Key Source International v. CeeColor Industries, LLC et al

Filing 49

ORDER REGARDING MOTION TO TRANSFER [re 29 MOTION to Dismiss Or In The Alternative Transfer filed by Alan Kipust, Sitka Spruce Security, LLC, CeeColor Industries, LLC]. Signed by Judge William Alsup on 6/6/2012. (whasec, COURT STAFF) (Filed on 6/6/2012)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE NORTHERN DISTRICT OF CALIFORNIA
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For the Northern District of California

United States District Court

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KEY SOURCE INTERNATIONAL, a California
Corporation,
No. C 12-01776 WHA
Plaintiff,

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v.
CEECOLOR INDUSTRIES, LLC, a Delaware
Limited Liability Company; ALAN KIPUST, an
individual; SITKA SPRUCE SECURITY, LLC,
a Delaware Limited Liability Company, and
DOES 1–1000,

ORDER REGARDING
MOTION TO TRANSFER

Defendants.

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In this declaratory relief patent action, defendants move to dismiss or, in the alternative,
transfer.
Plaintiff Key Source International (“KSI”) is a California corporation with its principal

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place of business in Oakland. Defendant CeeColor Industries, LLC, is a Delaware limited

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liability company with its principal place of business in Delaware. CeeColor was formed in the

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past thirty days (approximately) and does not manufacture any products and it is evidently in the

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business of suing others on patents.

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On March 22, 2012, CeeColor filed a patent infringement suit against “Key Source

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International, Inc.” in the United States District Court of Delaware, alleging that “Key Source

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International, Inc.’s” keyboards infringed Patent No. US 6,570,610 B1 (“Kipust patent”).

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CeeColor Indus. v. Key Source International, Inc., No. 12CV00369 2012 WL 1189788 (D. Del.,

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Mar. 22, 2012).

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CeeColor alleged that “Key Source International, Inc.” was a Delaware corporation with

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its principal place of business at 7711 Oakport Street in Oakland. CeeColor then allegedly sent

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a demand letter to 7711 Oakport Street in Oakland on March 23, 2012 (Compl. [in the present

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action herein] Exh. 3).

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Our plaintiff, KSI (Key Source International), received the letter. The letter discussed
CeeColor’s suit in Delaware and demanded payment.
CeeColor filed an amended complaint in Delaware on April 5, 2012, which added “Key
Source Systems, Inc.” as a defendant and pled that “Key Source Systems, Inc.” was a California

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For the Northern District of California

United States District Court

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corporation with a principal place of business at 7711 Oakport Street in Oakland (RJN Exh. B at

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1). On April 9, 2012, CeeColor attempted to serve the amended complaint and summons on KSI

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through the Delaware Secretary of State pursuant to 8 Delaware Code § 382, which provides a

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procedure for serving out-of-state corporations. The Secretary of State was directed to deliver

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the summons and amended complaint to each of “Key Source International, Inc.” and “Key

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Source Systems, Inc.” at 7711 Oakport Street in Oakland (id. Exh. C). Our plaintiff

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acknowledged that such a delivery of complaint and summons arrived in Oakland at the

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7711 Oakport address but claims to have endorsed and returned the papers as served on the

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wrong party.

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Our plaintiff, KSI, filed this present declaratory action herein seeking invalidity and

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non-infringement of the Kipust patent on April 10, 2012. In its complaint, KSI alleges that it

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was (and is) a California corporation with its principal place of business in Oakland. KSI argues

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that it has nothing to do with the company being sued in the Delaware action, “Key Source

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International, Inc.,” despite having a similar name.

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CeeColor argues our plaintiff is the same as “Key Source International, Inc.” and “Key

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Source Systems, Inc.,” both allegedly properly sued and served in the Delaware court before

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the commencement of our instant action. KSI admitted that its 1700 series and 1450 series of

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Security keyboards are at issue in the Delaware action.
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As stated, defendant CeeColor Industries moves to dismiss or, in the alternative, transfer
to the District of Delaware.
Where this controversy should be litigated should be decided by the Delaware district

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judge, the Honorable Richard Andrews. Out of comity, it is best for him to determine whether

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the first-filed action was properly prosecuted and served, and whether our plaintiff here is a

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proper defendant there. The undersigned judge would like to give Judge Andrews the first

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opportunity to make this determination, which could occur in a variety of ways, such as via

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possible default judgment, a possible motion to dismiss for lack of personal jurisdiction, or other

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possible Rule 12 motion. In any event, the proper course of action is to hold this instant motion

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For the Northern District of California

United States District Court

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on abeyance until a determination has been made on the first-filed action.
In the meantime, the parties are each allowed limited discovery on the issues of service

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of process, personal jurisdiction (Delaware or here), and the multitude of allegations made at

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the hearing on June 6. Each side will be allowed two three-hour depositions and ten

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narrowly-framed document requests for the issues discussed. The parties will have until July 27

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to finish this limited discovery. Supplementary submissions on the pending motion will be due

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at noon on July 27.

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This judge wishes to make clear for his colleague in Delaware that he will follow his

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lead, and if he decides that a transfer to California is best, then the undersigned judge will

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conform to this decision. If he decides that the action is properly situated in Delaware, then the

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instant action will be transferred there. CeeColor is ordered to promptly provide a copy of this

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order to the Honorable Richard Andrews.

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IT IS SO ORDERED.

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Dated: June 6, 2012.

WILLIAM ALSUP
UNITED STATES DISTRICT JUDGE

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