United States District Court, D. Delaware
TSMC TECHNOLOGY, INC., TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY, LIMITED and TSMC NORTH AMERICA CORP., Plaintiffs,
ZOND, LLC, Defendant.
REPORT AND RECOMMENDATION
CHRISTOPHER J. BURKE, Magistrate Judge.
Presently before the Court are: (1) Plaintiffs TSMC Technology, Inc. ("TTI"), Taiwan Semiconductor Manufacturing Company, Limited ("TSMC Ltd."), and TSMC North America Corp.'s ("TSMC NA") (collectively, "Plaintiffs" or "TSMC") "Motion to Enjoin Zond LLC from Maintaining a Later-Filed Action in the District of Massachusetts, " (D.I. 7) (the "Motion to Enjoin"); and (2) Defendant Zond, LLC's ("Zond" or "Defendant") "Motion to Transfer Venue of this Action to the District of Massachusetts Pursuant to 28 U.S.C. § 1404(a), " (D.I. 13) (the "Motion to Transfer, " and collectively with the Motion to Enjoin, the "Motions").
For the reasons that follow, the Court recommends that Plaintiffs' Motion to Enjoin be GRANTED, and orders that Zond's Motion to Transfer be DENIED.
A. Factual Background
1. The Parties
TTI is a corporation organized under the laws of Delaware with a principal place of business in San Jose, California; it is an indirect subsidiary of TSMC Ltd. (D.I. 1 at ¶ 1) TSMC Ltd. is a corporation organized under the laws of Taiwan, with a principal place of business in Hsinchu, Taiwan. ( Id. at ¶ 2) TSMC NA is a corporation organized under the laws of California, with a principal place of business in San Jose, California, and is a direct subsidiary of TSMC Ltd. ( Id. at ¶ 3)
Zond is a limited liability company organized under the laws of Delaware, with a registered agent in this District. ( Id. at ¶ 4) It has its principal place of business in Mansfield, Massachusetts. (D.I. 15 at ¶ 3) Zond is the owner of the various patents-in-suit in this matter: United States Patent Nos. 6, 806, 651 ("the '651 Patent"), 6, 896, 773 ("the '773 Patent"), 6, 896, 775 ("the '775 Patent"), 6, 903, 511 ("the '511 Patent"), 7, 095, 179 ("the '179 Patent"), and 7, 446, 479 ("the '479 Patent") (collectively, "the Group Two Patents"). (D.I. 1 at ¶ 5)
2. Actions in the District of Massachusetts and Their Relationship to the Instant Case
In July 2013, Zond filed seven actions against seven different defendants or sets of defendants in the United States District Court for the District of Massachusetts ("District of Massachusetts"); in each case, Zond alleged infringement of seven of Zond's patents (the "Group One Patents"). (D.I. 1 at ¶ 8; D.I. 8 at 3, 7-8); Zand, LLC v. Fujitsu Ltd. et al., Civil Action No. 13-cv-11634-WGY (D. Mass.) ( "Zand, LLC" ), (D.I. 19). The seven Group One Patents are different patents from the Group Two Patents, although there are relationships among them. All thirteen patents share the same inventor, Roman Chistyakov, and relate to the subjects of semiconductor manufacturing and plasma discharge technology. One of the Group One Patents, U.S. Patent No. 7, 808, 184 ("the '184 Patent"), is a continuation of one of the Group Two Patents, the '179 Patent, and they share an identical specification. (See generally '184 Patent; '179 Patent) Another Group One Patent, U.S. Patent No. 6, 806, 652 ("the '652 Patent"), is a continuation-in-part of a Group Two Patent, the '651 Patent, and their specifications are nearly identical. (See generally '652 Patent; '651 Patent)
Additionally, in the first of the seven Group One Patent actions, which Zond filed against The Gillette Company and The Procter & Gamble Company (the "Gillette Action"), Zond not only asserted the seven Group One Patents, but also asserted two Group Two Patents: the '773 Patent and the '775 Patent. (D.I. 8 at 3, 7-8) Ultimately, the seven Group One Patent actions were assigned to five different United States District Judges in the District of Massachusetts; the Gillette Action was assigned to United States District Judge Denise J. Casper. ( Id. at 7-8)
