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Paul Allen v. World – One At A Time (Or Not) - Updated, Order as text
Wednesday, May 18 2011 @ 01:00 PM EDT

Since Groklaw last visited Paul Allen's patent attack on Google and the World, the court has agreed to sever the omnibus complaint into eleven separate ones 229 [PDF]. There is really no great surprise here. The nature of the asserted infringements in the first amended complaint were so unrelated to each other that the court had little choice but to sever. As the court stated:
It is difficult to find joinder proper when the only shared facts alleged against multiple defendants is that each infringed the same patent.
The point is, at least in the 9th Circuit, you can't make a bunch of parties defendants in the same action just because you are suing them all for infringement under the same patents; it is the acts of infringement (or acts contributing to the infringement) that must be shared among the defendants for them to be co-defendants in an action such as this. The ability to combine defendants in a single suit is called joinder, and as the court explains, the standard for joinder in the 9th Circuit is
(1) the plaintiffs assert any right to relief arising out of the same transaction, occurrence, or series of transactions or occurrences; AND [emphasis added] (2) there are common questions of law or fact.
As Yahoo!, among others, pointed out in its Motion to Sever, 193 [PDF]:
Without any showing that Defendants’ websites operate in the same manner or are subject to overlapping evidence, Interval suggests that it will try to prove its case against one website or service, and then attempt to argue that every other purportedly “similar” accused instrumentality infringes for the same reasons. (D.I. 167 at 10.) This approach is improper and highly prejudicial to Defendants because a jury could become confused by a proceeding involving a multitude of unrelated products, infringement theories, and defenses.


The court, however, did not stop there. Rather, the court then consolidated the eleven cases for both pre-trial proceedings and trial stating that
(i)The claims asserted against the Defendants share many common questions of law and fact regardless of the fact Defendants have not allegedly engaged in the same transactions or occurrences . . .
This is not as inexplicable as it first appears. First, Yahoo!, among others, had in fact suggested this sever and then consolidate approach, recognizing that there were some common questions of law, and you certainly didn't want the court having to make eleven different determinations of what the Interval claims mean. Besides, the judge did indicate that she has not made a final decision as to consolidation at trial, but by consolidating the cases for the time being for all pre-trial activities, the judge preserves efficiency within the court. So, while each defendant gets to individually protect itself, Interval may or may not be forced to conduct eleven different trials. That remains to be determined.

The more disappointing ruling from the court was that it would not stay the proceedings pending the reexamination of the patents by the USPTO. However, there remains a ray of sunshine here as the court's only reason for rejecting the request for a stay was the fact that the USPTO has yet to accept the reexamination requests. The denial of the stay is without prejudice, so once the USPTO does accept the reexamination requests (anyone want to bet against those odds?) the defendants can once again request the stay. Going out on a limb here, but I suspect the court will be far more sympathetic at that point.

In the latest filing with the court, 232 [PDF] the parties have filed a consolidated status report in which both sides argue vigorously over the consolidation of the cases for trial. Interval is happy as a clam to keep them consolidated, and the defendants argue just as strongly that they are being prejudiced by such a consolidation at trial. The status report does affirm that the consolidated trial is still an open issue when it quotes the courts earlier statement that
[t]he Court does not make any binding determination as to how it will run the trials in this matter. That issue will be decided later.”
This matter will have to move much further down the road for the court to make a final determination of how best to conduct the trial(s) in fairness to both plaintiff and defendants. Clearly, the next thing to keep an eye out for are those reexamination requests on the patents pending before the USPTO. As of today there has been no action on that front. And what are the odds of the Interval patents surviving reexamination intact? Not good. Although these statistics are a few years old, Patently O noted in July 2009 that in 60% of inter partes reexaminations all of the claims are cancelled, and in another 28% of cases the claims are narrowed. In only 12% of the cases do the claims survive intact. So the odds favor the defendants tremendously if they can persuade the court to wait until reexamination is complete.

[ Update: Here's the transript [PDF] of the April 25, 2011 hearing on the motions to sever, that resulted in the order.

] Here is the court's order, as text:

*************************

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

___________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

AOL, INC. et al.,

Defendants.

__________________

CASE NO. C10-1385 MJP

ORDER GRANTING SEVERANCE,
CONSOLIDATING CASES, AND
DENYING REQUEST FOR STAY

__________________

This matter comes before the Court on Defendants' motions to dismiss or sever (Dkt. Nos. 192, 193, 215, 216, 217 (including joinders)) and Defendants' motion to stay pending reexamination (Dkt. No. 198). The Court has reviewed the motions and joinders, the responses (Dkt. Nos. 200, 206), the replies (Dkt. Nos. 203, 205, 211), and all related papers. The Court heard oral argument on the motions to dismiss or sever on April 25, 2010 and GRANTED the motion to sever, but DENIED the motion to dismiss. The Court also orally DENIED the motion to stay without oral argument. This written ruling expands on the Court's oral rulings.

