United States District Court, S.D. New York
June 16, 2004.
MASTERCARD INTERNATIONAL INCORPORATED and MASTERCARD INTERNATIONAL, LLC, Plaintiffs,
LEXCEL SOLUTIONS, INC., Defendant.
The opinion of the court was delivered by: WILLIAM PAULEY, District Judge
MEMORANDUM and ORDER
Plaintiffs MasterCard International Inc. and MasterCard
International, LLC (collectively, "MasterCard") bring this action
for a declaratory judgment of non-infringement and invalidity of
defendant Lexcel Solutions Inc.'s ("Lexcel's") patents for an
electronic funds transfer network test system, U.S. Patent No.
6,129,271, and U.S. Patent No. 6,336,590. Lexcel moves to dismiss
this action pursuant to Fed.R.Civ.P. 12(b)(1) for lack of
subject matter jurisdiction, and alternatively moves to transfer
this action to the District of Arizona, pursuant to
28 U.S.C. § 1404(a). For the reasons stated below, Lexcel's motion to dismiss
is denied, and its motion to transfer venue is granted.
This action stems from the deterioration of a relationship
between parties to a software license agreement. Lexcel sells and
licenses software called "financial transaction network testing and simulation software" to test financial
transaction systems, such as electronic funds transfer systems.
(Compl. ¶ 8.) MasterCard operates financial transaction networks
and supplies testing and simulation software to its member
financial institutions to allow them to verify that their systems
will operate with MasterCard's financial transaction networks.
(Compl. ¶¶ 9-10.) Until April 2003, MasterCard licensed this
testing and simulation software from outside vendors, including
Lexcel. (Compl. ¶ 11.) In collaboration with another vendor,
MasterCard is developing network testing and simulation software
for distribution to its associated financial institutions.
(Compl. ¶ 15; Supplemental Declaration of Simon Dix, dated
November 24, 2003 ("Dix Decl. II.") ¶¶ 2-5.) As a result, Lexcel
filed suit against MasterCard in the District of Arizona on July
29, 2003, (the "Arizona Action") claiming breach of contract,
misappropriation of trade secrets, unfair competition, copyright
infringement and breach of fiduciary duty. (Compl. ¶ 12;
Declaration of Nathan Dunn, dated Oct. 30, 2002 ("Dunn Decl.")
Ex. F: Lexcel Arizona Complaint.) The Arizona Action concerns the
same technology and products at issue here. (Transcript of Oral
Argument, dated December 5, 2003 ("Tr.") at 11; Compl. ¶ 12; Dunn
Decl. Ex. F.) Specifically, Lexcel alleges in the Arizona Action
that MasterCard improperly accessed the confidential source code
of Lexcel's financial network testing software. (Dunn Decl. Ex. F ¶¶ 11-18, 23, 25, 34, 37, 40, 43.) On August
15, 2003, MasterCard answered and counterclaimed for breach of a
license agreement in that action. (Dunn Decl. Ex. C: MasterCard
Arizona Answer and Counterclaim.)
On September 4, 2003, Lexcel's counsel advised MasterCard's
counsel in the context of a compromise negotiation that Lexcel
might have a claim for patent infringement against MasterCard for
"infringement that may occur in the future or that may have
already occurred." (Compl. ¶ 13; Dunn Decl. Ex. B at 2.) Further,
during an "in-person meeting between MasterCard and Lexcel
personnel subsequent to the filing of the Arizona Action, Lexcel
personnel allegedly told MasterCard that Lexcel owned at least
two government-issued U.S. patents, and suggested that the
existence of those patents would prevent MasterCard from pursuing
alternate sourcing of network testing and/or simulator software
other than from Lexcel without facing a lawsuit from Lexcel."
(Compl. ¶ 14.)
