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Patent Cases and Multi-District Litigation

By Troll Tracker

Today at 9:30 am in Phoenix, Arizona, the Judicial Panel on Multidistrict Litigation will meet to select new cases for MDL treatment. The fact that they are holding the hearing at the site of the Super Bowl, so close to the big game, has to be coincidental, right? Ever try getting a hotel in a Super Bowl city so close to the game? Not easy.

All patent litigators need to learn the MDL rules and JPML procedure. Why? Because after patent reform, patentees will be litigating their multi-defendant cases in multiple venues. Congress already anticipated how to manage these types of cases. Let's take a look at 28 USC 1407:

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 on multidistrict litigation authorized by this section 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. Each action so transferred shall be remanded by the panel at or before the conclusion of such pretrial proceedings to the district from which it was transferred unless it shall have been previously terminated: Provided, however, That the panel may separate any claim, cross-claim, counter-claim, or third-party claim and remand any of such claims before the remainder of the action is remanded.

That's just legal-talk for this: if a patent is being litigated in a multiple of districts, it's a candidate for MDL treatment.

Now, why should the contingency bar learn to love the JPML? It's simple: the JPML can transfer patent cases anywhere. So, after patent reform, a patentee like Minerva can sue 33 companies in 6 fora (they'll have to sue somewhere that actually makes sense), then ask the JPML to send the case somewhere where there is a judge with good patent experience and plenty of time and willingness to handle complex patent litigation. And where better for that than the Eastern District of Texas?

Yes, patent reform may end the prospect of having trials in Marshall when it doesn't make sense to do so, but that won't stop plenty of patent cases being referred there by the JPML for pretrial. Of course, defendants will argue for keeping the case at least in a court that will eventually see the case for trial, so there are more battles ahead. Pracitioners should learn these rules!

There are already a few existing MDL patent cases: the ones involving Katz, Rembrandt, and Acacia's streaming media patent. Currently, the many Katz cases are consolidated in Los Angeles with Judge R. Gary Klausner, who had heard a Katz case or two in the past. The Rembrandt cases are consolidated with Judge Gregory Sleet in Delaware. Again, he's the trial judge for at least some of the numerous cases. Finally, the Acacia cases are consolidated with Judge James Ware of San Jose, California, who already has construed many (if not all) claim terms.

There are currently two patent cases being considered for MDL treatment. Today, the JPML will discuss MDL No. 1910 -- In Re Phoenix Licensing, LLC Patent Litigation. State Farm, USAA, and others filed a declaratory judgment complaint against Phoenix Licensing, LLC and LPL Licensing (represented by Dovel & Luner) in July 2007. In August 2007, Phoenix and LPL sued Chase Manhattan, JP Morgan Chase, etc., etc., etc., in a massive 23-defendant litigation in Marshall, Texas. Discover Products filed a DJ in Chicago in October 2007, and Citicorp Credit Services filed a DJ in Delaware in October 2007.

Who are Phoenix Licensing and LPL Licensing? I posted about them back in September here - see #101. Richard Libman is the manager (and maybe sole member) of Phoenix Licensing, according to Arizona corporate records available here (hopefully). He also is the manager of LPL Licensing (here). The patents involved in the MDL are 5,987,434 ("Apparatus and Method for Transacting Marketing and Sales of Financial Products"), 6,076,072 ("Method and Apparatus for Preparing Client Communications Involving Financial Products and Services"), and 6,999,938 ("Automated Reply Generation Direct Marketing System"). Yes, I'm sure that Chase and JP Morgan didn't do any sales or marketing before Libman showed them how it's done. Then again, Sterne Kessler did have Libman write an article on business method patents in the financial services industry. The article says he "is a recognized leader, innovator and important influence in the area of financial product marketing." So it must be true.

In addition, the defendants sued by Acacia subsidiary Screentone Systems are seeking MDL treatment in MDL No. 1926 - In Re Halftone Color Separations ('809) Patent Litigation. I'm not sure this one will succeed. Under current venue rules, Screentone probably had proper venue in the Eastern District of Texas when they sued all the defendants. However, according to the defendants, Acacia/Screentone may not have had proper standing at the time of filing. If that's true, then the first-filed cases would be the 4 declaratory judgment cases filed by defendants in the Western District of Washington, Central District of California, and District of Delaware. I can see MDL treatment being proper under the new venue rules, and can see it when the actual first-to-file cases are in different districts, so maybe this will work. But I also understand the counter-argument: defendants should not be able to split up and file DJs to manufacture MDL jurisdiction. Right now, the JPML meets every other month, so the Acacia Screentone MDL probably will be considered at their hearing at the end of March.

For those who think that the JPML being overrun with cases is not going to happen, look at all of the products liability cases that are given MDL treatment. It works, and there's no reason to think it won't work in the patent context, too. The real battle will be over where to refer the case. Much more information on the JPML website for those who want to get a head start.

On another note, Michael Martin has a post on the pending patent reform in the Senate. He explains why the proposed reforms could help solve the problem of patent thickets. He even backs off his earlier conclusion that damages apportionment may be disastrous for the emerging market for ideas. It's an intelligent post, and I encourage everyone to read it. If the Patent Prospector blog is posting that the pending reform isn't far from being fair, then perhaps it's going to happen, after all. This is consistent with what I'm reading: that patent reform is in "the final stretch."

Full post as published by Patent Troll Tracker on January 30, 2008 (boomark / email).