NextGen Leads, LLC v. Gen3Ventures, LLC ( 2021 )

1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 SOUTHERN DISTRICT OF CALIFORNIA 10 11 NEXTGEN LEADS LLC, Case No.: 21cv1001 DMS (MSB) 12 Plaintiff, ORDER (1) GRANTING IN PART 13 v. AND DENYING IN PART DEFENDANTS’ MOTION TO 14 GEN3VENTURES, LLC and CONNECT DISMISS FOR LACK OF SUBJECT ME, LLC 15 MATTER JURISDICTION AND Defendants. IMPROPER VENUE, AND (2) 16 DENYING AS MOOT 17 DEFENDANTS’ ALTERNATIVE MOTION TO TRANSFER VENUE 18 19 20 This case comes before the Court on Defendants’ motion to dismiss Plaintiff’s 21 Complaint for lack of subject matter jurisdiction and improper venue, or in the alternative, 22 to transfer venue. Plaintiff filed an opposition to the motion, and Defendants filed a reply. 23 After thoroughly considering the issues, the Court denies the motion to dismiss for lack of 24 subject matter jurisdiction, but grants the motion to dismiss under the first-to-file rule. In 25 light of the first-to-file ruling, the Court denies as moot Defendants’ alternative motion to 26 transfer. 27 / / / 28 / / / 1 I. 2 BACKGROUND 3 Defendant Gen3Ventures, LLC is the owner by assignment of United States Patent 4 No. 10,075,592 (“the ‘592 Patent”). (Compl. ¶5.) The ‘592 Patent is entitled “Intelligent 5 Call Lead Generation,” and it issued on September 11, 2018. (Compl., Ex. A.) Gen3 and 6 Defendant Connect Me, LLC also have a Connect Me Application, which “allows a 7 prospective insurance purchaser to click a button to receive a call and quote from a 8 representative.” (Compl. ¶15.) 9 On October 8, 2018, Plaintiff NextGen Leads LLC had a discussion with Defendants 10 about their Connect Me Application. (Id. ¶16.) NextGen alleges that during this 11 discussion, Defendants “threatened NextGen by stating that use of any click-to-call 12 technology by NextGen other than from Gen3Ventures and Connect Me would result in a 13 suit for patent infringement based on [the ‘592 Patent] even if NextGen did not actually 14 infringe [the ‘592 Patent].” (Id. ¶17.) 15 Defendants allege NextGen entered into a Connect Me Application Agreement with 16 Gen3 on October 13, 2018. See Gen3Ventures, LLC, et al. v. NextGenLeads, LLC, United 17 States District Court for the Southern District of Indiana, Case No. 1:21-cv-01411-TWP- 18 TAB, ECF No. 1-2 ¶6. Defendants allege NextGen entered into a similar Agreement with 19 ConnectMe on July 26, 2019. Id. ¶7. 20 On May 10, 2021, Gen3 and Connect Me filed a Complaint against NextGen in 21 Marion Superior Court in Marion County, Indiana. Id., ECF No. 1-1. That Complaint 22 alleges claims for breach of the Connect Me Application Agreements and for preliminary 23 injunction. Id. 24 On May 26, 2021, NextGen filed the present case in this Court alleging claims for 25 declaratory judgment of noninfringement of the ‘592 Patent and declaratory judgment of 26 invalidity of the ‘592 Patent. Two days later, NextGen removed Gen3 and Connect Me’s 27 state court Complaint from Marion County Superior Court to the United States District 28 Court for the Southern District of Indiana. NextGen then filed a motion to dismiss that 1 Complaint, which motion is currently pending. In the present case, NextGen filed an 2 Amended Complaint, after which Gen3 and Connect Me filed the present motion. 3 II. 4 DISCUSSION 5 Gen3 and Connect Me move to dismiss this case for lack of subject matter 6 jurisdiction and pursuant to the first-to-file rule, or in the alternative, move to transfer this 7 case to the Southern District of Indiana pursuant to 28 U.S.C. § 1404(a). 8 A. Subject Matter Jurisdiction 9 NextGen alleges this Court has subject matter jurisdiction over this case pursuant to 10 the Declaratory Judgment Act, 28 U.S.C. §§ 2201. “A court has subject matter jurisdiction 11 under the Declaratory Judgment Act only if ‘the facts alleged, under all the circumstances, 12 show that there is a substantial controversy, between parties having adverse legal interests, 13 of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’” 14 Hewlett-Packard Co. v. Acceleron LLC, 587 F.3d 1358, 1361 (Fed. Cir. 2009) (quoting 15 MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118, 127 (2007)). “In patent cases, 16 declaratory judgment jurisdiction exists ‘where a patentee asserts rights under a patent 17 based on certain identified ongoing or planned activity of another party, and where that 18 party contends that it has the right to engage in the accused activity without license.’” Id. 19 (quoting SanDisk Corp. v. STMicroelectronics, Inc., 480 F.3d 1372, 1377 (Fed. Cir. 2007)). 