Katz is a well-known non-practicing entity. He filed 25 actions in which he "asserted a total of 1,975 claims from 31 patents against 165 defendants in 50 groups of related corporate entities (“defendant groups”)." It is obviously not practical for a trial court to decide whether 1,975 patent claims are each valid and infringed, and if so, what are the appropriate damages.
The district court adopted the following procedure for dealing with this morass:
Choosing a middle ground between the two proposals, the district court ordered Katz initially to select no more than 40 claims per defendant group, and after discovery to narrow the number of selected claims to 16 per defendant group. The court further directed that the total number of claims to be asserted against all defendants could not exceed 64 (eight claims for each unique specification including four specifications not at issue in this appeal). However, the court added a proviso that the limitations on the numbers of claims were not immutable. The proviso permitted Katz to add new claims if they “raise[d] issues of infringement/validity that [were] not duplicative” of previously selected claims. Katz added new claims to exceed a total of 64 across all the actions, but the number of claims did not exceed 16 per defendant group.
Instead of selecting additional claims and seeking to show that those claims raised non-duplicative issues of infringement or validity, Katz moved the court to sever and stay the non-selected claims. Katz contended that the court’s requirement that it select particular claims violated its due process rights because the court’s order could result in decisions having a preclusive effect on non-selected claims regardless of whether those claims pre-sented distinct issues of invalidity or infringement. The court denied Katz’s motion. The court held that Katz’s rights under the unselected claims were protected by the proviso that Katz could add new claims if it could show that the new claims raised non-duplicative issues of validity or infringement.
The Federal Circuit rejected Katz's appeal on the due process argument and affirmed the district court's procedure:
In approving the district court’s procedure, we do not suggest that a district court’s claim selection decisions in a complex case such as this one are unreviewable. Katz could have sought to demonstrate that some of its unselected claims presented unique issues as to liability or damages. If, notwithstanding such a showing, the district court had refused to permit Katz to add those specified claims, that decision would be subject to review and reversal. As noted, however, the problem with Katz’s position is that Katz made no effort to make such a showing with respect to any of the unselected claims. Instead, Katz chose to make the "all or nothing" argument that the entire claim selection process was flawed from the start and that it is impermissible to give the judgments effect as to the unselected claims regardless of Katz’s failure to make any showing as to the uniqueness of any of those claims. That sort of global claim of impropriety is unpersuasive. In complex cases, and particularly in multidistrict litigation cases, the district court "needs to have broad discretion to administer the proceeding." In re Phenylpropanolamine (PPA) Prods. Liab. Litig., 460 F.3d 1217, 1232 (9th Cir. 2006). Given the district court’s need to manage the cases before it and the "strong public interest in the finality of judgments in patent litigation," Cardinal Chem. Co. v. Morton Int’l, Inc. 508 U.S. 83, 100 (1993), we cannot adopt Katz’s broad proposition. And, not having made a record reflecting that the court erred in its disposition of particular claims, Katz cannot point to specific errors by the court in the administration of the claim selection scheme that the court adopted.
This will be useful in dealing with non-practicing entities that practice abusive litigation tactics. In the particular case, most of the claims were invalidated or not infringed; the CAFC remanded the case to the district court on some of the issues.
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