Intellectual Property > IP Newsflash > Under the First-to-File Rule, District Court Stays Case Filed Hours After a Declaratory Judgment Action
17 May '17

Under the first-to-file rule (not to be confused with the provision from the America Invents Act), when two actions involving overlapping issues and parties are pending in two federal venues, the first-filed case is generally favored. This case applies the rule to a fact pattern in which the first case (a declaratory judgment action) was filed one minute after the patent-in-suit issued, and the second case was filed hours thereafter.

On March 10, 2017, ClearOne, Inc. (“ClearOne”) sent a demand letter to several defendants, including Shure Inc. (“Shure”), referencing a pending patent application, which later issued as U.S. Patent No. 9,635,186 (the “’186 Patent”). The demand letter requested that the recipients cease all alleged infringement; contained a claim chart of the alleged infringement; and stated, “ClearOne reserve[d] the right to seek appropriate injunctive and other relief.” Correspondence between the parties continued, resulting in Shure asserting that it did not infringe the ’186 Patent and demanding that ClearOne refrain from contacting third parties about the alleged infringement.

The ’186 Patent issued on April 25—Shure filed a declaratory judgment action in the United States District Court for the Northern District of Illinois (the location of its headquarters) at 12:01 a.m. EDT on the same day, ostensibly, the instant the ’186 Patent issued and when the court would have subject-matter jurisdiction. ClearOne filed its complaint in the United States District Court for the District of Utah (the location of its headquarters) 11 hours later. Shortly thereafter, Shure filed a motion in the Northern District of Illinois action to enjoin ClearOne from pursuing its claims in the District of Utah action. Shure also filed a motion to stay the District of Utah action.

On May 15, 2017, Magistrate Judge Pead granted Shure’s motion to stay the District of Utah action pending a decision on its motion to enjoin filed in the Northern District of Illinois action. In doing so, he held that, under the first-to-file rule, the Northern District of Illinois should determine which court is the proper venue. The opinion expressly states that the court granted the stay without analyzing the merits of Shure’s motion to enjoin. As a result, several questions remain. First, does a patent issue when the clock strikes midnight on its date of issue, or does it issue after the patent is published on the United States Patent and Trademark Office website?  Second, will the Northern District of Illinois apply the first-to-file rule, or will it find that it is inapplicable to this “race to the courthouse” fact pattern? The Northern District of Illinois may provide further guidance on those questions in deciding Shure’s motion to enjoin.

ClearOne Communications v. Shure, Inc. et al, 2-17-cv-00322 (Utah District Court, May 15, 2017)