Guardian Alliance Technologies, Inc. v. Miller Mendel, Inc. ( 2022 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---- 11 12 GUARDIAN ALLIANCE TECHNOLOGIES, No. 2:22-cv-01390 WBS AC INC., a California corporation; 13 Plaintiff, 14 ORDER STAYING CASE v. 15 MILLER MENDEL, INC., a 16 Washington corporation; and TYLER MILLER, an individual, 17 Defendants. 18 19 ----oo0oo---- 20 Plaintiff Guardian Alliance Technologies, Inc. 21 (“Guardian”) brought this action against Miller Mendel, Inc. and 22 Tyler Miller seeking various forms of declaratory relief that two 23 of defendants’ patents are invalid, as well as asserting claims 24 for violations of § 2 of the Sherman Act, 15 U.S.C § 2, and 25 various California state law claims. (Docket No. 1.) Before the 26 court are defendants’ motion to strike plaintiff’s state law 27 claims pursuant to California’s Anti-SLAPP statute, Cal. Civil 28 1 Code § 425.16, (Docket No. 11) and defendants’ motion to dismiss 2 plaintiff’s complaint in its entirety (Docket No. 12). 3 I. Factual and Procedural History 4 Plaintiff is a California-based company that creates 5 and sells access to software for managing employee background 6 checks, primarily for government organizations and law 7 enforcement agencies. (Compl. ¶¶ 4, 28.) Defendant Miller 8 Mendel is a Seattle-based company that creates and sells access 9 to similar software. (Id. ¶¶ 5, 28.) Defendant Tyler Miller is 10 the founder and sole owner of Miller Mendel. (Rylander Decl. ¶4, 11 Ex. A (Docket No. 15).) 12 In April 2011, Tyler Miller (“Miller”) filed a 13 provisional patent application with the U.S. Patent and Trademark 14 Office, U.S. Patent Application No. 61/472,556, covering public 15 safety background investigation management software. (Compl. ¶¶ 16 48-49.) In April 2012, Miller filed a non-provisional patent 17 application claiming priority to the provisional patent 18 application. (Id. ¶ 53.) On June 30, 2015, Miller was issued 19 U.S. Patent No. 9,070,098 (the “‘098 Patent”). (Id. ¶ 55.) In 20 May 2015, Miller filed another non-provisional patent 21 application, resulting in the issuance of U.S. Patent No. 22 10,043,188 (the “‘188 Patent”) on August 7, 2018. (Id. ¶¶ 56, 23 58.) Miller licensed both patents to Miller Mendel. (Id. ¶ 59.) 24 Defendants have filed several lawsuits in different 25 district courts alleging that plaintiff’s customers infringe the 26 ‘188 Patent through use of plaintiff’s platform.1 In October 27 1 Defendants have not sued plaintiff directly for patent 28 infringement. They have only sued plaintiff’s customers. 1 2018, both defendants sued the City of Oklahoma City, Oklahoma in 2 the Western District of Oklahoma (the “Oklahoma Action”).2 See 3 Case No. 5:18-cv-00990 JD (W.D. Okla.). In February 2021, Miller 4 Mendel sued Washington County, Oregon and the Washington County 5 Sheriff’s Office in the District of Oregon (the “Oregon Action”). 6 See Case No. 3:21-cv-00168 SB (D. Ore.). In May 2021, defendants 7 sued Alaska State Troopers and James E. Cockrell, the 8 Commissioner of the State of Alaska Department of Public Safety, 9 in the District of Alaska (the “Alaska Action”). See Case No. 10 3:21-cv-00129 (D. Alaska). Both the Oregon Action and the Alaska 11 Action were stayed under the first-to-file rule because of the 12 earlier-filed Oklahoma Action. In December 2021, Miller Mendel 13 sued the City of Anna, Texas in the Eastern District of Texas 14 (the “Texas Action). See Case No. 2:21-cv-00445 JRG (E.D. Tex.). 