Case: 19-1672 Document: 51 Page: 1 Filed: 03/13/2020
United States Court of Appeals
for the Federal Circuit
______________________
COMMUNICATIONS TEST DESIGN, INC.,
Plaintiff-Appellant
v.
CONTEC, LLC,
Defendant-Appellee
______________________
2019-1672
______________________
Appeal from the United States District Court for the
Eastern District of Pennsylvania in No. 2:18-cv-04077-
GJP, Judge Gerald J. Pappert.
______________________
Decided: March 13, 2020
______________________
RICHARD WILLIAM MILLER, Ballard Spahr LLP, Atlanta, GA, argued for plaintiff-appellant. Also represented
by DENNIS ALAN WHITE, JR.; LYNN E. RZONCA, Philadelphia, PA.
COBY SCOTT NIXON, Taylor English Duma LLP, Atlanta, GA, argued for defendant-appellee. Also represented by KELLY MULLALLY, SETH KINCAID TRIMBLE.
______________________
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2 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
Before O’MALLEY, MAYER, and WALLACH, Circuit Judges.
O’MALLEY, Circuit Judge.
Communications Test Design, Inc. (“CTDI”) filed suit
in the United States District Court for the Eastern District
of Pennsylvania, seeking declaratory judgment that its test
systems do not infringe two of Contec, LLC’s patents (“the
Pennsylvania action”). Six days later, Contec sued CTDI
for patent infringement in the United States District Court
for the Northern District of New York (“the New York action”). Contec moved to dismiss the Pennsylvania action,
arguing that CTDI’s anticipatory filing was made in bad
faith during active licensing discussions. The district court
granted the motion, exercising its discretion to decline jurisdiction over CTDI’s declaratory judgment action.
Commc’ns Test Design, Inc. v. Contec LLC, 367 F. Supp. 3d
350, 360 (E.D. Pa. 2019). In doing so, the court found that
equitable considerations warranted departure from the
first-to-file rule. CTDI appeals the district court’s dismissal of the Pennsylvania action. Because we conclude that
the district court did not abuse the broad discretion accorded to it—both under the Declaratory Judgment Act,
28
U.S.C. § 2201(a) and pursuant to the first-to-file rule—we
affirm.
I. BACKGROUND
A. The Parties
CTDI is an engineering, repair, and logistics company
with its principal place of business in West Chester, Pennsylvania. Commc’ns Test Design, 367 F.3d at 353. Since
2007, CTDI has developed, manufactured, and been using
its “Gen3” and “Gen5” test systems within the United
States for testing set-top boxes and multimedia devices. Id.
These test systems, which form the basis of Contec’s infringement claims, were designed and developed at CTDI’s
West Chester facility. Although based in Pennsylvania,
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COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 3
CTDI has over ninety facilities worldwide, including one in
Glenville, New York.
Contec “provides repair, test and reverse logistics for
electronics hardware used in a broad range of markets.”
Id. Contec is the owner by assignment of the two patents
at issue in this case: (1) U.S. Patent No. 8,209,732 for an
“Arrangement and Method for Managing Testing and Repair of Set-Top Boxes;” and (2)
U.S. Patent No. 8,689,071
for a “Multimedia Device Test System.”
Id. The systems
described in the asserted patents were designed and developed at Contec’s corporate headquarters in Schenectady,
New York.
Id. Three of the six inventors of the asserted
patents reside in New York, while another left Contec in
2014 and works in CTDI’s Glenville, New York facility.
Id.
at 359, 360 n.3.
B. Pre-Suit Communications
In September 2017, Contec sent a letter to CTDI to determine whether CTDI’s test systems infringed any claims
of the asserted patents. Over the course of the following
year, the parties exchanged numerous emails and letters.
In June 2018, counsel for both parties met in person, and
CTDI disclosed certain information about its test systems
pursuant to a confidentiality agreement.
In September 2018, Contec’s counsel sent a letter to
CTDI stating that “the parties’ extrajudicial process for obtaining information about CTDI’s systems, without the full
discovery obligations that would be imposed during litigation, has proved unsatisfactory.” Id. at 353. Counsel explained that Contec had a good faith basis to believe that
CTDI infringes at least one claim of the asserted patents.
The letter asked CTDI to indicate, by September 19, 2018,
whether it was willing to “discuss potential terms for a patent license agreement.”
