UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION
June 9, 2011
MICROCHIP TECHNOLOGY, INC. AND
SILICON STORAGE TECHNOLOGY, INC.,
UNITED MODULE CORP., AND KERANOS, LLC,
DEFENDANTS. ANALOG DEVICES, INC.
UNITED MODULE CORP., AND KERANOS, LLC, 25 DEFENDANTS.
TAIWAN SEMICONDUCTOR MANUFACTURING CO., LTD., TSMC NORTH
AMERICA, AND UBICOM, INC.,
UNITED MODULE CORP., AND KERANOS, LLC,
DEFENDANTS. SAMSUNG ELECTRONICS CO., LTD., AND SAMSUNG SEMICONDUCTOR, INC., LLC,
UNITED MODULE CORP., AND KERANOS, 12 DEFENDANTS.
The opinion of the court was delivered by: Lucy H. Koh United States District Judge
ORDER GRANTING DEFENDANTS' MOTIONS TO FREESCALE SEMICONDUCOR, INC., NATIONAL SEMICONDUCTOR CORP., and TRANSFER CASES TO EASTERN DISTRICT OF TEXAS
to three now-expired patents owned by or exclusively licensed to Defendants: U.S. Patent No. 18
5,042,009 (the '009 Patent). Defendants United Module Corp. and Keranos LLC move to dismiss, 20 transfer, or stay the cases based on the first-to-file rule. Defendants are Plaintiffs in an earlier filed 21 action in the Eastern District of Texas pending before the Honorable T. John Ward. The Court 22 23 held a hearing on these motions on March 3, 2011. Pursuant to the parties' request, the Court stayed these cases through June 8, 2011 to provide the parties an opportunity to try to resolve the 25 cases through mediation. The parties participated in a court-appointed mediation on June 6, 2011,
In these related actions, Plaintiffs seek a declaration of non-infringement and invalidity as 4,795,719 (the '719 Patent); U.S. Patent No. 4,868,629 (the '629 Patent); and U.S. Patent No. 19
but the parties did not settle the cases. As of June 9, 2011, the case is no longer stayed.*fn1 For the 2 reasons set forth below, the Court GRANTS the motions to transfer based on the first-to-file rule.
5 6 declaratory judgment action on September 20, 2010. See Compl. [dkt. #1] in Case No. 10-CV- 4241-LHK. Three additional cases followed. On November 16, 2010, Plaintiffs Freescale
Semiconductor, Inc., National Semiconductor Corp., and Analog Devices, Inc., filed their own 9 declaratory judgment action. See Compl. [dkt. #1] in Case No. 10-CV-5196-LHK. On November 10
22, 2010, Plaintiffs Taiwan Semiconductor Manufacturing Co., Ltd., TSMC North America, and 11
Plaintiffs Microchip Technology, Inc., and Silicon Storage Technology, Inc., filed this UBICOM, Inc., filed a decl See Compl. [dkt. #1] in Case No. 10-CV-aratory judgment action.
5290-LHK. Finally, on January 28, 2011, Plaintiffs Samsung Electronics Co., Ltd., and Samsung
0430-LHK. The Court found these cases related pursuant to the District's Civil Local Rules.
The Defendants in each of the cases are United Module Corp. (UMC) and Keranos (collectively "DJ Defendants"). UMC is the owner of the three now-expired patents. According to
DJ Plaintiffs, the '719 and '629 patents expired in 2006, while the '009 patent expired in 2008. 20
UMC is headquartered in Los Altos, California. According to patent assignment records, a 21 22 suit on June 29, 2000. See Tatelman Decl., Exh. 26. Keranos was formed as a Texas Limited 24
Semiconductor Inc. filed a declaratory judgment action. See Compl. [dkt. #1] in Case No. 11-CV-
Hereafter, Plaintiffs will be referred to as "DJ Plaintiffs." 17
Fremont, California company named "Waferscale Integration Inc." assigned UMC the patents-in- Liability Company on February 10, 2010. See Tatelman Decl, Exh. 15 ("Certificate of 25 Formation"). The street address of Keranos is 211 E. 7th Street, Suite 620, Austin, Texas 78701-2
3128. According to its Certificate of Formation, Keranos has a sole member, J. Nicholas Gross, 3 whose address is located in Berkeley, California. According to the DJ Defendants, although UMC 4 is the legal owner of the patents at issue, shortly after Keranos was formed, UMC "completely 5 6 transferred to Keranos its rights to sue" under an Exclusive License Agreement. See Defs.' Reply*fn2 at 7.
