One of my favorite things about patent litigation is the sheer number of legal issues that can arise in even the most straightforward patent dispute. In addition to decisions on the merits with respect to the patent trifecta — infringement, invalidity, and damages — very interesting procedural issues often surface as well. From venue and convenience questions at the beginning of a case to questions of standing that can pop up at any time or even to procedural issues that trail a federal circuit remand, you never know what you are going to get in a given case. Having litigated dozens of patent cases over the past 20 years, I thought I had seen it all, at least in terms of the variety of motions that can be presented. But I was wrong, as I recently saw an unsealed opinion from late October that addressed a novel (but very impactful on the case) issue. Namely, whether the plaintiff could update the case caption, or substitute a party, at a pretty advanced stage of the case.
Interestingly, the decision I saw was rendered in a high-value case covered in a June 2021 column on these pages. In that column, I wrote about the plaintiff’s attempt to preserve a $235 million jury verdict that had been thrown out by the trial judge on standing grounds, via a fast-tracked mandamus petition in the Federal Circuit. At issue was the fact that one of the entities discussed before the jury, Cirba Inc., had been adjudged by the trial judge as a bare licensee, without the right to exclude necessary for standing in a patent case. And because that entity had presented evidence of economic harm to the jury, the jury’s verdict was irredeemably tainted in the trial court’s view. On mandamus, the Federal Circuit refused to disturb the trial court’s findings, as Cirba failed to “demonstrate a clear and indisputable right to issuance of the writ based on the district court’s holding that Article III requires an injury to the plaintiff’s right to exclude.” As a result, the case reverted back to the district court, in part for a redo of the jury trial without the inclusion of the Cirba entity that lacked standing.
In a twist, the two Cirba entities that had been involved in the first jury trial had also undergone the Canadian version of a corporate merger, or an amalgamation. The result of that process was a new patent holder entity composed of the two prior entities, now known as Cirba Inc. d/b/a Densify. With the case proceeding on remand, the new Cirba entity moved the trial court for permission to either update the case caption, or to substitute the new entity under FRCP 25. The motion was opposed. Unfortunately for Cirba, neither attempt was successful, with the trial court declining to grant the requested relief on either ground.
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First, the court addressed the request to update the case caption. Recognizing that “few courts have addressed a party’s request that seeks only to amend a caption,” the court concluded that the proper approach would be to exercise its discretion and decide whether the requested change to the caption would result in “promoting clarity and avoiding confusion.” In opposition, the defendant argued that allowing the requested amendment would “cause juror confusion and be prejudicial” — especially since the “new” entity, Cirba Inc., shared its name with the same entity that had previously been determined as lacking standing. As a result, the defendant argued “that updating the case caption may encourage post-amalgamated Cirba Inc. to advance arguments and evidence that blur the line between the competitive harms allegedly suffered by pre-amalgamated Cirba Inc. — which were found to be prejudicial in the first jury trial because of Inc.’s later dismissal for lack of standing.” The court agreed that this concern warranted denial of the motion to amend the caption.
Next, the court used similar reasoning to deny Cirba’s request to substitute the “new” Cirba Inc. as the plaintiff in the case. In doing so, the court credited the defendant’s argument that allowing the substitution would cause juror confusion, namely with respect to “which entity had what rights, and when.” In effect, “substituting post-amalgamated ‘Cirba Inc.’ in the case caption would not obviate the parties need to label and clarify each Cirba entity, e.g., Inc., IP, and post amalgamated Cirba Inc., to both the jury and this Court throughout the trial.“ Moreover, the court raised concerns regarding “the potential prejudice that VMware may face were post-amalgamated Cirba Inc. able to advance its now repeated attempt to assert the rights of a party dismissed for lacking standing.” Put differently, the risk of juror confusion and prejudice were real, despite the seemingly innocuous nature of Cirba’s request. As a result, Cirba’s requested relief was denied.
Ultimately, besides introducing us to a novel set of legal issues regarding case captions and party substitutions, this decision illustrates the increased focus on the part of courts and defendants on the question of standing in patent cases. With the introduction of outside capital and complex ownership structures becoming the norm in high-value patent cases, things are often no longer as simple as they once were in terms of determining patent ownership and the right to sue therefrom. Here, even a relatively simple set of circumstances involving a corporate parent and its subsidiary led to a years-long diversion in terms of getting to a judgment on the merits. Add in third-parties and things can only become more complex when it comes to a sizable chunk of newly filed patent cases. The days of giving scant attention to the identity of the patent owner — and ignoring those that may be standing behind them — are quickly coming to an end. Going forward, we can expect more interest in what lies behind a patentee’s name.
Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.
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Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.