Ims Health, Inc. v. Vality Technology Inc.

• Decision Date: 28 July 1999
• Docket Number: Civil Action No. 99-1500.
• Citation: 59 F.Supp.2d 454
• Parties: IMS HEALTH, INC., Plaintiff, v. VALITY TECHNOLOGY INC., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

59 F.Supp.2d 454

IMS HEALTH, INC., Plaintiff, v. VALITY TECHNOLOGY INC., Defendants.

Civil Action No. 99-1500.

United States District Court, E.D. Pennsylvania.

July 28, 1999.

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Lee A. Rosengard, Marianne Johnston, Stradley, Ronon, Stevens & Young, LLP, Philadelphia, PA, for plaintiff.

John P. Donohue, Jr., Philadelphia, PA, for defendant.

MEMORANDUM

LOWELL A. REED, Jr., Senior District Judge.

Presently before the Court is the motion of defendant Vality Technology Inc. ("Vality"), to dismiss the complaint, or in the alternative to transfer or stay these proceedings (Document No. 2), the response of plaintiff IMS Health Incorporated ("IMS") thereto, the cross-motion of IMS to enjoin defendant Vality from proceeding with the later-filed, related action in the United States District Court for the District of Massachusetts (Document No. 6), the reply of Vality in support of its motion to dismiss, transfer, or stay these proceedings, and in opposition to the cross-motion of IMS enjoin Vality from proceeding with the later-filed action, and the sur-reply of IMS thereto. Based on the following analysis, the motion of the Vality will be denied. The cross-motion of IMS will be granted.

I. Background

IMS is a corporation based in Plymouth Meeting, Pennsylvania which provides information services to the pharmaceutical and health care industries. In order to best provide these services, IMS has developed databases which contain information on pharmaceutical wholesale transactions within the United States, the habits of pharmaceutical prescribers, and preferred addresses for use by pharmaceutical sales representatives.

In early 1994, IMS entered into what would become an ongoing relationship with MatchWare Technologies, Inc. ("MatchWare"), a Maryland-based firm which provided IMS with software ("MatchWare software" or "matching software") that was useful in organizing and facilitating more productive utilization of the large data sets collected by IMS. (Affidavit of Ilene Blanton ¶ 2). This relationship commenced with a presentation at the Plymouth Meeting facility by Matthew Jaro, the President of MatchWare, which was followed by several extended episodes in 1994 and 1995 during which Mr. Jaro worked at that facility with IMS personnel and systems in order that the MatchWare software could be modified for use in IMS's mainframe system. (Affidavit of Ilene Blanton ¶¶ 3, 6, 7). On or about July 25, 1994, IMS and MatchWare executed an End-User License Agreement and Source Code License Agreement relating to the use by IMS of IBM MVS versions of the MatchWare software. On or about September 8, 1994, they executed a similar agreement which pertained to HP UNIX versions of the software (collectively "the 1994 agreements"). (Affidavit of Inez H. Friedman ¶¶ 2, 3). The 1994 agreements were negotiated and executed at the IMS facility in Plymouth Meeting, Pennsylvania. (Affidavit of Stephen L. Engber ¶¶ 3, 4).

During the period following the execution of these documents and continuing through November, 1997, an interval which saw the entry of IMS and MatchWare into another End User License Agreement, IMS and MatchWare enjoyed an apparently trouble-free relationship which was marked by frequent service visits by Mr. Jaro to the Plymouth Meeting facility, as were required under the 1994 agreements. (Affidavit of Ilene Blanton ¶ 11). Further, in July of 1996 and August of 1997, IMS and MatchWare entered into additional maintenance, support and training agreements relating to the MatchWare software. (Affidavit of Stephen L. Engber ¶ 5).

In December 1997, Vality, a Massachusetts corporation, acquired MatchWare, (Plt. Mem. at 8), and became the successor-in-interest to MatchWare, a status which still characterizes it today.¹ (Def. Mem. at 2). Over a year later, on or about January 14, 1999, a meeting transpired between officers of IMS and Vality at the Boston headquarters of Vality. At this meeting, Mark. E. Atkins, President of Vality, alleged that IMS had misappropriated its trade secrets and engaged in unauthorized use of its copyrighted matching software. (Affidavit of Stephen L. Engber ¶ 9). Specifically, Vality alleges that while the agreements between it and IMS were "end-user" agreements, meaning that IMS was authorized only to use the matching software for its own internal purposes and not for providing data-processing services to third parties,² IMS was in fact using the software to provide precisely these services to its own clients. (Memorandum of Law in Support of Motion of Defendant ("Def. Mem." at 4, 5)).