15 As of the date of this order, both the Oklahoma Action 16 and the Texas Action are ongoing. The Oklahoma Action remains 17 pending in the Western District of Oklahoma. In the Texas 18 Action, cross appeals were filed to the Federal Circuit following 19 the district court’s orders granting defendant City of Anna’s 20 motion for judgment on the pleadings and invalidated the ‘188 21 Patent,3 Miller Mendel, Inc. v. City of Anna, Tex., No. 2:21-cv- 22 23 2 In October 2019, Guardian (as a non-party in the Oklahoma Action) filed a petition with the Patent Trial and 24 Appeal Board (“PTAB”) for inter partes review of the validity of the ‘188 Patent, IPR2020-00031. (Compl. ¶ 119, Ex. 30.) The 25 PTAB denied review on March 26, 2020. (Id.) 26 3 Judge Gilstrap found the ‘188 Patent ineligible for 27 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 28 *10 (E.D. Tex. Apr. 14, 2022). On May 2, 2022, Miller Mendel 1 00445 JRG, 2022 WL 1437686, at *10 (E.D. Tex. Apr. 14, 2022), and 2 denying the city’s motion for attorneys’ fees,4 id., 2022 WL 3 2704790, at *6 (E.D. Tex. June 13, 2022). The appeals were 4 consolidated and are still pending. See Miller Mendel, Inc. v. 5 City of Anna, Tex., No. 22-1753 (Fed. Cir.) (associated with Case 6 No. 22-1999). 7 II. Discussion 8 The first-to-file rule is “a generally recognized 9 doctrine of federal comity . . . .” Pacesetter Sys. Inc. v. 10 Medtronic, Inc., 678 F.2d 93, 94-95 (9th Cir. 1982). The rule 11 allows a district court to stay, transfer, or dismiss proceedings 12 where a similar case was previously filed in another district 13 court. See Kohn Law Grp., Inc. v. Auto Parts Mfg. Miss., Inc., 14 787 F.3d 1237, 1239 (9th Cir. 2015). “When applying the first- 15 to-file rule, courts should be driven to maximize ‘economy, 16 consistency, and comity.’” Kohn, 787 F.3d at 1240 (quoting Cadle 17 Co. v. Whataburger of Alice, Inc., 174 F.3d 599, 604 (5th Cir. 18 1999)); see also Pacesetter, 678 F.2d at 95 (explaining that the 19 first-to-file rule “is not a rigid or inflexible rule to be 20 mechanically applied, but rather is to be applied with a view to 21 appealed the decision to the Federal Circuit. See Miller Mendel, 22 Inc. v. City of Anna, Tex., Case No. 22-1753 (Fed. Cir.). 23 4 Judge Gilstrap denied the motion for attorneys’ fees on the ground that “finding the ‘188 Patent ineligibl[e] at the 24 12(c) stage” does not mean Miller Mendel’s arguments to the contrary were “frivolous or objectively unreasonable.” Id., 2022 25 WL 2704790, at *6 (E.D. Tex. June 13, 2022). Furthermore, “Miller Mendel was entitled to believe that the ‘188 Patent was 26 valid after it was examined and allowed by the [U.S. Patent and Trademark Office].” Id. On July 8, 2022, the City of Anna 27 appealed the decision to the Federal Circuit. See Miller Mendel, Inc. v. City of Anna, Tex., No. 22-1999 (Fed. Cir.). That appeal 28 is still pending. 1 the dictates of sound judicial administration”). 2 The first-to-file rule requires analysis of three 3 factors: (1) chronology of the lawsuits; (2) similarity of the 4 parties; and (3) similarity of the issues. Kohn, 787 F.3d at 5 1240 (citing Alltrade, Inc. v. Uniweld Prods., Inc., 946 F.2d 6 622, 625 (9th Cir. 1991)). The first-to-file rule does not 7 require that the identities of the parties be identical, but 8 rather “requires only substantial similarity of the parties.” 9 Id. (citation omitted). Likewise, “[t]he issues in both cases 10 also need not be identical, only substantially similar.” Id. 11 Here, the court need not analyze the issue of 12 chronology because plaintiff does not argue that the present case 13 was filed first. Tyler Miller and/or Miller Mendel is a party in 14 the present case as well as the Texas Action and Oklahoma Action. 15 While plaintiff in the present case is not a named party in 16 either the Oklahoma Action or the Texas Action, plaintiff was 17 contractually obligated to indemnify the City of Oklahoma City 18 and the City of Anna against Miller Mendel’s patent infringement 19 claims. (Compl. ¶¶ 99, 103.) As a result, plaintiff has funded 20 the entirety of the defense in both the Oklahoma Action and Texas 21 Action. Because the parties in the present case are all heavily 22 involved in the previously filed cases, the court finds the 23 parties are substantially similar. See Kohn, 787 F.3d at 1240 24 (finding the parties were substantially similar even though the 25 defendant in one case was not a named party in the other case). 