Id. at 353–54. Contec warned
that, if it did not receive such confirmation, it would sue for
patent infringement.
Id. at 354. Contec attached to its letter a draft of its proposed complaint.
Id.
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4 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
On September 19—Contec’s stated deadline—Jerry
Parsons, CTDI’s Chairman and chief executive officer
(CEO), spoke on the phone with Hari Pillai, Contec’s CEO,
about a possible license for Contec’s patents. During that
conversation, Pillai proposed initial terms, and the executives agreed to talk again on September 24, when Parsons
would make a counterproposal. Id. After their discussion,
Pillai emailed Parsons, confirming the follow-up call and
indicating that he looked forward to the counterproposal.
Id.
Later that same day, CTDI’s counsel sent an email to
Contec’s counsel, confirming that “CTDI will consider potential terms as requested in your most recent letter.” Id.
Counsel reiterated that, “[d]espite our firm position on non-infringement and without admission, in an attempt to
avoid an impasse, we remain willing to consider reasonable
licensing terms and so, we encourage a continued conversation between the executives.”
Id.
On September 21—two days after accepting Contec’s
request to discuss licensing terms—CTDI filed a declaratory judgment action in Pennsylvania. Id. Later that afternoon, Parsons sent an email to Pillai, confirming that
CTDI would put a licensing proposal together and accepting Pillai’s suggested time for their follow-up call on September 24.
Id. Parsons made no mention of the fact that
CTDI had filed its declaratory judgment complaint.
On September 24—the day the CEOs were scheduled
to talk—CTDI’s counsel emailed Contec’s counsel a copy of
the declaratory judgment complaint. Counsel stated that
official service would be held for a period of time to allow
further discussion between the executives. 1
1 CTDI ultimately served its declaratory judgment
complaint on October 15, 2018.
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COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 5
On September 27, 2018, Contec filed its complaint for
patent infringement in the Northern District of New York.
That case remains pending.
C. Procedural History
As noted, CTDI filed the Pennsylvania action on September 21, 2018. On November 13, 2018, Contec moved to
dismiss, or in the alternative, transfer or stay, CTDI’s complaint. Contec argued that CTDI filed the Pennsylvania
action “in bad faith during active licensing discussions,
only after inducing Contec to refrain from filing its own
complaint against CTDI in a different forum.” Def.’s Mot.
to Dismiss, Commc’ns Test Design, Inc. v. Contec, LLC, No.
2:18cv4077 (E.D. Pa. Nov. 13, 2018), ECF No. 5. Contec
asked the court to decline to exercise jurisdiction over the
declaratory judgment action and dismiss the complaint in
favor of the New York action.
On February 15, 2019, the district court granted Contec’s motion and dismissed CTDI’s complaint. At the outset, the court noted that “[n]either party disputes that an
actual controversy exists here.” Commc’ns Test Design,
367 F. Supp. 3d at 355. Both the Pennsylvania and New
York actions involve the same parties, the same patents,
the same allegedly infringing products, and the same issue:
whether CTDI’s test systems infringe Contec’s patents.
The court recognized that, between CTDI’s first-filed declaratory judgment action and Contec’s subsequently filed
patent infringement action, CTDI’s first-filed action is preferred “unless considerations of judicial and litigant economy, and the just and effective disposition of disputes,
require otherwise.”
Id. at 356 (quoting Genentech, Inc. v.
Eli Lilly & Co.,
998 F.2d 931, 937 (Fed. Cir. 1993), abrogated on other grounds by Wilton v. Seven Falls Co.,
515
U.S. 277, 288 (1995)).
Relying on the timing and content of the parties’ communications, the district court found that “CTDI filed suit
in anticipation of Contec’s impending infringement suit.”
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6 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
Id. at 357. Although CTDI promised Contec “a desire for a
non-judicial resolution and continued negotiations,” it sued
Contec two days later, thereby “beat[ing] Contec to the
courthouse.”
Id. The court found that, although CTDI “had
every right, in its business and legal judgment, to break off
negotiations and resort to litigation,” it was not permitted
to “string Contec along just long enough to get the judicial
drop and file this lawsuit in its own backyard.”
Id. at 358.
The court noted that CTDI’s communications before and
after its filing reveal its “nefarious motive,” and ultimately
determined that “CTDI’s conduct was inconsistent with the
policy of promoting extrajudicial dispute resolution, not to
mention sound judicial administration and the conservation of judicial resources.”
