District Court Properly Enjoined Later-Filed Copending Parallel Litigation
September 30, 2004
Last Month at the Federal Circuit - October 2004
Judges: Linn (author), Michel, and Gajarsa
In Laboratory Corp. of America Holdings v. Chiron Corp., No. 03-1572 (Fed. Cir. Sept. 30, 2004), the Federal Circuit affirmed that the U.S. District Court for the District of Delaware did not abuse its discretion in granting a motion to enjoin Chiron Corporation (“Chiron”) from maintaining a parallel litigation copending in the U.S. District Court for the Northern District of California.
Chiron developed and owns several U.S. patents related to various aspects of its Hepatitis C virus (“HCV”)-related inventions. Laboratory Corporation of America Holdings and related companies (collectively “LabCorp”) supply testing products for detecting the presence and quantity of HCV, and perform HCV tests at facilities in North Carolina.
On November 21, 2002, Chiron informed LabCorp that it would file a patentinfringement complaint against LabCorp the same day unless LabCorp signed a standstill agreement and undertook licensing negotiations. LabCorp executed a First Standstill Agreement that day. The parties subsequently executed a Second Standstill Agreement, which expired in early April 2003. After LabCorp failed to sign a proposed extension of the Standstill Agreement, Chiron filed suit against LabCorp in the United States District Court for the Northern District of California (“California action”) on April 19, 2003. Earlier that same day, unbeknownst to Chiron, LabCorp had filed a DJ lawsuit against Chiron in the United States District Court for the District of Delaware (“Delaware action”). The same patents are in dispute in both cases.
LabCorp brought a motion in the Delaware district court to enjoin the California action. Chiron responded with a cross-motion to dismiss, stay, or transfer the Delaware action. The Delaware district court granted LabCorp’s motion and denied Chiron’s cross-motion. Chiron appealed the grant of the motion to enjoin the California action, but did not appeal the denial of its cross-motion to dismiss, stay, or transfer the Delaware action.
The Federal Circuit first noted that its law differs from that of the Third Circuit concerning whether injunctions enjoining co-pending actions in other courts are appealable under 28 U.S.C. § 1292(a)(1). The Federal Circuit has concluded that such injunctions are appealable, while the Third Circuit has held that they are not.
Accordingly, the Federal Circuit first determined which law to apply and concluded that Federal Circuit law applies, which is consistent with its precedent governing the review of the grant or denial in other cases of injunctions directed to substantive issues in patent cases under Federal Circuit law.
The Court then reviewed whether the district court abused its discretion by enjoining the parallel California action. Chiron argued that the district court improperly ignored the Second Standstill Agreement by enjoining the California action. Chiron also argued that (1) LabCorp improperly forum shopped; (2) LabCorp failed to respect an earlier ruling by the Northern District of California that the current California action was related to some prior litigation in that court; (3) California has the greatest connection to the events in dispute; and (4) even though LabCorp’s complaint was filed four hours before Chiron’s complaint, because the two actions were filed on the same day, they should be treated as filed simultaneously.
The Court agreed with LabCorp that Chiron failed to point out a clear error of judgment, error of law, or clearly erroneous factual finding underlying the district court’s decision to enjoin the California action. The Court would not conclude that the district court abused its discretion in not finding the Second Standstill Agreement to be a barrier to the action. The Court declined to find an abuse of discretion when the district court made an informed determination as to how it would manage the litigation pending before it based on sound reasoning and identified facts.