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First-to-File Rule Must Be Followed Unless Compelling Circumstances Justify Exception

Vacating and remanding a district court’s decision not to transfer a case, the US Court of Appeals for the Federal Circuit granted a petition for a writ of mandamus because the district court did not consider whether the first-to-file rule favored keeping the case in the second-filed court. In re: Nitro, Case No. 20-142 (Fed. Cir. Oct. 28, 2020) (Reyna, J.).

In 2018, Cameron International filed a suit against Nitro in the Southern District of Texas alleging that Nitro’s fracturing-fluid delivery systems infringed three of Cameron’s patents. In February 2020, Cameron filed a second suit against Nitro in the Western District of Texas, alleging that the same accused products infringed two of Cameron’s other related patents. Relying on the first-to-file rule, which generally dictates that the court in which an action is first filed is the appropriate court to determine whether subsequently filed cases involving substantially similar issues should proceed, Nitro moved the Western District of Texas to decline jurisdiction or transfer the action to the Southern District of Texas.

The district court rejected the application of the first-to-file rule, but not because the two cases lacked substantial overlap. Instead, the district court relied on US Court of Appeals for the Fifth Circuit precedent stating that even where there is such overlap, the court still must determine whether there are “sufficiently ‘compelling circumstances’ to avoid the rule’s application.” The district court determined that it was appropriate to use a balance of the traditional transfer factors to make that determination, concluding that when a balance of transfer factors “does not weigh in favor of transfer[,] . . . compelling circumstances exist in order to avoid application of the first-to-file rule.” Applying this standard, the district court denied Nitro’s motion. The district court found that although two of the factors (relative ease of access to sources of proof, and local interest in having localized interests decided at home) favored transfer, the administrative difficulties flowing from court congestion, co-pending suits against another defendant involving the same patents, and the district court’s ability to more quickly schedule a trial weighed against transfer. Nitro filed for mandamus.

Proceeding from the district court’s premise that transfer pursuant to the first-to-file rule would be proper absent the existence of compelling circumstances, and that a balance of the transfer factors can support such an exception, the Federal Circuit explained that consideration of Nitro’s petition turned on the correctness of the district court’s application of those factors. The Court explained that the district court had it backwards by concluding that the first-to-file rule is only applicable when the balance of factors favors the first-filed court. Instead, the proper inquiry is that unless the balance of transfer factors favors keeping the case in the second-filed court, there are no compelling circumstances to keep the case in the second-filed court.

The Federal Circuit found that the district court did not resolve the critical issue of whether a balance of the factors favored the second-filed court. The Federal Circuit explained that although the district court found that two factors (the sources of proof and local interest factors) favored transfer and that most factors (including the witness-related factors) were neutral, the district court nevertheless concluded that two factors (the court congestion and practical problems factors) favored retaining the case. Importantly, the district court did so without indicating that court congestion and practical problems were important enough to warrant keeping the case in the Western District of Texas. The Federal Circuit also found that the district court erred in its reasoning regarding court congestion because it did not focus on whether there was an appreciable difference between the two forums. The Federal Circuit further found that the district court erred in its analysis of judicial economy by replacing the importance of the first-to-file rule with its own views on the importance of speed of resolution. Accordingly, the Federal Circuit granted Nitro’s petition, vacating the district court’s order and instructing the district court to conduct further proceedings consistent with the Federal Circuit’s opinion.

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© 2021 McDermott Will & EmeryNational Law Review, Volume X, Number 309
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About this Author

Amol Parikh, McDermott Will Emery, Chicago, patent lawyer, Intellectual Property Litigation Attorney
Associate

Amol Parikh is an associate in the law firm of McDermott Will & Emery LLP and is based in the Firm's Chicago office.  He focuses his practice on IP litigation, counseling and prosecution. Amol has been recognized as a 2011 Illinois Rising Star in Intellectual Property by Law & Politics.  Rising Stars are lawyers under the age of 40 that have been in practice for 10 years or less.  No more than 2.5 percent of the lawyers in Illinois are named as Rising Stars.

Amol has...

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