On June 23, 2010, Keranos filed a patent infringement action in the Eastern District of Texas. That action is captioned "Keranos LLC v. Analog Devices, Inc., et al., Civil Action No. 10 2:10-cv-207" ("Texas Case"), and involves claims of infringement with respect to the same three patents at issue in this action. The claims of patent infringement relate to, among other devices, "integrated circuits using embedded flash memory in discrete form, wafer form, or incorporated 13 14 within larger systems on printed circuit boards." See Compl. ¶ 12. Each of the DJ Plaintiffs here, except for Silicon Storage Technology (SST), is a Defendant in the Texas case. SST is a wholly 16 owned subsidiary of DJ Plaintiff Microchip Technology, Inc. Id. at ¶ 2 ("On April 8, 2010, 17 Plaintiff SST became a wholly-owned subsidiary of Plaintiff Microchip.") Besides the DJ 18
Plaintiffs, the Texas case also includes some two-dozen other Defendants, including Qualcomm, 19 Inc., Intel Corp., IBM Corp., and Apple, Inc. According to DJ Defendants (and the Court's review 20 of the docket in the Texas Case), defendants in the Texas Case have filed more than twenty 21 22 motions to dismiss for lack of standing and/or for judgment on the pleadings (specifically raising the issue of whether UMC is a "necessary and indispensable party"). Those motions are fully 24 briefed, and under submission before Judge Ward. 25 26 27 28 merely citing information available in the redacted public version of Keranos' Reply Brief.
3 first to file rule. DJ Plaintiffs oppose dismissal on both grounds. The Court exercises its discretion 4 to decline to rule on UMC's jurisdictional argument, and instead finds transfer proper based on the 5 6 first-to-file rule.
9 conveniens dismissal, bypassing questions of subject-matter and personal jurisdiction, when 10 considerations of convenience, fairness, and judicial economy so warrant." See Sinochem Int'l Co. v. Malaysia Int'l Shipping Corp., 549 U.S. 422, 423 (2007). The Supreme Court went on to state that a "federal court has leeway to choose among threshold grounds for denying audience to a case 13 14 on the merits." Id. at 431. The Supreme Court's conclusion in Sinochem is equally applicable in the context of motions to transfer, which are not decisions on the merits. See San Francisco Tech., 16
UMC argues that the Court lacks subject matter jurisdiction over it. Specifically, UMC 18 argues that there is no actual case or controversy between UMC and DJ Plaintiffs because UMC, as 19 the patent owner, completely transferred to Keranos UMC's rights to sue for patent infringement. 20
Thus, UMC contends any litigation threat to DJ Plaintiffs is from Keranos and not from UMC. 21 22
Texas Case, it does not reach UMC's argument for dismissal based on a lack of an actual case or 24 controversy, and thus a lack of subject matter jurisdiction. *fn3 A decision by this Court that there is, 25
DJ Defendants have moved to dismiss on two grounds: subject matter jurisdiction and the A.UMC's Motion to Dismiss for Lack of Subject Matter Jurisdiction
The Supreme Court has ruled that a district court "may dispose of an action by a forum non
