United States District Court

EASTERN DISTRICT OF TEXAS SHERM AN DIVISION

IMPERIUM (IP) HOLDINGS, INC.

v.

APPLE INC., ET. AL.

Case No. 4:11-CV-163 Judge Schneider/Judge Mazzant

REPORT AND RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE Pending before the Court is Defendant Apple Inc.s Motion to Sever Pursuant to Rules 20 and 21 and to Transfer Venue Pursuant to 28 U.S.C. 1404(a) (Dkt. #103). Having considered the relevant pleadings, the Court is of the opinion that Defendants motion should be denied. I. BACKGROUND In its Complaint, Plaintiff Imperium (IP) Holdings, Inc. (Plaintiff or IIPH) accuses eight Defendants of infringing two or more of the following patents: U.S. Patent No. 6,271,884, U.S. Patent No. 6,838,651, U.S. Patent No. 6,838,715, U.S. Patent No. 7, 064,768, and U.S. Patent No. 7,109,535. COMPL. (Dkt. #1) at 5-10. Plaintiff asserts that Defendant Apple Inc. (Apple) infringed all the patents-in-suit by manufacturing, using, selling, offering for sale, and/or importing cell phones and/or other devices with image sensors, including, but not limited to, the iPhone 3G cell phone, throughout the United States, including in this judicial district. Id. Plaintiff alleges all other Defendants infringed two or more of the patents-in-suit also by manufacturing, using, selling, offering for sale, and/or importing cell phones and/or other devices with image sensors... Id. On October 5, 2011, Apple filed its Motion to Sever Pursuant to Rules 20 and 21 and to Transfer Venue pursuant to 28 U.S.C. 1404(a) (Dkt. #103). On November 10, 2011, Plaintiff filed

its Response in opposition to Apples motion (Dkt. #112). Apple filed its Reply on November 29, 2011 (Dkt. #116). On December 9, 2011, Plaintiff filed its Sur-Reply (Dkt. #117). II. ANALYSIS Generally, Apple requests severance under Federal Rules of Civil Procedure 20 and 21 because Plaintiff improperly joined Apple in this case. Apple asserts that the other Defendants in this case are unrelated to Apple, and are, in fact, competitors of Apple. MOTION (Dkt. #103) at 1. Apple contends that because Plaintiff accuses each Defendant separately and independently of infringing Plaintiffs patents, Plaintiff has not shown that the allegedly infringing systems arise from the same transaction, occurrence, or series of transactions or occurrences. See FED . R. CIV . P. 20(a)(2)(A). Apple further contends that Plaintiff has not pleaded any connection between Apple and the other Defendants or between Apples iPhone 3G and the other Defendants products. MOTION at 7. Apple asks the Court to sever Plaintiffs claims against Apple, and in addition, asks the Court, pursuant to 28 U.S.C. 1404(a), to transfer venue of Plaintiffs claims against Apple to the Northern District of California. A. Joinder and Motions to Sever On motion or on its own, the court may at any time, on just terms, add or drop a party. FED . R. CIV . P. 21. [A] trial court has broad discretion to sever. Anderson v. Red River Waterway Commn, 231 F.3d 211, 214 (5th Cir. 2000). Courts in the Fifth Circuit look to Rule 20 to determine if parties have been misjoined and should thus be severed under Rule 21. Acevedo v. Allsups Convenience Stores, Inc., 600 F.3d 516, 521 (5th Cir. 2010). Rule 20(a)(2) states:

Persons...may be joined in one action as defendants 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. Fed. R. Civ. P. 20(a)(2). Courts have described Rule 20 as creating a two-prong test, allowing joinder of the defendants when (1) their claims arise out of the same transaction, occurrence, or series of transactions or occurrences and (2) there is at least one common question of law or fact linking all the claims. See Acevedo, 600 F.3d at 521. Under the Rules, the impulse is towards entertaining the broadest possible scope of action consistent with fairness of the parties; joinder of claims, parties and remedies is strongly encouraged. United Mine Workers of America v. Gibbs, 383 U.S. 715, 724 (1966). 1) Same Transaction or Occurrence Generally, Apple argues that it is improperly joined in this action because the sale of allegedly infringing products by unrelated companies does not satisfy the same transaction or occurrence requirement. Apple asserts that Plaintiff failed to allege that any Defendant is related to another Defendant in this case, nor does Plaintiff seek joint or several relief from the Defendants. MOTION at 3. Apple argues that proof of infringement against each Defendant will require proof of facts specific to each individual Defendant, to each accused product, and to each asserted patent claim. MOTION at 10. Courts in this District have consistently held that transactions or occurrences satisfy the series of transactions or occurrences requirement of Rule 20(a) if there is some connection or logical relationship between the various transactions or occurrences. Microunity Systems Engineering, Inc. v. Acer Inc., No. 2:10-CV-91, 2011 WL 4591917, at *3 (E.D. Tex. Sept. 30, 2011) (citing Hanley 3