In another of those Group One Patent actions (the "First TSMC Massachusetts Action"), TSMC Ltd. and TSMC NA were sued as defendants, as were two other defendants that remain in that case: Fujitsu Semiconductor Limited and Fujitsu Semiconductor America, Inc. (collectively, the "Fujitsu entities"). ( Id. at 8) The First TSMC Massachusetts Action was assigned to United States District Judge William G. Young; Judge Young was not assigned to oversee any of the other six cases. ( Id.) On June 2, 2014, the First TSMC Massachusetts Action was administratively closed, until the conclusion of inter partes review proceedings occurring before the United States Patent and Trademark Office ("PTO") or May 9, 2016, whichever came first. (D.I. 1 at ¶ 8; D.I. 8 at 8 (citing Zand, LLC I, D.I. 124)) Judge Young later clarified that the case may be reopened earlier than those dates as to any claims not accepted for inter partes review. (D.I. 8 at 8 (citing Zand, LLC I, D.I. 129))
At the time of the filing of the instant Motions, of the other six Group One Patent cases in the District of Massachusetts, one case had been settled and dismissed, two had been stayed pending inter partes review, and three were ongoing, with motions to dismiss or stay pending in each. (D.I. 8 at 7-9) As of the current date, two of these six cases have been settled and dismissed, and the other four all are now stayed (for differing periods of time) pending inter partes review proceedings. See Zand, Inc. v. The Gillette Co., et al., Civil Action No. 13-cv-11567-DJC (D. Mass.), (D.I. 120) (stay pending inter partes review); Zand, LLC v. Intel Corp., Civil Action No. 13-cv-11570-RGS (D. Mass.), (D.I. 130) (dismissal); Zand, LLC v. Advanced Micro Devices, Inc., et al., Civil Action No. 13-cv-11577-LTS (D. Mass.), (D.I. 74, 82) (stay pending inter partes review); Zand, Inc. v. Toshiba Am. Elec. Components, Inc., et al., Civil Action No. 13-cv-11581-DJC (D. Mass.), (D.I. 70) (stay pending inter parties review); Zand, LLC v. SK Hynix, Inc., et al., Civil Action No. 13-cv-11591-RGS (D. Mass.), (D.I. 68) (dismissal); Zand, LLC v. Renesas Elecs. Corp., et al., Civil Action No. 13-cv-11625-NMG (D. Mass.), (D.I. 44) (stay pending inter partes review). None of those Group One Patent cases proceeded to the Markman stage before being dismissed or stayed. (D.I. 8 at 8-9) The District of Massachusetts has confirmed by Order that none of the remaining Group One Patent cases will be consolidated; instead, all will proceed on different schedules. Zand, Inc. v. The Gillette Co., et al., Civil Action No. 13-cv-11567-DJC (D. Mass.), (D.I. 100); (D.I. 8 at 9).
3. The Instant Action and the Second TSMC Massachusetts Action
On Thursday, June 5, 2014, three days after the First TSMC Massachusetts Action was stayed, counsel for Zond sent a letter to TSMC Ltd. and TSMC NA (the "June 5 letter"). (D.I. 1 at ¶ 9) The June 5 letter stated that, based on investigation, Zond believed that TSMC Ltd. and TSMC NA infringed the six Group Two Patents. (D.I. 1, ex. G at 1) Zond asserted that it "intend[ed] to file next week a new action in the District of Massachusetts, related to the [first TSMC Massachusetts] Action, involving the same parties and the same accused TSMC products and processes, including products sold by TSMC to many of its customers." ( Id.) The letter gave these TSMC entities until "Noon Eastern time, on Monday, June , 2014[, ]" to contact Zond's counsel regarding obtaining a license to the patents. ( Id. at 2)
Instead of contacting Zond's counsel, Plaintiffs filed the instant case in this Court on Sunday, June 8, 2014. (D.I. 1; D.I. 8 at 5) (The filing was assigned a filing date of Friday, June 6, 2014, on this Court's docket). (D.I. 1) With the instant action, Plaintiffs sought a declaratory judgment that they do not infringe, directly or indirectly, each of the six Group Two Patents. ( Id. at ¶¶ 14-37)