Inc. v. Glad Prods. Co., 2010 U.S. Dist. LEXIS 83681, *19 (N.D. Cal. July 19, 2010). 17
Because the Court has determined that transfer is appropriate based on the earlier filed
549 U.S. at 425 ("a court need not resolve whether it has authority to adjudicate the cause (subject-
Case No.: 10-CV-04241, 10-CV-5290, 10-CV-5196 ORDER GRANTING DEFENDANTS' MOTIONS TO TRANSFER
Case5:10-cv-04241-LHK Document77 Filed06/09/11 Page6 of 13
or is not, an actual case or controversy between UMC and DJ Plaintiffs is inappropriate given the 2 fully briefed motions in the Texas Court on the related issue of whether UMC, as the patent owner, 3 is a necessary and indispensable party in the Texas Case. The issue of UMC's status should be 4 addressed to the Texas Court. 5 6
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 9 issues has already been filed in another district." See Pacesetter Sys., Inc. v. Medtronic, Inc., 678 10
F.2d 93, 94-95 (9th Cir. 1982). As another Judge in this District has noted, the "rule promotes 11 judicial efficiency and prevents the risk of inconsistent decisions that would arise from multiple
litigations of identical claims. Accordingly, 'it should not be disregarded lightly.'" See Meru 13 14
(Whyte, J.) (citing Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 625 (9th Cir. 1991)). 16
B.DJ Defendants' Motion to Dismiss on Basis of First-to-File Rule
United States District Court
For the Northern District of California
Networks, Inc. v. Extricom, Ltd., 2010 U.S. Dist. LEXIS 90212, *2-3 (N.D. Cal. Aug. 31, 2010)
The first-to-file rule, however, is not inflexible, as the Ninth Circuit has recognized limited 17 exceptions under various circumstances such as bad faith, anticipatory suit, and forum shopping. 18
See Alltrade, 946 F.2d at 628. The Federal Circuit has determined that the first-to-file rule applies 19 to patent cases. See Genentech, Inc. v. Eli Lilly & Co., 998 F.2d 931, 938 (Fed. Cir. 1993). 20
the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the 24 issues. See Alltrade, 946 F.2d at 625; see also Meru Networks, 2010 U.S. Dist. LEXIS 90212, *3. 25
DJ Plaintiffs do not challenge the first and third factors. And, it is clear that those factors are 26 satisfied here. The Texas Case, filed on June 23, 2010, was filed three months before the first 27
The application of the first-to-file rule requires consideration of three threshold factors: (1)
matter jurisdiction) or personal jurisdiction over the defendant if it determines that, in any event, a 28 foreign tribunal is plainly the more suitable arbiter of the merits of the case") (emphasis added).
Case No.: 10-CV-04241, 10-CV-5290, 10-CV-5196 ORDER GRANTING DEFENDANTS' MOTIONS TO TRANSFER
Case5:10-cv-04241-LHK Document77 Filed06/09/11 Page7 of 13
action was filed in this Court, on September 20, 2010. Moreover, the two actions involve mirror 2 image issues. In the Texas Case, Keranos alleges patent infringement with respect to the '719, 3
'629, and '009 patents. In this action, DJ Plaintiffs seek a declaratory judgment of non-4 infringement and invalidity with respect to the same three patents. 5 6
in this action, namely DJ Plaintiff SST and DJ Defendant UMC, are not parties in the Texas Case.
