Opinion
Civil Action No. 2-03-CV-358 (TJW).
May 26, 2004
ORDER
Defendants Glory, Ltd., Glory Shoji Co., Ltd., and Glory (U.S.A.), Inc. (collectively "Glory") filed a Motion to Transfer Venue (Docket #7) requesting that the Court transfer this patent infringement suit to the United States District Court for the Northern District of Illinois, Eastern Division, pursuant to 28 U.S.C. § 1400 and 1404. After considering the parties' filings and the applicable case law, the Court ORDERS that the motion be DENIED for the reasons expressed below.
I. Factual Background
In this patent infringement suit the Plaintiff accuses the Defendants of infringing three United States patents: the '592 patent, the '354 patent, and the '067 patent. Since October 1, 2002, a closely related action involving the same parties and related patents has been pending in the United States District Court for the Northern District of Illinois, Eastern Division ("the Illinois case"). In the Illinois case the Plaintiff accuses the Defendants of infringing the '806 and '196 patents. The '067 and '196 patents are parents of the '806 patent. The '592 and '354 patents are continuations-in-part of the '196 patent.
On October 10, 2003, the Plaintiff sought leave to amend its complaint in the Illinois case to add the '592, '354, and '067 patents to the suit. The Plaintiff informed the judge that during discovery the Plaintiff had identified other patents that are allegedly being infringed by the Defendants that could not have been foreseen until that point in time. The Plaintiff argued that the patents are closely related and involve overlapping issues, as well as involve the same accused infringing products. At a hearing on the motion to amend on October 16, 2003, the judge in the Illinois case, Judge Guzman, refused to allow the additional patents to be added. Judge Guzman pointed to the extensive amount of discovery that had already been done in the case and the impending discovery deadline as one reason for denying the motion for leave to amend. In addition, Judge Guzman stated that the identification of the infringement of the other patents should result in a new cause of action as opposed to being part of the pending Illinois case.
As a result of Judge Guzman's ruling, the Plaintiff filed this action ("the Texas case") alleging infringement by the Defendants of the three patents that Judge Guzman had refused to add to the Illinois case. Subsequent to the filing of the Texas case, the Defendants filed a declaratory judgment action ("the second Illinois case") in the Northern District of Illinois, Eastern Division, to have the three patents asserted in the Texas case declared not infringed, invalid, and unenforceable. The second Illinois case was assigned to a different judge, Judge Conlon. Noting that Judge Guzman had refused to add the patents to the initial Illinois case and that an identical case, the Texas case, was pending in this Court, Judge Conlon entered a scheduling order and discovery order for the case to proceed and set a trial date for August of 2004. At the scheduling conference, Judge Conlon stated that the Texas case is the first-filed case and left it to this Court to decide whether the case should be transferred. Subsequent to the scheduling conference, the Defendants filed a motion in the initial Illinois case pending before Judge Guzman seeking to consolidate or reassign the second Illinois case pending before Judge Conlon with the initial Illinois case. As with the Defendants' request to add the new patents to the initial Illinois case, Judge Guzman denied the motion to consolidate noting his belief that reassigning the second Illinois case to his court would not preserve judicial economies and efficiencies.
II. Motion to Transfer Venue
Defendants have filed a Motion to Transfer Venue requesting that the Court transfer this action to the Northern District of Illinois, Eastern Division, pursuant to 28 U.S.C. § 1400 and 1404. The Defendants contend that since the Illinois case involves the same parties, the same accused infringing products, and other patents closely related to the patents in this case, the initial Illinois case is the first-filed case and that this case, the second-filed case, should be transferred to Illinois. In addition, the Defendants argue that this case should be transferred to Illinois pursuant to 28 U.S.C. § 1404(a) for the purpose of convenience and in the interest of justice.
The Plaintiff responds by arguing that this case is the first-filed case and, therefore, should not be transferred. The Plaintiff points to comments made by Judge Guzman that different patents should normally be the subject of different lawsuits and that the identification during discovery of the infringement of different patents should be a new, separate cause of action. The Plaintiff also contends that Judge Guzman's denial of the motion for leave to join the patents in the Illinois case and denial of the motion to consolidate the first Illinois case with the second Illinois case foreclose the possibility of realizing any efficiencies if this Court transfers the case to Illinois.
