The opinion of the court was delivered by: Hamilton, District Judge.
ORDER RE: MOTIONS TO DISMISS
Defendants' motions to dismiss the above-entitled related actions came
on for hearing on September 12, 2001, before this court, the Honorable
Phyllis J. Hamilton presiding. Biosite, Inc., appeared by its counsel
Kirk M. Hasson and Sharon L. O'Grady, and XOMA Ltd., XOMA (Bermuda)
Ltd., XOMA Ireland Ltd. and XOMA Corporation appeared by their counsel
Charles A. Gilman and Matthew B. Lehr. Having read the parties' papers
and carefully considered their arguments and the relevant legal
authority, and good cause appearing, the court hereby rules as follows.
Plaintiff Biosite Diagnostics, Inc. ("Biosite"), filed suit against
defendants XOMA Ltd., XOMA (U.S.) LLC, XOMA Ireland Ltd., and XOMA
Corporation ("XOMA"), seeking a declaratory judgment that it does not
infringe XOMIA's patents, and that the license agreements between Biosite
and XOMA remain valid, and seeking injunctive relief barring XOMA from
purporting to terminate the license agreements (Case No. C-01-2251 PJH
— "the declaratory judgment action").
A month later, plaintiffs XOMA Ltd., XOMA (Bermuda) Ltd., XOMA Ireland
Ltd., and XOMA Technology, Ltd. ("XOMA") filed suit against defendant
Biosite, alleging patent infringement, fraud, breach of contract,
misappropriation, and unfair business practices (Case No. C-01-2580 PJH
— "the direct action").
Biosite is a biotech research company, which develops medical
diagnostic tests. XOMA is a biopharmaceutical company whose primary
business is the identification and development of novel therapeutic
protein products, including the identification and development of
antibodies for therapeutic purposes. XOMA is the owner of various patents
relating to technology for methods of expression and secretion of
antibodies in bacterial cells. In 1998 and 1999, various XOMA entities
granted licenses to Biosite pursuant to three written license agreements
XOMA now moves for an order dismissing the complaint brought by Biosite
(the declaratory judgment action). XOMA argues that 1) Biosite sought
declaratory judgment only after being put on clear notice; 2) the direct
action is the more appropriate vehicle to address the issues; and 3)
Biosite's claims are defenses to the direct action.
Biosite opposes XOMA's motion on the basis that 1) Biosite's complaint
was first filed; 2) the two parties in the actions are identical; 3) the
issues in the two actions are the same; and 4) no valid purpose would be
served by granting Xoma's motion.
Biosite seeks an order dismissing the complaint brought by XOMA (the
direct action), or in the alternative, to dismiss or stay certain
claims. Biosite argues that 1) the complaint is duplicative of Biosite's
pending declaratory relief action, which is favored over XOMA's direct
action since the declaratory relief action was filed first; 2) XOMA
(Bermuda) and XOMA Technology Ltd. lack the requisite standing to sue; 3)
the XOMA plaintiffs are not qualified to do business in California, and
the state law claims are subject to abatement until plaintiffs comply
with the requirements of California Corporations Code § 2105; and 4)
the fraud claim should be dismissed because XOMA has failed to comply
with the requirements of Federal Rule of Civil Procedure 9(b).
XOMA opposes Biosite's motion, arguing 1) Biosite's reliance on the
first-to-file rule is misplaced and therefore the declaratory relief
action is not favored over XOMA's direct action; 2) XOMA (Bermuda) has
standing by way of assignment of 2 of the 3 licenses at issue, and XOMA
Technology Ltd. has standing by way of assignment of ownership of each of
the 5 patents at issue; 3) XOMA may properly bring state law claims since
the basis of the Court's jurisdiction is the assertion of federal patent
claims; and 4) Biosite is on sufficient notice to defend itself against
A. XOMA's Motion to Dismiss
Biosite argues that its declaratory judgment action was filed first and
that the first-to-file rule dictates that XOMA's direct action should be
dismissed. Additionally, Biosite argues that because XOMA's claims are
compulsory counterclaims to the declaratory judgment action, dismissal of
the direct action, rather than a stay, is appropriate. XOMA contends that
Biosite's reliance on the first to file rule is misplaced and that its
action sets forth the complete dispute between the parties.
The first-to-file rule provides that when identical
suits are pending in two courts, the court in which
the first suit was filed should generally proceed to
judgment . . . It is "not a rigid or inflexible rule
to be mechanically applied." Rather, "[t]he most basic
aspect of the first-to-file rule is that it is
discretionary." "The decision and the discretion
belong to the district court."
St. Helena Wine Co. v. Allied Mgt., Inc., 1998 WL 480190, *1 (N.D.Cal.
1998) (citations omitted); see also In re Burley, 738 F.2d 981, 988 (9th
Cir. 1984); Wilton v. Seven Falls Co., 515 U.S. 277, 115 S.Ct. 2137,
2142, 132 L.Ed.2d 214 (1995). Thus, it is clear that the ...