Beach Sales & Engineering, LLC v. TeleBrands Corp.
Filing
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Opinion and Order. Defendant's Motion to Dismiss, or in the alternative, to Transfer (Related doc # 7 ) is granted in part. The Court finds transfer is appropriate and orders this action transferred to the District Court of the District of New Jersey for further adjudication. Judge Christopher A. Boyko on 4/28/2015. (H,CM)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
BEACH SALES & ENGINEERING
LLC,
Plaintiff,
Vs.
TELEBRANDS, CORP.,
Defendant.
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CASE NO.1:14CV2516
JUDGE CHRISTOPHER A. BOYKO
OPINION AND ORDER
CHRISTOPHER A. BOYKO, J:
This matter is before the Court on Defendant Telebrands, Corp.’s Motion to Dismiss
Pursuant to Fed. R. Civ. P. 12(b)(1) or, in the alternative, to Transfer to the District of New
Jersey Pursuant to 28 U.S.C. § 1404(a) (ECF # 7). For the following reasons, the Court
grants, in part, Defendant’s Motion and transfers the case to the District Court of the District
of New Jersey for further adjudication.
Background Facts
On November 14, 2014, Plaintiff Beach Sales & Engineering, LLC (“Beach”) filed
this action seeking a Declaratory Judgment that its product, the CYCLOMOP, does not
infringe on patents owned by Defendant Telebrands, Corp. (“Telebrands”). According to
Plaintiff’s Complaint, Plaintiff is an Ohio company that manufactures, markets and sells a
number of products, including the CYCLOMOP. Telebrands is a New Jersey company that
holds a number of patents, including United States Patent Nos. 7,743,528 (“‘528"), 8,132,287
(“‘287") and 8,347,519 (“‘519"). On or about November 3, 2014, Beach received a letter
from Telebrands demanding Beach cease and desist from directly or indirectly manufacturing,
marketing and selling the CYCLOMOP, a commercial grade rinse and spin mop and rinsing
and drying bucket. The cease and desist letter from Telebrands alleged that the CYCLOMOP
infringes on Telebrands’ patents, demanded Beach Sales stop manufacturing, selling and
distributing the CYCLOMOP and ordered Beach to comply by November 17, 2014, or else
Telebrand reserved the right to pursue legal action.
Three days before the Telebrand deadline, Beach filed this action, a one count
Complaint seeking a Declaratory Judgment from the Court that the CYCLOMOP does not
infringe Telebrands’ patents. On November 17, 2014, Telebrands filed a coercive suit in the
District Court of the District of New Jersey.
LAW AND ANALYSIS
Telebrand moves the Court to dismiss this action pursuant to Fed. R. Civ. P. 12(b)(1)
or transfer under 28 U.S.C. § 1404(a). “A motion to dismiss in a declaratory judgment action
is considered a factual attack on subject matter jurisdiction.” Google, Inc. v. EMSAT
Advanced Geo-Location Tech., LLC, No. 4:09CV1243, 2010 WL 55685, *2 (N.D. Ohio Jan.
4, 2010) (citing 3D Sys. v. Envisiontec, Inc., 575 F. Supp. 2d 799, 804 (E.D. Mich. 2008)).
On such a motion, the Court does not need to presume the truthfulness of the pleadings.
Google, 2010 WL 55685, at *1; see also RMI Titanium Co. v. Westinghouse Elec. Corp., 78
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F. 3d 1125, 1134-1135 (6th Cir. 1996). “In reviewing such motions, a district court has wide
discretion to allow affidavits [and] documents [. . . .]” Id. (citing Ohio Nat’l Life Ins. Co. v.
United States, 922 F. 2d 320, 325 (6th Cir. 1990)). The Declaratory Judgment Act is not an
independent basis of subject matter jurisdiction, but rather is a remedial statute. See Toledo v.
Jackson, 485 F. 3d 836, 839 (6th Cir. 2007). Instead, subject matter jurisdiction is claimed
under 28 U.S.C. §§ 1331, 1332 and 1338(a).
With a coercive action pending in United States District Court of the District of New
Jersey, Telebrands seeks the dismissal or transfer of the present declaratory judgment action.
