Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_11-cv-01658/USCOURTS-casd-3_11-cv-01658-0/pdf.json

Nature of Suit Code: 830
Nature of Suit: Patent
Cause of Action: 35:145 Patent Infringement

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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

CREATIVE NAIL DESIGN, INC., Civil No. 11cv1658-CAB (WMc)

Plaintiff,

ORDER GRANTING DEFENDANT’S

MOTION TO DISMISS, AND DENYING

PLAINTIFF’S MOTION TO STRIKE THE

REPLY AS MOOT

[Doc. Nos. 12, 21]

v.

MYCONE DENTAL SUPPLY CO., INC.

D/B/A/ KEYSTONE RESEARCH &

PHARMACEUTICAL,

Defendant.

Before the Court is Defendant Mycone Dental Supply Co. d/b/a Keystone Research and

Pharmaceutical’s Motion to Dismiss or Stay, or in the Alternative, to Transfer this matter to the District of

New Jersey. [Doc. No. 12.] Plaintiff filed an opposition, [Doc. No. 19,] and Defendant filed a Reply [Doc.

No 20.] Plaintiff filed a Motion to Strike certain portion of the Reply brief. [Doc. No. 21.] Upon

consideration of the briefing, for the reasons set forth below, the Court GRANTS Defendant’s Motion,

DENIES Plaintiff’s motion to strike the reply, and finds that this matter shall be DISMISSED without

prejudice. 

I. BACKGROUND

Defendant Keystone is headquartered in Cherry Hill, New Jersey, and is a developer of products for

use in the cosmetic fingernail industry. Keystone owns U.S. Patent No. 5,965,147 (“the ‘147 Patent”), which

is directed to a certain acid-free chemical composition for use as inter alia, an artificial finger nail coating. 

Keystone sells nail coating products utilizing the inventions embodied in the ‘147 Patent under the brand

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name GELPOLISH. Plaintiff Creative Nail Design (“CND”) is in the business of manufacturing, marketing

and selling cosmetic nail products. It markets and sells an integrated fingernail polish system under the

brand name SHELLAC. Keystone claims that CND’s products infringe on one or more of the claims of the

‘147 Patent, and the use of the SHELLAC products byCND’s customers infringes at least one method claim

of the ‘147 Patent. 

In March of 2011, Keystone informed CND that the SHELLAC products infringed on the ‘147Patent

and sought to find an amicable resolution of the dispute outside of formal litigation. After a series of phone

conferences, in the ensuing months, Keystone’s president sent an email to CND representatives on July 14,

2011 attaching a draft patent infringement Complaint against CND and other related infringers. Keystone

stated that it was prepared to file the attached complaint, but that it would delay filing until July 19, 2011

if CND was willing to negotiate in good faith to reach an amicable resolution, and expressly requested that

CND refrain from using the settlement discussions “as a tool to prepare and file an anticipatory declaratory

judgment action in a jurisdiction different from the U.S. District Court for the District of New Jersey, named

in the attached draft complaint.” [Doc. No. 12-1 at 5; Robinson Decl. Ex. 1.]

CND responded to Keystone that it was interested in settlement, and at CND’s request, the parties

held an in-person settlement discussion on July 26, 2011 in New York City. Keystone alleges that following

the meeting the parties agreed to continue the settlement discussions going forward. CND, however, filed

the present action in this district the following day, seeking declaratory relief as to Keystone’s patent claims. 

Keystone then proceeded to file its complaint in the New Jersey Action, on July 28, 2011, which contains

patent claims, as well as a Lanham Act claim, and other claims under New Jersey state law. Keystone’s

complaint also names three of CND’s distributors and customers as defendants. 

Keystone brought this motion, arguing that this matter should be dismissed or transferred to the

District of New Jersey in light of its complaint. There is no dispute concerning the chronology of the two

actions, the similarity of the parties, or the similarity of the issues. The issue before the Court, therefore, is

whether, despite the fact that CND was the “first to file,” the action, the Court should apply an exception

to the “first-to-file rule.” Keystone contends that CND’s action is an “anticipatory action” and an attempt

to engage in forum shopping, and further asserts that the balance of convenience weighs in favor of transfer

of the first-filed case to New Jersey.

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II. ANALYSIS

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.” Pacesetter Systems, Inc. v. Medtronic, Inc., 678 F.2d 93, 95 (9th 

Cir. 1982). The rule is meant to promote judicial efficiency, however it is not absolute, and it is within the

Court’s discretion to determine whether and how to apply the rule. Id. See also 28 U.S.C. § 2201; Huth v.

