Renesas Elecs. Am. v. Monterey Research, LLC

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RENESAS ELECTRONICS AMERICA INC., Plaintiff, v. MONTEREY RESEARCH, LLC, Defendant.

No. 24-cv-06223-JSC

United States District Court, N.D. California

December 10, 2024

Re Dkt. No. 22

ORDER RE: MOTION TO DISMISS, STAY, OR TRANSFER

JACQUELINE SCOTT CORLEY, United States District Judge

In April 2024, Monterey Research LLC (“Monterey”) sued Renesas Electric Corporation (“REL”) and two reseller defendants in the Eastern District of Texas alleging infringement of four patents. Approximately five months later, the wholly-owned subsidiary of REL, Renesas Electronics America, Inc. (“REA”), filed the present action against Monterey seeking a declaratory judgment of non-infringement as to the same four patents. Pending before the Court is Monterey's motion to dismiss stay, or transfer the present case under the first-to-file rule. (Dkt. No. 22.) After careful consideration of the parties' briefing, the Court concludes oral argument is not necessary, see N.D. Cal. Civ. L.R. 7-1(b) VACATES the December 12, 2024 hearing, and GRANTS Monterey's motion to stay the case pending resolution of the first-filed Texas action.

BACKGROUND

I. COMPLAINT ALLEGATIONS

On September 3, 2024, REA filed the present suit against Monterey seeking declaratory judgment. (Dkt. No. 1.)^[1] Specifically, “REA seeks a declaration of non-infringement of United States Patents Nos.: 6,243,300 (“the '300 patent”), 7,679,968 (“the '968 patent”), 7,089,133 (“the '133 patent”), and 7,825,688 (“the '688 patent”) (together, the “Patents-in-Suit”).” (Id. ¶ 1.)

The complaint alleges Monterey-“a subsidiary of IP Value Management, a patent monetization company”-“expressly accused REA of infringing the Patents-in-Suit” in letters Monterey sent REA and REA's parent company, REL. (Id. ¶¶ 15, 17-19.) Specifically, Monterey sent REL and REA a letter in August 2018 alleging certain products infringe the ‘300 and ‘968 patents, and Monterey sent REL and REA another letter in March 2022 alleging certain products infringe the '133 and '688 patents. (Id. ¶¶ 17-18.) As additional enforcement conduct, REA's complaint describes Monterey's lawsuit in the Eastern District of Texas. (Id. ¶¶ 19-20.)

II. TEXAS ACTION

On April 10, 2024, approximately five months before REA filed the present case, Monterey sued REL and two additional defendants alleging infringement of the same four patents. Monterey Research, LLC v. Renesas Elecs. Corp., No. 2:24-cv-00238 (E.D. Tex. Apr. 10, 2024) (“Texas Action”). The patents “are directed to inventive technology relating to computer memory, computer processors and microcontrollers, and computer display interfaces, and/or products containing the same.” (Dkt. No. 22-3 ¶¶ 21.) In addition to REL, Monterey named as defendants Denso Corporation (“Denso”), a Japanese corporation, and Denso International America, Inc. (“DIA”), a wholly a wholly-owned subsidiary of Denso with a regular place of business in Texas. (Id. ¶¶ 6-7.) The complaint alleges “[t]he Denso Defendants are an important customer” for REL as they “integrate[] [REL] semiconductor devices and integrated circuits into a wide variety of devices,” which they make “for numerous leading auto manufacturers.” (Id. ¶ 22.)

Denso and DIA (collectively, “DENSO”) filed a joint motion to dismiss, arguing “the Complaint fails to identify a single accused DENSO product or any DENSO-specific acts, knowledge, or intent to support its claims of direct, induced, contributory, and willful infringement.” (Texas Action, Dkt. No. 16 at 5.)

While the motion to dismiss was pending, on September 19, 2024, REL and DENSO jointly requested the court sever and stay “claims against DENSO pending final resolution of Monterey's identical claims against DENSO's upstream supplier, Renesas, under either the customer-suit exception or traditional stay factors.” (Texas Action, Dkt. No. 27 at 5.) The motion asserts REL, as the manufacturer, “is the ‘true defendant.'” (Id.)

In addition, on October 10, 2024, REL moved to transfer the case to the Northern District of California. (Texas Action, Dkt. No. 36.)

On December 3, 2024, the Eastern District of Texas granted in part and denied in part DENSO's motion to dismiss. The court concluded Monterey sufficiently stated a claim of direct infringement for all asserted patents; pre-suit induced, contributory, and willful infringement for some of the asserted patents; and post-suit induced, contributory, and willful infringement for all asserted patents. (Texas Action, Docket No. 62.) The motions to sever, stay, and transfer are still pending before the Eastern District of Texas.

DISCUSSION

Pending before the Court is Monterey's motion to dismiss, stay or transfer this declaratory judgment action under the first-to-file rule.