20 “[A] declaratory judgment plaintiff must show that the dispute is ‘definite and concrete, 21 touching the legal relations of parties having adverse legal interest; and that it be real and 22 substantial and admit of specific relief through a decree of a conclusive character, as 23 distinguished from an opinion advising what the law would be upon a hypothetical state of 24 facts.’” Id. at 1362 (quoting MedImmune, 549 U.S. at 127). 25 Here, NextGen alleges that during its October 8, 2018 discussion with Gen3 and 26 Connect Me, Gen3 and Connect Me “threatened NextGen by stating that use of any click- 27 to-call technology by NextGen other than from Gen3Ventures and Connect Me would 28 result in a suit for patent infringement based on the Patent-in-Suit even if NextGen did not 1 actually infringe the Patent-in-Suit.” (Am. Compl. ¶17.) NextGen also alleges Gen3 and 2 Connect Me have “since attempted to force NextGen to use their product, and only their 3 product, in perpetuity, on the threat that they have a claim for patent infringement.” (Id. 4 ¶18.) NextGen also alleges Gen3 and Connect Me “have further threatened to sue NextGen 5 for patent infringement of the Patent-in-Suit based on NextGen’s NextGen product.” (Id. 6 ¶19.) 7 Gen3 and Connect Me argue these allegations are insufficient to support subject 8 matter jurisdiction under the Declaratory Judgment Act. Specifically, they assert they have 9 not alleged a claim for patent infringement against NextGen either in this Court or in the 10 Indiana courts, and that the only specific threat alleged in the Amended Complaint was a 11 verbal threat made three years ago before the parties entered into the Connect Me 12 Application Agreements. Numerous cases hold, however, that an actual claim of 13 infringement is not required to support a declaratory judgment action for noninfringement 14 and invalidity. See, e.g., Vanguard Research,. Inc. v. PEAT, Inc., 304 F.3d 1249, 1254 15 (Fed. Cir. 2002) (stating “express threat” not required to establish “reasonable 16 apprehension of suit”) (citation omitted); EMC Corp. v. Norand Corp., 89 F.3d 807, 811 17 (Fed. Cir. 1996) (“reasonable apprehension of suit does not require an express charge of 18 infringement and threat of suit”), overruled in part on other grounds by MedImmune, 549 19 U.S. 118. Gen3 and Connect Me also fail to cite any authority to support their argument 20 that a verbal threat is insufficient to support declaratory judgment jurisdiction. The length 21 of time between the alleged initial threat and NextGen’s filing of the present case 22 (approximately three years) is a factor the Court may consider in determining whether 23 Gen3 and Connect Me have engaged in an affirmative act related to enforcement of their 24 patent rights, ActiveVideo Networks, Inc. v. Trans Video Electronics, Ltd., 975 F.Supp.2d 25 1083, 1087-88 (N.D. Cal. 2013), and if that were the only threat alleged in this case, that 26 passage of time would weigh against a finding that there is a substantial case or 27 controversy. But, that is not the only threat alleged here. Although short on specifics, 28 NextGen also alleges Gen3 and Connect Me have since threatened NextGen with a claim 1 of patent infringement if it uses a product other than theirs, and also threatened NextGen 2 with patent infringement based on NextGen’s product. (Am. Compl. ¶¶ 18-19.) These 3 repeated threats, coupled with Gen3 and Connect Me’s filing of a Complaint against 4 NextGen in Indiana, show there is a substantial controversy between the parties “’of 5 sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’” Asia 6 Vital Components Co., Ltd. v. Asetek Danmark A/S, 837 F.3d 1249, 1252 (Fed. Cir. 2016) 7 (quoting MedImmune, 549 U.S. at 127). Therefore, the Court denies Gen3 and Connect 8 Me’s motion to dismiss this case for lack of subject matter jurisdiction. 