Background

Interval Licensing LLC filed suit against 11 individual defendants, asserting that each has infringed on four patents. The complaint alleges Defendants have each infringed on Plaintiff's four patents. Defendants argue their purported infringement arises out of separate and distinct transactions and occurrences, making permissive joinder improper. There are no allegations that the Defendants have operated together or acted in concert to infringe on the patents.

Defendants have filed requests for inter partes reexamination of the four patents at issue with the U.S. Patent and Trademark Office ("PTO"). As of the date of this order, the PTO has not determined whether to accept the reexamination requests.

Analysis

A. Permissive Joinder Improper

Rule 20(a)(2) allows a plaintiff to join several defendants in one action if "(A) any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences; and (B) any question of law or fact common to all defendants will arise in the action." The Ninth Circuit has stated that Rule 20 "permits the joinder of plaintiffs in one action if: (1) the plaintiffs assert any right to relief arising out of the same transaction, occurrence, or series of transactions or occurrences; and (2) there are common questions of law or fact." Coughlin v. Rogers, 130 F.3d 1348, 1350 (9th Cir. 1997). Rule 20 "is to be construed liberally in order to promote trial convenience and to expedite the final determination of disputes, thereby preventing multiple lawsuits." League to Save Lake Tahoe v. Tahoe Reg. Planning Agency, 558 F.2d 914, 917 (9th Cir. 1972). "If the test for permissive joinder is not satisfied, a court, in its discretion, may sever

2

the misjoined parties, so long as no substantial right will be prejudiced by the severance." Coughlin, 130 F.3d at 1350 (citing Fed. R. Civ. P. 21).

There is no binding Ninth Circuit authority on when joinder is appropriate in a patent case where the plaintiff sues divergent defendants for infringing the same patent. District courts in the Ninth Circuit that have considered such cases largely find joinder inappropriate. See WiAV Networks LLC v. 3Com Corp., No. C10-3488 WHA, 2010 WL 3895047, at *3 (N.D. Cal. Oct. 1, 2010) (finding severance proper in a patent infringement suit brought against 40 unrelated defendants with unrelated products); Golden Scorpio Corp. v. Steel Horse Bar & Grill, 596 F. Supp. 2d 1282, 1285 (D. Ariz. 2009) (finding that plaintiff's infringement claims did not arise out of same transaction where defendants were alleged to have acted independently in infringing the same trademark); San Francisco Tech., Inc. v. The Glad Prods. Co., No. 10-CV-00966, 2010 WL 2943537, at *5 (N.D. Cal. July 26, 2010) (finding joinder improper where the only commonality between 21 unrelated defendants was that each allegedly violated 35 U.S.C. § 292). The reasoning of these cases is sound and based on a fair reading of Rule 20 and related Ninth Circuit precedent. It is difficult to find joinder proper when the only shared facts alleged against multiple defendants is that each infringed the same patent. Plaintiff claims that the cases Defendants cite employ a per se rule that bars joinder of defendants in patent infringement cases. This is not accurate. Each case examined the rule in the context of the allegations of the particular case and found joinder improper. The Court does not impose a per se rule.

Plaintiff relies only two out of circuit and unpersuasive district court cases in support of its view that joinder is appropriate. In MyMail Ltd. v. Am. Online, Inc., et al., the court found joinder proper under a different rule than the Ninth Circuit employs. It wrote that joinder is proper if "there is some connection or logical relationship between the various transactions or

3

occurrences," and that a logical relationship requires only a "nucleus of operative facts or law." 223 F.R.D. 455, 456 (E.D. Tex. 2004). This is not the state of the law in the Ninth Circuit as to Rule 20. Similarly, in Mannatech, Inc. v. Country Life, LLC, the court found joinder of three defendants in a patent infringement suit appropriate under the "logical relationship" rule, which is not Ninth Circuit law. 2010 WL 2944574, at *1-2 (N.D. Tex. July 26, 2010). Reliance on these cases would be misplaced and Court will not follow them.

Based on an application of the relevant Ninth Circuit law and the guidance of other district courts, the Court finds joinder improper. Plaintiff has not alleged that the Defendants have engaged in the same transaction or occurrence or series of transactions or occurrences. Rather, Defendants are accused of infringing the patents in similar ways, but not as part of the same transaction or occurrence or series of transactions or occurrences. Each Defendant operates differently and offers products that often compete with those of other Defendants. Joinder is thus improper under Rule 20(a). The Court therefore GRANTS the request to sever, but not does not find dismissal the proper remedy. The Court therefore SEVERS all of the Defendants from the single action and assigns each case against each defendant a separate case number, as explained below.

The Court also consolidates all eleven cases for all pretrial proceedings and for trial pursuant to Rule 42(a). The claims asserted against the Defendants share many common questions of law and fact regardless of the fact Defendants have not allegedly engaged in the same transactions or occurrences sufficient to satisfy Rule 20. The eleven cases will be consolidated under Case No. C10-1385 MJP as the lead case. The current scheduling order in this case (C10-1385 MJP, Dkt. No. 178) will govern all eleven actions, although the Court requests the parties meet and confer and file a joint status report as to what dates in the current

4

scheduling order need to be amended or altered. The status report shall be filed within 15 days of entry of this order. The Court does not make any binding determination as to how it will run the trials in this matter. That issue will be decided later.