Under the Declaratory Judgment Act, “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.” 28 U.S.C. § 2201(a) (emphasis added). The Declaratory Judgment
Act allows the Court to exercise jurisdiction over a declaratory judgment action, but the Court
is not required to do so. Wilton v. Seven Falls Co., 515 U.S. 277, 282 (1995). “There must be
well-founded reasons for declining to entertain a declaratory judgment action.” Public Affairs
Assocs., Inc. v. Rickover, 369 U.S. 111, 112 (1962).
The Sixth Circuit adopted a five-factor test in Grand Trunk Western R. Co. v.
Consolidated Rail Corp. to determine the appropriateness of exercising jurisdiction over
declaratory actions. 746 F. 3d 323 326 (6th Cir. 1984). There is some question whether the
Court must apply Sixth Circuit or Federal Circuit law. Because this is a case concerning
patent infringement, the Federal Circuit Court of Appeals has exclusive jurisdiction over final
decisions. 28 U.S.C. § 1295. However, the Federal Circuit applies the law of the regional
circuit on ordinary procedural matters and Federal Circuit law on matters unique to patent
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law. Vivid Tech., Inc. v. Am. Sci. & Eng’g., Inc., 200 F.3d 795, 807 (Fed Cir. 1999). Courts
in this district, including this Court, have applied Sixth Circuit law. See Foundations
Worldwide, Inc. v. Oliver & Tate Enterprises, Inc., No.1:13CV506, 2013 WL 4054636 (N.D.
Ohio Jan. 4, 2010). In Foundations, this Court applied Sixth Circuit law but in an abundance
of caution also considered Federal Circuit precedent in reaching its decision.
In reviewing the present caselaw, the Court holds that in fact, Federal Circuit law
governs this matter. The Federal Circuit has expressly held, “We prefer to apply in patent
cases the general rule whereby the forum of the first-filed case is favored, unless
considerations of judicial and litigant economy, and the just and effective disposition of
disputes, require otherwise. The general rule favors the forum of the first-filed action,
whether or not it is a declaratory action. Exceptions, however, are not rare, and are made
when justice or expediency requires, as in any issue of choice of forum.” Genentech, Inc. v.
Eli Lilly and Co. 998 F.2d 931, 937 (Fed. Cir. 1993)(overruled on other grounds). In so
holding, the Federal Circuit held, “although matters of procedure do not always carry
substantive weight, the regional circuit practice need not control when the question is
important to national uniformity in patent practice.” Id. “The question whether to accept or
decline jurisdiction in an action for a declaration of patent rights in view of a later-filed suit
for patent infringement impacts this court's mandate to promote national uniformity in patent
practice. Because it is an issue that falls within our exclusive subject matter jurisdiction, we
do not defer to the procedural rules of the regional circuits nor are we bound by their
decisions.” Electronics for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1345 -1346 (Fed Cir.,
2005). Because the Federal Circuit has held that its mandate to promote uniformity in patent
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law includes the appropriate test for determining when a district court should exercise its
discretion to hear a first-filed declaratory judgment action over a later filed coercive suit, the
Court acknowledges that the Federal Circuit has expressly reserved this question as falling
under its mandate.
In Genentech, the Federal Circuit described the appropriate factors a court should
consider when deciding a motion to dismiss in a first-filed declaratory judgment action.
[T]he trial court's discretion tempers the preference for the first-filed suit,
when such preference should yield to the forum in which all interests are best
served. Id. at 184, There must, however, be sound reason that would make it
unjust or inefficient to continue the first-filed action. Such reason may be the
convenience and availability of witnesses, or absence of jurisdiction over all
necessary or desirable parties, or the possibility of consolidation with related
litigation, or considerations relating to the real party in interest. The Court
cautioned against “rigid mechanical solution[s]” to questions of forum,
stressing the importance of conservation of judicial resources and the
comprehensive disposition of litigation.
Another factor for courts to consider is whether the declaratory suit was intended to
preempt another party’s infringement suit. See Coyle, 394 F.3d at 1348. A party’s intention
to preempt another’s patent infringement suit may be considered in ruling on a dismissal of a
declaratory action, but a court must also consider other factors. Micron Tech., Inc. v. Mosaid
Techs., Inc., 518 F. 3d 897, 904 (Fed. Cir. 2008).
Against this backdrop, the Court will apply the Federal Circuit holding in Genentech
to determine the Motion to Dismiss. These factors significantly overlap the Sixth Circuit
factors the Court previously applied with the exception that the first-filed rule in declaratory
judgment actions is disfavored in the Sixth Circuit but favored in the Federal Circuit.
