Infringement Claims Severed And Stayed Against Manufacturer’s Customers, Where Claims Were “Peripheral” To Those Asserted Against Manufacturer
Written By: Christopher H. Blaszkowski

In a series of four separate patent infringement actions, each involving plaintiff Rothschild Mobile Imaging Innovations (“RMII”), defendant Mitek Systems (“Mitek”), and one of four bank customers of Mitek’s (“the Bank Defendants”), Judge Sleet granted the Bank Defendants’ motions to sever and stay RMII’s infringement claims against them until the Court resolves those claims against Mitek. Civ. Nos. 14-617, 14-1142, 14-1143, and 14-1144 (D. Del. July 31, 2015).

The suit concerned Mitek’s mobile imaging products and services, and Mitek’s provision of the same to the Bank Defendants. The infringement allegations in each of the four suits were “essentially identical”, and in each suit, RMII alleged infringement of its four patents by both Mitek’s accused products and services as well as the implementation of those products and services by the Bank Defendants. Each of the Bank Defendants individually moved to sever and stay the infringement claims pending resolution of the case against the manufacturer, Mitek.

The Court found that several factors justified severing and staying the claims against the Bank Defendants. First, these infringement claims were “peripheral” to the claims of infringement against Mitek, primarily because the Bank Defendants were customers of Mitek’s allegedly infringing technology. Indeed, in such cases, the manufacturer is the “true defendant” and the “real party in interest.” Slip op. at p. 5. The Court dismissed RMII’s argument that the Bank Defendants’ implementations of the accused products were “separate and distinct accused products ….” Id. Critically, this argument contradicted statements made by RMII in its own complaints, which provided that the allegations against the Defendants involve “the same or similar related and commonly derived instrumentalities.” Slip op. at p. 6.

Second, the Court found that resolution of the infringement claims against Mitek would “dispose of any claims against the Bank Defendants.” Id. In other words, the Bank Defendants could only be liable if Mitek were found to be liable. Thus, “[t]he presence of the Bank Defendants as parties neither adds nor detracts from RMII’s patent infringement claims against Mitek.” Id. Drawing on the Court’s “virtually unfettered discretion in determining whether or not severance is appropriate,” the Court granted the motions to sever the infringement claims against the Bank Defendants. Id.

The Court also found that each of the three factors typically considered in determining the propriety of a stay favored the Bank Defendants. The Court granted a stay of the infringement claims against the Bank Defendants because: 1) a stay would simplify the issues for trial; 2) the status of the litigation was still very early and trial would not occur for nearly two more years; and 3) no undue prejudice would be suffered and no clear tactical advantage would be gained through the issuance of a stay. Slip op. at p. 7. With respect to the third factor, the Court found that RMII, a patent monetizing entity that sold no products, would be made whole by monetary damages in the event of liability. Consequently, the Court stayed the infringement claims against the Bank Defendants.