Proctor & Gamble Co. v. Team Techns., Inc.

• Decision Date: 26 November 2012
• Docket Number: Case No. 1:12-cv-552
• Parties: THE PROCTOR & GAMBLE COMPANY, Plaintiff, v. TEAM TECHNOLOGIES, INC., et al., Defendant.
• Court: U.S. District Court — Southern District of Ohio

THE PROCTOR & GAMBLE COMPANY, Plaintiff,

v.TEAM TECHNOLOGIES, INC., et al., Defendant.

Case No. 1:12-cv-552

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF OHIO WESTERN DIVISION

Date: November 26, 2012

Judge Timothy S. Black

ORDER DENYING DEFENDANTS' MOTIONS TO DISMISS, STAY

OR TRANSFER TO THE DISTRICT OF NEW JERSEY(Docs. 13, 17)

This civil action is before the Court on Defendant Team Technologies, Inc.'s Motion to Stay or Transfer to the District of New Jersey for Proper Venue Under28 U.S.C. § 1404(a)(Doc. 13), DefendantCLIO USA, Inc.'s Motion to Dismiss or Transfer to the District of New Jersey(Doc. 17), and the parties' responsive memoranda (Docs. 16, 19, 23, and 26).

I.BACKGROUND FACTS AS ALLEGED BY PLAINTIFF

PlaintiffProctor & Gamble Company is the holder of the United States PatentNos. 5,891,453; 5,894,017; and 7,122,199, which concern home tooth whitening products.(Doc. 16at 2).Plaintiff is located in Cincinnati, Ohio.(Id. at 15).Earlier this year, Plaintiff learned of the existence of a tooth whitening product that potentially infringes the patents at issue.The product packaging indicates the products are "distributed by" Rite Aid and CVS/Pharmacy drug stores.(Id. at 2).Through further investigation, Plaintiff learned that the source of these products is DefendantTeam Techologies, Inc.("Team Tech"), a company located in Morristown, Tennessee.(Id. at 3).

Upon contacting Team Tech about the allegedly infringing products, Plaintiff was told that Team Tech was aware of Plaintiff's patents and had previously reviewed legal opinions with respect to the question of potential patent infringement provided by a third party who "supplied" the allegedly infringing products to Team Tech.(Id.)When Plaintiff asked for the identity of the supplier, Team Tech refused to provide this information and ceased communications with Plaintiff.(Id.)

On July 20, 2012, Plaintiff brought this suit against Team Tech for patent infringement.(Doc. 1).This Court is currently also presiding over another suit brought by Plaintiff against Defendant Be Well Marketing, Case No. 1:12-cv-264, which concerns two of the three patents at issue in the case at hand.

On or about August 6, 2012, Plaintiff's counsel was contacted by Joseph Zito, counsel for Team Tech.(Doc. 16at 4).Plaintiff's counsel and Mr. Zito were in contact multiple times over the next month regarding case scheduling matters.(Id.)Team Tech filed its Answer on September 4, 2012.

On September 12, 2012, DefendantCLIO USA, Inc.("CLIO"), a New Jersey company, filed a declaratory judgment complaint against Plaintiff in the United States District Court for the District of New Jersey, in which it identified itself as the manufacturer of the products in question.(Id.)Mr. Zito appeared as counsel of record for CLIO in the New Jersey case.(Id.)

On September 14, 2012, having now learned of the existence of CLIO, Plaintiff amended its Complaint to add CLIO as a defendant in this case.(Id. at 5).CLIO was served with the Amended Complaint at or about 2:15 p.m. on the same day.(Id.)Team Tech filed its Motion to Stay or Transfer to the District of New Jersey for Proper Venue Under28 U.S.C. § 1404(a) three hours later, at 5:21 p.m.(Doc. 13;Doc. 16at 5, n. 2).

On October 5, 2012, Defendant CLIO filed its Motion to Dismiss or Transfer to the District of New Jersey.(Doc. 17).In its motion, CLIO admits that it manufactures the accused products for Team Tech.(Doc. 17at 4;Doc 23at 4).According to Team Tech, CLIO manufactures every part of the products, including the packaging.(Doc. 13at 7;Doc. 23at 4).The packaging is marked with the Rite Aid and CVS brands and states that the products are being sold through the Rite Aid and CVS retail networks.(Doc. 23at 4).

II.STANDARD OF REVIEW

A. First-to-File Rule

The first-to-file rule embodies the principle that "[i]n all cases of concurrent jurisdiction, the Court which first has possession of the subject must decide it."Smith v. McIver, 22 U.S. 532, 535(1824).The rule is a "well established doctrine that encourages comity among federal courts of equal rank."Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511 F.3d 535, 551(6th Cir.2007).

