 35 U.S.C. 299).  Under this new section of the Patent Act, a plaintiff will no longer be able to group unrelated defendants together simply because they are accused of infringing the same patent.  Once President Obama signs the patent reform bill into law (which is expected to happen tomorrow), there will need to be a legitimate factual nexus among the various defendants – which in most cases will require making, using or selling the same product.

What this means for plaintiffs’ is that in more cases than not, new cases will have only one defendant per complaint instead of the large collection of defendants that are now common in most patent cases.  This won’t stop the case from being filed, of course, but will result in a modest increase in transaction costs for filing a complaint since for 10 defendants a plaintiff will need to file 10 complaints and pay $3500 in filing fees instead of $350.  (We should expect to see a spike in the number of patent cases filed next year, since the “typical” case filed recently will now require multiple filings).  This change should also make it easier for individual defendants seeking to transfer the case from a venue that it has little or no connection to, since (in theory) it no longer needs to consider the potential ties other defendants may have to the plaintiff’s chosen forum.  On the downside, it may also make the logistics of joint defense groups slightly more complicated as defendants’ will need to coordinate across a number of related cases instead of acting within a single case.  (As a practical matter, I expect that most judges will likely be inclined to consolidate the related cases at least for purposes of discovery, minimizing the logistical complications.)

So, what are the unintended consequences referred to in the title of this post?  It may be coincidence (if you believe in such stuff), but the number of multi-defendant cases filed since the Senate passed the patent reform bill seems unusually high.  PriorSmart litigation alerts so far this week show 88 new complaints with 515 defendants, including today's report of 18 new complaints against a whopping 196 defendants.  It looks like plaintiffs are racing to the court house to get there last multi-defendant complaints filed before President Obama signs the bill into law and changes the rules of the game.  No one is being sued who wouldn’t eventually be sued anyway, but they may be seeing the lawsuit a bit sooner.  Welcome to the brave new world of patent reform.