Over the ensuing months, the parties then engaged in an exchange of letters and conference calls focusing on the proper interpretation of the 1994 agreements, and on how to resolve the disagreement which had developed between them. Although Mr. Jaro asserts that "[t]he negotiations respecting Vality's claim that IMS's conduct breached the [1994 agreements] ... took place primarily in Massachusetts," (Affidavit of Matthew Jaro ¶ 7), it is unclear what he means by this statement, as except for the January 12, 1999 meeting when the allegations were first leveled, no face to face meeting is alleged by either party to have taken place. The only contacts discussed by either party were the aforementioned letters and conference calls, and there is every indication that these occurred with all IMS officers situated in Plymouth Meeting, and all Vality officers in Boston.

IMS contends that Vality's communiques expressly threatened litigation. (Affidavit of Stephen L. Engber ¶ 12). Vality argues that no such threat was made or reasonably inferred from any of the letters exchanged. (Def. Mem. at 6-9). In contrast, the defendant asserts that the parties were attempting to come to an amicable resolution of the dispute when IMS filed this declaratory judgment action on March 25, 1999. (Def. Mem. at 9). Finally, on May 5, 1999, Vality filed an action in the District of Massachusetts ("the Massachusetts action") in which it asserted claims sounding in copyright infringement, breach of contract, breach of implied covenant of good faith and fair dealing, quantum meruit and misappropriation of trade secrets.

Vality moves to dismiss the complaint on the ground that the Court lacks subject matter jurisdiction over the action, as no actual case or controversy existed at the time of filing. In the alternative, Vality argues that the Court should decline to exercise its discretionary jurisdiction over this declaratory judgment action because: (1) IMS engaged in strategic, preemptive litigious tactics which should not be rewarded by this Court via a refusal to dismiss; (2) the "first-filed" rule is not controlling; and (3) the balance of conveniences and judicial economy favor proceeding in the United States District Court for the District of Massachusetts.

In the alternative, Vality moves to transfer the case to the District of Massachusetts under 28 U.S.C. § 1406(a) on the ground that substantial activity giving rise to the claims did not occur in Pennsylvania, thus rendering venue improper under 28 U.S.C. § 1391(b), and making § 1406(a) applicable.

In the alternative, Vality moves to transfer the case to the District of Massachusetts under 28 U.S.C. § 1404(a) on the grounds that (1) the District of Massachusetts is a more convenient forum than the Eastern District of Pennsylvania, (2) the interest of justice mandates transfer, and (3) the case "might have been brought" in Massachusetts.

In the alternative, Vality moves to stay these proceedings pending the resolution of the Massachusetts action.

IMS responds to the motion of Vality by arguing that (1) the Court does have subject matter jurisdiction over the action, (2) the "first-filed rule does require the Court to retain this jurisdiction, and (3) Vality is not entitled to a transfer of venue pursuant to either 28 U.S.C. § 1404(a) or 28 U.S.C. § 1406(a). IMS also cross-moves the Court to enjoin Vality from proceeding in the Massachusetts action."

II. Dismissal for Lack of Subject Matter Jurisdiction

A. Standard

28 U.S.C. § 2201(a) (1994) reads in relevant part:

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.

The Declaratory Judgment Act has a remedial character, and should therefore be interpreted liberally. Algrant v. Evergreen Valley Nurseries, Ltd. Partnership, 126 F.3d 178, 189 (3d Cir.1997) (Mansmann, J., dissenting) (citing Exxon Corp. v. Fed. Trade Comm'n, 588 F.2d 895, 900 (3d Cir.1978)). Despite this predilection, however, a court may assert jurisdiction over an action brought pursuant to the Declaratory Judgment Act only if an actual case or controversy which is ripe for disposition is before the tribunal. See Travelers Ins. Co. v. Obusek, 72 F.3d 1148, 1153-54 (3d Cir.1995).

In order to satisfy the "actual controversy" requirement, a declaratory judgment action must present a controversy that "`(1) is real and not hypothetical; (2) affects an individual in a concrete manner so as to provide the factual predicate for reasoned adjudication, and (3) sharpens the issues for judicial resolution.'" Travelers Ins. Co., 72 F.3d at 1154 (quoting Armstrong World Indus. v. Adams, 961 F.2d 405, 410 (3d Cir.1992)). "Basically, the question ... is whether the facts alleged, under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment." Maryland Cas. Co. v. Pacific Coal & Oil Co., 312 U.S. 270, 273, 61 S.Ct. 510, 85 L.Ed. 826 (1941).

Ripeness, similarly, is determined by examining (1) the adversity of the interest between the parties to...