Id. at 357, 358.
Recognizing that the anticipatory nature of CTDI’s suit
is “merely one factor in the analysis” under the first-to-file
rule, the district court explained that “[i]nterference with
ongoing negotiations constitutes another ‘sound reason
that would make it unjust’ to exercise jurisdiction over the
declaratory judgment action.” Id. at 358 (citation omitted).
The court also considered the convenience of the parties
and availability of witnesses and determined that, “on balance the Northern District of New York is a more convenient forum to resolve the dispute between the parties.”
Id.
at 359. Given these considerations, the district court dismissed the Pennsylvania action in favor of Contec’s later-filed infringement action. 2
2 After the district court dismissed the Pennsylvania
action, the district court in the Northern District of New
York issued a decision denying CTDI’s motion to dismiss
that action. Contec, LLC v. Commc’ns Test Design, Inc.,
No. 18-cv-1172, 2019 WL 4736455, at *3 (N.D.N.Y. Sept.
27, 2019). The New York district court explained that it
deferred to the Eastern District of Pennsylvania’s determination under the first-to-file rule, and noted that, “were it
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COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 7
CTDI appeals. We have jurisdiction under 28 U.S.C.
§ 1295(a)(1).
II. DISCUSSION
On appeal, CTDI argues that the district court abused
its discretion when it dismissed CTDI’s first-filed complaint seeking declaratory judgment of non-infringement
in favor of Contec’s later-filed patent infringement action.
According to CTDI, the Pennsylvania action was “entitled
to precedence” over the New York action because there was
no “sound reason” to depart from the first-to-file rule and
because the “center of gravity” of the alleged infringing activity is in Pennsylvania. Appellant Br. 12–13. CTDI asks
this court to find an abuse of discretion, reverse the district
court’s dismissal, and remand for further proceedings on
the merits of the declaratory judgment action. In the alternative, CTDI submits that we should remand for an evidentiary hearing so that the district court can make factual
findings regarding CTDI’s alleged motive. We address
each issue in turn.
A. The District Court Did Not Abuse Its Discretion.
The Declaratory Judgment Act provides, in relevant
part, that: “In a case of actual controversy within its jurisdiction . . . any court of the United States, upon the filing
of an appropriate pleading, may declare the rights and
other legal relations of any interested party seeking such
declaration, whether or not further relief is or could be
up to this Court to determine the appropriate forum, it
would have come to the same conclusion.” Id. at *3–4. In
doing so, the New York district court remarked that it was
“unable to see how an email from CTDI’s CEO suggesting
that a proposal was on the way—and which was written
the same day that CTDI filed the Pennsylvania Action—
could be anything other than a delay tactic to ensure the
Pennsylvania Action was filed first.”
Id. at *4.
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8 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
sought.”
28 U.S.C. § 2201(a). Given the statute’s use of the
word “may,” the Supreme Court has said that a district
court has “unique and substantial discretion in deciding
whether to declare the rights of litigants.” Wilton,
515 U.S.
at 286. The use of that discretion is not plenary, however,
and “[t]here must be well-founded reasons for declining to
entertain a declaratory judgment action.” Capo, Inc. v. Dioptics Med. Prods.,
387 F.3d 1352, 1355 (Fed. Cir. 2004);
see also Genentech,
998 F.2d at 937 (“When there is an actual controversy and a declaratory judgment would settle
the legal relations in dispute and afford relief from uncertainty or insecurity, in the usual circumstance the declaratory action is not subject to dismissal.”). We review a
district court decision declining jurisdiction over a declaratory judgment for an abuse of discretion. 3 Wilton, 515 U.S.
at 289–90.
As long as the district court “acts in accordance with the
purposes of the Declaratory Judgment Act and the principles of sound judicial administration, [it] has broad discretion to refuse to entertain a declaratory judgment action.”
EMC, 89 F.3d at 813–14. We have stated that “the purpose
of the Declaratory Judgment Act . . . in patent cases is to
provide the allegedly infringing party relief from uncertainty and delay regarding its legal rights.” Goodyear Tire
& Rubber Co. v. Releasomers, Inc., 824 F.2d 953, 956 (Fed.