MasterCard filed this action on September 12, 2003, alleging
that it is entitled to a declaratory judgment of patent
non-infringement and invalidity, and a finding that Lexcel's
patents are unenforceable because: (a) both MasterCard and Visa
publically used their own versions of financial transaction
network testing or simulation software before Lexcel applied for
its patents; and (b) Lexcel intentionally failed to disclose prior art to the United States Patent and Trademark Office
("PTO") during prosecution. (Compl. ¶¶ 17-39.) The underlying
facts of the parties' dispute are nearly identical to those of
the Arizona Action. (Dunn Decl. Ex. F ¶¶ 11-18; Compl. ¶¶ 8-16.)
On December 3, 2003, two days before oral argument on this
motion, this Court received notice from Lexcel that it moved to
amend its complaint in the Arizona Action to add, inter alia, a
"conditional" patent infringement claim. (Lexcel Supplemental
Submission, dated December 3, 2003; Joint Status Letter to the
Court, dated May 14, 2004 ("Joint Letter") at 2.) On May 28,
2004, the Arizona federal district court denied Lexcel's motion
to amend its complaint to include a "conditional proposed count"
of patent infringement because: (1) Lexcel's conditional
amendment failed to satisfy the standards of Fed.R.Civ.P.
Rule 8; and (2) Lexcel's conditional request failed to demonstrate
that an actual case or controversy existed. Lexcel Solutions,
Inc. v. MasterCard, Inc., CV-03-1454-PHX-JAT (D. Ariz. May 28,
I. Rule 12(b)(1) Standards
On a Rule 12(b) motion to dismiss, this Court generally must
accept the factual allegations contained in the complaint as
true, and draw all reasonable inferences in favor of the non-movant; it should not dismiss the complaint "unless it
appears beyond doubt that the plaintiff can prove no set of facts
in support of his claim which would entitle him to relief."
Conley v. Gibson, 355 U.S. 41, 45-46 (1957); accord
Leatherman v. Tarrant County Narcotics Intelligence &
Coordination Unit, 507 U.S. 163, 164, 113 S.Ct. 1160, 1161
(1993) (noting that factual allegations in the complaint must be
accepted as true on motion to dismiss); Press v. Quick & Reilly,
Inc., 218 F.3d 121, 128 (2d Cir. 2000) (same). In order to avoid
dismissal, a plaintiff must assert a cognizable claim and allege
facts that, if true, would support such a claim. Boddie v.
Schnieder, 105 F.3d 857, 860 (2d Cir. 1997).
Under a Rule 12(b)(1) challenge to a court's subject matter
jurisdiction, the disputed jurisdictional fact issues may be
resolved by referring to evidence outside of the pleadings, such
as affidavits, and if necessary, an evidentiary hearing. See
Phifer v. City of New York, 289 F.3d 49, 55 (2d Cir. 2002);
Zappia Middle East Constr. Co. v. Emirate of Abu Dhabi,
215 F.3d 247, 253 (2d Cir. 2000).
II. Declaratory Judgment Act
MasterCard asserts subject matter jurisdiction pursuant to the
Declaratory Judgment Act, 28 U.S.C. § 2201 (2003) and the federal
patent laws, pursuant to 28 U.S.C. § 1338(a) (2003). (Compl. ¶ 5.) Lexcel argues that this Court should dismiss the
complaint for lack of subject matter jurisdiction, pursuant to
Fed.R.Civ.P. 12(b)(1) because an actual controversy does not
exist. Interpreting the Declaratory Judgment Act,
28 U.S.C. § 2201, the Federal Circuit has established a two-pronged test to
determine if there is a justiciable controversy in a declaratory
judgment action concerning patent law. A declaratory judgment
plaintiff must show that, as of the time the complaint was filed:
(1) the defendant's conduct "created on the part of plaintiff a
reasonable apprehension that the defendant [would] initiate
suit"; and (2) the plaintiff either produced or had taken steps
to produce the accused device. Arrowhead Indus. Water, Inc. v.
Ecolochem, Inc., 846 F.2d 731, 736 (Fed. Cir. 1988); Shell Oil
Co. v. Amoco Corp., 270 F.2d 885, 888 (Fed. Cir. 1992).
