The Software IP Report

Joinder Ordered of All Parties with Potential Standing to Assert Patent

By Charles Bieneman

Categories: Patent Civil Procedure, The Software IP Report

Following a patent owner’s appeal of an adverse judgment, and a remand by the Federal Circuit for consideration of a motion to substitute a purported purchaser of rights in the patent-in-suit, a district court has ordered joinder of the purported purchaser. Mformation Techs. v. Research in Motion, No. C-08-4990 EMC (N.D. Cal. Aug. 29, 2013).

The original patent owner (MT) moved for a new trial, and then the next day appealed the district court’s judgment to the Federal Circuit. The Federal Circuit deactivated this appeal because of the motion for a new trial, which motion was subsequently denied by the district court. The alleged new patent owner (MST), and not MT, then filed a second appeal with the Federal Circuit. After the appeals were consolidated, “MST filed a motion to substitute with the Federal Circuit.” In response, “RIM opposed the motion and cross-moved to dismiss for lack of standing.” RIM contended that MST had provided inadequate documentation concerning the alleged transfer of property. Only in its reply supporting the motion to substitute did MST provide documentation including a “Bill of Sale” and a “Confirmation Agreement.”

The Federal Circuit remanded the consolidated appeals to the district court for the limited purpose of deciding the motion to substitute. However, the Federal Circuit explicitly stated that the district court, on remand, could consider:

a) it is legally proper for a party to be substituted for another party to a litigation as distinct from being added to the litigation where the party asking for substitution denies responsibility for financial obligations imposed upon it by the district court’s judgment, and,

b) whether, because Mformation Technologies, Inc. has not provided the court with the September 21, 2012 Secured Party Sale Agreement, it has failed to demonstrate that mFormation Software Technologies, Inc. owns the right to sue and recover for infringement of the patents in suit.

The first issue on remand was its scope. RIM argued that the district court was

essentially restricted to considering the exact motion to substitute that MST filed with the Federal Circuit – in other words, the Court should not consider the new motion filed with this Court which makes new arguments (e.g., an alternative request for joinder if no substitution is granted) and presents new evidence.

While RIM’s argument was “not without any support,” the court found it “unpersuasive” for three reasons. First, the remand order stated that MST’s motion to substitute at the Federal Circuit would be held in abeyance, and therefore “essentially instructed MST to file a new motion with” the district court. Second, the Federal Circuit did not indicate any restrictions on MST’s new motion. Third, the remand was actually based on RIM’s alternative request that the district court investigate the alleged terms of the property transfer. On this basis, “it would make no sense for the Federal Circuit to order a remand but preclude any development of the transfer issue.” Further, joining MST would not prevent the Federal Circuit from later determining the question of MST’s standing.

The court then turned to the question of whether MST should be substituted for MT or simply joined to the action. On its face, Fed. R. Civ. P. 25(c) gave the district court discretion concerning whether to substitute or join a party to which an interest was transferred. Regardless of whether a successor was substituted or joined, or no action was taken, “successor liability still obtains.” However, MT owed over $200,000 in costs awarded by the district court, and an agreement between MT and MST provided that MST would not be liable for these costs.

The court rejected RIM’s arguments that “joinder of MST would be pointless because MST lacks standing,” and that joinder was “impermissible” because MT was a “dissolved company” and not a “functioning entity.” The standing issue was explicitly reserved by the Federal Circuit to decide. Further, joinder “assures that the Federal Circuit will have before it all parties which potentially have standing.”

Although the standing issue was reserved for the Federal Circuit to decide, the court did provide findings of fact to facilitate appellate consideration of that issue. The court’s opinion then concluded by granting “MST’s alternative request for relief – i.e., for joinder.”