Opinion
Case No. 20-cv-02256-JSW
2020-07-21
SMIC, AMERICAS, et al., Plaintiffs, v. INNOVATIVE FOUNDRY TECHNOLOGIES LLC, Defendant.
Ruffin B. Cordell, Pro Hac Vice, Fish & Richardson P.C., Washington, DC, Betty Hong Chen, Fish and Richardson PC, Redwood City, CA, for Plaintiffs. Evan Nadel, Mintz Levin Cohn Ferris Glovsky and Popeo, P.C., San Francisco, CA, for Defendant.
Ruffin B. Cordell, Pro Hac Vice, Fish & Richardson P.C., Washington, DC, Betty Hong Chen, Fish and Richardson PC, Redwood City, CA, for Plaintiffs.
Evan Nadel, Mintz Levin Cohn Ferris Glovsky and Popeo, P.C., San Francisco, CA, for Defendant.
ORDER GRANTING MOTION TO DISMISS
Re: Dkt. No. 20
JEFFREY S. WHITE, United States District Judge
Now before the Court for consideration is Defendant Innovative Foundry Technologies, LLC's ("Defendant's" or "IFT's") motion to dismiss, or in the alternative, to stay the action based on the first-to-file doctrine. The Court has considered the parties’ papers, relevant legal authority, and the record in the case and finds this case suitable for disposition without oral argument. See N.D. Cal. L-R 7-1(b). For the foregoing reasons, the Court HEREBY GRANTS Defendant's motion and dismisses this action without prejudice.
BACKGROUND
On April 2, 2020, Plaintiffs SMIC, Americas, Semiconductor Manufacturing International (Shanghai) Corporation ("SMIC Shanghai"), Semiconductor Manufacturing International (Beijing) Corporation ("SMIC Beijing"), Semiconductor Manufacturing International (Tianjin) Corporation ("SMIC Tianjin"), Semiconductor Manufacturing International (BVI) Corporation ("SMIC BVI"), Semiconductor Manufacturing North China (Beijing) Corporation ("SMNC"), and Semiconductor Manufacturing South China (Beijing) Corporation ("SMSC") (collectively, "Plaintiffs") filed this action against Defendant Innovative Foundry Technologies. (Dkt. No. 1.) Plaintiffs seek a declaratory judgment of non-infringement of U.S. Patent Nos. 6,580,122 ("’122 Patent") ; 6,806,126 ("’126 Patent") ; 6,933,620 ("’620 patent") ; and 7,009,226 ("’226 Patent").
Prior to the filing of this action on December 20, 2019, IFT filed a lawsuit in the Western District of Texas, Innovative Foundry Techs. LLC v. Semiconductor Mfg. Int'l Corp. , No. 6:19-cv-00719-ADA (W.D. Tex. Dec. 20, 2019) (the "Texas Litigation"), against defendants Semiconductor Manufacturing International Corporation ("SMIC"), Broadcom Incorporated and Broadcom Corporation (collectively, "Broadcom"), Cypress Semiconductor Corporation ("Cypress"), and DISH Network Corporation ("DISH Network"). (Dkt. 20-2, Declaration of Evan S. Nadel ("Nadel Decl."), Ex. 1.) In the Texas Litigation, IFT alleges that the defendants’ products and methods of manufacturing infringe the ’122 Patent, ’126 Patent, ’620 Patent, and ’226 Patent —the same patents at issue here. (Compl. ¶¶ 15, 17.) Specifically, IFT asserts that all semiconductor devices manufactured by the Texas defendants using 65 nanometer or lower technology infringe the patents. (Id. ) On April 14, 2020, IFT filed a first amended complaint in the Texas Litigation, adding as defendants the following subsidiaries of SMIC: SMIC Shanghai, SMIC Beijing, SMIC BVI, SMIC North China, and SMIC South China. (See Dkt. No. 20-3, Nadel Decl., Ex. 2.) As a result of the amended complaint in the Texas Litigation, each SMIC subsidiary that is a plaintiff in this action is now a defendant in the Texas Litigation except SMIC, Americas. (Id. ) IFT now moves to dismiss this case under the first-to-file rule in light of the Texas Litigation. In the alternative, IFT asks the Court to stay this case pending resolution of the Texas Litigation.