A plaintiff may establish an objective reasonable apprehension
of suit through evidence of a defendant's express charge of
infringement or through a totality of the circumstances.
Cardinal Chem. Co. v. Morton Int'l, Inc., 508 U.S. 83, 96
(1993); Shell Oil, 270 F.2d at 888; Arrowhead, 846 F.2d at
734-36. "To invoke the court's declaratory judgment jurisdiction,
a plaintiff must show `more than the nervous state of mind of a
possible infringer,' but does not have to show that the patentee
is `poised on the courthouse steps.'" Vanguard Research, Inc. v.
PEAT, Inc., 304 F.3d 1249, 1255-56 (Fed. Cir. 2002) (citations omitted). Finally, even if there is an actual
controversy, a court still retains discretion to decline
jurisdiction. E.M.C. v. Normand Corp., 89 F.3d 807, 813 (Fed.
A. Reasonable Apprehension
Lexcel contends that its conduct did not create a reasonable
apprehension that it would initiate a patent suit against
MasterCard because: (a) it did not make an express charge of
infringement against MasterCard; (b) its complaint in the Arizona
Action does not allege a patent claim that could have been easily
included; (c) it had not begun an investigation into pursuing a
patent infringement action; and (d) the statements to which
MasterCard points in support of the existence of a reasonable
apprehension were made in the context of settlement negotiations
and do not indicate a threat of litigation. Lexcel does not
dispute that it engaged in discussions with MasterCard concerning
its patents, but instead characterizes those communications as
"pure positional statement[s]," "jawboning," or "a reservation of
rights" in order to minimize the likelihood of a finding of
reasonable apprehension of suit. (Def. Br. at 5-6.) As noted,
however, when determining whether a reasonable apprehension
exists, the test is an objective one, and the subjective intent
of a plaintiff or defendant is irrelevant. Goodyear Tire, 824 F.2d at 955-56; Vangaurd Research, 304
F.3d at 1255.
In opposition, MasterCard argues that Lexcel's conduct amounted
to an express charge of infringement, and that even assuming it
did not, jurisdiction is still proper because the totality of
Lexcel's conduct created a reasonable apprehension of a future
lawsuit. MasterCard points to a letter it received from Lexcel,
dated September 4, 2003 (the "September 4 Letter"), in which
Lexcel charged that it may have a claim for patent infringement
against MasterCard and would consider such infringement to be
willful. (Compl. ¶ 14; Dunn Decl. Ex. B. at 2.) Additionally,
MasterCard alleges that Lexcel asserted it owned two patents that
would prevent MasterCard from "pursuing alternate sourcing of
network testing and/or simulator software other than from Lexcel
without facing a lawsuit from Lexcel." (Compl. ¶ 15.) MasterCard
argues that Lexcel's conduct placed it under a reasonable
apprehension that Lexcel would file a patent infringement suit if
MasterCard were to use another vendor's software. (Compl. ¶ 16.)
This Court finds that Lexcel's conduct constituted an express
charge of infringement that created a reasonable apprehension of
suit by MasterCard. Specifically, in the September 4 Letter from
Lexcel's counsel to MasterCard's counsel in the Arizona Action,
Lexcel charged that it: reserves all rights for any claim that Lexcel might
have for patent infringement that may occur in the
future or that may have already occurred. Indeed, we
would consider any infringement to be willful,
notwithstanding your suggestion that an action for
patent infringement would be "ill advised."
MasterCard should know, better than anyone, the
process covered in Lexcel's patents for testing
software readiness was not known previously. . . . In
fact, it is my understanding that MasterCard had a
failed effort at providing a testing and
certification software system before it went to
Lexcel. As you know, this is powerful evidence of
patent validity, on top of the statutory presumption
of validity. You should also see the brochures that
MasterCard has distributed which tout the advantages
and character of Lexcel's software. This, too, will
be powerful evidence.
