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Interactive Fitness Holdings, LLC, A Delaware Company v. Icon Health & Fitness

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION


April 5, 2011

INTERACTIVE FITNESS HOLDINGS, LLC, A DELAWARE COMPANY, PLAINTIFF,
v.
ICON HEALTH & FITNESS, INC., A DELAWARE CORPORATION,
DEFENDANT.

The opinion of the court was delivered by: Lucy H. Koh United States District Court

United States District Court For the Northern District of California

ORDER GRANTING MOTION TO TRANSFER AND TRANSFERRING CASE

Defendant ICON Health & Fitness, Inc. (ICON) moves to dismiss this action or, in the alternative, transfer this case to the District of Utah. See Motion (Dkt. No. 13). The Court finds 20 this matter suitable for decision without oral argument. See Civil Local Rule 7-1(b). Accordingly, 21 the hearing on this motion, set for April 7, 2011, is hereby VACATED. For the reasons set forth 22 below, the Court GRANTS ICON's motion to transfer and transfers the case to the District of Utah. 23

Accordingly, the Case Management Conference set to follow the April 7, 2011 hearing is likewise VACATED.

I. Introduction and Background

Plaintiff Interactive Fitness Holdings, LLC (Interactive) filed this declaratory judgment action on October 13, 2010, seeking declaratory judgment of non-infringement of two U.S. patents, 28 number 6,447,424 ('424 Patent) and 6,808,472 ('472 Patent) (together, the Patents in Suit). See Compl. (Dkt. No. 1). The Patents in Suit are owned by ICON.*fn1 In its Complaint, Interactive notes 2 that in January, 2008, ICON sued third party Fisher Price, Inc. in the District of Utah, asserting 3 infringement of the '424 Patent.*fn2 Compl. ¶ 12; Icon Health & Fitness, Inc. v. Fisher-Price, Inc. 4 and Expresso Fitness Corp., No. 1:08-CV-10 TS (the Utah action). The Utah action is still 5 pending in the District of Utah. Id.; see Utah action, Dkt. No. 1. On June 16, 2008, ICON filed a 6 First Amended Complaint in the Utah action, adding allegations of infringement of the '424 Patent 7 against defendant Expresso Fitness Corp. (Expresso). See Utah action, Dkt. No. 10. On June 30, 8 2008, Fisher-Price settled the claims asserted against it in the Utah action, leaving Expresso as the 9 sole defendant. See Utah action, Dkt. No. 11. On September 8, 2009, ICON filed a Second 10 against Expresso. See Utah action, Dkt. No. 32. In November, 2009, Interactive purchased

Expresso's assets at a foreclosure sale. Compl. ¶ 14. Interactive expressly disclaimed any 13 assumption of Espresso's debts or liabilities. Compl. ¶ 17. Interactive continues to sell the 14 exercise cycles accused of infringing the Patents in Suit. See Opp'n at 4. 15

16 action, arguing that Interactive "is now selling the same infringing bikes that Expresso was 17 selling." See Motion to Substitute (Compl. Ex. 3). On October 13, 2010, Interactive filed the 18 instant action, citing ICON's allegations in the Utah action as evidence of the "substantial 19 controversy between the parties" and denying infringement of the Patents in Suit. Interactive did 20

ORDER TRANSFERRING CASE

Amended Complaint in the Utah action, adding allegations of infringement of the '472 Patent

On September 27, 2010, ICON moved to substitute Interactive for Expresso in the Utah not serve ICON with the Complaint until January 11, 2011. ICON filed its Motion to dismiss or 2 transfer on January 26, 2011. The District of Utah court recently denied ICON's motion to 3 substitute Interactive for Expresso based on its finding that Interactive has no successor liability to 4

II. Legal Standard

The first-to-file rule is a "generally recognized doctrine of federal comity which permits a 7 district court to decline jurisdiction over an action when a complaint involving the same parties and 8 issues has already been filed in another district." Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 9

Expresso. See Order dated February 21, 2011 (Utah action, Dkt. No. 61). 5

93, 94-95 (9th Cir. 1982). This rule promotes judicial efficiency and prevents the risk of 10 inconsistent decisions that would arise from multiple litigations of identical claims. Accordingly, it

"should not be disregarded lightly." Alltrade, Inc. v. Uniwield Products, Inc., 946 F.2d 622, 625 (9th Cir. 1991). At the same time, it is "not a rigid or inflexible rule to be mechanically applied, 13 but rather is to be applied with a view to the dictates of sound judicial administration." Pacesetter, 14

678 F.2d at 95. Thus, the Ninth Circuit has recognized exceptions to the first-to-file rule under 15 various circumstances, such as bad faith, anticipatory suit, and forum shopping. Alltrade, 946 F.2d 16 at 628. A court may also decline to apply the first-to-file rule when the balance of convenience 17 weighs in favor of the later-filed action. See id. at 628. The Federal Circuit has made clear that the 18 first-to-file rule applies to patent cases and thus likewise requires deference to the first-filed action 19 unless there is "sound reason that would make it unjust or inefficient to continue the first-filed 20 action." Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 938 (Fed.Cir. 1993). 21

23 chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the issues. 24

See Alltrade, 946 F.2d at 625. Here, Interactive does not dispute that the Utah action was filed 25 first, and that precisely the same issues (infringement of the same Patents in Suit by the same 26 accused product) are raised in both actions. Therefore, the only question is whether Expresso and 27

Interactive are "substantially similar" parties for first-to-file purposes. See Fossum v. 28