Cir. 1987). We have also stated that the “question whether
to accept or decline jurisdiction in an action for a declaration of patent rights in view of a later-filed suit for patent
infringement impacts this court’s mandate to promote
3 The Declaratory Judgment Act is not an independent basis for jurisdiction. See, e.g., Skelly Oil Co. v. Phillips
Petroleum Co., 339 U.S. 667, 671–72 (1950); Cat Tech LLC
v. TubeMaster, Inc.,
528 F.3d 871, 879 (Fed. Cir. 2008). The
district court had jurisdiction over this action pursuant to
28 U.S.C. §§ 1331 and 1338(a).
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COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 9
national uniformity in patent practice.” Elecs. for Imaging,
Inc. v. Coyle,
394 F.3d 1341, 1345 (Fed. Cir. 2005). Because
it is an issue that falls within our exclusive subject matter
jurisdiction, “we do not defer to the procedural rules of
other circuits.” Serco Servs. Co., L.P. v. Kelley Co., Inc.,
51
F.3d 1037, 1038 (Fed. Cir. 1995).
The district court dismissed CTDI’s declaratory judgment action so that Contec’s patent infringement action—
filed six days later—could proceed in New York. In these
circumstances, where the issue is whether a suit for declaration of patent rights should yield to a later-filed infringement suit, the trial court’s discretion is guided by the first- to-file rule, “whereby the forum of the first-filed case is favored.” Genentech, 998 F.2d at 937. “The ‘first-to-file’ rule
is a doctrine of federal comity, intended to avoid conflicting
decisions and promote judicial efficiency, that generally favors pursuing only the first-filed action when multiple lawsuits involving the same claims are filed in different
jurisdictions.” Merial Ltd. v. Cipla Ltd.,
681 F.3d 1283,
1299 (Fed. Cir. 2012) (citing Genentech, 998 F.2d at 937–
38). The filing date of an action derives from the filing of
the complaint.
Id. (citing Fed. R. Civ. P. 3). Under the
first-to-file rule, a district court may choose to stay, transfer, or dismiss a later-filed duplicative action.
Id.
The general rule is that the first-filed action is preferred, even if it is declaratory, “unless considerations of
judicial and litigant economy, and the just and effective
disposition of disputes, require otherwise.” Serco, 51 F.3d
at 1039. “[T]rial courts have discretion to make exceptions
to this general rule in the interest of justice or expediency,”
and we have recognized that such “exceptions are not rare.”
Micron Tech., Inc. v. Mosaid Techs., Inc.,
518 F.3d 897, 904
(Fed. Cir. 2008) (citing Genentech,
998 F.2d at 937). For
example, a district court may consider “a party’s intention
to preempt another’s infringement suit when ruling on the
dismissal of a declaratory action, but that consideration is
merely one factor in the analysis.”
Id. (citing Genentech,
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10 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
998 F.2d at 938). “Other factors include the convenience
and availability of witnesses, the absence of jurisdiction
over all necessary or desirable parties, and the possibility
of consolidation with related litigation.”
Id. at 904–05.
When one of two competing suits in a first-to-file analysis is a declaratory judgment action, district courts enjoy a
“double dose” of discretion: discretion to decline to exercise
jurisdiction over a declaratory judgment action and discretion when considering and applying the first-to-file rule
and its equitable exceptions. See Kerotest Mfg. Co. v. C-O-
Two Fire Equip. Co., 342 U.S. 180, 183–84 (1952) (noting
that, in questions of priority between similar proceedings,
“an ample degree of discretion, appropriate for disciplined
and experienced judges, must be left to the lower courts”).
Although district courts can, in the exercise of that discretion, dispense with the first-to-file rule, there must “be
sound reason that would make it unjust or inefficient to
continue the first-filed action.” Genentech,
998 F.2d at 938.
With this framework in mind, we turn to the district court’s
analysis.
Here, the district court carefully considered the record
of the parties’ dispute, up to and including the competing
filings, and concluded that several factors warranted departure from the first-to-file rule. Specifically, the court
found that: (1) CTDI filed its declaratory judgment complaint in anticipation of Contec’s patent infringement complaint; (2) CTDI’s suit interfered with ongoing negotiations
between the parties and did not serve the objectives of the
Declaratory Judgment Act; and (3) on balance, the Northern District of New York is a more convenient forum. As
explained below, we find no abuse of discretion in the district court’s analysis.