(Dunn Decl. Ex. B. at 2.) This is the paradigm of an express
charge of infringement. See Arrowhead, 846 F.2d at 737-38
(finding express charge of infringement where defendant's letter
made "thinly veiled threats" to enforce its patent rights by
litigation); FindWhat.com v. Overture Servs., 02 Civ. 447
(MBM), 2003 WL 403649, at *3-4 (S.D.N.Y. Feb. 21, 2003) (finding
express charge of infringement where defendant asserted to
plaintiff twice in conversation that plaintiff was infringing its
patent) (citing Applexion S.A. v. Almalgamated Sugar Co., No.
95 C 858, 1995 WL 229049 (N.D. Ill. Apr. 17, 1995) (same)).
Indeed, Lexcel expressly warns that it may pursue a patent
infringement suit against MasterCard for past or future conduct,
and cites to "powerful evidence" of its patents' validity. (Dunn
Decl. Ex. B at 2.) "If [a] defendant has expressly charged a current activity
of the plaintiff as an infringement, there is clearly an actual
controversy, certainty has rendered apprehension irrelevant, and
one need say no more." Arrowhead Indus., 846 F.2d at 736.
The facts of the present case are analogous to those in
Goodyear Tire & Rubber Co. v. Releasomers, Inc., 824 F.2d 953
(Fed. Cir. 1987). In Goodyear Tire, the Federal Circuit
reversed a district court's dismissal of a declaratory judgment
action and held that plaintiff had an objectively reasonable
apprehension that defendant would file a patent infringement suit
because: (1) the defendant had filed a trade secret
misappropriation claim against plaintiff in state court that
related to the same technology; and (2) the defendant had made
innuendos during negotiations over the state court action that
could have reasonably led the plaintiff to believe defendant
would bring a patent infringement action. See Goodyear, 824
F.2d at 955-56 (finding "objective inference of an impending
infringement suit" where defendant asserted patents and made
"innuendoes" concerning possible litigation during settlement
negotiations in a separate action).
That the parties were engaged in compromise negotiations when
Lexcel advanced a charge of infringement is of no moment.
Goodyear, 824 F.2d at 955-56. Further, the existence of Lexcel's suit against MasterCard for the same technology in
another forum also favors a finding of a reasonable apprehension
of suit because it demonstrates a "willingness to protect that
technology." Vanguard Research, 304 F.3d at 1255 (reversing
district court dismissal, holding that plaintiff had a reasonable
apprehension of suit where defendant had filed a previous
misappropriation of trade secrets claim relating to the same
technology). Accordingly, this Court finds that Lexcel's conduct
created an objective reasonable apprehension of suit.
B. Production of the Accused Device
Lexcel argues for the first time in its reply brief that
MasterCard cannot meet the requirements for initiating a
declaratory judgment action because it has not actually produced
or prepared to produce the accused device. (Def. Reply Br. at
1-2.) MasterCard, however, avers in its complaint that it is
preparing to release its competitive "Alternative Software" into
the market shortly, and details "concrete steps" it has
undertaken in preparation for that release. (Compl. ¶ 15.)
Indeed, MasterCard's supporting affidavits and exhibits support
its assertion that it has developed the Alternative Software,
that it will market to financial institutions in early 2004. (Dix
Decl. I ¶¶ 9, 16, 18; Dix Decl. II ¶¶ 3-5, Ex. A.) Lexcel fails
to raise anything other than its own conjecture to dispute Mastercard's position. Thus, Lexcel's argument that MasterCard
fails to meet this second requirement of the Declaratory Judgment
Act is without merit.
In conclusion, this Court finds that Lexcel's conduct created a
reasonable apprehension that a lawsuit would be initiated and
that MasterCard has already taken steps to produce the accused
device. Accordingly, this Court has subject matter jurisdiction
over this action because MasterCard has established an actionable
case or controversy under the Declaratory Judgment Act. Lexcel's
12(b)(1) motion to dismiss is denied.
III. Motion to Transfer Venue
Lexcel also moves to transfer this action to the District of
Arizona for consolidation with the parties' action currently
pending there. Section 1404(a) states that "[f]or the convenience
of the parties and witnesses, in the interests of justice, a
district court may transfer any civil action to any other
district or division where it might have been brought."
