Xilinx, Inc. v. Invention Inv. Fund I LP
| Decision Date | 27 July 2011 |
| Docket Number | No. C 11-0671 SI,C 11-0671 SI |
| Parties | XILINX, INC., Plaintiff, v. INVENTION INVESTMENT FUND I LP, et al., Defendants. |
| Court | U.S. District Court — Northern District of California |
Xilinx's motion to enjoin prosecution of a parallel Delaware action, and defendants' motion to dismiss Xilinx's complaint, are currently scheduled for hearing on July 29, 2011. Pursuant to Civil Local Rule 7-1(b), the Court finds this matter appropriate for resolution without oral argument and hereby VACATES the hearing. Having considered the papers submitted, and for good cause shown, the Court DENIES Xilinx's motion, GRANTS in part and DENIES in part defendants' motions, and SEVERS and TRANSFERS certain claims to the District of Delaware.
The Case Management Conference set for July 29, 2011 at 2:30 p.m. remains on calendar.
Plaintiff Xilinx, Inc. is a Delaware corporation with its principal place of business at 2100 Logic Drive, San Jose, California 95124. Compl. for Decl. J. ¶ 2. Xilinx is in the business of "designing, developing and marketing complete programmable logic solutions, including advanced integrated circuits, software design tools, predefined system functions delivered as intellectual property cores, design services, customer training, field engineering and customer support." Id. ¶ 2. Defendants, sixDelaware entities,1 have their principal place of business at 3150 139th Avenue SE, Building 4, Bellevue, Washington 98005. Id. ¶ 3. Defendants are in the business of acquiring intellectual property assets and offering licencing to investors. Id. ¶ 4.
Neither party disputes that, in 2010 and 2011, Xilinx and defendants were engaged in discussions concerning the possibility of Xilinx licencing certain patents from defendants. See, e.g., Motion to Dismiss ("MTD") at 3:23-24. Defendants had been involved in similar, ultimately unsuccessful, negotiations with some of Xilinx's competitors. When those negotiations foundered, defendants filed an infringement suit against the competitors in the District of Delaware (hereafter referred to as the "Delaware Action") on December 8, 2010. MTD at 4:1-2. On the same day that defendants filed the Delaware Action, they informed Xilinx that the suit was filed to enforce defendant's invention rights after efforts to negotiate licenses had broken down. Declaration of Behrooz Shariati in Supp. of MTD (Shariati Decl.), Ex. 11. In the Delaware Action, Xilinx's competitors filed cross claims challenging the validity of four of defendants' patents.
On February 14th, 2011, Xililnx filed this complaint for declaratory judgement of non-infringement and invalidity of sixteen patents,2 including the four patents at issue in the Delaware Action. On February 15, 2011, defendants filed a first amended complaint in the Delaware Action adding Xilinx as a party defendant to the infringement suit.
Currently before this Court are defendants' motion to dismiss and Xilinx's motion to enjoin defendants from prosecuting the "duplicative" action in the District Court of Delaware.
A. Legal standard
Defendants filed their action in the District of Delaware on December 8, 2010. Xilinx filed its action in this District on February 14, 2011. Defendants added Xilinx as a party defendant to the Delaware Action on February 15, 2011.
Xilinx moves to enjoin defendants from prosecuting their claims against Xilinx in the Delaware Action under the first-to-file rule. The first-to-file rule was developed to "'serve the purpose of promoting efficiency well and should not be disregarded lightly.'" Alltrade, Inc. v. Uniweld Prods, Inc., 946 F.2d 622, 625 (9th Cir.1991), quoting Church of Scientology v. United States Dep't of the Army, 611 F.2d 738, 750 (9th Cir.1979). Under the first-to-file rule, a district court may transfer, stay or dismiss an action when a similar action has been filed in another district court. See Alltrade, 946 F.2d at 625-26. When deciding whether to apply the first-to-file rule, the court must look at three factors: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of issues. Id. "Exact parallelism between the two actions need not exist; it is enough if the parties and issues in the two actions are substantially similar." Alioto v. Hoiles, No. C 04-1395 PJH, 2004 WL 2326367, at *5 (N.D. Cal. Oct. 12, 2004) (internal quotation marks omitted).