26 In finding that the first-to-file rule applied even though a 27 defendant in the first action was not named in the second action, 28 the court in Kohn explained that “a contrary holding could allow 1 a party . . . to skirt the first-to-file rule by omitting one 2 party from a second lawsuit. . . .” Kohn, 787 F.3d at 1240. 3 Similarly, here, defendants’ choice to sue only plaintiff’s 4 customers for patent infringement, rather than sue plaintiff 5 directly, should not render the first-to-file rule inapplicable. 6 “To determine whether two suits involve substantially 7 similar issues, [the court] look[s] at whether there is 8 ‘substantial overlap’ between the two suits.” Id., 787 F.3d at 9 1241 (citation omitted). Here, the central questions in both the 10 present case and the previously filed cases are the validity and 11 enforceability of the ‘098 and ‘188 Patents. Plaintiff’s four 12 claims for declaratory relief ask this court to find the ‘098 and 13 ‘188 Patents invalid and unenforceable. (Compl. ¶¶ 128-145.) 14 “[P]ermitting multiple litigations of these identical claims 15 could serve no purpose of judicial administration, and the risk 16 of conflicting determinations as to the patents’ validity and 17 enforceability [is] clear.” See Pacesetter, 678 F.2d at 96. 18 Furthermore, plaintiff’s two Sherman Act claims are at least in 19 part based on defendants’ patent infringement lawsuits, which 20 seek to enforce the same patents that plaintiff claims are 21 invalid and unenforceable. (Id. ¶¶ 146-159.) As such, six of 22 plaintiff’s eleven claims involve the validity and enforceability 23 of the patents and thus there is “substantial overlap” between 24 the cases. Kohn, 787 F.3d at 1241 (finding similar issues where 25 both cases involved claims to the same funds). 26 Defendants contend that dismissal is warranted because 27 plaintiff “may file its claims in the Oklahoma action to the 28 1 extent necessary.” 5 (See Mot. to Dismiss at 2). The existence 2 of plaintiff’s state law claims, however, counsel against 3 outright dismissal. Were another district court to find the 4 patents invalid or otherwise dismiss defendants’ patent 5 enforcement action, plaintiff would have to file a new suit in 6 California and could risk encountering statute of limitation 7 problems. See Alltrade, 946 F.2d at 629 (citing Asset Allocation 8 & Mgt. v. Western Employers Ins., 892 F.2d 566, 571 (7th Cir. 9 1989) (“Granted, the statute of limitations problems may not be 10 serious . . . . But why take chances? It is simpler just to 11 stay the [later] suit”.)) Accordingly, because the central 12 issues in the present case--the validity and enforceability of 13 defendants’ patents--are the same as the previously filed cases, 14 the court finds the first-to-file rule is applicable to the 15 present case and warrants a stay. 16 IT IS THEREFORE ORDERED that defendants’ motion to 17 strike (Docket No. 11) and motion to dismiss (Docket No. 12), be 18 and hereby are, DENIED without prejudice, and the hearing on 19 those motions set for January 9, 2023, and any other deadlines in 20 this case, are hereby VACATED; 21 AND IT IS FURTHER ORDERED that all proceedings in this 22 case are hereby STAYED pending final adjudication of the validity 23 of the ‘098 and ‘188 Patents by the Federal Circuit. The parties 24 5 Plaintiff argues that the first-to-file rule is not 25 applicable here because of various issues it identifies with transferring the case to the Western District of Oklahoma. (See 26 Opp’n to Mot. to Dismiss at 9 (Docket No. 30).) However, the 27 court need not address plaintiff’s concerns because the court is staying the case, not transferring it. 28 eee eee ON IRIE I OE SEE OSE ND OE 1 shall file a joint status report within fourteen days after all 2 | proceedings in the Federal Circuit regarding the ‘098 and ‘188 3 | Patents have concluded. dh ble (hi. 4 Dated: December 7, 2022 Pi he Vi (eh 5 UNITED STATES DISTRICT JUDGE 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28