9 B. First-to-File Rule 10 Next, Gen3 and Connect Me argue the Court should dismiss this case under the first- 11 to-file rule. This rule “is a generally recognized doctrine of federal comity which permits 12 a district court to decline jurisdiction over an action when a complaint involving the same 13 parties and issues has already been filed in another district.” Pacesetter Sys. v. Medtronic, 14 Inc., 678 F.2d 93, 94-95 (9th Cir. 1982) (citations omitted). See also Alltrade, Inc. v. 15 Uniweld Prods., 946 F.2d 622, 623 (9th Cir. 1991) (stating first-to-file rule gives federal 16 district courts discretion “to transfer, stay, or dismiss an action when a similar complaint 17 has already been filed in another federal court[.]”) “The first-to-file rule was developed to 18 serve[ ] the purpose of promoting efficiency well and should not be disregarded lightly.” 19 Alltrade, 946 F.2d at 625 (internal quotation marks and citations omitted). Courts analyze 20 three factors to determine the applicability of the first-to-file rule: (1) “chronology of the 21 lawsuits,” (2) “similarity of the parties,” and (3) “similarity of the issues.” Kohn Law Grp., 22 Inc. v. Auto Parts Mfg., Miss., Inc., 787 F.3d 1237, 1240 (9th Cir. 2015). 23 1. Chronology of the Lawsuits 24 The first factor, chronology of the lawsuits, “simply requires that the case in question 25 was filed later in time.” Therapy Stores, Inc. v. JGV Apparel Grp., LLC, No. 4:16-CV- 26 02588-YGR, 2016 WL 4492583, at *4 (N.D. Cal. Aug. 26, 2016) (citations omitted). Here, 27 there is no dispute this case was filed after Gen3 and Connect Me filed their case in Indiana. 28 / / / 1 2. Similarity of the Parties 2 The second factor, similarity of the parties, “does not require exact identity of the 3 parties.” Kohn Law Grp., Inc., 787 F.3d at 1240 (citations omitted). Rather, the first-to- 4 file rule “requires only substantial similarity of parties.” Id. (citations omitted). 5 That requirement is met here, as well. NextGen, Gen 3 and ConnectMe are parties 6 to both cases. NextGen’s argument that the parties are not identical is contrary to Kohn 7 Law Grp., Inc., and it does not alter this conclusion. Therefore, this requirement is met. 8 3. Similarity of the Issues 9 The third and final factor requires the Court to consider the similarity of the issues 10 in the relevant actions. As with the party factor, the first-to-file rule does not require 11 identical issues or “exact parallelism,” but requires substantial similarity of the issues. See 12 id.; see Nakash v. Marciano, 882 F.2d 1411, 1416 (9th Cir. 1989) (“exact parallelism does 13 not exist, but it is not required. It is enough if the two proceedings are ‘substantially 14 similar.’”). In order to determine whether the actions involve substantially similar issues, 15 courts “look at whether there is ‘substantial overlap’ between the two suits.” Kohn Law 16 Grp., Inc., 787 F.3d at 1240. 17 Here, the Indiana case involves claims for breach of the Connect Me Application 18 Agreements, which are identified in NextGen’s Complaint in this case, misappropriation 19 of trade secrets, and infringement of trade dress. This case, by contrast, alleges claims for 20 declaratory judgment of noninfringement and invalidity of Gen3’s ‘592 Patent. NextGen 21 relies on the different legal claims to argue that the issues in each case are “dramatically 22 different,” but the Court disagrees with that argument. As NextGen argued in its motion 23 to dismiss the claims for trade secret misappropriation and trade dress infringement, the 24 alleged trade secret “is the subject of and [was] disclosed in” the ‘592 Patent. 25 Gen3Ventures, ECF No. 20 at 2. And, again according to NextGen, the contracts appear 26 to reference, if not cover, the invention described in the ‘592 Patent. Id. at 7. Thus, 27 although the issues in the two cases are not identical, there is a substantial overlap between 28 the cases, which satisfies the third factor of the first-to-file rule. 1 III. 2 CONCLUSION 3 Although the Court disagrees with Gen3 and Connect Me’s argument that the Court 4 lacks subject matter jurisdiction to hear this case, the Court agrees that the requirements of 5 || the first-to-file rule are satisfied here, and that dismissal is warranted pursuant to that rule. 6 || Accordingly, Defendants’ motion to dismiss is granted, and this case is dismissed without 7 ||prejudice. In light of this ruling, Gen3 and Connect Me’s alternative motion to transfer 8 || venue is denied as moot. 9 IT ISSO ORDERED. 10 ||Dated: October 22, 2021 1 am bl 1D Hon. Dana M. Sabraw, Chief Judge United States District Court 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28