The next day, Monday, June 9, 2014, Zond filed a Complaint in the District of Massachusetts, alleging that TSMC Ltd. and TSMC NA directly and indirectly infringe the six Group Two Patents ("the Second TSMC Massachusetts Action"). (D.I. 8 at 5) That suit is captioned Zond, LLC v. Fujitsu Semiconductor Ltd. et al., Civil Action No. 14-cv-12438-WGY (D. Mass.) ( "Zond, LLC JI"). As with the First TSMC Massachusetts Action, Zond's new suit did not name TTI as a defendant, but did name the Fujitsu entities as defendants. (D.I. 8 at 5-6) Zond noticed the Second TSMC Massachusetts Action as being related to the First TSMC Massachusetts Action, and so the Second TSMC Massachusetts Action was also assigned to Judge Young. ( Id.; D.I. 14 at 1, 4)
On October 9, 2014, Judge Young entered a Scheduling Order in the Second TSMC Massachusetts Action. (D.I. 35 & ex. A) A claim construction hearing is currently scheduled for the week of April 13, 2015, fact discovery is set to close on April 24, 2015 and trial is scheduled for October 2015. ( Id. & ex. A at 11-12) In that matter, the case as to the Fujitsu entities has been stayed. ( Zand, LLC II, D.I. 59)
B. Procedural Background Regarding the Instant Case
As noted above, on June 8, 2014, Plaintiffs commenced the instant action. (D.I. 1) On June 19, 2014, Plaintiffs filed the Motion to Enjoin, which seeks to enjoin the Second TSMC Massachusetts Action. (D.I. 7) On July 8, 2014, Defendant filed the Motion to Transfer, seeking transfer of the instant action to the District of Massachusetts. (D.I. 13)
On October 16, 2014, Chief Judge Leonard P. Stark referred this case to the Court to hear and resolve all pre-trial matters, up to and including the resolution of case-dispositive motions. (D.I. 28) On November 4, 2014, the Court heard oral argument on a number of pending motions, including the Motion to Transfer and Motion to Enjoin. (D.I. 33 (hereinafter "Tr."))
II. LEGAL STANDARDS
A. The Motion to Enjoin and the First-Filed Rule
The United States Court of Appeals for the Federal Circuit has adopted what is known as the "first-filed" rule in patent cases. That Court has explained that it prefers "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." Genentech, Inc. v. Eli Lilly and Co., 998 F.2d 931, 937 (Fed. Cir. 1993), rev'd on other grounds, Wilton v. Seven Falls Co., 515 U.S. 277 (1995). If applied, the rule counsels that a later-filed action involving the same controversy should be dismissed, transferred, or otherwise enjoined in favor of the first-filed action. See id. at 938; Nexans Inc. v. Belden Inc., 966 F.Supp.2d 396, 403 (D. Del. 2013). Adoption of this rule serves to prevent a multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising from common matters. Genentech, 998 F.2d at 938; Corixa Corp. v. IDEC Pharms. Corp., No. CIV.A.01-615-GMS, 2002 WL 265094, at *1 (D. Del. Feb. 25, 2002). "The considerations affecting transfer to or dismissal in favor of another forum do not change simply because the first-filed action is a declaratory action." Genentech, 998 F.2d at 938.
Under Federal Circuit law, as set out in Genentech, Inc. v. Eli Lilly and Co., 998 F.2d 931 (Fed. Cir. 1993), exceptions to the first-filed rule are "not rare" and are made when justice or expediency requires, though there must be "sound reason that would make it unjust or inefficient to continue the first-filed action." Genentech, 998 F.2d at 938. In Genentech, the Federal Circuit further explained that "[s]uch 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." Id. The Federal Circuit has otherwise noted that another such "sound reason" would be a situation in which "forum shopping" was the sole motivation for the plaintiffs filing of the first case. Id .; see also Kahn v. Gen. Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989). And it has also stated that a district court can consider, as part of its analysis, whether the first-filed suit was an anticipatory suit (that is, "whether a party intended to preempt another's infringement suit"). Elecs. for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347-48 (Fed. Cir. 2005). However, the Federal Circuit has explained that whether a declaratory suit was anticipatory should be but "one factor in the analysis[;]" it has cautioned that a court should not rely "solely on the anticipatory nature" of a suit when ruling that a first-filed declaratory judgment action should give way to a second-filed infringement suit. Id.