The Court directs the Clerk to open ten new cases that shall be assigned to the severed cases as follows and shall bear the following captions:

INTERVAL LICENSING LLC,

Plaintiff,

v.

AOL, INC.,

Defendant.

___________________

CASE NO. C10-1385 MJP

__________________________________

INTERVAL LICENSING LLC,

Plaintiff,

v. APPLE, INC.,

Defendant.

__________

CASE NO. C11-708 MJP
LEAD CASE NO. C10-1385 MJP

__________________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

EBAY, INC.,

Defendant.

____________

CASE NO. C11-709 MJP
LEAD CASE NO. C10-1385 MJP

___________________________________

5

INTERVAL LICENSING LLC,

Plaintiff,

v.

FACEBOOK, INC.,

Defendant.

_____________

CASE NO. C11-710 MJP
LEAD CASE NO. C10-1385 MJP

_________________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

GOOGLE, INC.,

Defendant.

______________

CASE NO. C11-711 MJP
LEAD CASE NO. C10-1385 MJP

______________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

NETFLIX, INC.,

Defendant.

CASE NO. C11-712 MJP
LEAD CASE NO. C10-1385 MJP

______________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

OFFICE DEPOT INC.,

Defendant.

_________________

CASE NO. C11-713 MJP
LEAD CASE NO. C10-1385 MJP

_________________________________

6

INTERVAL LICENSING LLC,

Plaintiff,

v.

OFFICEMAX INC.,

Defendant.

_____________

CASE NO. C11-714 MJP
LEAD CASE NO. C10-1385 MJP

_______________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

STAPLES INC.,

Defendant.

_______________

CASE NO. C11-715 MJP
LEAD CASE NO. C10-1385 MJP

_______________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

YAHOO! INC.,

Defendant.

_________________

CASE NO. C11-716 MJP
LEAD CASE NO. C10-1385 MJP

________________________________

INTERVAL LICENSING LLC,

Plaintiff,

v.

YOUTUBE LLC,

Defendant.

_____________

CASE NO. C11-717 MJP
LEAD CASE NO. C10-1385 MJP

________________________________

7

With limited exceptions, all filings in this consolidated action must be filed in Case No. C10-1385 MJP and the related individual case docket. For example, if Defendant Google files a motion, it must enter it in C11-711 MJP and C10-1385 MJP. Google does not need to file anything on the remaining individual case dockets.

The Court directs Plaintiff to refile its amended complaint (C10-1385 MJP, Docket Number 153) in each one of the newly opened cases. Plaintiff shall file its amended complaint within 5 days of entry of this order. Consistent with 28 U.S.C. § 1914(a), Plaintiff is ordered to pay the filing fee if $350.00 for each newly opened case at the time it files the amended complaint in each action. Each Defendant is then directed to refile its answer to the amended complaint in the case related to it within 5 days after Plaintiff files the amended complaint in each individual case. Only as to this answer the Defendants are not to file their answer in any other case docket, including C10-1385 MJP. For example, Defendant Google will file its answer to the amended complaint only in C11-711 MJP. Plaintiff need not refile its amended complaint in C10-1385 MJP.

B. Inter Partes Reexamination

The Court DENIES the request for a stay pending reexamination without prejudice. The PTO has not determined whether it will accept the request for reexamination. A request to stay pending reexamination is therefore premature.

C. Conferences

The Court also establishes quarterly telephonic conferences to be conducted with the party whips. The Court will hold a brief status conference in court at the start of the Markman hearing set for July 22, 2011. Thereafter, the telephonic conferences are scheduled as follows: October 14, 2011 at 10:00 a.m.; January 13, 2012 at 10:00 a.m.; April 13, 2012 at 10:00 a.m.

8

The parties who are not whips are free to participate, but their presence is not required. The party whips are expected to be able to speak to all issues, but may ask other counsel to speak if it would be more efficient.

Conclusion

The Court finds joinder of the Defendants improper. Rather than dismiss the complaint, the Court SEVERS the case into eleven individual actions. The Court consolidates all eleven case into Case No. C10-1385 for all proceedings, and the cases shall remain on the same scheduling order already set in Case No. C10-1385 (Dkt. No. 178). The parties must meet and confer and submit a joint status report within 15 days of this order to explain whether any dates need to be changed or amended. Within five days of this order, Plaintiff is ordered to refile its amended complaint in each of the newly-opened case dockets and pay the respective filing fees, on the schedule set forth above. Each Defendant must file its answer in the respective case within five days of the filing of the amended complaint.

The Court DENIES the request to stay without prejudice. The issue is not ripe.

The clerk is ordered to provide copies of this order to all counsel.

Dated this 29th day of April, 2011.

[signature]
Marsha J. Pechman
United States District Judge

9


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