DJ Plaintiffs argue, however, that the first-to-file rule should not apply because two parties
See Pls.' Combined Response to Defs.' Mot. to Dismiss at 18-19 [dkt. #35]. The Court is not 9 persuaded. 10
The similar parties' requirement does not require "exact identity," but instead is satisfied if
the parties are substantially similar. See, e.g., Intersearch Worldwide, Ltd. v. Intersearch Group,
Inc., 544 F. Supp. 2d 949, 959 (N.D. Cal. 2008) (stating that "exact identity is not required to 13 14 satisfy the first-to-file rule"); see also Inherent.com v. Martindale-Hubbell, 420 F. Supp. 2d 1093
(N.D. Cal. 2006) (ruling that the "'sameness' requirement does not mandate that the two actions be 16 identical, but is satisfied if they are 'substantially similar.'"). It is clear that the parties in this 17 action and in the Texas Case are substantially similar, although the Texas Case includes far more 18 entities that have been accused of patent infringement. Although SST is not yet a party in the 19
Texas Case, it is, in fact, a wholly owned subsidiary of Microchip Technology, Inc., and 20 presumably, may be added to the Texas Case. Judicial economy, however, is better served by 21 22 leaving the joinder issue to the determination of the Texas Court. See British Telecommunications
plc v. McDonnell Douglas Corp., 1993 U.S. Dist. LEXIS 6345, *12-14 (N.D. Cal. May 3, 1993) 24
United States District Court
For the Northern District of California
(although one party was not identical to both actions, applying first-to-file rule and leaving joinder 25 decision to court in first-filed case). 26
27 somewhat misleading because DJ Plaintiffs (defendants in the Texas Case) have filed numerous 28
DJ Plaintiffs also note that UMC is not yet a party in the Texas Case. This argument is motions arguing that UMC, as the patent owner, is a necessary and indispensable party in the Texas 2
Case. These motions, as previously noted, are under submission. If Judge Ward grants the 3 motions, UMC will likely be added as a party to the Texas Case. In any event, the decision with 4 respect to UMC's role in the Texas Case, if any, is within the sound discretion of the Texas Court. 5 6
opinion by this Court support their argument against application of the first-to-file rule. Neither point is well-taken. Noting the "ample degree of discretion" in transfer rulings, the Federal Circuit 9 denied a writ of mandamus where a court in a second-filed action determined that transfer was not 10 warranted under the first-to-file rule. See In re Transaction Sys. Architects, Inc., 2000 U.S. App. 11 e, however, the district court found that the LEXIS 5103, *3-6 (Fed. Cir. Feb. 25, 2000). In that cas 12 two cases were "completely different," and involved different parties, different products, and 13 14 different claims. Id. at *3. Here, the parties are substantially the same and the issues, involving the same three patents in both actions, are identical. 16
17 not met where the actions did not involve the same parties and the same subject matter issues. See 18
Aliphcom v. Wi-LAN, Inc., 2010 U.S. Dist. LEXIS 123295 (N.D. Cal. Nov. 10, 2010), writ of 19 mandamus denied by In re Aliphcom, 2011 U.S. App. LEXIS 2604 (Fed. Cir. Feb. 9, 2011). 20
Finally, DJ Plaintiffs argue that an unpublished decision of the Federal Circuit and a recent
In a recent opinion, this Court found that the threshold factors of the first-to-file rule were Aliphcom, however, is distinguishable from the instant action on at least three grounds. First, and 21 22 most important, the Court found an exception to the first-to-file rule in Aliphcom because one of the patents at issue was already the subject of claim construction in the later-filed case. Id. at *7. 24
Here, however, the three patents in issue have not been the subject of a claim construction. Thus, 25 there is no "sound reason" to depart from the first-to-file rule, especially where, as in Aliphcom, 26 considerations of judicial efficiency and avoidance of inconsistent judgments call for transfer. 27 28
Second, in Aliphcom, the declaratory judgment plaintiff in the later-filed California action 2 had no connection with any of the parties in the earlier-filed Texas action. Id. at *6 ("However, 3 Wi-LAN has cited no case applying the first-to-file rule where the original defendant in the first-4 filed suit had no relationship at all to the plaintiff bringing the later-filed suit."). Here, the parties 5 6 are substantially the same, except that SST and UMC are not parties to the Texas Case but are parties in the cases before this Court. However, both SST and UMC have a close connection to the Texas Case. SST is a wholly owned-subsidiary of Microchip Technology, Inc., which is a 9 defendant in the Texas Case. Similarly, whether UMC, as the patent owner, is a necessary and 10 indispensable party in the Texas Case is at issue in fully briefed motions before the Texas Court.