IFT originally filed the amended complaint in the Texas Litigation on April 3, 2020. IFT subsequently withdrew that complaint, moved unopposed for leave to file the amended complaint, and re-filed the amended complaint on April 14, 2020.
ANALYSIS
A. Applicable Legal Standard.
The first-to-file rule is a " ‘doctrine of federal comity which permits a district court to decline jurisdiction over an action when a complaint involving the same parties and issues has already been filed in another district.’ " Apple Inc. v. Psystar Corp. , 658 F.3d 1150, 1161 (9th Cir. 2011) (quoting Pacesetter Sys. Inc. v. Medtronic, Inc. , 678 F.2d 93, 94–95 (9th Cir. 1982) ). This 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. U.S. Dep't of the Army , 611 F.2d 738, 750 (9th Cir. 1979) ). In addition to judicial efficiency, the rule helps "prevent[ ] the risk of inconsistent decisions that would arise from multiple litigations of identical claims." Ruckus Wireless, Inc. v. Harris Corp. , 11–cv–019440–LHK, 2012 WL 588782 at *2 (N.D. Cal. Feb. 22, 2012) ; see also Church of Scientology , 611 F.2d at 750 ("The doctrine is designed to avoid placing an unnecessary burden on the federal judiciary, and to avoid the embarrassment of conflicting judgments."). In patent litigation, "[t]he first-filed action is preferred, even if it is declaratory, ‘unless considerations of judicial and litigant economy, and the just and effective disposition of disputes, require otherwise.’ " Barnes & Noble, Inc. v. LSI Corp. , 823 F. Supp. 2d 980, 986–87 (N.D. Cal. 2011) (quoting Serco Services Co., L.P. v. Kelley Co., Inc. , 51 F.3d 1037, 1039 (Fed. Cir. 1995) ).
Under the first-to-file doctrine, a district court may choose to transfer, stay, or dismiss an action where a similar complaint has been filed in another district court. See Alltrade , 946 F.2d at 623. The court must consider three threshold factors in deciding whether to apply the first-to-file rule: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the issues. Ward. v. Follett Corp. , 158 F.R.D. 645, 648 (N.D. Cal. 1994) ; see also Apple Inc. , 658 F.3d at 1161. However, 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." Pacesetter , 678 F.2d at 95. Accordingly, "[t]he most basic aspect of the first-to-file rule is that it is discretionary; ‘an ample degree of discretion, appropriate for disciplined and experienced judges, must be left to the lower courts.’ " Barnes & Noble , 823 F. Supp. 2d at 987 (quoting Alltrade , 946 F.2d at 628 ). A court's decision to depart from this general rule must present a "sound reason that would make it unjust or inefficient to continue the first-filed action." Id. (quoting Genentech v. Eli Lilly and Co. , 998 F.2d 931, 938 (Fed. Cir. 1993) ).
B. The Threshold Factors Warrant Application of the First-To-File Rule.
1. Chronology of the actions.
The first factor in assessing whether relief is warranted under the first-to-file rule requires an assessment of the chronology of the two actions. Here, the parties dispute which action should be considered the first filed. IFT filed the original complaint in the Texas Litigation on December 20, 2019. Plaintiffs filed this declaratory judgment action on April 2, 2020. On April 14, 2020, IFT filed the amended complaint in the Texas Litigation, which names as defendants all but one of the SMIC subsidiaries who are Plaintiffs here.
