Davox Corp. v. Digital Systems Intern., Inc.

• Decision Date: 25 January 1993
• Docket Number: Civ. A. No. 92-11515WF.
• Citation: 846 F. Supp. 144
• Parties: DAVOX CORPORATION, Plaintiff, v. DIGITAL SYSTEMS INTERNATIONAL, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

846 F. Supp. 144

DAVOX CORPORATION, Plaintiff, v. DIGITAL SYSTEMS INTERNATIONAL, INC., Defendant.

Civ. A. No. 92-11515WF.

United States District Court, D. Massachusetts.

January 25, 1993.

Steven M. Bauer and Susan A. Cardoza, Testa, Hurwitz & Thibeault, Boston, MA, for plaintiff.

James E. Cockfield, Lahive & Cockfield, Boston, MA, for defendant.

MEMORANDUM AND ORDER

WOLF, District Judge.

I. INTRODUCTION

After receiving inquiries from defendant Digital Systems International ("DSI") expressing concerns that its patent was being infringed, and after representing that it would respond by letter to those concerns, plaintiff Davox Corporation ("Davox"), whose principal place of business is in Billerica, Massachusetts, filed this action for declaratory relief against DSI, on June 18, 1992. Davox originally requested a declaratory judgment that defendant's patent-in-suit is invalid, unenforceable and not infringed by plaintiff. One day later, DSI, a Washington corporation whose principal place of business is Redmond, Washington, filed suit in the Western District of Washington, seeking damages and an injunction against Davox for alleged infringement of the same patent. Davox subsequently amended its complaint and filed its own patent infringement claims against Digital in this court.

DSI has moved for dismissal of Davox's declaratory judgment action for lack of subject matter jurisdiction, claiming that no case or controversy existed at the time Davox filed its suit in the District of Massachusetts. DSI also has moved for transfer of all of the remaining issues presented by Davox's amended complaint to the Western District of Washington. Davox has petitioned the court in the Western District of Washington to have the case filed by DSI transferred to this court, in the interest of avoiding duplicative litigation. That court has issued a stay of the action in Washington, pending this court's ruling on DSI's motions to dismiss or to transfer.

As explained below, it would be contrary to important public policies discouraging needless litigation to reward Davox's race to the courthouse by giving preference to its choice of forum. Accordingly, the court will exercise its discretion to dismiss Davox's complaint for declaratory judgment and, in the interests of judicial economy and avoiding duplicative litigation, will transfer Davox's additional patent infringement claims to the Western District of Washington.

II. FACTUAL AND PROCEDURAL BACKGROUND

DSI and Davox compete for the manufacture and sale of computer auto-dialers, which allow business organizations to place simultaneously large numbers of telephone calls. In its most recent Securities and Exchange Commission Form 10-K filing, DSI names Davox as one of its primary competitors in the industry. (Attached as Exhibit B to Plaintiff Davox Corporation's Memorandum of Law in Opposition to Defendant's Motion to Dismiss ("Davox Memorandum")).

The current controversy began with a letter dated April 16, 1992, sent by DSI to Douglas H. Ebstyne ("Ebstyne"), a Davox employee who had earlier been employed by DSI. (Attached as Exhibit A to Declaration of Wm. Bradford Weller in Support of Defendant's Motion to Dismiss ("Weller Aff.")). The letter opens by reminding Ebstyne of his alleged obligations to honor the confidentiality of DSI's trade secrets and specifically warns him that DSI "will take any and all appropriate action against you and/or your new employer to enforce" the agreements relating to trade secrets. Id. In that same letter, DSI raises the issue that spawned the present lawsuit. In its final paragraph the DSI letter suggests that a product marketed by Davox, the "Smart Management Center," is similar to DSI's "Realtime Monitor," covered by DSI's U.S. patent No. 5,101,425. The letter closes by inviting Davox to "have the appropriate person at Davox review the patent claims, and, if Davox believes that the monitoring capabilities of the Davox product ... are not covered by the patent, provide us with a detailed explanation of how Davox reached that conclusion." Id.

Apparently after not having received a reply from Davox to its April 16, 1992 letter, DSI sent a second letter to Davox, dated May 8, 1992. Weller Aff.Exh. B. That letter, again addressed to Ebstyne, opens by accusing the former DSI employee of lying to customers about his reasons for terminating his employment with DSI. Id. The letter continues by asserting that Davox's Smart Management Center "appears to fall within the scope of DSI's patent claims." The letter concludes by once again requesting that Davox respond by letter to DSI's contentions.