And third, in Aliphcom, plaintiffs in the earlier-filed Texas action did not assert infringement of a particular patent, and only tried to add infringement claims with respect to that 13 14 patent after the later California action was filed. Id. at *4. Thus, the Court found that the California action was really the first-filed case. In this action, there is no dispute that the Texas Case is the first-filed since DJ Plaintiffs seek declaratory relief with respect to the same three 17 patents at issue in the Texas Case.
21 22 discretion, decline to apply the first-to-file rule based on a "customer-suit" and/or "forum shopping" exception. See Pls.' Combined Response to Defs.' Mot. to Dismiss at 19-22. For the 24 reasons specified below, the Court finds that neither exception is a "sound reason" to depart from 25 the first-to-file rule. See Genentech, 998 F.2d at 938 (requiring deference to the first-filed action 26 unless there is "sound reason that would make it unjust or inefficient to continue the first-filed 27 action"). 28
In sum, the Court finds the threshold factors for application of the first-to-file rule satisfied.
2.Potential Exceptions to First-to-File Rule
DJ Plaintiffs argue that, even if the threshold factors are satisfied,
the Court should, in its
3 first-filed action." See Tegic Communs. Corp. v. Bd. of Regents, 458
F.3d 1335, 1343 (Fed. Cir. 4 2006). More specifically, the customer suit exception involves the
scenario in which "[t]he first is 5 6 the 'customer action', where the
first suit is filed against a customer who is simply a reseller of the
accused goods, while the second suit is a declaratory action brought
by the manufacturer of the
accused goods." See Kahn v. General Motors Corp., 889 F.2d 1078, 1081
(Fed. Cir. 1989). In 9 evaluating the customer-suit exception, "the
primary question is whether the issues and parties are 10 such that
the disposition of one case would be dispositive of the other." See
Katz v. Siegler, 909
"The customer suit exception is an exception to the general rule that favors the forum of the F.2d 1459, 1463 (Fed. Cir. 1990). DJ Plaintiffs argue that this action should take precedence over the Texas Case because SST is a manufacturer of the technology accused of infringing the patents, 13 14 and that, in the Texas Case, Keranos has "accused several of SST's customers of infringing the patents-in-suit" but not SST itself. See Pls.' Combined Response to Defs.' Mot. to Dismiss at 19. exception are efficiency and judicial economy. See Tegic, 458 F.3d at 1343. DJ Plaintiffs do not 18 suggest that SST is the only manufacturer of the relevant technology. Thus, resolution of this 19 action would not "resolve all charges against customers" in the first-filed action. See Kahn, 889 20
F.2d at 1081. In addition, complete relief is more difficult in this case, at least at this time, because 21 22 numerous defendants in the Texas Case are not before this Court. In these circumstances, the
guiding principles of efficiency and judicial economy support application of the first-to-file rule. 24
The Federal Circuit has made clear that the "guiding principles" of the customer-suit
b.Forum Shopping Exception
Another potential exception to the first-to-file rule is bad faith forum shopping. See Alltrade, 946 F.2d at 628. In this action, DJ Plaintiffs argue that "the lawsuit in Eastern Texas has 27 little, if any, connection to the factual circumstances of Keranos' suit, and is merely an attempt to 28
manipulate the venue laws." See Pls.' Combined Response to Defs.' Mot. to Dismiss at 21. 2
Specifically, DJ Plaintiffs point to: (1) UMC's Los Altos, California headquarters; (2) the 3 formation of Keranos as a Texas limited liability company in February 2010, four months before 4 the Texas Case was filed; and (3) shortly after Keranos' formation, UMC's transfer of its right to 5 6 sue for infringement to Keranos via an Exclusive License Agreement. Id. DJ Defendants' only
response is that Keranos rents office space at a building in Longview, Texas (though acknowledges