IFT argues the date the original complaint was filed in the Texas Litigation is the relevant date for determining the chronology of the actions. According to IFT, for purposes of the first-to-file analysis, it is irrelevant that Plaintiffs filed this action before IFT filed the amended complaint in the Texas Litigation. Plaintiffs disagree. They argue the date of the amended complaint's filing in the Texas Litigation should govern here because the Texas amended complaint does not relate back to the original complaint under Fed. R. Civ. P. 15(c).
The parties acknowledge that there are two lines of cases addressing the interplay between the first-to-file rule and Rule 15 ’s relation back doctrine. In the first line of cases, courts have found that the filing of a complaint triggers the first-filed rule regardless of whether the plaintiff later amends the complaint. See Barnes & Noble , 823 F. Supp. 2d at 987 ; Hilton v. Apple Inc. , No. C-13-2167, 2013 WL 5487317, at *6 (N.D. Cal. Oct. 1, 2013) ; Ford v. [24]7.ai, Inc. , No. 18-CV-02770-BLF, 2019 WL 570756, at *3 (N.D. Cal. Feb. 12, 2019) (collecting cases). Courts in the second line of cases, however, consider an action first filed, even if not chronologically first, if the claims relate back to an original complaint that was chronologically filed first. See Halo Electronics, Inc., v. Bel Fuse Inc. , No. C-07-06222 RMW, 2008 WL 1991904, at *2 (N.D. Cal. May 5, 2008).
This Court agrees with the courts finding the relation back inquiry unnecessary and finds that the "filing of a complaint triggers the first-filed rule, regardless of whether the plaintiff later amends the complaint." Hilton , 2013 WL 5487317 at *6. This approach "comport[s] with the general liberality of Rule 15." Id. (citing Barnes & Noble , 823 F. Supp. 2d at 988 ). Moreover, requiring a relation back analysis would be in tension with the first-to-file rule's aims of promoting judicial efficiency and lessening the risk of inconsistent decisions. See Ruckus Wireless, Inc. v. Harris Corp. , 2012 WL 588792 at *2. Accordingly, the Court finds that no relation back analysis is necessary. Because the original complaint in the Texas Litigation, filed on December 20, 2019, preceded the filing of this complaint on April 2, 2020 by three months, the Texas Litigation is the first-filed action. See Advanta Corp. v. Visa U.S.A., Inc. , No. CIV.A. 96-7940, 1997 WL 88906, at *3 (E.D. Pa. Feb. 19, 1997) ("Advanta cannot avoid application of the first-filed rule simply by asserting that it was not initially a party to the earlier filed action. The first-filed rule turns on which court first obtains possession of the subject of the dispute, not the parties of the dispute.").
The Court also notes that even if it were to undertake the relation back inquiry, the outcome would likely not change. Fed. R. Civ. P. 15(c) governs when an amended pleading relates back to the date of the original pleading. Plaintiffs argue that IFT's amended complaint in the Texas Litigation fails to satisfy Rule 15(c)(1)(C)(ii) which provides when "the amendment changes the party or the naming of the party against whom a claim is asserted" the amended pleading relates back only if "the party to be brought in by amendment knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party's identity." Fed. R. Civ. P. 15(c)(1)(C)(ii). " Rule 15(c)(1)(C)(ii) asks what the prospective defendant knew or should have known during the Rule 4(m) period, not what the plaintiff knew or should have known at the time of filing [the] original complaint." Krupski v. Costa Crociere S. p. A. , 560 U.S. 538, 548, 130 S.Ct. 2485, 177 L.Ed.2d 48 (2010).