A. Motion to Transfer Venue to the First-Filed Court
The "first-to-file" rule is a generally recognized doctrine of federal comity which permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district. Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180 (1952); Texas Instruments Inc. v. Micron Semiconductor, Inc., 815 F. Supp. 994 (E.D. Tex. 1993). In determining whether to apply the "first-to-file" rule to an action, a court must resolve two questions: 1) are the two pending actions so duplicative or involve substantially similar issues that one court should decide the subject matter of both actions and 2) which of the two courts should take the case? Texas Instruments Inc. v. Micron Semiconductor, Inc., 815 F. Supp. 994, 997 (E.D. Tex. 1993) (citing Superior Savings Association v. Bank of Dallas, 705 F. Supp. 326, 328-329 (N.D. Tex. 1989)).
In order to satisfy the first inquiry, the two actions must involve closely related questions, common subject matter, or core issues that substantially overlap. Id. The cases need not be identical to be duplicative. Superior Savings Association v. Bank of Dallas, 705 F. Supp. 326, 328-329 (N.D. Tex. 1989) (quoting Mann Manufacturing, Inc. v. Hortex, Inc., 439 F.2d 403, 407 (5th Cir. 1971)). The rule with regard to the second inquiry is that in the absence of compelling circumstances the court first seized of jurisdiction over a dispute should be permitted to decide whether it will adjudicate that controversy fully. West Gulf Maritime Association v. ILA Deep Sea Local 24, 751 F.2d 721, 729 (5th Cir. 1985); Mann Manufacturing, 439 F.2d at 407.
However, the "first-to-file" rule is not a rigid or inflexible rule to be mechanically applied. Mann Manufacturing, 439 F.2d at 407. The decision of whether to apply the "first-to-file" rule is discretionary, and involves determinations concerning "[w]ise judicial administration, giving regard to conservation of judicial resources and comprehensive disposition of litigation." Kerotest, 342 U.S. at 183. Further, the "first-to-file" rule gives the first-filed court the responsibility to determine which case should proceed. Texas Instruments, 815 F. Supp. at 999 (citing Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 96 (9th Cir. 1982)).
(1) Initial Illinois Case
In this case, the Defendants contend that the first-filed case is the initial Illinois case, despite the fact that the two cases involve different patents. If the Illinois case is indeed the first-filed case, then the Illinois court has the responsibility to determine which case should proceed. In the transcript of the hearing on the motion for leave and in denying the Defendant's subsequent motion to consolidate, Judge Guzman makes clear that he has considered whether the interest in judicial administration and the conservation of judicial resources and comprehensive disposition of litigation point to having the dispute over the additional patents in the Illinois case. Judge Guzman exercised his discretion to not have the patents joined with the existing litigation and felt they should be the subject of a new cause of action. The Defendants had the chance to argue for the joining of the patents in the Illinois case, but instead urged Judge Guzman to deny the motion for leave to amend. Further, Judge Guzman exercised his discretion not to consolidate the two Illinois actions believing that consolidation would not preserve judicial economies and efficiencies.
The Court finds that this case is the first-filed case and should proceed in this Court. Although the patents are related and might involve the interpretation of identical claim terms, the patents are different patents than those in suit in the initial Illinois case. This Court has been involved in cases where the patents and disputed claim terms have been the subject of two different suits pending at the same time. It might be that with the same parties involved and related patents the claim construction work done in the Illinois case will serve to preclude any determination by this Court that would conflict with the Illinois court's determinations. See Omega Engineering, Inc. v. Raytek Corp., 334 F.3d 1314, 1334 (Fed. Cir. 2003) ("[W]e presume, unless otherwise compelled, that the same claim term in the same patent or related patents carries the same construed meaning."); see also Burke, Inc. v. Bruno Independent Living Aids, Inc., 183 F.3d 1334, 1337 (Fed. Cir. 1999) ("[T]he interest in consistency in the construction of patent claims would be ill served . . . [by] preclud[ing] consideration of a prior claim construction rendered as a matter of law by this court."). At the least, it will serve as some authority for this Court to consider in making a claim construction determination. In addition, any discovery gathered from the Illinois case presumably will preclude the need for any duplicative discovery in this case. In fact, the parties agreed with Judge Conlon's conclusion that "interrogatories, depositions, and so forth, that have been taken in Judge Guzman's case to the extent they touch on the same issues or related issues" should not be duplicated. Thus, the Court finds that transferring the case to Illinois will not result in any significant efficiencies and that keeping the case in this Court will not result in any significant inefficiencies.