28 U.S.C. § 1404(a) (2004). The goal of Section 1404(a) "is to prevent
waste of `time, energy and money' and `to protect litigants,
witnesses and [the] public against unnecessary inconvenience and
expense.'" Van Dusen v. Barrack, 376 U.S. 612, 616 (1964)
(internal quotations omitted); accord Citicorp Leasing, Inc.
v. United Am. Funding, Inc., 03 Civ. 1586 (WHP), 2004 WL 102761, at *2 (S.D.N.Y. Jan. 21, 2004). In analyzing a
motion to transfer venue, courts use "broad discretion" and must
make their determinations "upon notions of convenience and
fairness on a case-by-case basis." In re Nematron Corp. Sec.
Litig., 30 F. Supp.2d 397, 399 (S.D.N.Y. 1998); accord Bionx
Implants, Inc. v. Biomet, Inc., 99 Civ. 0740 (WHP), 1999 WL
342306, at *3 (S.D.N.Y. May 27, 1999) (district court has
"considerable discretion" in deciding whether to transfer venue).
In determining whether to transfer venue, courts examine: (1)
whether the action could have been brought in the proposed
transferee forum; and (2) whether the transfer would "promote the
convenience of parties and witnesses and would be in the
interests of justice." Clarendon Nat'l Ins. Co. v. Pascual, 99
Civ. 10840 (JGK)(AJP), 2000 WL 270862, at *2 (S.D.N.Y. Mar. 13,
2000). The parties do not dispute that this action could be
brought in the District of Arizona. Instead, they focus on
whether transfer would promote the interests of justice and
convenience of the parties.
In analyzing whether transfer would promote such interests,
courts consider several factors, including:
(1) the place where the operative facts occurred; (2)
the convenience of the parties; (3) the convenience
of the witnesses; (4) the relative ease of access of
proof; (5) the availability of process to compel the
attendance of unwilling witnesses; (6) the
plaintiff's choice of forum; (7) the forum's
familiarity with the governing law; and (8) trial efficiency and the interests of justice.
Clarendon Nat'l Ins., 2000 WL 270862, at *3; accord J. Lyons
Co. v. Republic of Tea, Inc., 892 F. Supp. 486, 492 (S.D.N.Y.
1995). "There is no rigid formula for balancing these factors and
no single one of them is determinative." Citigroup, Inc. v. City
Holding Co., 97 F. Supp.2d 549, 561 (S.D.N.Y. 2000). "In
performing the analysis the Court must, however, give due
deference to the plaintiff's choice of forum which should not be
disturbed unless the balance of convenience and justice weigh
heavily in favor of defendant's forum." Citigroup, 97 F. Supp.2d
at 561; accord Reliance Ins. Co. v. Six Star, Inc.,
155 F. Supp.2d 49, 57 (S.D.N.Y. 2001); NBA Props., Inc. v. Salvino,
Inc., 99 Civ. 11799 (AGS), 2000 WL 323257, at *3 (S.D.N.Y. Mar.
27, 2000). Further, the balancing of these factors is an
equitable task and an "ample degree of discretion is afforded to
the district courts in determining a suitable forum." First City
Nat'l Bank & Trust Co. v. Simmons, 878 F.2d 76
, 80 (2d Cir.
1989). Finally, the moving party, Lexcel, bears the burden of
establishing by clear and convincing evidence that transfer is
appropriate. Reliance, 155 F. Supp.2d at 56.
A. Balance of Conveniences
After conducting an analysis of the balance of conveniences,
this Court finds that the factors weigh heavily in favor of transfer to the District of Arizona. First, the locus of
operative facts favors transfer. "In determining the locus of
operative facts a court must look to the site of events from
which the claim arises." Transatlantic Reinsurance Co. v.
Continental Ins. Co., 03 Civ. 3227 (CBM), 2003 WL 22743829, at
*5 (Nov. 20, 2003) (internal citations omitted). "In infringement
cases the operative facts usually relate `to the design,
development and production of a patented product.'"
