Judge Sue L. Robinson recently denied a defendant’s motion to dismiss a first-filed declaratory judgment action or, in the alternative, to transfer it to the Northern District of New York where a second-filed infringement action was pending. Trustco Bank v. Automated Transactions LLC, Civ. No. 12-613-SLR (D. Del. Mar. 27, 2013). After the parties’ licensing negotiations broke down, the plaintiff filed a declaratory judgment action in the District of Delaware, and within about three hours the defendant filed its own affirmative infringement action in the Northern District of New York. Id. at 2. The defendant then moved to dismiss the Delaware action, or in the alternative to transfer it to New York, and the plaintiff moved to enjoin the New York action. Id. at 1.
Judge Robinson explained that “[t]he Federal Circuit 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.’” Id. at 3 (quoting Genentech, Inc. v. Eli Lilly and Co., 988 F.2d 931, 937 (Fed. Cir. 1993), rev’d on other grounds, Wilton v. Seven Falls Co., 515 U.S. 277 (1995). To that end, the Court explained that the first-to-file rule should only be departed from in situations involving “bad faith, forum shopping, when the second-filed action has developed further than the initial suit, and when the first-filing party instituted suit in one forum in anticipation of the opposing party’s imminent suit in another, less favorable, forum.” Id. at 4.
The defendant first argued that the plaintiff’s bad faith negotiation tactics (alleged delay tactics intended to provide additional time to draft a declaratory judgment complaint) justified departing from the first-to-file rule. The Court rejected that argument, explaining that “[p]reparations for litigation during negotiations are commonplace and the court concludes that there is no evidence of bad faith.” Id. at 7. Further, the Court found that the plaintiff had justifiable reasons for choosing to file its declaratory judgment action in Delaware (including the defendant’s status as a Delaware entity with a history of litigating in Delaware), such that forum shopping was not an issue. Id. Finally, the Court did not view transferring the case to New York as compellingly favorable from a judicial economy standpoint given that the New York action was stayed pending resolution of the motion before the Court, and a related New York action was subject to a motion to transfer to the District of Delaware. Id. at 8.
The Court next considered whether it should exercise its discretion to transfer the action to New York under 28 U.S.C. § 1404(a), upon a consideration of the Jumara factors, and found that transfer was not warranted based on the information provided to the Court. Id. at 8-10. The Court explained that the plaintiff did not satisfy its “burden of overcoming the first-filed rule” or its “burden of persuading the court, by a preponderance of the evidence, that the Jumara factors warrant transfer.” Id. at 11. As a result, the Court denied the defendant’s motion, and granted the plaintiff’s motion to enjoin the New York action. Id.