v. First Investors Corp., 151 F.R.D. 76, 79 (E.D. Tex. 1993)). A logical relationship exists if there is some nucleus of operative facts or law. Id. Courts have also found joinder proper where Defendants allegedly infringing products are not dramatically different and determining Defendants liability will involve substantially overlapping questions of law and fact. Oasis Research, LLC v. Adrive, LLC, No. 4:10-CV-435, 2011 WL 3099885, at *2 (E.D. Tex. May 23, 2011) (adopted by Oasis Research, LLC v. Adrive, LLC, No. 4:10-CV-435, 2011 WL 3103972 (E.D. Tex. July 25, 2011)).1 Apple argues that this Court should adopt a standard in accordance with various district courts throughout the country that recognize that, in the context of patent infringement cases, similar acts of infringement do not meet the same transaction test simply because multiple parties make or sell similar products alleged to have infringed the same patents. MOTION at 9 (citing cases from various circuits and districts outside of this district supporting this proposition, or a similar proposition). However, the Federal Circuit, in an unpublished order on a writ of mandamus, recently upheld this Districts decision in Eolas Tech., Inc. v. Adobe Systems, Inc., No. 6:09-CV-446, 2010 WL 3835762, at *2 (E.D. Tex. Sept. 28, 2010), on exactly the argument presented by Defendants. In re Google, Inc., 412 F. Appx 295, 296 (Fed. Cir. 2011). In Eolas Tech, the plaintiff accused twenty-three unrelated defendants of infringing two different patents, and the Court held joinder was

See Eolas Tech., Inc. v. Adobe Systems, Inc., No. 6:09-CV-446, 2010 W L 3835762, at *2 (E.D. Tex. Sept. 28, 2010) (holding adjudicating infringement will require construing the claims and evaluating the patents innovation over the prior art...will involve substantially overlapping questions of law and fact); Adrain v. Genetec, Inc., No. 2:08-CV-423, 2009 W L 30633414, at *2 (E.D. Tex. Sept. 22, 2009) (license plate recognition system[s] sold by unrelated defendants were sufficiently similar to be of the same transaction or occurrence); MyMail, Ltd. v. America Online, Inc., 223 F.R.D. 455, 457 (E.D. Tex. 2004) (severance could be appropriate if the defendants methods or products were dramatically different).

proper, stating, [a]ll defendants are accused of infringing the patents in suit, and adjudicating infringement will require construing the claims and evaluating the patents innovation over the prior art. Thus, determining defendants liability will involve substantially overlapping questions of law and fact. Eolas Tech, 2010 WL 3835762 at *2. The Federal Circuit upheld the decision of the Court not to sever the claims, pointing out that judicial economy plays a paramount role in trying to maintain an orderly, effective, administration of justice and having one trial court decide all of these claims clearly furthers that objective. In re Google, Inc., 412 F. Appx at 296. Further, the district court noted that, in this case, adjudicating infringement...will involve substantially overlapping question of law or fact. Id. Therefore, the Court sees no reason to adopt a standard other than the one adopted by the Fifth Circuit, and affirmed by the Federal Circuit.2 All Defendants, including Apple, make cell phones and other devices that incorporate digital cameras. The accused devices all rely on the same technology for image sensors and image processors, which Defendants purchase and integrate into their products. Plaintiff asserts that the underlying technology is very similar and is, in some cases, identical. Further, Plaintiff asserts that the Apple product, the iPhone 3G, and the LG product, the Voyager VX 10000, use the same MT9D112 image sensor manufactured by Aptina, a third-party supplier. Further, Plaintiff alleges that it expects additional discovery will reveal similarities between other Apple products and the other Defendants in the case. Therefore, the similarity of the component image sensors and image

Further, as Plaintiff observes, the Leahy-Smith America Invents Act (the Act) does not apply to this case. The Act states that amendments to 35 U.S.C. 299 apply to any civil action commenced on or after the date of the enactment of this Act. Pub. L. No. 112-29, 19(e), 125 Stat. 284, 129 (2011). This action was commenced on March 30, 2011 (Dkt. #1), prior to the effective date of the Act on September 16, 2011.