Findwhat.com, 2003 WL 402649, at *6 (quoting Invivo Research,
Inc. v. Magnetic Resonance Equipment Corp., 119 F. Supp.2d 433,
439 (S.D.N.Y. 2000)); accord Bionx Implants, 1999 WL
342306, at *4. MasterCard's complaint alleging invalidity,
uneforceability and noninfringment is largely focused on the
contention that Lexcel failed to disclose prior art to the PTO
during prosecution of the patents-in-suit. (Compl. ¶¶ 17-21,
30-39, Prayer for Relief at B-C.) Against that backdrop, the
locus of operative facts strongly support transfer to Arizona,
and do not weigh in favor of a New York forum. This action arose
in Arizona, where Carl Kubitz, Lexcel's CEO, invented the
patented systems. Additionally, the prosecution of the patent,
which is essential to this action, took place in Arizona.
(Declaration of Carl Kubitz, dated October 29, 2003 ("C. Kubitz
Decl. I") ¶ 5; Reply Declaration of Carl Kubitz, dated November
19, 2003 ("C. Kubitz Decl. II") ¶ 2.) That the locus of operative
facts concerning Lexcel's patents is in Arizona is further supported by
the fact that all of Lexcel's employees with knowledge of
Lexcel's products and patents continue to reside there, and all
of Lexcel's records concerning the patented technology and its
prosecution are maintained at Lexcel's headquarters in
Scottsdale, Arizona. (Declaration of Flora Kubitz, dated October
29, 2003 ("F. Kubitz Decl.") ¶ 10; C. Kubitz Decl. II ¶ 2.) Since
this action has only a gossamer connection to New York, this
factor weighs strongly in favor of transfer. See United States
v. Nature's Farm Products, Inc., 00 Civ. 6593 (SHS), 2004 WL
1077968, at *5 (S.D.N.Y. May 13, 2004) (transferring venue where
locus of operative facts occurred mainly in transferee venue).
The convenience of witnesses is a neutral factor. Most, if not
all, of the trial witnesses in this action will be party
witnesses. All of Lexcel's employees and witnesses with knowledge
of Lexcel's products and patents, including the inventor Carl
Kubitz and the attorney who prosecuted the patents, reside in
Arizona. (C. Kubitz Decl. I ¶ 5; F. Kubitz Decl. ¶ 10.)
MasterCard's employees with knowledge of the development of the
Alternative Software are located at its operations center in
O'Fallon, Missouri. (F. Kubitz Decl. ¶ 4; Dix Decl. I ¶ 19.)
MasterCard argues that two of its party witnesses reside in
Purchase, New York and Miami, Florida, respectively. However, their testimony concerning prior use of simulation software will
be presented in the Arizona Action in connection with Lexcel's
copyright infringement claim. (C. Kubitz Decl. II ¶¶ 4-5;
Declaration of Christopher Cosgrove, dated November 13, 2003
("Cosgrove Decl.") ¶ 2; Declaration of Raquel White, dated
November 13, 2003 ("White Decl.") ¶¶ 2-3.) Thus, this factor is
neutral as party witnesses are located in Missouri, Arizona, New
York, and Florida.
MasterCard identifies a vendor located in Belgium that may be a
non-party witness outside of this Court's subpoena power. At this
stage, this Court cannot assess the relevance and availability of
that non-party witness. Accordingly, this Court finds the process
over unwilling witnesses factor to be neutral.
The location of documents factor favors transfer. All of
Lexcel's documents concerning the patents in suit are located in
Arizona and the technology at issue in both actions was developed
in Arizona. (C. Kubitz Decl. I ¶ 5; F. Kubitz Decl. ¶ 10.) Most
of MasterCard's documents are located in O'Fallon, Missouri,
where it conducts primary oversight and development of the
Alternative Software. (Dix Decl. I ¶¶ 19-20; F. Kubitz Decl. ¶
9.) Additional documents may be located in Belgium, where
MasterCard's new, non-party vendor is located. (Dix Decl. ¶ 20.)
