Shire U.S., Inc. v. Johnson Matthey, Inc.

• Decision Date: 14 February 2008
• Docket Number: Civil No. 07-CV-2958.
• Citation: 543 F.Supp.2d 404
• Parties: SHIRE U.S., INC., et al., Plaintiffs, v. JOHNSON MATTHEY, INC., et al., Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

543 F.Supp.2d 404

SHIRE U.S., INC., et al., Plaintiffs, v. JOHNSON MATTHEY, INC., et al., Defendants.

Civil No. 07-CV-2958.

United States District Court, E.D. Pennsylvania.

February 14, 2008.

Aleksander J. Goranin, Michael J. Bonella, Woodcock Washburn LLP, Philadelphia, PA, Edgar H. Haug, John J. Molenda, Nicholas F. Giove, Frommer, Lawrence & Haug, L.L.P., New York, NY, for Plaintiffs.

Douglas R. Nemec, Marti A. Johnson, Skadden Arps Slate Meagher & Flom LLP, New York, NY, Sandra A. Jeskie, Duane, Morris LLP, Philadelphia, PA, for Defendants.

MEMORANDUM & ORDER

RUFE, District Judge.

This is a declaratory judgment action involving a question of patent infringement. Presently before the Court is Defendants' Motion to Dismiss, or in the Alternative, to Transfer or Stay, the action.¹ For the following reasons, the Motion to Dismiss will be granted.

BACKGROUND

Plaintiffs Shire U.S., Inc. and Shire Pharmaceuticals Ireland Limited (collectively, "Shire") seek a judgment that they do not infringe a patent assigned to Defendants Johnson Matthey, Inc., and/or Johnson Matthey PLC (Defendants collectively, "Johnson Matthey").² Both Plaintiffs and Defendants have their United States corporate headquarters in Wayne, Pennsylvania. The patent at issue, U.S. Patent No. 6,096,760, entitled "Solid Α— phenyl-2-piperidine Acetate Free Base, Its Preparation and Use in Medicine," claims methylphenidate base and methods for its production and use ("the '760 patent"). Methylphenidate is a compound which can be used in the treatment of attention-deficit hyperactivity disorder (ADHD). The base form of methylphenidate is applied to transdermal patches often used to treat children with ADHD. The '760 patent issued on August 1, 2000, to inventor Chester Sapino, and was assigned sometime thereafter to Johnson Matthey.

Shire is the exclusive licensee and global distributor of a product marketed under the trademark Daytrana. Daytrana is a pharmaceutical patch that delivers methylphenidate base transdermally. It is manufactured by Noven Pharmaceuticals, Inc. ("Noven"), a Delaware corporation with its principal place of business in Miami, Florida.³

On June 19, 2007, Johnson Matthey filed a complaint against Noven in the U.S. District Court for the Eastern District of Texas, claiming that Noven infringed the '760 patent by manufacturing Daytrana ("the Texas Action").⁴ Shire was not named as a defendant in the Texas Action at the time. Approximately one month later, on July 18, 2007, Shire instituted this action for declaratory judgment, seeking a ruling that it does not infringe the '760 patent by distributing Daytrana. Subsequently, on July 23, 2007, Johnson Matthey amended the complaint in the Texas Action to include Shire as a defendant on the basis of Shire's alleged infringement of the '760 patent through its distribution of Daytrana.⁵

Johnson Matthey moved to dismiss, or in the alternative, to transfer or stay this action on August 15, 2007. After reviewing the Motion, the response thereto, and the reply and sur-reply thereto, and hearing oral argument on the same, this matter is now ready for decision.

DISCUSSION

Johnson Matthey argues this Court should exercise its discretion⁶ to dismiss Shire's declaratory judgment action on the basis of the "first-to-file" rule, the doctrine of federal comity applicable to venue or forum disputes involving similar, concurrent actions in different jurisdictions. Under the rule, the forum of the first-filed case is favored unless fairness or efficiency considerations require otherwise.⁷ Defendants contend that the rule compels this Court to yield to the Texas Action because the Texas Action was earlier-filed, and involves identical factual and legal questions to those involved here — namely, whether Daytrana infringes the '760 patent. Johnson Matthey asserts that it is immaterial to the first-to-file analysis that Shire was not made a party to the Texas Action until after the instant action was filed because the rule "turns on which court first obtains possession of the subject of the dispute, not the parties of the dispute."⁸ Defendants further argue that no efficiency or justice considerations appear that would justify something other than the ordinary application of the first-to-file rule in this case. Finally, Defendants forward several alternative arguments, should the Court reject their primary argument on the application of the first-to-file rule.⁹

