Case 9:12-cv-00132-RC Document 1

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** NOT FOR PRINTED PUBLICATION ** IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS LUFKIN DIVISION SWIPE INNOVATIONS, LLC, Plaintiff, v.

9:12cv132 xxxxxxxx CIVIL ACTION NO. 9:12CV-40 JUDGE RON CLARK

ELAVON, INC. et al, Defendants.

ORDER GRANTING DEFENDANT ELAVONS MOTION TO SEVER Plaintiff Swipe Innovations, LLC. filed suit against Defendants Elavon, Inc. et al on March 7, 2012, claiming infringement of United States Patent No. 5,351,296. Defendant Elavon now moves to sever the claims against it. The court grants Elavons motion and severs Swipe Innovationss claims against Elavon into a separate lawsuit. This new suit will be consolidated with the instant action only for pre-trial issues. The instant case shall serve as the lead case for consolidated issues, and the new case will remain active for trial. All motions shall be filed in the consolidated instant case. I. BACKGROUND The following facts are undisputed, unless otherwise noted. Plaintiff Swipe Innovations, LLC is the assignee of the 296 patent. It filed this suit on March 7, 2012 against 12 Defendants.1

Two of the original 12 Defendants was later dismissed, and another Defendant was added. The total Defendant count at this time is therefore 11, although one of those DefendantsVantiv, LLChas already been severed into a separate case. 1

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On July 12, 2012, Defendant Elavon, Inc. filed the instant motion to sever. On July 20, 2012, Swipe Innovations amended its original Complaint. With respect to Elavon, the Complaint states the following: Elavon, either alone and/or in conjunction with others, including its customers and/or suppliers, made, had made, used, imported, provided, supplied, distributed, sold, and/or offered for sale payment terminal products and/or systems (including at least products and/or systems with encrypting PIN pads) that infringed one or more claims of the 296 patent. Doc. # 98 at 20. With respect to joinder, the Complaint states the following: Defendants are properly joined under 35 U.S.C. 299(a) because a right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, and/or selling of the same products and/or processes. For example, as alleged in detail below, defendants are alleged to infringe the patent in suit with respect to payment terminal products and/or processes that practice industry standards. In addition, questions of fact common to all of defendants are presented in the action at least because defendants infringing acts arise from their common acts of adhering to and practicing such standards. Id. at 17. This is the first of 13 cases2 that Swipe Innovations has filed in the Lufkin Division involving the 296 patent. All 13 cases are assigned to the undersigned. The Case Management Conference in this case is set for August 23, 2012. II. APPLICABLE LAW Under Federal Rule of Civil Procedure 21, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party.

These cases are: 9:12-cv-67; 9:12-cv-68; 9:12-cv-73; 9:12-cv-74; 9:12-cv-75; 9:12-cv77; 9:12-cv-78; 9:12-cv-84; 9:12-cv-85; 9:12-cv-126; 9:12-cv-127; and 9:12-cv-128. All 12 of these cases were filed between May 11, 2012 and August 8, 2012. A 14th case was created when Swipe Innovationss claims against Vantiv, LLC were severed out of the instant case on August 13, 2012. 9:12-cv-131. 2

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Before the Leahy-Smith America Invents Act (AIA) became effective on September 16, 20113, the court would have referred to Federal Rule of Civil Procedure 20 to determine whether a party was properly joined. Rule 20 provides that Defendants may be joined in an action if: 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 any question of law or fact common to all defendants will arise in the action. Fed. R. Civ. P. 20(a)(2)(A), (B). Because this case was filed after the AIA became effective, the test for joinder is that codified in 35 U.S.C. 299(a): Defendants may be joined only if: (1) any right to relief is asserted against the parties jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences relating to the making, using, importing into the United States, offering for sale, or selling of the same accused product of process; and (2) questions of fact common to all defendants will arise in the action. Satisfaction of this standard cannot be based solely on allegations that they [Defendants] each have infringed the patent or patents in suit. Id. at 299(b). However, a Defendant can waive the limitations set out in Section 299. Id. at 299(c). These tests are not entirely dissimilar at first glance. A recent Federal Circuit case addressed joinder requirements at length. In re EMC Corp., 677 F.3d 1351, 1359 (Fed. Cir. 2012). The In re EMC court made it clear that it was addressing joinder requirements under Rule 20, rather than the AIA. In re EMC, 677 F.3d at 1360 n.4. However, the In re EMC courts analysis of what constitutes a common transaction or occurrence under Rule 20 is persuasive regarding interpretation of the same language in the AIA.
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The AIA codified a joinder standard for cases involving patent infringement, which will be discussed below. See 35 U.S.C. 299. 3

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In the patent infringement context, claims against independent Defendants may not be joined under Rule 20 unless the facts underlying the claim of infringement asserted against each defendant share an aggregate of operative facts. In re EMC., 677 F.3d at 1359. The similarity of the accused products of processes of Defendants is not enough to satisfy this test. Id. Other relevant factors in considering whether joinder is proper include: (1) the temporal proximity of alleged infringement; (2) the relationship between the Defendants; (3) the use of common components in the accused products; (4) licensing or technology agreements between the Defendants; (5) shared development and manufacturing; and (6) whether the damages sought are based on lost profits. Id. at 135960. III. DISCUSSION Swipe Innovations does not oppose severance per se, but does argue that if the claims against Elavon are severed, the Swipe/Elavon case should be consolidated with the instant case for purposes of discovery. The court does not think joinder of Elavons claims is appropriate in this case. Swipe Innovations has done nothing more than parrot the language in Section 299 in its pleadings, and make a vague statement that joinder is appropriate because the Defendants accused infringing devices all practice industry standards. Swipe Innovations fails to put forth any real argument in its response why joinder is appropriate. What the court will do is sever Swipe Innovationss claims against Elavon into a separate lawsuit. This new suit will be consolidated with the instant action only for pre-trial issues.4 The
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See Fed. R. Civ. P. 42(a) (If actions before the court involve a common question of law or fact, the court may: (1) join for hearing or trial any or all matters at issue in the actions; (2) consolidate the actions; or (3) issue any other orders to avoid unnecessary cost or delay.). The court has considerable discretion in applying Rule 42. In re EMC, 677 F.3d at 1360; see also Luera v. M/V Albeta, 635 F.3d 181, 194 (5th Cir. 2011) (Rule 42(a) provides district courts with 4

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instant action shall serve as the lead case for consolidated issues, and the new case will remain active for trial. All motions shall be filed in the consolidated case. IT IS THEREFORE ORDERED that Defendant Elavon, Inc.s Motion to Sever [Doc. # 77 is GRANTED. IT IS FURTHER ORDERED that all claims pertaining to Elavon, Inc. be severed into a separate cause of action. Plaintiff Swipe Innovations shall pay the filing fee for this case within ten calender days of this Order to avoid having the severed action dismissed with prejudice. This severed case is CONSOLIDATED for all pre-trial issues with the original filed action, 9:12-cv-40, which is the lead case. Swipe Innovations and Elavon are both directed to file any future motions pertaining to the claims against Elavon in the lead case. The severed case will remain active for trial. To be clear, counsel and a corporate representative for Elavon should still plan to appear at the August 23, 2012 Case Management Conference in the instant case.
So ORDERED and SIGNED this 14 day of August, 2012.

___________________________________ Ron Clark, United States District Judge

broad authority to consolidate actions that involve a common question of law or fact.). 5