Opinion
2:22-cv-01390 WBS AC
12-08-2022
GUARDIAN ALLIANCE TECHNOLOGIES, INC., a California corporation; Plaintiff, v. MILLER MENDEL, INC., a Washington corporation; and TYLER MILLER, an individual, Defendants.
ORDER STAYING CASE
WILLIAM B. SHUBB, UNITED STATES DISTRICT JUDGE
Plaintiff Guardian Alliance Technologies, Inc. (“Guardian”) brought this action against Miller Mendel, Inc. and Tyler Miller seeking various forms of declaratory relief that two of defendants' patents are invalid, as well as asserting claims for violations of § 2 of the Sherman Act, 15 U.S.C § 2, and various California state law claims. (Docket No. 1.) Before the court are defendants' motion to strike plaintiff's state law claims pursuant to California's Anti-SLAPP statute, Cal. Civil Code § 425.16, (Docket No. 11) and defendants' motion to dismiss plaintiff's complaint in its entirety (Docket No. 12).
I. Factual and Procedural History
Plaintiff is a California-based company that creates and sells access to software for managing employee background checks, primarily for government organizations and law enforcement agencies. (Compl. ¶¶ 4, 28.) Defendant Miller Mendel is a Seattle-based company that creates and sells access to similar software. (Id. ¶¶ 5, 28.) Defendant Tyler Miller is the founder and sole owner of Miller Mendel. (Rylander Decl. ¶4, Ex. A (Docket No. 15).)
In April 2011, Tyler Miller (“Miller”) filed a provisional patent application with the U.S. Patent and Trademark Office, U.S. Patent Application No. 61/472,556, covering public safety background investigation management software. (Compl. ¶¶ 48-49.) In April 2012, Miller filed a non-provisional patent application claiming priority to the provisional patent application. (Id. ¶ 53.) On June 30, 2015, Miller was issued U.S. Patent No. 9,070,098 (the “‘098 Patent”). (Id. ¶ 55.) In May 2015, Miller filed another non-provisional patent application, resulting in the issuance of U.S. Patent No. 10,043,188 (the “‘188 Patent”) on August 7, 2018. (Id. ¶¶ 56, 58.) Miller licensed both patents to Miller Mendel. (Id. ¶ 59.)
Defendants have filed several lawsuits in different district courts alleging that plaintiff's customers infringe the ‘188 Patent through use of plaintiff's platform. In October 2018, both defendants sued the City of Oklahoma City, Oklahoma in the Western District of Oklahoma (the “Oklahoma Action”). See Case No. 5:18-cv-00990 JD (W.D. Okla.). In February 2021, Miller Mendel sued Washington County, Oregon and the Washington County Sheriff's Office in the District of Oregon (the “Oregon Action”). See Case No. 3:21-cv-00168 SB (D. Ore.). In May 2021, defendants sued Alaska State Troopers and James E. Cockrell, the Commissioner of the State of Alaska Department of Public Safety, in the District of Alaska (the “Alaska Action”). See Case No. 3:21-cv-00129 (D. Alaska). Both the Oregon Action and the Alaska Action were stayed under the first-to-file rule because of the earlier-filed Oklahoma Action. In December 2021, Miller Mendel sued the City of Anna, Texas in the Eastern District of Texas (the “Texas Action). See Case No. 2:21-cv-00445 JRG (E.D. Tex.).
Defendants have not sued plaintiff directly for patent infringement. They have only sued plaintiff's customers.
In October 2019, Guardian (as a non-party in the Oklahoma Action) filed a petition with the Patent Trial and Appeal Board (“PTAB”) for inter partes review of the validity of the ‘188 Patent, IPR2020-00031. (Compl. ¶ 119, Ex. 30.) The PTAB denied review on March 26, 2020. (Id.)
As of the date of this order, both the Oklahoma Action and the Texas Action are ongoing. The Oklahoma Action remains pending in the Western District of Oklahoma. In the Texas Action, cross appeals were filed to the Federal Circuit following the district court's orders granting defendant City of Anna's motion for judgment on the pleadings and invalidated the ‘188 Patent, Miller Mendel, Inc. v. City of Anna, Tex., No. 2:21-cv-00445 JRG, 2022 WL 1437686, at *10 (E.D. Tex. Apr. 14, 2022), and denying the city's motion for attorneys' fees, id., 2022 WL 2704790, at *6 (E.D. Tex. June 13, 2022) . The appeals were consolidated and are still pending. See Miller Mendel, Inc. v. City of Anna, Tex., No. 22-1753 (Fed. Cir.) (associated with Case No. 22-1999).
Judge Gilstrap found the ‘188 Patent ineligible for patent protection under 35 U.S.C. § 101. Miller Mendel, Inc. v. City of Anna, Tex., No. 2:21-cv-00445 JRG, 2022 WL 1437686, at *10 (E.D. Tex. Apr. 14, 2022). On May 2, 2022, Miller Mendel appealed the decision to the Federal Circuit. See Miller Mendel, Inc. v. City of Anna, Tex., Case No. 22-1753 (Fed. Cir.).
Judge Gilstrap denied the motion for attorneys' fees on the ground that “finding the ‘188 Patent ineligibl[e] at the 12(c) stage” does not mean Miller Mendel's arguments to the contrary were “frivolous or objectively unreasonable.” Id., 2022 WL 2704790, at *6 (E.D. Tex. June 13, 2022). Furthermore, “Miller Mendel was entitled to believe that the ‘188 Patent was valid after it was examined and allowed by the [U.S. Patent and Trademark Office].” Id. On July 8, 2022, the City of Anna appealed the decision to the Federal Circuit. See Miller Mendel, Inc. v. City of Anna, Tex., No. 22-1999 (Fed. Cir.). That appeal is still pending.
