Opinion
Case No. 17-cv-0335 DMS (NLS)
07-17-2017
3D4MEDICAL LIMITED, an Irish corporation, and 3D4MEDICAL.COM LLC, a Nevada corporation, Plaintiffs, v. ORCA HEALTH, INC., a Delaware corporation, Defendant.
ORDER GRANTING MOTION TO STAY
Pending before the Court is Defendant Orca Health, Inc.'s ("Orca Health") Motion to Stay pursuant to the first-to-file rule. Plaintiffs 3D4Medical Limited and 3D4Medical.com LLC (collectively "3D4Medical") filed an opposition to the motion, and Orca Health filed a reply. For the reasons discussed below, the motion is granted. / / / / / /
Initially, the Complaint identified one of the Plaintiffs as 3D4Medical LLC. Plaintiffs, however, corrected the name to 3D4Medical.com LLC in their opposition to the motion.
I.
BACKGROUND
A. Utah Action
Orca Health is a Delaware corporation that develops patient education software applications ("apps"). One of Orca Health's apps include Orca Care, originally known as "OrcaMD," which allows physicians to educate their patients about their diagnosis and treatment options by using an interactive three-dimensional model of the human anatomy.
In July 2014, Orca Health employed Jared Huish as the Vice President of Business Development. Huish had access to Orca Health's confidential and proprietary information regarding Orca Care. Beginning in 2015, Huish allegedly disclosed such information to 3D4Medical, a corporation that also develops patient education apps. Subsequently, Huish left Orca Health and joined 3D4Medical. Orca Health alleges 3D4Medical acquired and used confidential and proprietary information regarding Orca Care to develop competing apps, Complete Ortho and Complete Ortho Pro.
Specifically, Orca Health alleges, "Huish had access to all, or a portion, of Orca Health's business plans and market strategies, software research, design, and development; product, market, pricing, and sales research and plans; clinical studies and hospital trials; and investor, partner, employee, supplier, client, and customer lists, information, prospects, communications, and agreements." (Declaration of Michael K. Erickson ("Erickson Decl.") ¶ 11, Ex. F.)
Orca Health also alleges 3D4Medical has developed other apps, including Complete Anatomy, Spine Pro III, and Essential Skeleton 4, that allows users to visualize, manipulate personalize, and modify anatomical elements in a manner that infringes the claims of its U.S. Patent No. 8,908,943. Orca Health contends the fundamental purpose, interface, and capabilities of 3D4Medical's apps are embodied by the issued claims of the '943 patent.
On January 3, 2017, Orca Health filed suit against 3D4Medical Limited, 3D4Medical.com LLC, 3D4Medical, Inc., and Huish in the U.S. District Court for the District of Utah. In the first amended complaint, Orca Health alleges the following causes of action: (1) misappropriation of trade secrets, Utah Code § 13-24-1 et seq., (2) violation of the Defend Trade Secrets Act ("DTSA"), 18 U.S.C. § 1831 et seq., (3) interference with economic relations, (4) breach of fiduciary duty, (5) breach of contract, (6) interference with contract, (7) unjust enrichment, (8) unfair competition, 15 U.S.C. § 1125, (9) patent infringement, (10) unfair competition, Utah Code § 13-5A-101 et seq., and (11) civil conspiracy. On March 21, 2017, 3D4Medical Limited and 3D4Medical, Inc. filed a motion to transfer the Utah action to this Court. That motion is currently pending.
Fourth and fifth causes of action were alleged only against Huish. Sixth through ninth causes of action were alleged only against 3D4Medical Limited, 3D4Medical.com LLC, and 3D4Medical, Inc. The remaining causes of action were alleged against all defendants.
B. California Action
Like Orca Health, 3D4Medical develops patient education apps that allow users to view, observe, and explore three-dimensional representation of the human anatomy. Some of 3D4Medical's apps include the Heart Pro and Skeleton System Pro. 3D4Medical contends "[t]hese proprietary works are protected by U.S. copyright registrations." (Mem. of P. & A. in Opp'n to Mot. at 12.)
On February 16 and 17, 2017, 3D4Medical submitted an application to the U.S. Copyright Office for registration of copyright for Heart Pro, Heart Pro III, and Skeleton System Pro apps. (Compl., Exs. L-Q.)
3D4Medical alleges Orca Health has released several apps, such as Heart Decide and Orca Care, which copy several distinctive and original features of its apps; thereby infringing its copyrights. Specifically, 3D4Medical argues Orca Heath copied several features of its apps, including the display of blue pushpins to designate features of organs.
On February 17, 2017, approximately 45 days after the commencement of the Utah action, 3D4Medical filed the present action against Orca Health. In the complaint, 3D4Medical alleges the following causes of action: (1) copyright infringement, (2) trade dress infringement in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A), (3) unfair competition, Cal. Bus. & Prof. Code § 1700 et seq., and (4) breach of contract. On April 18, 2017, Orca Health filed a motion to stay proceedings pending the resolution of the motion to transfer in the Utah action.
II.
DISCUSSION
Pursuant to the first-to-file rule, federal district courts have discretion "to stay proceedings if a similar case with substantially similar issues and parties was previously filed in another district court." Kohn Law Grp., Inc. v. Auto Parts Mfg. Miss., Inc., 787 F.3d 1237, 1239 (9th Cir. 2015). "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 Prod., Inc., 946 F.2d 622, 625 (9th Cir. 1991) (internal quotation marks and citations omitted); see Crawford v. Bell, 599 F.2d 890, 893 (9th Cir. 1979) ("increasing calendar congestion in the federal courts makes it imperative to avoid concurrent litigation in more than one forum whenever consistent with the rights of the parties."). Courts analyze three factors to determine the applicability of the first-to-file rule: (1) "chronology of the lawsuits," (2) "similarity of the parties," and (3) "similarity of the issues." Kohn Law Grp., Inc., 787 F.3d at 1240.