At the outset, the record is clear that CTDI’s filing was
anticipatory. It is undisputed that, after the parties’ extrajudicial discussions proved unsatisfactory to Contec, Contec sent CTDI a draft complaint and told CTDI that it
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COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 11
would file suit if CTDI did not confirm by September 18,
2018, that it was willing to discuss the terms of a potential
license. Commc’ns Test Design, 367 F. Supp. 3d at 357.
When that deadline arrived, CTDI indicated to Contec—on
the phone and by letter—that it was willing to engage in
licensing discussions. But two days later, CTDI filed its
declaratory judgment action in Pennsylvania. Given these
facts, the district court concluded that “CTDI filed suit in
anticipation of Contec’s impending infringement suit.”
Id.
On appeal, CTDI does not take issue with the district
court’s characterization of the Pennsylvania action as anticipatory. 4 Instead, it focuses on the district court’s statement that CTDI’s “communications, both immediately
before and after CTDI’s filing, . . . reveal its ‘nefarious motive’ to anticipate Contec’s impending suit and interfere
with negotiations that Contec reasonably believed CTDI
was conducting in good faith.” Commc’ns Test Design, 367
F. Supp. 3d at 357 (quoting Sony Elecs., Inc. v. Guardian
Media Techs., Ltd.,
497 F.3d 1271, 1286 (Fed. Cir. 2007)).
CTDI claims that the district court’s dismissal was “largely
if not entirely based” on its “nefarious motive”
4 Although CTDI attempts to challenge the district
court’s characterization of its complaint as anticipatory for
the first time in its reply brief, counsel for CTDI conceded
at oral argument that it failed to raise this argument in the
opening brief. Oral Arg. at 7:07–18, available at
http://oralarguments.cafc.uscourts.gov/default.aspx?fl=
2019-1672.mp3. It is well established that an issue not
raised by an appellant in its opening brief is waived. Becton Dickinson & Co. v. C.R. Bard, Inc., 922 F.2d 792, 800
(Fed. Cir. 1990); see also Amhil Enters. Ltd. v. Wawa, Inc.,
81 F.3d 1554, 1563 (Fed. Cir. 1996) (“A reply brief, which
should ‘reply to the brief of the appellee,’ see Fed. R. App.
P. 28(c), is not the appropriate place to raise, for the first
time, an issue for appellate review.”).
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12 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
determination, and that such a determination “was an
abuse of discretion.” Appellant Br. 18. We disagree.
Although the court remarked that CTDI’s pre-suit communications revealed a “nefarious motive” to anticipate
and interfere with negotiations, its decision to dismiss was
not, as CTDI suggests, based “largely if not entirely” on
that statement. Instead, the court analyzed the parties’
pre-filing actions and communications and found that
CTDI filed suit in anticipation of Contec’s impending infringement suit. Commc’ns Test Design, 367 F. Supp. 3d at
357. The court explained that, “[a]rmed with the
knowledge that Contec intended to sue if the parties did
not enter into a patent license, CTDI continued the pretense of good faith negotiations.”
Id. When Contec’s stated
deadline arrived, CTDI reassured Contec that it was willing to discuss non-judicial resolution and that litigation
might be avoidable. Indeed, CTDI expressly agreed to have
further licensing discussions the following week, thereby
ensuring that Contec would refrain from filing its complaint. At the same time, however, CTDI was preparing its
declaratory judgment complaint.
CTDI argues that, as of September 19, 2018, it was apparent to Parsons “that a licensing agreement would probably not be reached between Contec and CTDI.” Appellant
Br. 19. As the district court found, however, Parsons’ apparent belief was never communicated to Contec.
Commc’ns Test Design, 367 F. Supp. 3d at 358. In other
words, even if Parsons believed non-judicial resolution was
unlikely, the undisputed, objective evidence showed that
CTDI continued to engage in and encourage negotiations.
The district court found that “CTDI had every right, in its
business and legal judgment, to break off negotiations and
resort to litigation.”
Id. But CTDI did not have the right
to “string Contec along just long enough to get the judicial
drop and file this lawsuit in its own backyard.”
Id.
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On this record, regardless of CTDI’s motive or intent,
its pre-suit communications and conduct support the district court’s conclusion that the declaratory judgment action was filed in anticipation of Contec’s infringement suit.
As such, we find no abuse of discretion in the district court’s
characterization of CTDI’s complaint as anticipatory.