II. Discussion
The first-to-file rule is “a generally recognized doctrine of federal comity . . . .” Pacesetter Sys. Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982). The rule allows a district court to stay, transfer, or dismiss proceedings where a similar case was previously filed in another district court. See Kohn Law Grp., Inc. v. Auto Parts Mfg. Miss., Inc., 787 F.3d 1237, 1239 (9th Cir. 2015). “When applying the first-to-file rule, courts should be driven to maximize ‘economy, consistency, and comity.'” Kohn, 787 F.3d at 1240 (quoting Cadle Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 604 (5th Cir. 1999)); see also Pacesetter, 678 F.2d at 95 (explaining that the first-to-file rule “is not a rigid or inflexible rule to be mechanically applied, but rather is to be applied with a view to the dictates of sound judicial administration”).
The first-to-file rule requires analysis of three factors: (1) chronology of the lawsuits; (2) similarity of the parties; and (3) similarity of the issues. Kohn, 787 F.3d at 1240 (citing Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 622, 625 (9th Cir. 1991)). The first-to-file rule does not require that the identities of the parties be identical, but rather “requires only substantial similarity of the parties.” Id. (citation omitted). Likewise, “[t]he issues in both cases also need not be identical, only substantially similar.” Id.
Here, the court need not analyze the issue of chronology because plaintiff does not argue that the present case was filed first. Tyler Miller and/or Miller Mendel is a party in the present case as well as the Texas Action and Oklahoma Action. While plaintiff in the present case is not a named party in either the Oklahoma Action or the Texas Action, plaintiff was contractually obligated to indemnify the City of Oklahoma City and the City of Anna against Miller Mendel's patent infringement claims. (Compl. ¶¶ 99, 103.) As a result, plaintiff has funded the entirety of the defense in both the Oklahoma Action and Texas Action. Because the parties in the present case are all heavily involved in the previously filed cases, the court finds the parties are substantially similar. See Kohn, 787 F.3d at 1240 (finding the parties were substantially similar even though the defendant in one case was not a named party in the other case). In finding that the first-to-file rule applied even though a defendant in the first action was not named in the second action, the court in Kohn explained that “a contrary holding could allow a party . . . to skirt the first-to-file rule by omitting one party from a second lawsuit. . . .” Kohn, 787 F.3d at 1240. Similarly, here, defendants' choice to sue only plaintiff's customers for patent infringement, rather than sue plaintiff directly, should not render the first-to-file rule inapplicable.
“To determine whether two suits involve substantially similar issues, [the court] look[s] at whether there is ‘substantial overlap' between the two suits.” Id., 787 F.3d at 1241 (citation omitted). Here, the central questions in both the present case and the previously filed cases are the validity and enforceability of the ‘098 and ‘188 Patents. Plaintiff's four claims for declaratory relief ask this court to find the ‘098 and ‘188 Patents invalid and unenforceable. (Compl. ¶¶ 128-145.) “[P]ermitting multiple litigations of these identical claims could serve no purpose of judicial administration, and the risk of conflicting determinations as to the patents' validity and enforceability [is] clear.” See Pacesetter, 678 F.2d at 96. Furthermore, plaintiff's two Sherman Act claims are at least in part based on defendants' patent infringement lawsuits, which seek to enforce the same patents that plaintiff claims are invalid and unenforceable. (Id. ¶¶ 146-159.) As such, six of plaintiff's eleven claims involve the validity and enforceability of the patents and thus there is “substantial overlap” between the cases. Kohn, 787 F.3d at 1241 (finding similar issues where both cases involved claims to the same funds).
Defendants contend that dismissal is warranted because plaintiff “may file its claims in the Oklahoma action to the extent necessary.” (See Mot. to Dismiss at 2). The existence of plaintiff's state law claims, however, counsel against outright dismissal. Were another district court to find the patents invalid or otherwise dismiss defendants' patent enforcement action, plaintiff would have to file a new suit in California and could risk encountering statute of limitation problems. See Alltrade, 946 F.2d at 629 (citing Asset Allocation & Mgt. v. Western Employers Ins., 892 F.2d 566, 571 (7th Cir. 1989) (“Granted, the statute of limitations problems may not be serious . . . . But why take chances? It is simpler just to stay the [later] suit”.)) Accordingly, because the central issues in the present case--the validity and enforceability of defendants' patents--are the same as the previously filed cases, the court finds the first-to-file rule is applicable to the present case and warrants a stay.
Plaintiff argues that the first-to-file rule is not applicable here because of various issues it identifies with transferring the case to the Western District of Oklahoma. (See Opp'n to Mot. to Dismiss at 9 (Docket No. 30).) However, the court need not address plaintiff's concerns because the court is staying the case, not transferring it.
IT IS THEREFORE ORDERED that defendants' motion to strike (Docket No. 11) and motion to dismiss (Docket No. 12), be and hereby are, DENIED without prejudice, and the hearing on those motions set for January 9, 2023, and any other deadlines in this case, are hereby VACATED;
AND IT IS FURTHER ORDERED that all proceedings in this case are hereby STAYED pending final adjudication of the validity of the ‘098 and ‘188 Patents by the Federal Circuit. The parties shall file a joint status report within fourteen days after all proceedings in the Federal Circuit regarding the ‘098 and ‘188 Patents have concluded.