Summary of Amendments to the Federal Rules of Civil Procedure and a Potential Impact on NPEs
By: Tony Salmo
On December 15, 2015 amendments to the Federal Rules of Civil Procedure went into effect. Congress passed and the Supreme Court adopted amendments to Rules 1, 4, 16, 26, 30, 31, 33, 34, 37, 55, and 84. The amendment to rule 84 effectively eliminated the Appendix of Forms. On April 28, 2016, the Supreme Court approved amendments for review by congress for: Federal Rules of Appellate Practice, Rules 4, 5, 21, 25, 26, 27, 28, 28.1, 29, 32, 35, and 40, and Forms 1, 5, and 6, new Form 7 and new Appendix; Bankruptcy Rules 1010, 1011, 2002, 3002.1, 7008, 7012, 7016, 9006, 9027, and 9033, and new Rule 1012; Civil Rules 4, 6, and 82; and Criminal Rules 4, 41, and 45.
This article includes a brief discussion of amendments and proposed amendments to the Federal Rules of Civil Procedure, followed by a discussion of the impact caused by the amendment to Rule 84 of the Federal Rules of Civil Procedure, specifically the impact of the elimination of Form 18 on non-practicing entities (NPEs).
2015 Amendments to Federal Rules of Civil Procedure
On December 15, 2015 amendments to Rules 1, 4, 16, 26, 30, 31, 33, 34, 37, 55, and 84 of the Federal Rules of Civil Procedure went into effect. The amendments are each briefly explained below.
Rule 1 was amended to emphasize that all parties to a suit share with the court the responsibility to employ the rules in favor of a just, speedy, and inexpensive manner. See Fed. R. Civ. P. 1, committee notes 2015, available at
http://uscode.house.gov/view.xhtml?path=/prelim@title28/title28a/node85/titleI&edition=prelim.
The most significant change to Rule 4 reduced the time to serve a defendant from 120 days to 90 days. Accompanying the change to rule 4 was a change to Rule 16 which reduced the time to issue a scheduling order to the earlier of 90 days (from 120 days) after any defendant has been served, or 60 days (from 90 days) after any defendant has appeared before the court. The committee noted that the changes to Rules 4 and 16 are in effort to reduce delays in early stages of litigation.
Perhaps the most expansive amendment is that of Rule 26(b)(1), which now requires discovery to be relevant to a party’s claim or defense and restores the requirement that discovery must be proportional to the needs of the case. Rules 30, 31, and 33 were amended in parallel to reflect the recognition of proportionality in Rule 26. Rule 26 was also amended to allow for requests for production after 21 days of serving that party, even if that request is prior to the Rule 26(f) conference.
Rule 34 was amended to reduce potential unreasonable burdens from being imposed by objections to requests to produce documents and things. Rule 34(b)(2)(B) now requires that objections to Rule 34 requests be stated with specificity. This requirement is tied to the amendment to Rule 34(b)(2)(c), which provides that objections to Rule 34 requests must state whether anything is withheld on the basis of the objection. Additionally, Rule 34(b)(2)(B) now explicitly allows for the production of copies of documents or electronically stored information as opposed to inspection, provided that the response to the request states what copies will be produced.
New Rule 37(e) seeks to address growing problems presented by electronically discoverable information. Rule 37(e) provides guidelines for the court when electronically stored information was not preserved that should have been preserved and cannot be recovered, the court may act: (1) upon determining the loss of information causes prejudice to another party; and (2) upon finding the party failing to preserve the electronically stored information acted with intent to deprive the other party. If the court determines these conditions exist, the court may: (A) presume the information was unfavorable to the party; (B) instruct the jury that it may or must presume the information was unfavorable to the party; or (C) dismiss the action under a default judgment.
Rule 55 was amended to clarify that a default judgment failing to dispose of all claims among all parties is not a final judgment unless the court directs entry of final judgment. The amendment to rule 55 relates to the issue of parallel proceedings, such as those in the United States Patent and Trademark Office.