(2) Second Illinois Case
On the other hand, this case and the second Illinois case involve the same patents. Therefore, the first inquiry under the "first-filed" rule is satisfied by the fact that the two actions go beyond involving closely related questions, common subject matter, and overlapping core issues, they are basically identical. Under the second inquiry, as the first-filed court, this Court has the discretion to decide whether to hear the case. Actions for infringement traditionally take precedence over declaratory judgment actions, even where later-filed, based on the policy that a party whose rights are being infringed should have the privilege of electing where to enforce its rights. Texas Instruments, 815 F. Supp. at 997. Therefore, the Court finds that the case should proceed in this Court. B. Motion to Transfer Venue under Section 1404(a)
The Defendants also contend that the case should be transferred to Illinois pursuant to 28 U.S.C. § 1404(a) for the convenience of the parties and in the interest of justice. Section 1404(a) allows a district court "[f]or the convenience of parties and witnesses, in the interest of justice" to transfer a case to any other district or division where the case might have been brought. 28 U.S.C. § 1404(a) (2003). Section 1404(a) protects litigants, witnesses, and the public against unnecessary inconvenience and expense, and avoids wasted time, energy, and money. Van Dusen v. Barrack, 376 U.S. 612, 616 (1964). It is within the district court's discretion to decide whether to transfer venue, and the moving party bears the burden of showing why the court should transfer the case to a different forum. Hanby v. Shell Oil Co., 144 F. Supp.2d 673, 676 (E.D. Tex. 2001). Transfer is proper if the plaintiff could have brought the case initially in the proposed transferee forum and transfer would promote the convenience of the parties and the witnesses and the interests of justice. In re Horseshoe Entertainment, 337 F.3d 429, 433 (5th Cir. 2003). The parties do not dispute that venue is proper in the Eastern District of Texas, Marshall Division, or that this action "might have been brought" in the Northern District of Illinois, Eastern Division. Therefore, the Court turns to whether the balance of convenience and justice substantially weighs in favor of transfer.
To prevail, the litigant must demonstrate that the balance of convenience and justice substantially weighs in favor of transfer, and unless the balance of conveniences weighs heavily in the favor of the defendant, the plaintiff's choice of forum will rarely be disturbed. See, e.g., Peteet v. Dow Chemical Co., 868 F.2d 1428, 1436 (5th Cir. 1989); Howell v. Tanner, 650 F.2d 610, 616 (5th Cir. 1981); Menendez Rodriguez v. Pan American Life Insurance Company, 311 F.2d 429, 434 (5th Cir. 1962) (stating that "whether it be by transfer order under the statute [1404(a)] or by dismissal under the doctrine of forum non conveniens the plaintiff's privilege to choose, or not to be ousted from, his chosen forum is highly esteemed"); LeDoux v. Isle of Capri Casino's Inc., 218 F. Supp.2d 835, 837 (E.D. Tex. 2002); Mohamed v. Mazda Motor Corp., 90 F. Supp.2d 757, 771-74 (E.D. Tex. 2000); see also Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 508 (1947). When deciding whether to transfer venue, the district court balances two types of interests: (1) the convenience of the litigants and (2) the public interests in the fair and efficient administration of justice. Mohamed v. Mazda Motor Corp., 90 F. Supp.2d 757, 771 (E.D. Tex. 2000) (citing International Software Sys., Inc. v. Amplicon, Inc., 77 F.3d 112, 115 (5th Cir. 1996)).