Recognizing that the anticipatory nature of CTDI’s declaratory action was “merely one factor in the analysis,” the
district court also found that CTDI’s “[i]nterference with
ongoing negotiations” provided “another ‘sound reason that
would make it unjust’ to exercise jurisdiction over the declaratory judgment action.” Commc’ns Test Design, 367 F.
Supp. 3d at 358 (quoting Genentech,
998 F.2d at 938). As
we held in EMC, district courts “may take into account the
pendency of serious negotiations to sell or license a patent
in determining to exercise jurisdiction over a declaratory
judgment action.” EMC, 89 F.3d at 814. We reasoned that,
when there are ongoing negotiations, a district court may
find that “the need for judicial relief is not as compelling as
in cases in which there is no real prospect of a non-judicial
resolution of the dispute.” Id.
In EMC, for example, the accused infringer filed a declaratory judgment action while it was in active negotiations with the patentee, and told the patentee that its filing
was “merely a defensive step” and that it wanted to continue discussions between the parties. Id. at 815. On appeal, we affirmed the district court’s finding that the
declaratory judgment complaint was “a tactical measure
filed in order to improve [the accused infringer’s] posture
in the ongoing negotiations—not a purpose that the Declaratory Judgment Act was designed to serve.” Id.
Here, CTDI argues that it filed the Pennsylvania action, not as a “tactical measure” to improve its “bargaining
position,” but rather “to obtain a resolution that nearly a
year of discussions had failed to achieve.” Appellant Br.
23. It submits that, “unlike EMC’s complaint, CTDI’s
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complaint was filed for a purpose that the Declaratory
Judgment Act was designed to serve—to provide CTDI
with relief from uncertainty and delay regarding its legal
rights.” Id. at 24.
As the district court explained, the undisputed evidence demonstrates that license negotiations were ongoing
when CTDI filed suit. Given these facts, the district court
found that “CTDI took advantage of the fact that Contec
deferred filing its complaint based on Contec’s reasonable
belief that licensing discussions were taking place in earnest, with the obvious hope that litigation would not be necessary.” Commc’ns Test Design, 367 F. Supp. 3d at 359.
The court concluded that CTDI’s conduct was “inconsistent
with the policy promoting extrajudicial dispute resolution,
not to mention sound judicial administration and the conservation of judicial resources.”
Id. at 358. The district
court was within its discretion in reaching this conclusion. 5
Finally, CTDI argues that the district court erred in
finding that, “on balance the Northern District of New York
is a more convenient forum to resolve the dispute between
the parties.” Appellant Br. 27 (quoting Commc’ns Test Design, 367 F. Supp. 3d at 359). On this point, the district
court considered that CTDI is headquartered in West Chester, Pennsylvania, and that many of the witnesses with testimony relevant to the accused test systems are located in
West Chester. Commc’ns Test Design,
367 F. Supp. 3d at
359. But the district court also considered that CTDI has
over ninety facilities worldwide, including in Glenville,
5 Although CTDI argues that the district court erred
in focusing on the parties’ dealings after September 12,
2018, and not on their communications over the course of
the prior year, the record is clear that the parties did not
begin to discuss a potential license until September 19,
2018.
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COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 15
New York, where the accused test systems have been used.
Id.
As to Contec, the district court considered that: (1) its
corporate headquarters are in New York; (2) it has no witnesses, physical facilities or place of business in Pennsylvania; (3) Contec’s employee files for its current and former
employees, its email server and its record databases are
maintained in its New York facility; (4) three of the six inventors of the patents at issue are current residents of New
York; and (5) five of the inventors, “who would serve as key
witnesses,” are beyond the subpoena power of the district
court. Id. On balance, the court found that these factors
favored Contec’s later-filed New York action.
Id. at 359–
60.
On appeal, CTDI does not take issue with the district
court’s fact findings relevant to the convenience factors.
Oral Arg. at 10:05–31 (“We don’t dispute the findings, Your
Honor, but [we] do dispute the conclusion that they demonstrate that the Northern District of New York is in fact a
more convenient forum overall.”). Instead, it argues that,
on balance, the “center of gravity” of the alleged infringing
activity is in the Eastern District of Pennsylvania. Appellant Br. 28. We find no error in the district court’s balancing of the convenience factors, which is committed to the
court’s sound discretion. These factors, coupled with the
district court’s findings that CTDI’s complaint interfered
with ongoing negotiations and was filed in anticipation of
Contec’s infringement suit, support the district court’s decision to depart from the first-to-file rule and dismiss
CTDI’s complaint.