The first-to-file rule, however, is not to be "mechanically applied, but rather is to be applied with a view to the dictates of sound judicial administration." Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 844 (9th Cir. 1986) (citation omitted). As such, courts can decline to apply the first-to-file rule in circumstances of "bad faith, anticipatory suit, and forum shopping." Alltrade, 946 F.2d at 628. Courts can also look to the respective convenience of the courts and parties in deciding whether to apply the first-to-file rule. See Altrade, 946 F.2d at 628; See also Z-Line Designs, Inc. v. Bell'O Int'l, LLC, 218 F.R.D. 663, 665 (N.D. Cal. 2003).
B. Application of first-to-file rule to the present matter
The parties do not contest that the threshold factors required for application of the first-to-file rule support the plaintiff here. See Alltrade, 946 F.2d at 625-26. This action was filed one day beforethe Delaware Action, the parties are the same, and the validity of the four patents at issue in the Delaware Action is also at issue here. However, because this Court finds that the action was anticipatory and that concerns for judicial economy and efficiency weigh in favor of allowing the Delaware Action to proceed against Xilinx, the motion will be denied.
Neither party disputes that in late 2010 and early 2011, Xilinx and defendants were engaged in discussions concerning the possibility of Xilinx licencing certain patents. See, e.g., MTD at 3:23-24. Before the end of these discussions, defendants filed suit against three of Xilinx's competitors (who countered by alleging invalidity and non-infringement of the four patents at issue). MTD at 4:1-2. On the same day the suit was filed, defendants notified Xilinx of the suit against Xilinx's competitors. Shariati Decl., Ex.11. With this information, and with negotiations foundering, Xilinx responded by filing this lawsuit, seeking to invalidate the four patents at issue in the Delaware Action as well as challenging additional patents. In these circumstances, this Court finds the action anticipatory. See Xoxide, Inc. v. Ford Motor Co., 448 F. Supp. 2d 1188, 1193 (C.D. Cal. 2006) () (quoting Z-Line Designs, 218 F.R.D. at 667). While a formal cease and desist letter was not issued here, defendants communicated their "intention to enforce [their] intellectual property rights" should negotiations break down by informing Xilinx of the Delaware Action against Xilinx's competitors. See Z-Line Designs, 218 F.R.D. at 665-66.
This court also finds persuasive the fact that, in the Delaware Action, Xilinx's competitors have asserted invalidity and non-infringement claims against four of the patents at issue here. Therefore, even if defendants were enjoined from prosecuting the Delaware Action against Xilinx, the Delaware court must construe and determine the validity of the four patents that overlap the two actions. As described below, in granting defendants' motion to transfer the claims regarding the four "overlapping" patents to Delaware, concerns for judicial economy and efficiency weigh in favor of not enjoining the Delaware Action against Xilinx but allowing the overlapping patents to be litigated in Delaware.
Xilinx's motion to enjoin defendants from prosecuting a duplicative action in the District ofDelaware is DENIED.
Defendants have moved to dismiss Xilinx's claims for declaratory judgement on seven patents it alleges are owned by parties that are not named in this suit. See MTD at 5:23-26. Defendants have also submitted evidence that parties other than defendants are the owners or assignees of these seven patents. See MTD at 7:7-10; Declaration of Ameet A. Modi (Modi Decl.), ¶¶ 7-13, Exs. F-L. Xilinx cannot bring a complaint seeking declaratory judgement regarding the seven patents not owned by defendants because, "(i)n order for a plaintiff to have standing in a declaratory action involving allegations of patent infringement, the defendant[s] must have a legal right in the patent at issue that would allow the defendant[s] to bring suit for infringement." Top Victory Elecs. v. Hitachi Ltd., No. 10-01579-CRB, 2010 WL 4722482, at *2 (N.D. Cal. Nov. 15, 2010). Moreover, the non-present parties cannot protect their interest in defending the validity of these seven patents. They are, as such, necessary and indispensable parties to the claims over these patents in accordance with Fed. R. Civ. P. 19.
Xilinx opposes the motion only by arguing that because, during the parties' negotiations, defendants pressured Xilinx to license rights for these patents, defendants should not now be able to argue that they cannot be sued over them. Xilinx Opp. to MTD at 6-7. Xilinx fails to address defendants' arguments or distinguish defendants' persuasive cases.
Accordingly, defendants' motion to dismiss...
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