ORDER TRANSFERRING CASE

III. Application

In applying the first-to-file rule, a court first looks at three threshold factors: (1) the

Northwestern Mut. Life Ins. Co., No. C 10-2657 SI, 2010 U.S. Dist. LEXIS 99904 at *5 (N.D. Cal. Sept. 16, 2010) ("Exact parallelism between the two actions need not exist; it is enough if the 2 parties and issues in the two actions are substantially similar.") (internal citations and quotations 3 omitted). 4

5 legally distinct entities were sufficiently similar for first-to-file purposes based on their activities. 6

Pa. Feb. 19, 1997), the first-filed complaint was brought by Visa against American Express based 8 on its partnership with Advanta (a separate entity), but Advanta was not as a defendant. Two days 9 later, Advanta sued Visa in a different forum, alleging anti-trust violations based on the same 10 controversy raised in the first complaint. The court found that "the first-filed rule turns on which

WL 88906 at *3. 14

2010 WL 395572 at *5 (N.D. Ohio Jan. 27, 2010), the court applied the first-to-file rule in a 16 situation very similar to the one presented here. American Hunting Innovations (AHI) originally 17 sued defendant Horton Manufacturing for patent infringement. Id. at *1. Shortly before this suit 18 was initiated, Horton Manufacturing had entered receivership. Its assets were subsequently sold to 19 another party, Horton Archery. Id. Horton Archery filed a declaratory judgment action asserting 20 non-infringement of the AHI patents asserted in the Horton Manufacturing case; subsequently, 21

AHI moved to amend its complaint to add Horton Archery as a defendant. Id. at *1. Even 22 assuming that the defendant in the first-filed case had no "legal relationship" to Horton Archery, 23 the court concluded that the original patent infringement case "certainly and without question" 24 gave the first court possession of the issues presented by both matters. Id. at *5. Accordingly, the 25 case was transferred. Id. at *5-*7. 26

Likewise, a court in Eastern District of Pennsylvania transferred a declaratory judgment

27 action brought by a drug distributor where a previous action asserting the same patents against the 28 same product was brought against the drug's manufacturer. See Shire U.S., Inc. v. Johnson

ICON cites several cases from outside this district where district courts have concluded that

For example, in Advanta Corp. v. Visa U.S.A., Inc., No. 96-7940, 1997 WL 88906 at *2-*3 (E.D. 7

court first obtains possession of the subject of the dispute, not the parties of the dispute" and

transferred the anti-trust suit to the district where the first-filed case was pending. Advanta, 1997 13

Similarly, in Horton Archery, LLC, v. Am. Hunting Innovations, LLC, No. 5:09CV1604,

Matthey, Inc., 543 F. Supp. 2d 404, 409 (E.D. Pa. 2008). Even though the manufacturer and 2 distributor were legally distinct entities, the court found that the first-to-file rule applied, holding 3 that "the substantive touchstone of the first-to-file inquiry is subject matter." Id. 4

Interactive argues that ICON has failed to identify any authority holding that legally

5 unrelated companies can constitute "substantially similar" entities under the first-to-file analysis, 6 but as outlined above, several courts have resolved this question in ICON's favor. In fact, 7

Interactive has failed to cite any factually similar cases in which a court found that the first-filed 8 action was not sufficiently related for "first-to-file" status where, as here, the issues raised in the 9 two matters are exactly the same. Thus, this Court finds that Interactive's purchase of Expresso's 10 assets, including the accused product, and its continued sale of that product, support a finding of substantial similarity between Expresso and Interactive for purposes of the first-to-file rule.*fn3

Therefore, the Court concludes the Utah action is the first-filed case for purposes of the first-to-file 13 rule. 14

The first-to-file rule is flexible, and exceptions to it are "not rare." Genentech v. Eli Lilly & Co., 998 F.2d at 937. However, any such exception must be justified by a "sound reason that 16 would make it unjust or inefficient to continue the first-filed action." Id. at 938. Interactive argues 17 that its convenience in litigating the dispute, including the convenience of its employee witnesses, 18 access to sources of proof, and the parties' contacts with this forum, support this Court's retention 19 of the case. However, as this Court has previously held, considerations such as these cannot trump 20 the judicial efficiency considerations which underlie the first-to-file rule. Aliphcom v. Wi-LAN, 21

(aff'd, 2011 U.S. App. LEXIS 2604 (Fed. Cir. Feb. 9, 2011) (citing In Re Vistaprint, 628 F.3d 23

"involving the same patent and underlying technology," provides a "substantial justification" for 25 retaining the case). The Federal Circuit has held that "the existence of multiple lawsuits involving 26

Inc., No. 10-cv-02337-LHK, 2010 U.S. Dist. LEXIS 123295 at *8-9 (N.D. Cal. Nov. 10, 2010) 22

1342, 1346-47 (Fed. Cir. 2010) (finding that co-pending litigation in the same judicial district the same issues is a paramount consideration when determining whether a transfer is in the interest 2 of justice." In re Volkswagen of Am., Inc., 566 F.3d 1349, 1351 (Fed. Cir. 2009). If the Utah 3 action and the instant case were to proceed in both courts, duplicative and potentially inconsistent 4 claim construction and infringement analyses would inevitably result. The first-to-file rule exists 5 to prevent this situation, and the Court finds that it is properly applicable here. 6

IV. Conclusion

Accordingly, ICON's motion is GRANTED, and this case is hereby transferred to the District of Utah for consolidation with the Utah action, Case No. 1:08-CV-10 TS. 9

IT IS SO ORDERED.


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