Shire agrees that the first-to-file rule should govern the disposition of this matter, but contends that the rule here favors the Pennsylvania forum.¹⁰ Shire's position apparently is based on a view that the identity of the parties in the disputes is central to the first-to-file inquiry. Thus, Plaintiffs assert the instant action was first-filed, relative to the Texas Action, because this action was the first to involve Shire as a party. Further focusing on the identity of parties, Shire rejects the proposition that the amended complaint adding it as a defendant in the Texas Action "relates back" to the original date of filing under Federal Rule of Civil Procedure 15(c)(3), arguing that Defendants cannot make out the conditions necessary to support relation back under that Rule. Moreover, Shire claims that Johnson Matthey cannot benefit from the first-to-file rule in any event because its filing in Texas and failure to sue Shire there in the first instance constitute bad faith litigation conduct which renders the rule inapplicable. Plaintiffs also address Defendants' alternative request for transfer, arguing that the relevant public and private interests under 28 U.S.C. § 1404(a) weigh decidedly against transfer in this case.

Federal district courts have jurisdiction to adjudicate declaratory judgment actions pursuant to the Declaratory Judgment Act.¹¹ Jurisdiction under the Act is discretionary.¹² As such, a district court may decline to hear a declaratory judgment action for a "sound reason."¹³ A district court abuses its discretion to dismiss a declaratory judgment action where it does so on the basis of incorrect legal conclusions, erroneous findings of fact, inadequate supporting evidence, or in an otherwise arbitrary or unreasonable manner.¹⁴ In general, the decision whether or not to adjudicate a declaratory judgment action is properly informed by "considerations of practicality and wise judicial administration."¹⁵

District courts apply substantive patent law as articulated by the Court of Appeals for the Federal Circuit, as well as Federal Circuit rulings on matters of procedural law which affect "national uniformity in patent practice."¹⁶ The Federal Circuit has endorsed application of the longstanding first-to-file rule in patent actions under the latter rationale.¹⁷ The Supreme Court first described the doctrine in 1824, stating, "[i]n all cases of concurrent jurisdiction, the Court which first has possession of the subject must decide it."¹⁸ The Federal Circuit has explained its view that the first-to-file rule is flexible, and exceptions to it are "not rare," although any such exception must be justified by a "sound reason that would make it unjust or inefficient to continue the first-filed action."¹⁹ This requirement mirrors the underlying purposes of the rule, to promote comity among courts and wise expenditure of judicial resources, as well as fairness and consistency of results, by avoiding duplicative concurrent actions.²⁰

The Federal Circuit has not expressly stated a view as to whether, in patent cases, the first-to-file rule applies only where the concurrent actions at issue involve identical parties. When deciding patent matters based upon particular aspects of the first-to-file rule on which the Federal Circuit has been silent, district courts look to understandings of the doctrine as developed generally in the federal courts.²¹ Regarding the instant question, courts within and outside this Circuit have found no requirement that the parties in the concurrent actions be the same in order for the first-to-file rule to apply.²² Meanwhile, district courts deciding patent actions in this Circuit repeatedly have stated that the rule hinges on which court first takes possession of the subject of the dispute, and not necessarily the parties to it.²³

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.²⁴ A rigid requirement that there be identical parties in the actions at issue would be at odds with the rule's flexible nature, which the Federal Circuit has emphasized.²⁵ In contrast, the rule accomplishes its core purpose of avoiding wasteful, and potentially inconsistent, duplicative litigation where it causes one action regarding a particular product's possible infringement of a patent to yield to another, earlier-filed action regarding the exact same question.

Here, the Court finds that the Texas Action and the instant declaratory judgment action share the same subject. The fundamental subject of both disputes is whether the product Daytrana infringes the '760 patent. The Texas Action was initiated on June 19, 2007, by complaint alleging infringement of the '760 patent by Noven through its manufacture of the product Daytrana. Approximately one month later, on July 18, 2007, Shire, as exclusive global licensee and distributor of Daytrana, filed the present action seeking a declaration that Daytrana does not infringe the '760 patent. Johnson Matthey subsequently added Shire as a defendant in the Texas Action via an amended complaint, as the parties thoroughly discuss in their arguments regarding relation back under Federal Rule 15(c)(3). However, the timing of the addition of Shire as a party to the Texas suit is not material to the determination of which action was first-filed.²⁶ Rather, as previously noted, the substantive...