The Court is not persuaded by Plaintiffs’ argument that Rule 15(c)(1)(C)(ii) is not satisfied in the case of the amended complaint in the Texas Litigation. Plaintiffs focus on what IFT apparently knew at the time it filed the complaint in the Texas Litigation and assert that IFT made a tactical choice, not a mistake, in naming SMIC rather than its corporate subsidiaries as a defendant. However, the relevant inquiry is what the subsidiaries of SMIC—the prospective defendants—knew or should have known at the time the complaint was filed. Id. The original Texas complaint challenges the manufacturing, use, and sale by SMIC by itself and/or "through the activities of its subsidiaries." (Dkt. No. 20-2, Nadel Decl., Ex. 1.) This suggests that the SMIC subsidiaries who are involved in manufacturing should have known that they were not named as defendants because of misunderstanding on IFT's part about which SMIC entity had responsibility for the claims at issue. This type of mistake concerning the proper party's identity does not foreclose a finding of relation back under Rule 15(c). Krupski , 560 U.S. at 549, 130 S.Ct. 2485 (noting that satisfaction of Rule 15(c)(1)(C)(ii) is not necessarily foreclosed where a plaintiff may know that a prospective defendant exists, because it may nonetheless "harbor a misunderstanding about his status or role in the events giving rise to the claim at issue, and she may mistakenly choose to sue a different defendant based on that misimpression.") Moreover, IFT has offered a sufficient explanation for its choice to bring claims against the parent SMIC in the Texas Litigation based upon SMIC's public reports. (See Reply at 10-11; see also Dkt. No. 20-6, Nadel Decl., Ex. 6.) Accordingly, even if the Court were to find the relation back inquiry necessary to determine the chronology of the actions, that analysis would not necessitate a different result. The Court finds that the Texas Litigation is the first-filed action.
2. Similarity of the parties.
With regard to the second factor, the similarity of parties, "the first-to-file rule does not require exact identity of the parties." Kohn Law Grp., Inc. v. Auto Parts Mfg. Mississippi, Inc. , 787 F.3d 1237, 1240 (9th Cir. 2015). "Rather, the first-to-file rule requires only substantial similarity of parties." Id. The parties here are substantially similar to the parties in the Texas Litigation. IFT is party to both actions. There is substantial similarity with respect to the SMIC entities as well. With the exception of SMIC, Americas, which is named in this action but not in the Texas Litigation, and the parent entity, SMIC, which is named in the Texas Litigation but not in this matter, the SMIC entities in both proceedings are the same. And although the Texas Litigation involves additional defendants—Broadcom, Cypress and DISH Network—not involved in this action, their presence does not preclude application of the first-to-file rule because "the similar parties’ requirement does not require exact identity." Microchip Tech., Inc. v. United Module Corp. , No. CV-10-04241-LHK, 2011 WL 2669627, at *3 (N.D. Cal. July 7, 2011) (finding the parties were substantially similar although the first-filed action included far more entities than the later-filed action). Accordingly, the Court finds this factor is satisfied.
3. Similarity of the issues.
Under the third factor, similarity of issues, "[t]he issues in both cases also need not be identical, only substantially similar." Kohn , 787 F.3d at 1240. To determine whether two suits involve substantially similar issues, a court must look at whether there is "substantial overlap" between the two suits. Id. at 1241. Plaintiffs do not dispute that these matters are closely related. Indeed, the Texas Litigation alleges infringement of the same patents that are the basis for Plaintiffs’ declaratory judgment claims in this action. See Microchip Tech. , 2011 WL 2669627, at *3 (similarity of issues satisfied where the actions involved "mirror image issues" because the same patents were at issue in the infringement action and the declaratory judgment action). Accordingly, the Court finds the issues in these actions substantially similar. C. No Exceptions to the First-to-File Rule Apply.
IFT also argues the fact that Plaintiffs may pursue these claims as compulsory counterclaims in the Texas Litigation even if they are dismissed here further shows the similarity of issues. Plaintiffs do not dispute that their declaratory judgment claims are compulsory counterclaims to the claims of infringement pending against the same patents in the Texas Litigation. See Ruckus Wireless , 2012 WL 588792, at *3 ("[D]istrict courts routinely hold that declaratory judgment claims for invalidity, unenforceability, and noninfringement are compulsory counterclaims to claims of infringement of the same patent.").