Furthermore, they also overlap the factors a court must consider on a motion to transfer
brought under 28 U.S.C. § 1404(a). See Micron Technology, Inc. v. Mosaid Technologies,
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Inc. 518 F.3d 897, 904 -905 (Fed Cir. 2008)( “this court notes that when the discretionary
determination is presented after the filing of an infringement action, the jurisdiction question
is basically the same as a transfer action under § 1404(a).”).1
However, “a transfer under section 1404(a) may not be granted when the district court
does not have personal jurisdiction over the defendants.” Pittock v. Otis Elevator Co., 8 F.3d
325, 329 (6th Cir. 1993). Defendant does not allege, nor do the parties contend, that the
Court lacks personal jurisdiction over Defendant. Therefore, §1404(a) applies.
Anticipatory Suit
There is no dispute that the declaratory judgment action was filed in response to the
cease and desist letter, dated November 3, 2014, sent by Telebrands to Beach. That letter
states in pertinent part:
We demand compliance with the foregoing requirements by November 17,
2014. If we do not receive your written assurances by then that you have
ceased all infringing activities and that you intend to comply with all of our
demands, we reserve our right to take any and all legal action to protect our
clients' rights.
By filing this suit on November 14, 2014, three days before the expiration of time set by
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“When ruling on a motion to transfer pursuant to 28 U.S.C. § 1404(a), the Court
considers ‘the private interests of the parties, including their convenience and the
convenience of potential witnesses, as well as other public interest concerns, such
as systemic integrity and fairness, which come under the rubric of ‘interests of
justice.’” Espey & Associates, Inc. v. Principal Mfg. Corp. 2009 WL 721740, 1
(N.D.Ohio,2009) quoting Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1137
(6th Cir.1991); Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 30 (1988)). “The
Court must also give some weight to the plaintiffs' choice of forum.” Atlantic
Marine Const. Co., Inc. v. U.S. Dist. Court for Western Dist. of Texas 134 S.Ct.
568, 581 (2013).
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Telebrands for compliance with the cease and desist letter, Beach engaged in forum shopping
by filing before the expiration of deadline set by Telebrands. This does not amount to
inequitable conduct or bad faith since there is no evidence Beach made any
misrepresentations or delayed Telebrand in order to beat them to the Court, so although this
factor weighs in favor of transfer, this is but one factor to be considered.
Convenience of Parties and Availability of Witnesses
This factor favors Telebrands because Telebrands coercive suit, presently pending in
New Jersey includes claims brought against Speedy Sweep, Inc., an alleged
customer/distributor of the CYCLOMOP for Beach, in New Jersey. Speedy is a
Massachusetts company. There is no evidence that this Court could exert personal
jurisdiction over Speedy, therefore, Telebrand would have to continue litigating its suit in
New Jersey against Speedy while simultaneously defending this action and asserting its
claims here in Ohio. This militates in favor of transfer to New Jersey.
Absence of Jurisdiction over Parties or Consolidation with Related Litigation
This factor weighs in favor or transfer because of the likelihood of multiple litigation.
The Federal Circuit has held that judicial economy is an important consideration when
deciding whether to maintain a Declaratory Judgment action over a later filed coercive suit.
Here, the presence of a third party in the later filed suit means that regardless of the decision
in this case, the New Jersey action will proceed. Thus, judicial economy weighs in favor of
transfer to New Jersey since all claims will be litigated in one action.
Interests of Justice
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This factor favors transfer because Telebrands has pending in New Jersey an
additional patent infringement action on the same patent at issue in this case against another
allegedly infringing company. That action, along with the coercive suit between these parties
and a third party as described above, are all pending before the same New Jersey District
Court judge. If this Court were to exercise its discretion and keep this Declaratory Judgment
action it would present a situation wherein two judges would render two claim construction
rulings and two juries would determine infringement issues on the same patent. This would
be a classic case of a waste of judicial resources and could potentially lead to conflicting
rulings.
Therefore, the Court finds transfer is appropriate under 28 U.S.C. § 1404(a) and orders
this action transferred to the District Court of the District of New Jersey for further
adjudication.
IT IS SO ORDERED.
s/ Christopher A. Boyko
CHRISTOPHER A. BOYKO
United States District Judge
Dated: April 28, 2015
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