Hartford Ins. Co., 298 F.3d 800, 802 (9th Cir. 2002)(“The exercise of jurisdiction under the Federal

Declaratory Judgment Act ... is committed to the sound discretion of the federal district courts.”). 

The rule may be set aside for equitable reasons “when the filing of the first suit evidences bad faith,

anticipatory suit, or forum shopping.” Inherent.com v. Martindale-Hubbell, 420 F.Supp.2d 1093, 1097

(N.D. Cal. 2006), citing Alltrade v. Uniweld Prod., Inc., 946 F.2d 622, 628 (9th Cir. 1991). “A suit is

‘anticipatory’ for the purposes of being an exception to the first-to-file rule if the plaintiff in the first-filed

action filed suit acts on receipt of specific, concrete indications that a suit by the defendant was imminent.”

Callaway Golf Co. v. Corporate Trade Inc., 09CV384 L(POR), 2010 WL 743829 (S.D. Cal. Mar. 1, 2010). 

Here, CND does not dispute that it received a letter from Keystone accusing CND of patent infringement,

and attaching a draft complaint that Keystone intended to file in the District of New Jersey unless a

settlement could be reached. Nor does CND deny that it engaged in settlement discussions the day prior to

the filing of its complaint. The Court finds, even without considering the challenged “additional facts” cited

in Keystone’s reply brief, that CND received concrete indications that Keystone intended to imminently file

a lawsuit in New Jersey, and acting on that information, it filed the instant lawsuit in this district. See First

Fishery Development Service, Inc. v. Lane Labs USA, Inc., 97CV1069-R, 1997 WL 579165 (S.D. Cal. July

21, 1997) (finding exception to the first-to-file rule applied and dismissing the case where plaintiff filed suit

two days before defendant’s anticipated date of filing suit); See also Xoxide, Inc. v. Ford Motor Co., 448

F.Supp.2d 1188 (C.D. Cal. 2006) (dismissing declaratoryrelief action and finding exception to “first-to-file”

rule where alleged patent infringer filed anticipatory action after engaging in settlement discussions).

The Court is not persuaded by CND’s argument that it filed suit here in order to eliminate the

uncertainty surrounding Keystone’s claims with respect to the ‘147 patent. Indeed, CND filed this action

within two weeks of receiving the draft New Jersey complaint, and the day after it had engaged in settlement

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discussions with Keystone. CND represents that it unilaterally came to the conclusion after that meeting

that the parties were at an “impasse,” but CND did not inform Keystone of its conclusion. The Court agrees

with Keystone that the only logical explanation for CND’s conduct in filing this action, without first

informing Keystone of its intentions, was to have the matter heard in California, rather than Keystone’s

expressly-communicated choice of New Jersey as its forum. See First Fishery, 1997 WL 579165 at * 3

(“The swiftness with which Plaintiff reacted to Defendant’s ultimatum indicates that, far from seeking to

resolve uncertainty and settle legal relations (both of which could have been done in New Jersey), Plaintiff

simply wanted to wrest the choice of forum away from the allegedly aggrieved party.”)

Moreover, even accepting CND’s contention that it did not believe Keystone really intended to file

its lawsuit, and that it did not file this suit in an attempt to forum shop, declaratory relief here would still be

inappropriate because Keystone did file its lawsuit. See id., fn. 2 (finding declaratory relief would serve “no

useful purpose” because the second-filed New Jerseyaction could effectivelysettle the legal claims at issue). 

See also Xoxide, 448 F.Supp. at 1193 (“Where the declaratory judgment action is filed in anticipation of

an infringement action, the infringement action should proceed, even w hen filed later.”) (internal quotations

omitted). Here it is undisputed that the claims are essentially the same in both lawsuits, and at most the

convenience to the parties and nonparty witnesses are equally as convenient in California and New Jersey. 

CND may adequately raise its arguments as counterclaims and defenses in the New Jersey action. 

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III. CONCLUSION

The Court finds, in its discretion, that to impose the “first-to-file” rule in this circumstance would 

unreasonably penalize Keystone for its attempt to resolve this dispute without bringing the matter to Court. 

Because the claims here may be adequately resolved by the District of New Jersey, and the convenience to

the parties and witnesses appear to be at least equal in both fora, if not more convenient in New Jersey, the

Court finds it appropriate that Keystone’s Motion [Doc. No. 12] be GRANTED, and the matter shall be

DISMISSED without prejudice. Plaintiff’s Motion to Strike the Reply [Doc. No. 21] is DENIED as moot

since the Court did not reach the disputed content of the reply in arriving at its conclusion. 

IT IS SO ORDERED.

DATED: June 11, 2012

CATHY ANN BENCIVENGO

United States District Judge

Da

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