processors used by Defendants is sufficient to satisfy the same transaction or occurrence prong.3 2) Common Questions of Law or Fact The parties agree that common questions of law exist, and that the second prong of the joinder test has been satisfied. The Court also agrees that the second prong has been satisfied. The Court further declines to exercise its discretion under Rule 21 and sever the properly joined Defendants. See FED . R. CIV . P. 21. The results of granting Defendants motions to sever and transfer would be the division of a single action into two different lawsuits, one in the Eastern District of Texas and another in the Northern District of California. [T]he existence of multiple lawsuits interpreting the same patent creates an unnecessary risk of inconsistent claim construction and adjudication. Adrain, 2009 WL 3063414 at *7. Besides being a duplicative use of scarce judicial resources, [multiple] claim constructions risk inconsistency, create greater uncertainty regarding the patents scope, and impede the administration of justice. MyMail, 223 F.R.D. at 458 (citations omitted). [J]udicial economy plays a paramount role in trying to maintain an orderly, effective administration of justice and having one trial court decide all... claims clearly furthers that objective. In re Google, 412 F. Appx at 296. Therefore, the Court finds that severance would create significant inefficiencies because the lawsuit would be divided into two parallel actions involving the same patents, claims, and third-parties common to the Defendants.

As previously noted, the Leahy-Smith America Invents Act does not apply to this case. However, the Court also notes that even if it were to adopt the standard proposed by Apple, joinder of Apple in this case would still be proper. Apple argues that the Court should adopt the following standard: In the context of patent infringement cases, similar acts of infringement do not meet the same transaction test simply because multiple parties make or sell similar products alleged to have infringed the same patents. M O TIO N at 9. The Court finds that the Defendants in this case make similar products that use the same technology and in many instances the same image sensor or processor. Defendants in this case are not merely accused of making or selling similar products that infringe the same patents. Therefore, the use of an identical image sensor or processor in different products is sufficient to satisfy the same transaction or occurrence test, since the technology at issue is the same.

Based upon the foregoing, the Court finds that Apple was properly joined and declines to sever the claims. B. Motion to Transfer A district court may transfer any civil case for the convenience of parties and witnesses, in the interest of justice...to any other district or division where it might have been brought. 28 U.S.C. 1404(a). The threshold inquiry when determining eligibility for transfer is whether the judicial district to which transfer is sought would have been a district in which the claim could have been filed. In re Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004) (Volkswagen I). Once that threshold inquiry is met, the Court balances the private interests of the litigants and the publics interest in the fair and efficient administration of justice. In re Nintendo Co., Ltd., 589 F.3d 1194, 1198 (Fed. Cir. 2009); In re TS Tech USA Corp, 551 F.3d 1315, 1319 (Fed. Cir. 2008). The private interest factors include (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; (4) all other practical problems that make trial of a case easy, expeditious and inexpensive. In re Volkswagen of America, Inc., 545 F.3d 304, 315 (5th Cir. 2008) (en banc) (Volkswagen II); In re Nintendo, 589 F.3d at 1198. The public interest factors include (1) the administrative difficulties flowing from court congestion; (2) the local interest in having localized interests decided at home; (3) the familiarity of the forum with the law that will govern the case; and (4) the avoidance of unnecessary problems of conflict of laws or in the application of foreign law. Id. These factors are not exhaustive or exclusive, and no single factor is dispositive. Id. The party seeking transfer of venue must show good cause for the transfer. Volkswagen II, 545 F.3d at 315. The moving party must show that the transferee venue is clearly more convenient 7

than the transferor venue. Volkswagen II, 545 F.3d at 315; TS Tech, 551 F.3d at 1319. The plaintiffs choice of venue is not a factor in this analysis, but rather contributes to the defendants burden to show good cause for the transfer. Volkswagen II, 545 F.3d at 315 n.10; TS Tech, 551 F.3d at 1320; In re Nintendo, 589 F.3d at 1200. Apple argues only that Plaintiffs claims against it should be severed, followed by the transfer of the claims against it to the Northern District of California. REPLY (Dkt. #116) at 4. Therefore, Apple fails to show that transfer would be appropriate for all Defendants. Plaintiff argues that should the Court deny Apples motion to sever, then Apples motion to transfer becomes moot and must also be denied. SUR-REPLY (Dkt. #117) at 4. The Court agrees. Therefore, based upon the foregoing, the Court finds that the motion to transfer should be denied. III. CONCLUSION AND RECOMMENDATION Based upon the findings discussed above, the Court RECOMMENDS that Defendant Apple Inc.s Motion to Sever Pursuant to Rules 20 and 21 and to Transfer Venue Pursuant to 28 U.S.C. 1404(a) (Dkt. #103) be DENIED. Within fourteen (14) days after service of the magistrate judge's report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C. 636(b)(1)(C). Failure to file written objections to the proposed findings and recommendations contained in this report within fourteen days after service shall bar an aggrieved party from de novo review by the district court of the proposed findings and recommendations and from appellate review of factual findings accepted or adopted by the district court except on grounds of plain error or manifest 8

injustice. Thomas v. Arn, 474 U.S. 140, 148 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir. 1988). SIGNED this 20th day of January, 2012.

___________________________________ AMOS L. MAZZANT UNITED STATES MAGISTRATE JUDGE