Brower v. Flint Ink Corp.

• Decision Date: 11 October 1994
• Docket Number: No. C 94-4012.,C 94-4012.
• Citation: 865 F. Supp. 564
• Parties: Sharen E. BROWER, Plaintiff, v. FLINT INK CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of West Virginia

865 F. Supp. 564

Sharen E. BROWER, Plaintiff, v. FLINT INK CORPORATION, Defendant.

No. C 94-4012.

United States District Court, N.D. Iowa, Western Division.

October 11, 1994.

James W. Gailey, Newel, IA and Raymond P. Niro of Niro, Scavone, Haller & Niro, Chicago, IL, for plaintiff Sharen E. Brower.

Edward J. Keane of Margolin, Gildemeister, Willia, Mugan & Keane, Sioux City, IA and Michael R. Dinnan and Robert A. Dunn, Dinnin & Dunn, P.C., Troy, MI, for defendant Flint Ink Corp.

ORDER RE: DEFENDANT'S MOTION TO DISMISS OR IN THE ALTERNATIVE TO TRANSFER OR STAY

BENNETT, District Judge.

This is a patent infringement action brought by the developer and patentholder of a soy ink art medium against a corporation that produces ink products. Prior to initiation of the patentholder's suit in this court, the corporation filed a declaratory judgment action embodying identical claims in the United States District Court for the Eastern District of Michigan. The corporation has moved to dismiss the present action for lack of personal jurisdiction and improper venue. In the alternative, the corporation asks this court to stay the present proceedings or transfer this case to the Eastern District of Michigan. The motion requires the court to examine the "first-filed rule" as it relates to declaratory judgment actions filed prior to the filing of a substantive suit in another district.

I. INTRODUCTION AND FACTUAL BACKGROUND

In this lawsuit pursuant to 35 U.S.C. § 271 et seq., filed February 7, 1994, plaintiff Sharen E. Brower (Brower), an Iowa citizen and resident, alleges that defendant Flint Ink Corporation (Flint), a Michigan corporation, has infringed and contributed to the infringement of her patent for "Soy Ink Based Art Media."¹ A second count in Brower's complaint is a claim for misappropriation of trade secrets and confidential information in violation of the Uniform Trade Secrets Act as enacted by Iowa, Iowa Code § 550.1 et seq. Jurisdiction over the complaint is founded on 28 U.S.C. § 1338(a) pertaining to patent actions. Venue is asserted under 28 U.S.C. § 1400(b), which also pertains specifically to patent actions.

The parties agree that Brower initiated contact with Flint in late 1989 to explore commercialization of her "Soy Ink Art Media." Brower and her attorney travelled to Michigan on January 7 or 8 to meet with officers of Flint. The parties eventually entered into a "Confidential Disclosure Agreement" in January of 1990 to allow Flint to evaluate the commercial utility of Brower's product. The agreement was drafted by one of Brower's attorneys, and revised by her patent attorney. Brower sent to Flint a signed copy of the agreement for execution by Flint officials in Michigan. After evaluating Brower's product, Flint concluded that it would be unable to develop Brower's product into a practical ink formulation.

In the mean time, Brower became aware that a company named Sinclair & Valentine, which was a company related to Flint Ink, had developed a soy ink formulation known as AGRI-TEK Ink which Brower has characterized as identical to hers except for use of corn oil. Flint asserts that AGRI-TEK Ink was developed before any contact occurred between Brower and Flint. In a letter dated August 30, 1990, Brower's attorney wrote to Flint stating that

we feel that Sinclair and Valentine, has, in fact, used Sharen's formula or trade secrets disclosed to you with only the slightest adjustment. We would, of course, be compelled to resist any patent infringement by anyone. We simply want you to understand our posture in this matter.

King Affidavit, Exhibit 3. In response, Flint denied that there had been any disclosure of Brower's formulation to anyone, and asserted that the AGRI-TEK Ink was based on formulations well known in the art. Brower made no further complaints about possible infringement until after the issuance of her patent in late 1992. On January 6, 1993, another of Brower's attorneys wrote to Flint indicating that a response to suggested licensing be made within one month. King Affidavit, Exhibit 5. Flint made no response. Brower's attorney wrote to Flint again on August 27, 1993, stating that

our own investigation reveals that it is likely that Flint Ink has breached the confidential disclosure agreement and that Flint Ink infringes the Brower patent.

King Affidavit, Exhibit 6.