B. Remand Is Not Necessary.
Although CTDI maintains that this court should reverse the district court’s dismissal and remand for further
proceedings on the merits of the declaratory judgment action, it asks, in the alternative, that we remand for an evidentiary hearing because “the district court made factual
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16 COMMUNICATIONS TEST DESIGN v. CONTEC, LLC
findings regarding CTDI’s ‘motive’ necessary to its decision.” Appellant Br. 34.
The procedure employed by the district court to make
jurisdictional determinations is a “procedural question not
unique to patent law,” and thus is governed by the law of
the regional circuit—here, the Third Circuit. Microsoft
Corp. v. GeoTag, Inc., 817 F.3d 1305, 1310 (Fed. Cir. 2016).
We review the district court’s choice of procedure for an
abuse of discretion. See Tanzymore v. Bethlehem Steel
Corp.,
457 F.2d 1320, 1323 (3d Cir. 1972). For the reasons
explained below, we find no such abuse of discretion. Accordingly, remand is not warranted.
First, in support of its procedural objection, CTDI argues that Contec’s motion to dismiss was “akin to a factual
attack on subject matter jurisdiction” and relies on procedures district courts employ when reviewing factual challenges to subject matter jurisdiction in the Rule 12(b)(1)
context. Appellant Br. 35. But as CTDI concedes, “whether
the district court had subject matter jurisdiction was not at
issue.” Id. at 34. Importantly, Contec’s motion to dismiss
was not a Rule 12(b)(1) motion, and did not challenge the
district court’s subject matter jurisdiction. Instead, Contec
moved to dismiss CTDI’s complaint pursuant to the district
court’s discretion under the Declaratory Judgment Act,
which does not implicate the court’s subject matter jurisdiction. See Countrywide Home Loans, Inc. v. Mortg. Guar.
Ins. Corp., 642 F.3d 849, 853 (9th Cir. 2011) (explaining
that the Declaratory Judgment Act (“DJA”) “does not confer jurisdiction, and therefore also does not afford the opportunity to decline it. The DJA gives district courts the
discretion to decline to exercise the conferred remedial
power, but in no way modifies the district court’s jurisdiction, which must properly exist independent of the DJA.”
(internal citation omitted)). Given this posture, the procedures CTDI attempts to invoke—which provide for a hearing if there is a dispute of material fact relevant to a
jurisdictional issue—are inapplicable. CTDI cites no
Case: 19-1672 Document: 51 Page: 17 Filed: 03/13/2020
COMMUNICATIONS TEST DESIGN v. CONTEC, LLC 17
authority requiring a district court to hold an evidentiary
hearing when deciding whether it should, in its discretion,
exercise jurisdiction over a declaratory judgment action.
Second, it is well-established that a “court can evaluate
its jurisdiction without an evidentiary hearing ‘so long as
the court has afforded [the parties] notice and a fair opportunity to be heard.’” McCann v. George W. Newman Irrevocable Trust, 458 F.3d 281, 290 (3d Cir. 2006) (quoting
Tanzymore, 457 F.2d at 1323–24). “A key consideration in
determining whether a hearing is required is whether either party requested one.” Id. Here, the parties had ample
opportunity to be heard through declarations and briefs.
Neither party requested oral argument or an evidentiary
hearing. As such, the district court did not err in dismissing CTDI’s complaint without a hearing.
Finally, where there are no material facts in dispute, a
hearing is not required. See McCann, 458 F.3d at 290. According to CTDI, in finding that it acted with a “nefarious
motive,” the district court made certain factual and credibility determinations that should have only been made after a hearing. Appellant Br. 34. But the district court’s
statement that CTDI acted with a “nefarious motive” was
not necessary to its decision. The district court found that
CTDI’s filing was anticipatory, disruptive to ongoing negotiations, and inconsistent with the purpose of the Declaratory Judgment Act. The objective evidence in the record
supports these findings. As such, remand for a hearing is
not warranted.
III. CONCLUSION
We have considered CTDI’s remaining arguments and
find them unpersuasive. Because the district court acted
within its discretion in declining to exercise jurisdiction
over CTDI’s declaratory judgment action, we affirm the district court’s dismissal.
AFFIRMED