While MasterCard contends that some documents are located in
Purchase, New York, at its global headquarters (Dix Decl. ¶ 20),
it does not explain how those documents are related to this action, much less how they relate to the development of the
Alternative Software. After a review of the parties' submissions,
it is evident that most of the pertinent documents in this action
will be found in Arizona and Missouri. Accordingly, this factor
weighs in favor of transfer.
The relative means of parties factor also favors transfer. "A
party arguing against or for transfer because of inadequate means
must offer documentation to show that transfer (or lack thereof)
would be unduly burdensome to his finances." Federman Assocs. v.
Paradigm Med. Indus., Inc., 96 Civ. 8545 (BSJ), 1997 WL 811539,
at *4 (S.D.N.Y. Apr. 8, 1997); accord Orb Factory, Ltd. v.
Design Sci. Toys, Ltd., 6 F. Supp.2d 203, 210 (S.D.N.Y. 1998).
Lexcel notes that the disparity in wealth between the parties is
significant, and avers that it would be unable to sustain a
viable business and litigate two actions against MasterCard in
two fora. (F. Kubitz Decl. ¶ 7; Declaration of Michael O. Sutton,
Esq. ("Sutton Decl.") ¶ 4.) Examining the relative means of the
parties, Lexcel's net income was $489,000 in 2002, as opposed to
MasterCard Inc.'s revenues of $1.89 billion and net income of
$116 million in 2002. (F. Kubitz Decl. ¶ 5; Dunn Decl. Ex. E at
5: MasterCard Income Statement.) Indeed, according to
MasterCard's exhibits, Lexcel's highest credit line is $21,200,
and it has a "moderate risk of severe payment delinquency over
the next 12 months." (Def. Opp. Ex. 6: D&B Report at 2-4.) This vast disparity between the parties'
relative means, along with the fact that dual litigation will
likely hamper Lexcel's viability, weighs heavily in favor of
transfer. See Lynch v. Nat'l Prescription Adm'rs, 03 Civ.
1303 (GBD), 2004 WL 385156, at *4 (S.D.N.Y. Mar. 1, 2004)
(relative means factor favors transfer where litigation would
pose a greater financial burden on party with lesser resources);
Everest Capital Ltd. v. Everest Mgmt., L.L.C., 178 F. Supp.2d 459,
467-68 (S.D.N.Y. 2002) (same); see also Mattel, Inc. v.
Procount Business Servs., 03 Civ. 7234 (RWS), 2004 WL 502190, at
*4 (S.D.N.Y. Mar. 10, 2004) (transferring action due in part to
vast disparity in relative means between parties).
The choice of forum factor also weighs in favor of transfer.
While MasterCard's choice of forum is entitled to a heavy
presumption, that presumption is rebutted by the application of
the first-filed rule. The first-filed rule creates a presumption
that the first suit should have priority between two similar
actions filed in different fora. Reliance, 155 F. Supp.2d at
54; Findwhat.com, 2003 WL 402649, at *4-5 (citing Kahn v. Gen.
Motors Corp., 889 F.2d 1078, 1081 (Fed. Cir. 1989)). There are
sufficient overlapping factual and legal issues between this
action and the first-filed Arizona Action to trigger the
first-filed rule. See GT Plus, Ltd. v. Ja-Ru, Inc.,
41 F. Supp.2d 421, 423-24 (S.D.N.Y. 1998) (noting that the first-filed rule "generally applies where two actions involve
same parties and embrace same issues"); Mfrs. Hanover Trust Co.
v. Palmer Corp., 798 F. Supp. 161, 166-67 (S.D.N.Y. 1991)
(finding cases related where they involved the same underlying
facts, witnesses and parties and stating that "[t]he interests of
justice require that the cases be related, not identical.").