"it does not have any employees yet"), and that Keranos is not an "ephemeral entity" merely 9 controlled by UMC. See Pls.' Reply at 9-10. At the March 3, 2011 hearing, counsel for DJ 10
Defendants confirmed that Keranos still had no employees in Texas, and stated his belief that the litigation. See Transcript of March 3, 2011 Hearing, p.12 [dkt. #70]. 13 14
Keranos rents office space for some litigation boxes and is "in the process of hiring someone." 16
Court. Moreover, continuing this action on a parallel track as the Texas Case, whereby both this 18
Court and the Texas Court would have to construe the claims and issue decisions regarding 19 infringement and invalidity of the same three patents, "would unavoidably result in unnecessary 20 duplication of judicial efforts, with a resulting risk of inconsistent results as the actions progress in 21 22 each Court." See Aliphcom, 2010 U.S. Dist. LEXIS 123295, *7. In conclusion, "the risk of inconsistent judgments and waste of judicial resources must outweigh the equitable concern" of the 24 parties' limited connections to Texas. Id. at *8. 25
Texas office only has "some boxes and documents related to the Texas and things like that"
DJ Plaintiffs raise troubling issues not fully answered by DJ Defendants' response that
These issues, however, are more appropriately raised in a motion to transfer venue in the Texas 17
3.Balance of Convenience Factors
Similar to their claims regarding forum shopping, DJ Plaintiffs argue that any analysis of the relevant convenience factors under 28 U.S.C. § 1404(a) results in a conclusion that "this patent 2 dispute plainly belongs here in the Northern District of California, not Texas." See Pls.' Combined 3
Response to Defs.' Mot. to Dismiss at 12. For example, DJ Plaintiffs point out that, aside from 4 Keranos, no party in either action is headquartered in Texas, while certain entities, including UMC 5 6 and SST, are either headquartered or have principal places of business in the Northern District of California. Id. at 14. Moreover, DJ Plaintiffs continue, a substantial number of witnesses are located in this judicial district. Id. 9
10 audience. "The Ninth Circuit has held that normally, this convenience argument should be These are all good convenience arguments, but are ultimately addressed to the wrong addressed to the court in the first-filed action, not the court in the later-filed action." See Meru Networks, 2010 U.S. Dist. LEXIS 90212, *5 (citing Alltrade, 946 F.3d at 628); see also Genentech, 13 14
issue] should be addressed to the court in the first-filed action"). In fact, a court in an earlier filed-16 action should consider all relevant convenience factors in its analysis of the appropriate forum on a 17 motion to transfer. See In re Acer Am. Corp., 626 F.3d 1252, 1256 (Fed. Cir. 2010) (directing 18 transfer from the Eastern District of Texas to the Northern District of California where "the 19 convenience of the parties and witnesses, the sources of proof, the local interest, and the 20 compulsory process factors all significantly favor transfer."); see also Micron Tech., Inc. v. Mosaid 21 22
convenience factors as "[e]ventually, robust consideration of these factors will reduce the 24 incentives for a race to the courthouse because both parties will realize that the case will be heard 25 or transferred to the most convenient or suitable forum."). Accordingly, convenience arguments 26 should be addressed to the court in the first-filed action. 27 28
2010 U.S. Dist. LEXIS 126773, *7 ("Under the procedural law of the Ninth Circuit, 'normally [this Techs., Inc., 518 F.3d 897 (Fed. Cir. 2008) (directing court in first-filed action to consider
For the foregoing reasons, the Court DENIES the parties' request to continue the stay and GRANTS Defendants' motions to transfer the related cases in this District to the Eastern District of 4 Texas for consolidation with the first-filed Texas Case. This Order applies to Case Numbers: 10-5 6
CV-4241-LHK, 10-CV-5196-LHK, 10-CV-5290-LHK, and 11-CV-0430-LHK. This Order is without prejudice to any motion to transfer based on convenience made in the Texas Court. The Clerk shall close the file.
IT IS SO ORDERED.