The first type of interest, the convenience of the litigants, is comprised of the following factors: (a) plaintiff's choice of forum, (b) convenience and location of witnesses and the parties, (c) cost of obtaining the attendance of witnesses/cost of trial, (d) place of the alleged wrong, (e) accessibility and location of sources of proof, and (f) possibility of delay and prejudice if transfer is granted. Id. at 771 (identifying the origin of the factors as Gulf Oil Corporation v. Gilbert, 330 U.S. 501, 508 (1947)). The second type of interest, the public interest, is comprised of the following factors: (a) administrative difficulty, (b) localized interests in resolving localized controversies, (c) jurors, and (d) conflict of laws. Id.
The first factor involves the plaintiff's choice of forum. The plaintiff's decision to file suit in the Eastern District of Texas, Marshall Division, is entitled to substantial deference and "should not be lightly disturbed." Nokia Corp. v. Buca, Inc., 2002 WL 1461913, at *2 (N.D. Tex. 2002) (citing National Group Underwriters, Inc. v. Southern Security Life Ins. Co., 2001 WL 1478800, at 2 (N.D. Tex. 2001)). Defendants urge the Court to afford the Plaintiff's choice of forum minimal deference because neither of the parties reside in this forum and none of the significant events relevant to this action occurred in this forum. However, the admitted sale of the allegedly infringing products in the Eastern District of Texas, Marshall Division, is an event that is significant and relevant to this action. Nokia Corp., 2002 WL 1461913, at *2 (denying defendant's motion to transfer venue where the allegedly infringing products were sold and offered for sale in the forum's state even though the products were distributed and sold from the defendant's headquarters in another state and all of the defendant's key witnesses and documents related to the sale of the products were located at the defendant's headquarters); Rock Bit International, Inc. v. Smith International, Inc., 957 F. Supp. 843, 843-44 (E.D. Tex. 1997) (granting defendant's motion to transfer venue where none of the parties resided in the forum and the plaintiff did not allege any acts of infringement occurred in the forum). Therefore, the Plaintiff's choice of forum may be overturned only by a substantial showing that the other factors clearly favor transfer to an alternative forum. Barton v. Young, 144 F. Supp.2d 685, 688 (E.D. Tex. 2001).
The second and third factors involve the convenience and location of witnesses and the parties and the cost of obtaining the attendance of witnesses. Here, the Plaintiff is located in Illinois and the Defendants are located in New Jersey and Japan. Although the Plaintiff will be more inconvenienced by keeping the case in Texas as opposed to Illinois, the Plaintiff's inconvenience is not a consideration. 15 Charles Alan Wright Arthur r. Miller, Federal Practice and Procedure § 3849 (West 1986). The Defendants state that the design and development documentation, engineering offices, and inventors are located in Japan. The Defendants' documentation and witnesses face the burden and cost of being transported away from Japan or New Jersey regardless of whether the case is tried in Texas or Illinois. The Defendants argue that Illinois and Marshall are not equally convenient for the Defendants. However, as has been noted before, Marshall is not in the wastelands of Siberia. Mohamed, 90 F. Supp.2d at 776. A regional airport is located in Shreveport, Louisiana, just 30 minutes away, and an international airport with direct flights to New Jersey and Tokyo is located in Dallas, Texas, just a couple of hours away.
Although the convenience of witnesses is the most important factor to be considered in ruling on a motion to transfer venue, it is the convenience of the non-party witnesses rather than employee witnesses that is the more important factor and is accorded greater weight. In re Triton Ltd. Securities Litigation, 70 F. Supp.2d 678 (E.D. Tex. 1999). Neither party specifically mentions any key non-party witnesses and where they are located. Therefore, the convenience of the party and non-party witnesses and cost of obtaining them at trial does not weigh in favor of transfer.
The fourth factor involves the place of the alleged wrong. Generally, the preferred forum in a patent infringement action is "that which is the center of accused activity." Beam Laser Systems, Inc. v. Cox Communications, Inc., 117 F. Supp.2d 515, 518-519 (E.D. Va. 2000). If there is no center of infringement activity in a particular case, as here, then, as long as the plaintiff brings its action in a forum where the alleged infringement is occurring, that choice should not be undermined by allegations that infringing activities occur throughout the country. Id.
