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Diablo Technologies, Inc. v. Netlist, Inc.

United States District Court, Ninth Circuit

October 11, 2013

DIABLO TECHNOLOGIES, INC., Plaintiff,
v.
NETLIST, INC., Defendant. And related action SMART MODULAR TECHNOLOGIES, INC., Plaintiff,
v.
NETLIST, INC., Defendant.

ORDER DENYING MOTIONS TO DISMISS OR TRANSFER COMPLAINT TO CENTRAL DISTRICT OF CALIFORNIA

YVONNE GONZALEZ ROGERS, District Judge.

Both Diablo Technologies, Inc. ("Diablo"), and Smart Modular Technologies, Inc. ("Smart Modular"), have filed declaratory judgment actions in this Court seeking a declaration that U.S. Patent Nos. 8, 001, 434; 8, 301, 833; 8, 359, 501; 8, 516, 185; and 8, 516, 187 (the 434, 833, 501, 185 and 187 patents, or, collectively, "the Five Netlist Patents") are invalid and not infringed by the accused product, a solid-state drive called ULLtraDIMM, developed by Diablo and Smart Storage Systems, Inc. ("Smart Storage").

Pending before the Court are two Motions brought by Defendant Netlist, Inc. ("Netlist") to Dismiss, or In the Alternative, to Transfer Complaint To Central District of California in the related cases (Dkt. No. 13 in Diablo Technologies, Inc. v. Netlist, Inc., 13-cv-3901-YGR, and Dkt. No. 13 in Smart Modular Technologies, Inc. v. Netlist, Inc., 13-cv-3916-YGR). Netlist brings the instant motions pursuant to Rules 12(b)(3), 12(b)(7), and 19 of the Federal Rules of Civil Procedure for orders dismissing the declaratory judgment complaints filed by Diablo and Smart Modular or, in the alternative, transferring these actions to the United States District Court for the Central District of California. Diablo and Smart Modular oppose the motions.

Having carefully considered the papers submitted, the admissible evidence, [1] and the pleadings in this action, and for the reasons set forth below, the Court hereby DENIES Netlist's Motions to Dismiss or Transfer.[2]

I. FACTUAL AND PROCEDURAL BACKGROUND

On September 10, 2012, Smart Modular filed suit against Netlist in the Eastern District of California alleging that certain Netlist products, including HyperCloud, infringe Smart Modular's 295 patent. (Cunningham Decl., Ex. D.) At present, the Eastern District litigation is stayed (on Netlist's motion) pending completion of an inter partes reexamination of the 295 Patent by the Patent Office. ( See Cunningham Decl., Exh. F.) Netlist's answer and counterclaims asserted fraud, unfair competition and antitrust violations.

On July 1, 2013, Netlist filed a complaint against Smart Modular in the Central District of California asserting claims for antitrust violations, unfair competition and fraud. ( Netlist, Inc. v. Smart Modular Technologies, Inc., 13-cv-996-DOC-JPR, "the Original Central District Complaint".) While the Original Central District Complaint mentioned the 295 patent, it did not bring any claims related to patent infringement or validity, did not name Diablo, and did not reference the accused ULLtraDIMM product.

On August 8, 2013, Diablo and SMART Storage announced the launch of their upcoming ULLtraDIMM solid-state drive product. ( See McMullen Decl. ¶ 4 ; Motion to Dismiss, Exh. B at ¶ 18.) The announcement did not give technical details about the product but stated that the ULLtraDIMM had just begun "sampling with select customers." Id.

Thereafter, Netlist drafted a First Amended Complaint ("Amended Central District Complaint") to add claims to the Original Central District Complaint, alleging that the ULLtraDIMM product infringed one or more claims of the Five Netlist Patents, and asserting new claims for patent infringement, trade secret misappropriation and related claims against existing-defendant Smart Modular, as well as new defendants Smart Storage, Smart Worldwide Holdings, Inc. ("Smart Worldwide") and Diablo. Between 5:15 pm and 5:30 pm on August 22, 2013, Netlist faxed a letter to each of the four defendants, including Diablo and Smart Modular, to inform them that Netlist intended to add claims concerning the Five Netlist Patents by way of an amendment to the Original Central District Complaint to be filed on the next business day, August 23, 2013.

Before that Amended Complaint was filed, however, on August 23, 2013, Diablo filed its declaratory relief action herein seeking a declaration of invalidity and non-infringement as to each of the Five Netlist Patents. The declaratory relief action did not include any claims related to the 295 Patent, or the anti-trust and unfair competition allegations in the Original Central District Complaint.

Less than two hours later, also on August 23, 2013, Netlist filed its amended complaint in the Central District. The Amended Central District Complaint alleged infringement of the Five Netlist Patents against Diablo, Smart Modular, Smart Worldwide, and Smart Storage, as well as adding claims against Diablo for Lanham Act violations, Misappropriation of Trade Secrets, Breach of Contract, violation of California Business & Professions Code section 17200 et seq., and correction of inventorship related to Diablo's 917 patent.

Also on August 23, 2013, about 30 minutes after Netlist filed its Amended Central District Complaint, Smart Modular also filed its declaratory judgment action in this Court, seeking a declaration of non-infringement and invalidity concerning the same Five Netlist Patents.

II. DISCUSSION

While Netlist brings its motions ostensibly on the grounds of improper venue under Rule 12(b)(3) and failure to join a party under Rules 12(b)(7) and 19, its arguments for dismissal or transfer of venue are not directed to either standard.[3] Instead, Netlist's arguments are that: (1) Netlist's complaint in the Central District takes precedence under a first-to-file analysis, making the declaratory judgment actions here duplicative; (2) the declaratory relief actions constitute disfavored "anticipatory suits;" and (3) the speed with which the declaratory relief actions were ...


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