Flint asserts that as a result of the accusations of infringement, it filed a declaratory judgment action in the United States District Court for the Eastern District of Michigan (the Michigan action) on September 7, 1993. Count I of Flint's declaratory judgment complaint attacks the validity of Brower's patent. Count II seeks declaratory judgment that there has been no breach of the confidential disclosure agreement. Before attempts were made to serve Brower with notice of the declaratory judgment action, the parties entered into settlement negotiations. Brower asserts that she had no notice of the Michigan declaratory judgment action until settlement negotiations failed and she was finally served with the complaint on November 12, 1993. On December 3, 1993, Brower moved to dismiss or, in the alternative, to transfer the Michigan action to the Northern District of Iowa, Western Division, in Sioux City, Iowa. On February 7, 1994, nearly three months after she was served with notice of the Michigan action and over two months after moving to transfer the Michigan action to Iowa, Brower filed the present lawsuit.

On February 28, 1994, the court in the Michigan action denied Brower's motion to dismiss or transfer. Flint Ink Corporation v. Sharen E. Brower, 845 F.Supp. 404 (E.D.Mich.1994). The Michigan court held that there was an actual controversy warranting declaratory judgment at the time the Michigan action was filed. Id. at 5. The court then determined that it had personal jurisdiction over Brower on the basis of her trip to Michigan seeking out a business relationship with Flint and entry into an agreement for evaluation of the commercial possibilities of her product, concluding that Brower had thereby transacted business and created a contract within the Michigan forum. Id. at 7-8. The court next concluded that venue is proper in the Michigan forum because it appeared to the court that most of the witnesses required by Flint were Flint employees resident in Michigan and that the witnesses required by Brower would most likely be herself, her counsel, and possibly her expert witness. Id. at 9. The Michigan court therefore entered another order on March 15, 1994, scheduling a conference for discovery, mediation, final pretrial order, final pretrial conference, and trial dates.

On March 25, 1994, Flint responded to Brower's Iowa complaint by filing the present motion to dismiss this action for lack of jurisdiction or, in the alternative, to transfer or stay.² Flint argues that it does not have sufficient minimum contacts with this forum for this court to assert personal jurisdiction over it. Flint also argues that venue is improper in Iowa, and that Michigan is the proper forum on the grounds of convenience of the parties and witnesses, and judicial economy. Flint argues that the Michigan action was filed first, and the Michigan court has already determined its jurisdiction over the parties and the propriety of venue in Michigan, and has also asserted control over the process to bring this matter to trial. Flint argues that the Michigan and Iowa actions are entirely duplicative, apart from designation of claims, and arise from identical operative facts. Finally, Flint argues that Brower's trade secrets claim under Iowa law is plainly time-barred because it was not brought within three years of Brower's learning of alleged misappropriation of trade secrets.

Brower argues here that this court may exercise jurisdiction over Flint for several reasons. Brower alleges that Flint does extensive business in this district, has a sales office in Des Moines and three sales employees in Iowa, sells its products here, and solicits business here. Brower specifically alleges that she discovered a barrel of ink labelled "Flint Ink" at a newspaper plant in Carroll, Iowa, and that tests on the composition of this ink revealed that it was nearly identical to her own product. She therefore asserts that sale of the infringing product has occurred in this forum. Brower also asserts that in 1989 Flint Ink mailed her a quart of Cobalt dryer, a compound not at issue in this lawsuit. Brower also asserts that while venue in Michigan in extremely inconvenient for her and her witnesses, Iowa is a more convenient forum. She lists sixteen witnesses on her behalf who reside in Iowa. Brower also argues that the court should look with disfavor upon Flint's "secret" filing of its "preemptive strike" declaratory judgment suit while negotiating a settlement in order to deprive Brower of her chosen forum should litigation become inevitable. Finally, Brower argues that her trade secrets claim is not time barred because prior to obtaining the analysis of the sample of Flint Ink from Carroll, Iowa, in 1993, she had only "suspicions," not "knowledge" of infringement by Flint.

II. ANALYSIS

A. The "First-Filed Rule"

The court believes that analysis of the "first-filed rule" and applicable policies will determine whether dismissal of this second-filed action in favor of the first-field Michigan action is appropriate. The Eighth Circuit has recognized this rule:

The well-established rule is that in cases of concurrent jurisdiction, "the first court in which jurisdiction attaches has priority to consider the case." Orthmann v. Apple River Campground Inc., 765 F.2d 119, 121 (8th Cir.1985). This first-filed rule "is not intended to be rigid, mechanical, or inflexible," Orthmann, 765 F.2d at 121, but is to be applied in a manner best serving the interests of justice. The prevailing standard is that "in the absence of compelling circumstances," Merrill

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