I. FIRST-TO-FILE RULE

“When two actions that sufficiently overlap are filed in different federal district courts, one for infringement and the other for declaratory relief, the declaratory judgment action, if filed later, generally is to be stayed, dismissed, or transferred to the forum of the infringement action.” Futurewei Techs., Inc. v. Acacia Rsch. Corp., 737 F.3d 704, 708 (Fed. Cir. 2013)^[2]; see also Pacesetter Sys., Inc. v. Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982) (explaining the first-to-file rule is “a generally recognized 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”). The rule “exists to avoid conflicting decisions and promote judicial efficiency.” Futurewei Techs., 737 F.3d at 708 (quotation marks omitted).

While exceptions to the rule are not rare, “there must be sound reason that would make it unjust or inefficient to continue the first-filed action.” Elecs. for Imaging, Inc. v. Coyle, 394 F.3d 1341, 1347 (Fed. Cir. 2005) (cleaned up).

In applying the first-to-file rule, courts look to three threshold factors: (1) the chronology of the two actions; (2) the similarity of the parties; and (3) the similarity of the issues. See Alltrade, Inc. v. Uniweld Products, Inc., 946 F.2d 622, 625 (9th Cir. 1991). If the case meets these requirements, the court has the discretion to transfer, stay, or dismiss the second-filed action. See id. at 628-29; see also Futurewei Techs., 737 F.3d at 708 (“Application of the first-to-file rule is generally a matter for a district court's discretion, exercised within governing legal constraints.”).

A. Chronology

It is undisputed the Texas Action predates the present action. Monterey filed suit in Texas in April 2024, approximately five months before REA filed suit in this case. REA argues both actions “are in their infancy,” noting the “Texas Court has not issued any substantive rulings.” (Dkt. No. 28 at 9.) But this factor focuses on chronology, not the stage of litigation. And the Texas Court has since issued a ruling on Denso and DIA's motion to dismiss. So, this factor weighs in favor of applying the first-to-file rule.

B. Similarity of the Parties

“[T]he first-to-file rule does not require exact identity of the parties,” it only requires substantial similarity of parties. Kohn L. Grp., Inc. v. Auto Parts Mfg. Mississippi, Inc., 787 F.3d 1237, 1240 (9th Cir. 2015). Here, Monterey is common to both cases-as the plaintiff in the Texas Action and the defendant in the present action. And while REL is the defendant in the Texas Action and REA is the plaintiff in the present action, REL is the parent-company of REA. (Dkt. No. 28-1 ¶ 3.) In light of the parent-subsidiary relationship, the “entities share common interests, rendering them substantially similar parties in this litigation.” See Aqua Connect, Inc. v. SHI Int'l Corp., No. CV 19-05662-AB (JPR), 2019 WL 8883452, at *3 (C.D. Cal. Dec. 16, 2019) (concluding the “parent-subsidiary corporate relationship indicate[d] that the two . . . entities share common interests, rendering them substantially similar parties in this litigation.”); see also SMIC, Americas v. Innovative Foundry Techs. LLC, 473 F.Supp.3d 1021, 1026 (N.D. Cal. 2020) (concluding parties were substantially similar when the parent entity was named in the Texas Litigation but not the DJ action and a subsidiary was named in the DJ action but not the Texas Litigation); Microchip Tech., Inc. v. United Module Corp., No. CV-10-04241-LHK, 2011 WL 2669627, at *3 (N.D. Cal. July 7, 2011) (concluding parties were substantially similar when “[e]ach of the DJ Plaintiffs here, except for Silicon Storage Technology (SST), [was] a Defendant in the Texas case” and “SST [was] a wholly owned subsidiary of” a DJ Plaintiff); McCain v. Racing, No. 07 CIV. 5729 (JRS), 2007 WL 2435170, at *2 (S.D.N.Y. Aug. 27, 2007) (“Rahal Letterman here and Team Rahal in California plainly represent the same interests where Rahal Letterman is the wholly owned subsidiary of Team Rahal.”).

The fact the Texas Action includes two additional defendants-Denso and DIA-does not preclude a finding of substantial similarity because “the first-to-file rule does not require exact identity of the parties.” Kohn L. Grp., 787 F.3d at 1240; see also SMIC, 473 F.Supp.3d at 1026 (finding substantial similarity even though “the Texas Litigation involve[d] additional defendants-Broadcom, Cypress and DISH Network-not involved in this action”); Microchip, 2011 WL 2669627, at *3 (“It is clear that the parties in this action and in the Texas Case are substantially similar, although the Texas Case includes far more entities that have been accused of patent infringement.”). So, this factor weighs in favor of applying the first-to-file rule.

C. Similarity of Issues

“To determine whether two suits involve substantially similar issues, we look at whether there is ...