Bear Declines Invitation to Oust MDL from Patent Infringement Realm

By Kyle Meziere

Recently, the Judicial Panel on Multidistrict Litigation (JPML) addressed the contention that the America Invents Act precludes multidistrict litigation (MDL) centralization for patent infringement proceedings. The current legality of MDL centralization was questioned due to an arguable conflict with 35 U.S.C. §299, which was enacted by the America Invents Act. The statute prohibits the alleged infringers, in most patent infringement cases, from being joined in one action. 35 U.S.C.S. §299 (§299). Since the 1960’s, pretrial proceedings for cases involving infringement of the same patent have commonly been centralized into one district under the authority of 28 U.S.C. §1407 (§1407). This has been a way for parties to conserve their resources. It also results in more consistency within a set of closely related cases. In the wake of §299’s implementation, the question of how §299 affects the availability of MDL centralization in patent infringement cases was raised.

In May, the JPML granted a motion by Bear Creek Technologies to centralize fourteen separate actions to one district. In re Bear Creek Technologies, Inc., MDL 2344, 2012 U.S. Dist. LEXIS 60884 (J.P.M.L. May 2, 2012). In the process, the panel addressed the issue of whether §299 modified §1407. The motion stemmed from a group of cases involving alleged infringements upon Bear Creek’s patent for a “[s]ystem for interconnecting standard telephony communications equipment to internet protocol networks.” At the time of the motion, there were fourteen allegedly infringing entities, including Vonage Holdings Corporation.

The legal issue was whether §299 modifies §1407. §1407 in the pertinent part states:

When civil actions involving one or more common questions of fact are pending in different districts, such actions may be transferred to any district for coordinated or consolidated pretrial proceedings. Such transfers shall be made by the judicial panel . . . upon its determination that transfers for such proceedings will be for the convenience of parties and witnesses and will promote the just and efficient conduct of such actions.

28 U.S.C.S. §1407 (2012).

The statute requires the cases to be remanded back to their respective districts no later than the conclusion of the pre-trial proceedings. Section 1407 was enacted in 1968 and has been applied to several dozen patent infringement cases since.

Vonage opposed centralization of the cases. It argued §299 prohibits centralization of cases which are related merely by the parties’ alleged infringement upon the same patent. Vonage cited specifically to the portion of §299 that reads: “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 [same] patent . . . .” 35 U.S.C.S. §299 (2012). The JPML rejected this argument. The panel found the following arguments more persuasive. First, §299 does not manifest an intent to modify §1407, which had commonly been applied to patent infringement cases for 40 years at the time congress enacted §299. Secondly, §299 addresses only trial phase proceedings expressly.  Section 1407 applies to pretrial proceedings and requires cases to be remanded back to their respective districts before the trial phase begins. Thirdly, the JPML emphasized that their role is limited to centralizing the cases to one district; the district judge determines if the pretrial proceedings are to be consolidated. Accordingly, the panel found there was no conflict between the two statutes.

One month later, the JPML reaffirmed its Bear Creek holding in Maxim. In re Maxim Integrated Products, Inc., MDL No. 2354, 2012 U.S. Dist. LEXIS 79496 (J.P.M.L. June 8, 2012). All of the suits Maxim sought to centralize involved infringement on various patents related to the secure transfer of data. The court reiterated that §1407 still allowed centralization of pre-trial proceedings for patent infringement cases. However, the parties opposed to centralization further argued that §299’s practical guarantee of separate trial proceedings should factor into the JPML’s judgment of whether centralization would further the goals of efficiency and justice. The panel found this argument to be sound, but not determinative.  The panel found that the cases’ similarities and the prospective efficiency of centralization overcame any inefficiency that resulted from the cases having to be remanded to their respective districts for trial. The court also noted that §299 may affect how the transferee judge deals with the cases. In particular, §299 may cause the transferee judge to remand the cases to their respective jurisdictions earlier than he may have before §299 was passed.

The effects of §299 on how the JPML gauges the appropriateness of MDL centralization for a particular set of cases and the statute’s effects on the decisions of the transferee judges remains to be seen. More importantly, however, MDL centralization remains available for dealing with patent infringement cases.

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