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Zyme Solutions, Inc. v. Infonow Corporation

United States District Court, Ninth Circuit

December 19, 2013

ZYME SOLUTIONS, INC., Plaintiff,
v.
INFONOW CORPORATION, d/b/a CHANNELINSIGHT, Defendant.

ORDER DENYING MOTION TO DISMISS OR STAY

WILLIAM ALSUP, District Judge.

In this declaratory judgment action, defendant moves to dismiss or stay proceedings pending resolution of an appeal of a dismissal of an action in another district. For the reasons outline below, the motion to dismiss or stay is DENIED.

BACKGROUND

In December 2012, InfoNow Corporation, d/b/a Channelinsight (defendant in this action) filed a complaint against Zyme Solutions, Inc. (plaintiff in this action) alleging infringement of United States patent number 8, 296, 258 B2 ("the 258 patent") entitled "Automated Channel Market Data Extraction, Validation, and Transformation" in the District of Colorado. Infonow Corporation v. Zyme Solutions, Inc., No. 12-cv-03255-MSK-MEH (D. Col. Dec. 14, 2012). In January 2013, Zyme filed a motion to dismiss pursuant to FRCP 12(b)(2) and 12(b)(6). Zyme argued that the complaint should be dismissed under FRCP 12(b)(6) because the 258 patent was invalid under 35 U.S.C. 101 and the complaint failed to plead facts sufficient to support a claim of patent infringement. After Channelinsight filed a motion for leave to conduct jurisdictional discovery, Channelinsight was permitted to serve interrogatories and depose Chandran Sankaran, Zyme's founder and CEO. On January 25, Magistrate Judge Michael E. Hegarty issued a protective order and a case management schedule was entered on April 29 (Dkt. Nos. 19, 34, 36).

On April 29, Magistrate Judge Hegarty recommended that Zyme's motion to dismiss for lack of personal jurisdiction be denied. It was recommended that Zyme's motion to dismiss under FRCP 12(b)(6) be granted because the complaint did not contain a statement that plaintiff had given defendant notice of infringement (citing In re Bill of Lading Transmission & Processing Sys. Patent Litig., 681 F.3d 1323, 1342 (Fed. Cir. 2012)). It was further recommended that Channelinsight be given an opportunity to cure the defect through amendment (Dkt. No. 35). Both parties filed objections to the Magistrate Judge's recommendation. On May 13, Channelinsight filed a motion for leave to file an amended complaint; the attached amended complaint did not add any new claims for relief, but added the following sentence "Channelinsight has given, by the filing of the Complaint in this matter, written notice of the infringement" (Dkt. No. 40-1).

On August 6, Judge Marcia S. Krieger granted Zyme's motion to dismiss for lack of personal jurisdiction. She declined to adopt the Magistrate Judge's recommendation and sustained Zyme's objections (Dkt. No. 48). Judgment for Zyme was entered on August 13. Costs were taxed against Channelinsight.

On September 4, almost a month later, Zyme filed the instant action alleging declaratory judgment of non-infringement and invalidity of the 258 patent. Zyme Solutions, Inc. v. InfoNow Corporation, No. 3:13-cv-04082-WHA (N.D. Cal. Sept. 4, 2013).

On September 11, Channelinsight appealed the District of Colorado final judgment dismissing the action for lack of personal jurisdiction to the Tenth Circuit. On September 19, the appeal was transferred to the Federal Circuit. The appeal, InfoNow Corporation v. Zyme Solutions, Inc., No. 13-664, is currently pending.

On October 3, Channelinsight filed a motion to dismiss or stay pending resolution of the appeal in this action. The action was reassigned to the undersigned judge on October 23 and the motion was re-noticed on October 24. The parties' first case management conference in this action occurred on December 19.

ANALYSIS

1. MOTION TO DISMISS.

Channelinsight argues that jurisdiction over this declaratory judgment action should be declined because a suit involving the same issues is already pending in another federal court. The complaint in this action seeks relief under the Declaratory Judgment Act which provides that "In a case of actual controversy within its jurisdiction... any court of the United States, upon filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought." 28 U.S.C. 2201 (emphasis added). Channelinsight emphasizes that courts have discretion to decline jurisdiction and there is a history of abusing the declaratory judgment mechanism to deprive plaintiffs of their choice of forum.

This argument is misplaced because when this action was filed, judgment had already been entered in the District of Colorado action. Judgment for Zyme was entered on August 13 and this action was filed on September 4. When the complaint in this action was filed, there was no pending action on infringement and invalidity of the 258 patent in the District of Colorado. Channelinsight waited until September 11 to file its appeal raising a single jurisdictional issue: "Whether the District Court erred in determining that Zyme Solutions, Inc.'s contacts with Colorado were insufficient to support the Court's exercise of personal jurisdiction over it" (Kanis Decl., Exh. 7). That appellate issue is not directed at infringement or invalidity and has little bearing on the merits of this action.

Channelinsight's reliance on Wilton v. Seven Falls Co., 515 U.S. 277, 290 (1995), is unpersuasive because Wilton involved a review of a decision to stay a declaratory judgment action when there was a parallel state court proceeding which would present an opportunity to ventilate the state law issues. There is no parallel state court action here. The only action - a federal appeal from a dismissal in an unrelated action in another district - Channelinsight relies upon is an appeal on a jurisdictional issue unique to the District of Colorado. Channelinsight has not identified any parallel state or federal court action adjudicating the merits of the infringement and invalidity disputes between Channelinsight and Zyme on the 258 ...


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