The Plaintiff alleges infringing activity by the Defendants through the sale of the allegedly infringing products throughout the United States, including the Eastern District of Texas, Marshall Division. Therefore, there are places of the alleged wrong located in the Eastern District of Texas, Marshall Division. Here, although the Defendants manufacturing of products using the allegedly infringing technology does not occur in the Eastern District of Texas, the Defendants' alleged distribution of the infringing products in the Eastern District of Texas establishes that this factor does not weigh in favor of transfer.
The fifth factor involves the accessibility and location of sources of proof. This case will involve a battle of documents and experts with documents coming from both parties' information and storage facilities presumably located in Japan, Illinois, and New Jersey. Although the accessibility and location of sources of proof remain considerations in the Court's transfer analysis, they are of only slight significance due to the increasing ease of storage, communication, copying, and transportation of documents and information and this Court's mandatory disclosure obligations under Local Rule CV-26 and the additional disclosure requirements in the case's Discovery Order. Mohamed v. Mazda Corp., 90 F. Supp.2d 757, 778 (E.D. Tex. 2000). Therefore, this factor does not weigh in favor of transfer.
The sixth private interest factor and the first public interest factor involve administrative difficulties caused by court congestion and the possibility of delay and prejudice if transfer is granted. The Defendants do not dispute that these factors weigh in favor of denying the transfer due to the fact that the caseload statistics show that the Plaintiff will get to trial faster in the Eastern District of Texas. However, the Defendants point to Judge Conlon setting the second Illinois case for trial in August. As discussed above, as a result of Judge Guzman's reluctance to join the patents in the Illinois case and subsequent refusal to consolidate the first Illinois case with the second Illinois case, it does not appear that there would be any significant efficiencies if the case is transferred. In fact, as noted above, any efficiencies available from the initial Illinois case, such as discovery and claim construction, would be available in this case as well. Therefore, these factors do not weigh in favor of transfer.
The second and third public interest factors involve the localized interest in resolving localized controversies and the burdening of citizens in the forum with jury duty. The residents of the Eastern District of Texas, Marshall Division, have a significant interest in the enforcement of federal patent laws against infringement activities occurring within the division. This interest is at least as significant as the residents of the Northern District of Illinois, Eastern Division. Therefore, these factors do not weigh in favor of transfer.
The fourth and final public interest factor involves any conflict of laws. Since this action is brought pursuant to the Patent Act, it will be governed by the law of the Federal Circuit applicable in both this forum and the Northern District of Illinois. Therefore, this factor does not weigh in favor of transfer.
Finally, Defendants contend that the question as to whether this Court has personal jurisdiction over the Defendants Glory Ltd. and Glory Shoji ("the Japanese defendants") weighs in favor of transfer to Illinois where the Japanese defendants have submitted to personal jurisdiction. The Japanese defendants do contest the issue of personal jurisdiction in their answer. However, the parties have not fully briefed the issue of whether the Japanese defendants are subject to personal jurisdiction in Texas. The Plaintiff's Complaint alleges that personal jurisdiction exists as to the Japanese defendants due to the fact that they conduct business in the State of Texas by directly or through intermediaries shipping, distributing, offering for sale, selling, and advertising products in the United States, State of Texas, and Eastern District of Texas. In addition, the filings indicate that the Japanese defendants manufacture the allegedly infringing products and deliver them into the stream of commerce where they eventually are sold in this state and district. The Defendants do not dispute that the allegedly infringing products are sold in the State of Texas and in the Eastern District of Texas, Marshall Division. Therefore, reading the allegations in the light most favorable to the Plaintiff at this stage, the Court finds that personal jurisdiction conceivably lies in Texas based on a stream of commerce theory and, therefore, the question as to jurisdiction does not weigh in favor of transfer.
III. Conclusion
Here, the Defendants have failed to persuade the Court that transfer to the Northern District of Illinois, Eastern Division, would be appropriate pursuant to either the first-filed rule or § 1404(a). Accordingly, the Court ORDERS that the Defendants' Motion to Transfer Venue be DENIED.
So ORDERED.