Under the first-to-file rule, when actions involving nearly the same parties and issues are filed in two separate district courts, "the court in which the first suit was filed should generally proceed to judgment."Zide Sport Shop of Ohio, Inc. v. Ed Tobergte Assocs., Inc., 16 F. App'x 433, 437(6th Cir.2001)."[T]he critical inquiry for first-to-file purposes is which court'first obtains possession of the subject of the dispute, not the parties of the dispute.'"Horton Archery, LLC v. Am. Hunting Innovations, LLC, No. 5:09CV1604, 2010 U.S. Dist. LEXIS 6699, at *13(N.D. OhioJan. 27, 2010)."The 'subject matter' requirement of the first-to-file rule is satisfied in patent infringement matters where the actions in question involve the same patent and the same allegedly infringing product, though not necessarily the same parties."Shire U.S., Inc. v. Johnson Matthey, Inc., 543 F. Supp. 2d 404, 409(E.D. Pa.2008).

B.Personal Jurisdiction

Plaintiff bears the burden of establishing this Court's personal jurisdiction over Defendants.Mich. Nat'l Bank v. Quality Dinette, Inc., 888 F.2d 462, 466(6th Cir.1989).This burden, however, is "slight."Coast to Coast Health Care Services, Inc. v. Meyerhoffer, 2:10cv734, 2012 U.S. Dist. LEXIS 6250, at *3(S.D. OhioJan. 19, 2012).In deciding whether personal jurisdiction exists, a court has discretion to hold a hearing or rely on the affidavits and factual allegations in the pleadings.Id.

When a defendant files a properly supported motion to dismiss, "the plaintiff may not stand on [its] pleadings but must, by affidavit or otherwise, set forth specific factsshowing that the court has jurisdiction."Theunissen v. Matthews, 935 F.2d 1454, 1458(6th Cir.1991).The plaintiff"need only make a prima facie showing of jurisdiction," and the court"does not weigh the [defendant's] controverting assertions."Id.Dismissal is proper where the plaintiff's factual allegations taken together fail to establish a prima facie case for personal jurisdiction.CompuServe, Inc. v. Patterson, 89 F.3d 1257, 1262(6th Cir.1996).

C.Transfer of Venue

Under 28 U.S.C. § 1404(a), "[f]or the convenience of the parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district court where it might have been brought."Courts interpreting Section1404(a) must engage in a two-step analysis and determine: (1) whether the action might have been brought in the proposed transferee court; and (2) whether considering all relevant factors, the balance of convenience and the interest of justice "strongly" favor transfer.Kay v. Nat'l City Mortg. Co., 494 F. Supp. 2d 845, 849-50(S.D. Ohio2007).

The moving party bears the burden of demonstrating that transfer under Section 1404 is proper.Id.District courts have discretion to adjudicate motions for transfer under Section 1404(a)"according to an 'individualized, case-by-case consideration of convenience and fairness.'"Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 29(1988).

III.ANALYSIS

A.Motion to Stay

Defendant Team Tech moves to stay this action pending the outcome of the New Jersey case on the basis of the customer suit exception to the first-to-file rule.(Doc 13at 4).The customer suit exception provides that when "litigation [is] against or brought by the manufacturer of infringing goods[, it] takes precedence over a suit by the patent owner against customers of the manufacturer."Katz v. Lear Siegler, Inc., 909 F.2d 1459, 1464(Fed. Cir.1990).Underlying the customer suit doctrine is the preference that infringement determinations should be made in suits involving the manufacturer because "the manufacturer is the true defendant in the customer suit."Id.Thus, when an action includes both the customer and the manufacturer as parties to the suit, the customer suit exception does not apply.See, e.g., Horton Archery, 2010 U.S. Dist. LEXIS 6699 at 17(finding that the customer suit exception "plainly" did not apply where the first filed case, "as amended," included the "true defendant").

Team Tech maintains that although Plaintiff filed this suit prior to CLIO's filing of the New Jersey declaratory judgment action and would satisfy the first-to-file rule, the customer suit exception to the first-to-file rule requires that the New Jersey suit be given precedence because the manufacturer of the products in question is a party to that suit.However, the premise of Team Tech's motion became moot a few hours prior to its filing,when Plaintiff amended its Complaint to add Defendant CLIO to this case as the manufacturer of the accused products.

When Team Tech moved for a stay pending the outcome of the New Jersey case, CLIO was already a party to this case.The customer suit exception is therefore inapplicable, and the first-to-file rule controls.

B.Motion to Dismiss

1.Personal Jurisdiction

In its motion, Defendant CLIO moves to dismiss the action pursuant to Fed. R. Civ. Proc. 12(b)(2) on the basis that the Court lacks personal jurisdiction.(Doc. 17at 9-10).Federal Circuit law governs whether a district court may properly exercise personal jurisdiction over an out-of-state defendant.Nuance Commc'ns, Inc. v. Abbyy Software House, 626 F.3d at 1231."Personal jurisdiction over an out-of-state defendant is appropriate if the relevant state's long-arm statute permits the assertion of jurisdiction without violating federal due process."Id. at 1230.

Ohio's long-arm statute provides, in relevant part:

(A)A court may exercise personal jurisdiction over a person who acts directly or by an agent, as to a cause of action arising from the person's: (1) Transacting any business in this state; (2) Contracting to supply services or goods in

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