Rule 84, which previously contained the Appendix of Forms, has been abrogated. The committee notes state that the purpose of the forms, “to demonstrate the simplicity and brevity of statement which the rules contemplate,” has been fulfilled and therefore the forms are no longer necessary. See Fed. R. Civ. P. 84, advisory committee’s note (2015), available at
http://uscode.house.gov/view.xhtml?path=/prelim@title28/title28a/node85/titleI&edition=prelim.
Patent Trolls Without Form 18 — Amended Rule 84
Patent Trolls, or non-practicing entities (NPEs), leverage the high cost of patent defense to obtain nuisance settlements for questionable claims of infringement. A typical strategy consists of filing a large number of suits against potential infringers; but filing large volumes of lawsuits comes with associated costs of preparing pleadings. NPEs often minimized legal fees by filing bare minimum complaints based on Form 18. Now-abrogated Form 18, which was specific to patent suits, only required: (1) a statement that the patent at issue is owned by the plaintiff; (2) that the defendant’s product infringed the plaintiff’s patent; and (3) infringement resulted in damages suffered by the plaintiff. The simplicity of Form 18 allowed NPEs to easily file a large number of complaints for a given patent.
After the Supreme Court holdings in Iqbal and Twombly set a heightened pleading standard of plausibility, many argued that “plausible” pleadings should be required for patent infringement complaints. Ashcroft v. Iqbal, 556 U.S. 662 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007). In 2012, the United States Court of Appeals for the Federal Circuit in In re Bill of Lading addressed the patent pleadings issue, holding that Form 18 satisfied the Iqbal and Twombly pleading standards for cases of direct infringement, but not for indirect infringement. In re Bill of Lading Transmission and Processing System Patent Litigation, 681 F.3d 1323, 1334; 1336 (Fed. Cir. 2012). In re Bill of Lading therefore allowed NPEs to continue their practice of filing complaints using Form 18.
Now that Form 18 has been eliminated by the abrogation of Rule 84, experts anticipate that suits for patent infringement will be required to meet the heightened pleading standards of Iqbal and Twombly. However, as the Iqbal and Twombly cases are not patent-specific, a new set of case law is likely to emerge to address patent-specific pleadings. While there is uncertainty as to the exact pleading standard for patent infringement complaints, NPEs may be required to provide more detailed pleadings than under old Form 18. One possible requirement is a fact-specific statement from a plaintiff explaining how a defendant’s product infringes the patent at issue.
More detailed pleadings mean more work for NPE attorneys and heightened pleading standards may cause an increase in Rule 12(b)(6) motions to dismiss (failure to state a claim for which relief can be granted), both of which will increase an NPE’s cost of doing business. Neither the additional cost of pleadings or the cost of responding to more 12(b)(6) motions will cripple the NPE economic model. However, additional up-front operating expenses will shift the economic model for NPEs and may at least curb the number of suits filed by NPEs.
2016 Proposed Amendments to Federal Rules of Civil Procedure
On April 28, 2016, the Supreme Court approved amendments for review by congress for the Federal Rules of Civil Procedure, Rules 4, 6, and 82. These proposed rules must pass through congress before they are implemented in December of 2016. The proposed amendments are each briefly explained below.
Rule 4 is proposed to be amended to address time limits for service and correct an ambiguity regarding service abroad on a corporation. Proposed Amendments to Federal Rules of Civil Procedure Adopted by The Supreme Court for Congressional Review (April 28, 2016), available at http://www.uscourts.gov/file/document/2016-04-28-final-package-congress. The amendment clarifies that the time limit set forth in Rule 4(m) (90 days) does not include service under Rule 4(h)(2) (service on a corporation outside the United States judicial district).
The proposed amendment to Rule 6 addresses an ambiguity from the term “after service” that was added in the 2005 amendment. The term “after service” could be interpreted as meaning either the party performing service or the party receiving service. To reduce confusion, Rule 6(d) is proposed to be amended to replace “after service” with “after being served,” to indicate the party being referenced is the party served.
The proposed amendment to Rule 82 is a technical amendment to address venue for admiralty and maritime claims, deleting reference to now-repealed §1391 and 1392 and adding reference to §1390 of venue statutes of Title 28.
Categorised in: Newsletter Vol. 8, Issue 2
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