1. Customer-suit exception.
Plaintiffs argue that the customer-suit exception to the first-to-file rule should apply here. The customer-suit exception applies in patent litigation where the earlier action is an infringement suit against a manufacturer's customers, and the later suit is a declaratory judgment action brought by the manufacturer of the accused products. Google Inc. v. Rockstar Consortium U.S. LP , No. C 13-5933 CW, 2014 WL 1571807, at *9 (N.D. Cal. Apr. 17, 2014). The claims in the Texas Litigation against the SMIC entities, Broadcom, Cypress, and the DISH Network involve allegations of manufacturing; the Texas Litigation defendants are not "simply reseller[s] of the accused goods." Kahn v. GMC , 889 F.2d 1078, 1081 (Fed. Cir. 1989) (noting that "in those cases in which a customer suit exception has been held to favor the forum of the second-filed action, the second action would resolve all charges against the customers in the stayed suit, including liability for damages"). The Court finds the customer-suit exception inapplicable here.
2. Forum shopping exception.
In resolving motions brought under the first-to-file rule, courts will often consider the convenience factors in 28 U.S.C. section 1404(a) (" Section 1404(a)"). These factors include: (1) plaintiff's choice of forum; (2) convenience of the parties; (3) convenience of the witnesses; (4) ease of access to the evidence; (5) familiarity of each forum with the applicable law; (6) feasibility of consolidation with other claims; (7) local interest in the controversy; and (8) the relative congestion of each forum. See Alul v. Am. Honda Motor Co., Inc. , No. 16-CV-04384-JST, 2016 WL 7116934, at *2 (N.D. Cal. Dec. 7, 2016).
Plaintiffs argue that the court should decline to apply the first-to-file rule based on the forum shopping exception. Plaintiffs argue that IFT's choice to file suit in the Western District of Texas was the result of forum-shopping. However, a plaintiff's choice of forum is entitled to deference, and on this record, IFT has offered some legitimate reasons for bringing its suit in the Western District of Texas, including that the named domestic defendants in the Texas Litigation have established places of business in Texas and have not challenged venue there. (See Reply at 14-15.) In any event, the Court finds that these issues would have been more suitable in a motion to transfer venue in the Texas Litigation.
Plaintiffs’ arguments regarding the remaining Section 1404(a) convenience factors are largely unsupported, and best, show the factors are neutral. Accordingly, the Court declines to depart from the first-to-file rule. Allowing this action to proceed alongside the Texas Litigation would result in duplicative judicial efforts and risk inconsistent results as both courts would be tasked with construing claims and issuing decisions regarding the same patents. Indeed, in the Texas Litigation, preliminary infringement contentions have been provided and a Markman hearing is already scheduled for September. The Court finds that "the risk of inconsistent judgments and waste of judicial resources must outweigh the equitable concern" of the parties’ connections to Texas. Microchip Tech. , 2011 WL 2669627, at *6 (quoting Aliphcom v. Wi-LAN Inc. , No. 10-CV-02337-LHK, 2010 WL 4699844, at *3 (N.D. Cal. Nov. 10, 2010) ); see also Alltrade , 946 F.2d 622, 628 (9th Cir. 1991) (affirming district court's decision to apply first-to-file rule despite allegations that appellee acted in bad faith); Pacesetter , 678 F.2d 93, 96 (9th Cir. 1982).
The Court finds that in this case dismissal would promote judicial economy. The Texas Litigation is still in the early stages, and Plaintiffs have not meaningfully asserted any bar to presenting the claims or defenses asserted here in that action. Additionally, the Western District of Texas is capable of efficiently resolving the issues given that it is already familiarizing itself with the patents at issue. The Court finds that dismissal here would promote a "comprehensive disposition of litigation" and conserve judicial resources. See Ruckus Wireless , 2012 WL 588792, at *6 (citing Pacesetter , 678 F.2d at 95 ).
CONCLUSION
For the foregoing reasons, the Court GRANTS Defendant's motion and DISMISSES Plaintiffs’ complaint without prejudice. The Clerk is directed to close the file.