Summary: CAFC affirmed the dismissal of declaratory judgment action under the “first-to-file” rule.

Case: Futurewei Technologies, Inc. v. Acacia Research Corp., No. 2013-1090 (Fed. Cir. Dec. 3, 2013) (precedential). On appeal from C.D. Cal. Before Reyna, Mayer, and Taranto.

Procedural Posture: After Acacia sued Huawei and Futurewei for patent infringement in the Eastern District of Texas, Huawei and Futurewei filed a declaratory judgment action in the Central District of California that sought not only a declaratory judgment of noninfringement and invalidity but also a declaration that by virtue of their status as customers of the patent owner Access, Huawei and Futurewei were third party beneficiaries of the exclusive license agreement between Access and Acacia, which provided that Acacia could not assert the patents against customers of Access. The district court dismissed Huawei and Futurewei’s complaint seeking a declaratory judgment of noninfringement and invalidity under the “first-to-file” rule in view of the previously filed Texas action, and dismissed the third party beneficiary claims for failure to state a claim and as compulsory counterclaims to the infringement claims in the Texas court. Huawei and Futurewei appealed the dismissal only as to the third party beneficiary claims. CAFC affirmed the dismissal under the “first-to-file” rule.

  • Declaratory Judgment Jurisdiction: The Federal Circuit affirmed the district court’s dismissal of the third party beneficiary claims of the declaratory judgment action under the “first-to-file” rule because of the previously filed infringement action in Texas. The Federal Circuit held that when declaratory judgment and infringement actions (filed in different district courts) “sufficiently overlap … the declaratory judgment action, if filed later, generally is to be stayed, dismissed, or transferred to the forum of the infringement action.” The Federal Circuit noted that exceptions may be made if justified by “considerations of judicial and litigant economy, and the just and effective disposition of disputes,” but found no basis for an exception in this case. The third party beneficiary claims were sufficiently related to the pending infringement action in Texas and Huawei and Futurewei’s license defense in that action that the Texas court should decide them in the interest of judicial economy.