The Federal Circuit further expounded upon how a district court should determine whether an exception to the first-filed rule should be made in Micron Tech., Inc. v. Mosaid Techs., Inc., 518 F.3d 897 (Fed. Cir. 2008) ( "Mosaid Techs., Inc." ). The Mosaid Techs., Inc. Court explained that when a district court analyzes whether to permit the first-filed declaratory judgment action to go forward (or to decline to hear it in favor of a later-filed patent infringement action in another forum), it should not apply any "categorical rules." Mosaid Techs., Inc., 518 F.3d at 904. Instead, the court should consider the "real underlying dispute: the convenience and suitability of competing forums." Id. In doing so, it "must weigh the factors used in a transfer analysis as for any other transfer motion[, ]" such that "when the discretionary decision is presented after the filing of an infringement action, the jurisdiction question is basically the same as a transfer action under [28 U.S.C.] § 1404(a)." Id .; but see Innovative Therapies, Inc. v. Kinetic Concepts, Inc., 599 F.3d 1377, 1385 (Fed. Cir. 2010) (noting that inMosaid Techs., Inc., the Federal Circuit did not hold that "forum convenience is the dominant consideration" relevant to a court's exercise of discretion in every case).
B. The Motion to Transfer
Section 1404(a) of Title 28 provides the statutory basis for a transfer inquiry. It provides that "[f]or the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented." 28 U.S.C. § 1404(a). "[S]ection 1404(a) was intended to vest district courts with broad discretion to determine, on an individualized, case-by-case basis, whether convenience and fairness considerations weigh in favor of transfer." Jumara v. State Farm Ins. Co., 55 F.3d 873, 883 (3d Cir. 1995) (citing Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 30-31 (1988)).
The United States Court of Appeals for the Third Circuit has emphasized that when considering a motion to transfer venue pursuant to Section 1404(a), "courts normally defer to a plaintiffs choice of forum" and thus "the plaintiffs choice of venue should not be lightly disturbed." Jumara, 55 F.3d at 879-80 (internal quotation marks and citations omitted). This general principle, drawn from the historic respect accorded a plaintiffs choice of venue, suggests that "a transfer is not to be liberally granted." Shutte v. Armco Steel Corp., 431 F.2d 22, 25 (3d Cir. 1970) (internal quotation marks and citation omitted).
The party seeking a transfer has the burden "to establish that a balancing of proper interests weigh[s] in favor of the transfer[.]" Id .; see also Jumara, 55 F.3d at 879. That burden is a heavy one: "unless the balance of convenience of the parties is strongly in favor of defendant, the plaintiffs choice of forum should prevail." Shutte, 431 F.2d at 25 (internal quotation marks and citation omitted) (emphasis added); see also CNH Am. LLC v. Kinzenbaw, C.A. No. 08-945(GMS), 2009 WL 3737653, at *2 (D. Del. Nov. 9, 2009). Accordingly, "transfer will be denied ¶ the factors are evenly balanced or weigh only slightly in favor of the transfer." Angiodynamics, Inc. v. Vascular Solutions, Inc., C.A. No. 09-554-JJF, 2010 WL 3037478, at *2 (D. Del. July 30, 2010); see also Illumina, Inc. v. Complete Genomics, Inc., Civil Action No. 10-649, 2010 WL 4818083, at *2 (D. Del. Nov. 9, 2010).
The Third Circuit has observed that, in undertaking this transfer analysis, "there is no definitive formula or list of factors to consider[.]" Jumara, 55 F.3d at 879. Instead, courts must analyze "all relevant factors" to determine whether "the litigation would more conveniently proceed and the interests ofjustice be better served by transfer to a different forum." Id. (internal quotation marks and citation omitted). Nevertheless, in Jumara v. State Farm Ins. Co., 55 F.3d 873 (3d Cir. 1995), the Third Circuit identified a set of private interest and public interest factors that should be taken into account in this analysis (the "Jumara factors"). The private interest factors to consider include:
 [The] plaintiffs forum preference as manifested in the original choice,  the defendant's preference,  whether the claim arose elsewhere,  the convenience of the parties as indicated by their relative physical and financial condition,  the convenience of the witnesses-but only to the extent that the witnesses may actually be unavailable for trial in one of the fora... and  the location of books and records (similarly limited to the extent that the files could not be produced in the alternative forum).
Id. The public interest factors to consider include:
 [T]he enforceability of the judgment,  practical considerations that could make the trial easy, expeditious, or inexpensive,  the relative administrative difficulty in the two fora resulting from court congestion,  the local interest in deciding local controversies at home,  the public policies of the fora, ... and  the familiarity of the trial judge with the applicable state law in diversity cases.
Id. at 879-80. District courts should explicitly consider each of these factors, at least to the extent that the parties make "arguments" about them. In re Link_A_Media Devices Corp., 662 F.3d 1221, 1224 (Fed. Cir. 2011) (citing Jumara, 55 F.3d at 879) (noting that it ...