A. Chronology of the Lawsuits
The first factor, chronology of the lawsuits, "simply requires that the case in question was filed later in time." Therapy Stores, Inc. v. JGV Apparel Grp., LLC, No. 4:16-CV-02588-YGR, 2016 WL 4492583, at *4 (N.D. Cal. Aug. 26, 2016) (citations omitted). The Utah action was filed on January 3, 2017, and the California action was filed on February 17, 2017. Because the Utah action is the first-filed action, the first factor weighs in favor of applying the first-to-file rule.
B. Similarity of the Parties
The second factor, similarity of the parties, "does not require exact identity of the parties." Kohn Law Grp., Inc., 787 F.3d at 1240 (citations omitted). Rather, the first-to-file rule "requires only substantial similarity of parties." Id. (citations omitted). Here, the parties are substantially similar. Orca Health is a defendant in this action and the plaintiff in the Utah action. 3D4Medical Limited and 3D4Medical.com LLC are plaintiffs in this action and defendants in the Utah action.
3D4Medical argues this factor is not met because this action does not include Huish or 3D4Medical, Inc., and "[t]his difference destroys any similarity between the parties and further bars application of the first-to-file rule." (Mem. of P. & A. in Opp'n to Mot. at 15.) However, the first-to-file rule does not require that the parties in the relevant actions be identical, but only that they be "substantially similar." Kohn Law Grp., Inc., 787 F.3d at 1240. Because there is sufficient similarity between the parties in the two actions, the second factor warrants application of the first-to-file rule.
C. Similarity of the Issues
Lastly, the third factor requires the Court to look to the similarity of the issues in the relevant actions. The first-to-file rule does not require identical issues or "exact parallelism," but requires substantial similarity of the issues. See Kohn Law Grp., Inc., 787 F.3d at 1240; see Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1989) ("exact parallelism does not exist, but it is not required. It is enough if the two proceedings are 'substantially similar.'"). In order to determine whether the actions involve substantially similar issues, courts "look at whether there is 'substantial overlap' between the two suits." Kohn Law Grp., Inc., 787 F.3d at 1240.
Both the instant action and the Utah action involve patient education apps created by 3D4Medical and Orca Health. In the Utah action, Orca Health argues in part 3D4Medical misappropriated the features of the Orca Care app in developing competing apps, thereby misappropriating trade secrets, interfering with its economic relations, and engaging in unfair competition. In contrast, 3D4Medical contends in this action that the Orca Care app contains identical features as its apps, resulting in copyright infringement, trade dress infringement, and unfair competition.
Both actions also include unfair competition claims and involve similar claims, such as breach of contract, interference of contract, misappropriation of trade secrets, and trade dress infringement. Although the specific causes of action in the two actions may differ, the parties ask for similar relief, and the discovery and evidence necessary to litigate each action are substantially similar. See Bashiri v. Sadler, No. CV 07-2268-PHX-JAT, 2008 WL 2561910, at *2 (D. Ariz. June 25, 2008) (finding the third factor satisfied because, "[w]hile the specific legal issues vary across the litigations, the discovery and evidence necessary to litigate each is substantially similar."). Indeed, in a brief filed in the Utah action, 3D4Medical states "the technology at issue in the related California Lawsuit concerns the same 3DMedical and Orca technologies, e.g., the ability to display and manipulate anatomical images in a software application.... These technologies are very similar. Both the parties and technologies involved in these two actions are substantially similar so factual matters will overlap[.]" (Erickson Decl. ¶ 9, Ex. D.) Due to the overlapping claims and technologies, a significant portion of discovery in the actions will be duplicative. See Calderon v. Cargill, Inc., No. CV137046GHKJEMX, 2013 WL 12205633, at *2 (C.D. Cal. Dec. 10, 2013) (finding the third factor satisfied because "significant judicial resources will be conserved by having discovery managed in one district."). Because there is "substantial overlap" between the two actions, the third factor also weighs in favor of applying the first-to-file rule. Accordingly, all of the elements of the first-to-file rule are met, and in the interests of efficiency and judicial economy, the first-to-file rule applies to this action.
In this action, 3D4Medical seeks in part injunctive relief precluding Orca Heath from distributing Orca Care and Heart Decide apps. In the Utah action, Orca Health also seeks in part injunctive relief against 3D4Medical.
The parties also dispute whether the balance of convenience favors the California action proceeding independently of the Utah action. Because consideration of the respective convenience of the two courts is typically addressed by the court in the first-filed action, the Court declines to address this argument. See Alltrade, 946 F.2d at 628 ("the respective convenience of the two courts,... 'normally ... should be addressed to the court in the first-filed action.'"); see also Juniper Networks, Inc. v. Mosaid Techs. Inc., No. C 11-6264 PJH, 2012 WL 1029572, at *2 (N.D. Cal. Mar. 26, 2012) ("it is the court with the first-filed action that should normally weigh the balance of convenience and any other factors that might create an exception to the first-to-file rule."). --------
III.
CONCLUSION
For the foregoing reasons, the Court grants Orca Health's motion and stays this action pending resolution of the motion to transfer venue in the Utah action. Should the Utah court grant the motion to transfer, the parties shall file a notice of related cases and this Court will relate and consolidate the two actions. If, however, the Utah court denies the motion to transfer, the parties shall notify this Court within 14 days of the Utah court's decision, and the Court will transfer this action to Utah.
IT IS SO ORDERED Dated: July 17, 2017
/s/_________
Hon. Dana M. Sabraw
United States District Judge