By letters dated May 14, 1992, and June 2, 1992, Davox's General Counsel responded to DSI's claims concerning Ebstyne and the potential patent dispute. In those letters counsel for Davox stated that DSI's patent inquiry had been referred to Davox's patent counsel, and promised that DSI would get a response directly from that firm. Weller Aff.Exhs. C and D.

DSI, however, never got the promised direct response from Davox's patent counsel. Instead, Davox filed the instant lawsuit on June 18, 1992. Davox claims that it filed suit in part because the company had learned that a DSI employee, Joe White, had told a prospective customer that DSI was suing Davox for patent infringement on its Realtime Monitor. Affidavit of James F. Mitchell ¶ 3. DSI and White vigorously deny that any such statement was made. Declaration of Joseph P. White (appended as Exhibit A to Defendant's Motion for Leave to File a Reply Memorandum).

As described earlier, DSI filed a patent infringement suit against Davox in the Western District of Washington one day after Davox filed the instant suit. On July 20, 1992, DSI filed its motion to dismiss Davox's declaratory judgment action, asserting a lack of subject matter jurisdiction. On July 27, 1992, Davox amended its complaint to include counts of patent infringement against DSI on two Davox patents. DSI subsequently filed a motion to transfer the entire dispute to the Western District of Washington, while reasserting its contention that this court lacks subject matter jurisdiction over Davox's original declaratory judgment action.

III. DISCUSSION

This court has subject matter jurisdiction over plaintiff's declaratory judgment action only if a case or controversy existed between the parties at the time the complaint was filed. See Indium Corp. of America v. Semi-Alloys, Inc., 781 F.2d 879, 882 (Fed. Cir.1985), cert. denied, 479 U.S. 820, 107 S.Ct. 84, 93 L.Ed.2d 37 (1986). Whether an actual case or controversy did exist at the time of filing must be determined by considering the "totality of the circumstances." Id.; see also Spectronics Corp. v. H.B. Fuller Co., Inc., 940 F.2d 631, 634 (Fed.Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 658, 116 L.Ed.2d 749 (1991). To conclude that a case or controversy existed in cases involving allegations of patent infringement, the court must find that (1) the accused infringer has actually produced or prepared to produce the allegedly infringing product; and (2) the patent holder's conduct must have created an objectively reasonable apprehension on the part of the accused that the patent holder will initiate legal action. See Id.; see also Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953, 955 (Fed.Cir.1987).

Based on the totality of the circumstances, the court finds that a case or controversy existed at the time Davox filed its declaratory judgment action. The parties do not dispute that Davox is marketing the allegedly infringing product. Thus, the first prong of the case or controversy test is satisfied. Furthermore, the court finds that the two letters sent by DSI, asserting that Davox's Smart Management Center appeared to fall within the scope of DSI's patent, created an objectively reasonable apprehension of litigation on the part of Davox. Though the letters appear to invite Davox to formulate its own position on the matter and contact DSI to begin extrajudicial resolution of the matter, the letters unambiguously convey DSI's position that it considers Davox's product to be an infringement on its patent-in-suit. Particularly when considered in light of the accusations against Ebstyne, which place the patent allegations within an acrimonious context, this court concludes that these letters created a reasonable apprehension that DSI would initiate legal action.¹ Therefore, the court may exercise subject matter jurisdiction over Davox's declaratory judgment action.

The finding that jurisdiction exists does not, however, end the court's inquiry. The exercise of jurisdiction over declaratory judgment actions is left to the sound discretion of the district courts. See Spectronics 940 F.2d at 634; Arrowhead Indus. Water, Inc. v. Ecolochem, Inc., 846 F.2d 731, 735 n. 6 (Fed.Cir.1988). Generally, as is strongly urged by plaintiff, the first filed case is given priority, and will not be dismissed in favor of a suit subsequently filed in another jurisdiction. See Kahn v. General Motors Corp. 889 F.2d 1078, 1081 (Fed.Cir.1989). However, giving priority to the first-filed case is not a rigid rule; rather, "`the factors relevant to wise administration here are equitable in nature'" Boston and Maine Corp. v. United Transp. Union, 110 F.R.D. 322, 331 (D.Mass. 1986) (quoting Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183, 72 S.Ct. 219, 221, 96 L.Ed. 200 (1953)). The equities in this case dictate a transfer to the Western District of Washington.

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