Indeed, both actions involve identical technology, and arise out
of the same dispute between the same parties. While this action
involves patents, and the Arizona Action involves, inter
alia, misappropriation of trade secrets, copyright infringement
and unfair competition, both actions concern alleged
misappropriation of either the source code or the structure of
the same electronic funds transfer testing equipment. (Compl. ¶¶
1-16; Dunn Decl. Ex. F ¶¶ 11-18; Tr. at 11.) Additionally, any
facts supporting a claim of willfulness here would be identical
to facts supporting Lexcel's claims in the Arizona Action,
including those for exemplary damages and statutory damages for
willful infringement. (Dunn Decl. Ex. F ¶ 52, Prayer for Relief
at ¶ b.) Accordingly, this factor favors transfer of venue.
The forum's familiarity with the law is a neutral factor since
"all federal district courts are assumed to be equally familiar
with federal patent law." Findwhat.com, 2003 WL 402649, at *6
(citing Recoton Corp. v. Allsop, Inc., 999 F. Supp. 574, 578
(S.D.N.Y. 1998)). Finally, judicial economy dictates that this action proceed in
the District of Arizona. Judicial economy is "a separate
component of the [c]ourt's [Section] 1404(a) transfer analysis . . .
and may be determinative in a particular case." Tucker
Anthony, Inc. v. Bankers Trust Co., 93 Civ. 0257 (SWK), 1994 WL
9683, at *8 (S.D.N.Y. Jan. 10, 1994) (citing Coffey v. Van Dorn
Iron Works, 796 F.2d 217, 220 (7th Cir. 1986)). One of the goals
of Section 1404(a) is to "prevent the waste of `time, energy and
money' and `to protect litigants witnesses and the public against
unnecessary inconvenience and expense.'" Van Dusen, 376 U.S. at
616. It would be inefficient and a waste of judicial resources to
subject the same parties to suit over interconnected claims
concerning identical technology and underlying disputes in two
separate fora. See Wyndham Assocs. v. Bintliff, 398 F.2d 614,
619 (2d Cir. 1968) (noting the "strong policy favoring litigation
of related claims" in the same forum). Indeed, the witnesses who
may testify in this action are identical to the witnesses
identified in the District of Arizona litigation. (See, e.g.,
C. Kubitz Decl. II ¶¶ 4-5; Cosgrove Decl. ¶ 2; White Decl. ¶¶
2-3; Dix Decl. I ¶¶ 2-15; Dix Decl. II ¶¶ 2-5; F. Kubitz Decl. ¶
10.) To compel such witnesses to travel to a second forum to give
similar testimony on the same technology and dispute would be
burdensome and inefficient for the parties, and would not promote
judicial efficiency. See 800-Flowers, Inc. v. Intercontinental Florist, Inc., 860 F. Supp. 128,
135-36 (S.D.N.Y. 1994) ("The interests of judicial economy
dictate that the two identical actions not both proceed");
Amersham Pharmacia Biotech, Inc. v. Perkin-Elmer Corp.,
11 F. Supp.2d 729, 730-31 (S.D.N.Y. 2003) (transferring patent
infringement action where trial efficiency factor weighed heavily
in favor of transfer). Accordingly, this factor strongly favors
B. Aggregation of Factors
Analyzing the Section 1404(a) factors as a whole, Lexcel
overcomes the heavy presumption that this action should remain in
New York. Of the eight convenience factors, the locus of
operative facts, location of documents, relative means of
parties, choice of forum and judicial economy factors strongly
favor transfer to the District of Arizona. The forum's
familiarity with the governing law, convenience of witnesses, and
availability of process factors are neutral, and thus favor
litigation of this action in New York. Accordingly, this Court
finds that Lexcel has shown by clear and convincing evidence that
transfer of this action to the District of Arizona would be in
the interests of convenience and fairness. CONCLUSION
For the reasons set forth in this Memorandum and Order,
Lexcel's motion to dismiss the action is denied and its motion to
transfer this action to the District of Arizona is granted. The
Clerk of Court is directed to transfer this action to the
District of Arizona, Phoenix Division, as related to case number
CV 03 1454 (PHX)(JAT).
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