## Facts

- Surface Supplied Inc. (Surface), a California corporation with its principal place of business in the Northern District of California, researched, designed, developed, and manufactured digital gas analyzer and depth gauge products for commercial underwater work.
- Surface’s products were in an early (“alpha”) stage, and none had been sold at the time of the dispute.
- Surface maintained a website describing product specifications but did not sell products through the site.
- Surface advertised through online channels (including Facebook and Twitter) and in national magazines.
- Surface used a helmet-related image/logo in connection with its products and marketing, including engraving the image on products and displaying marketing images online.
- Kirby Morgan Dive Systems, Inc. (Kirby), a California corporation that manufactures and markets surface-supplied commercial helmet equipment, owned federal trademark registrations covering its marks and helmet designs.
- Kirby sent Surface a cease-and-desist letter asserting that Surface’s helmet image (and related images used in marketing) infringed Kirby’s federal trademarks and demanded Surface stop using the challenged images.
- Surface filed an action in the U.S. District Court for the Northern District of California seeking declaratory relief that its use was noninfringing (and, as pleaded in the case, also sought related declaratory relief challenging enforceability based on alleged misuse).
- After Surface filed first in the Northern District, Kirby filed a trademark infringement action against Surface in the U.S. District Court for the Central District of California.
- Kirby’s facilities and most of its employees were located in the Central District; Surface and its employees were located in the Northern District.
- In the Northern District action, Kirby moved to dismiss under the Declaratory Judgment Act or, alternatively, to transfer the case to the Central District under 28 U.S.C. § 1404(a).

## Issues

1. Whether the court should decline to exercise jurisdiction over Surface’s first-filed declaratory-judgment action under the Declaratory Judgment Act in light of Kirby’s later-filed infringement suit in another federal district.
2. Whether the action should be transferred to the Central District of California under 28 U.S.C. § 1404(a) for convenience and in the interest of justice.

## Decision

- The court denied Kirby’s motion to dismiss the declaratory-judgment action under the Declaratory Judgment Act.
- The court denied Kirby’s alternative motion to transfer venue to the Central District of California under 28 U.S.C. § 1404(a).
- The action remained in the Northern District of California as the first-filed case.

## Legal Principles

- The Declaratory Judgment Act confers discretion: even when an actual controversy exists, a federal court may decide whether to hear a declaratory-judgment claim.
- In exercising Declaratory Judgment Act discretion, courts consider whether retaining the action would serve the purposes of declaratory relief, including clarifying legal relations and reducing duplicative litigation, while discouraging improper forum shopping.
- A declaratory-judgment action filed after receiving a cease-and-desist letter is not automatically dismissed as an improper anticipatory filing; courts examine the surrounding circumstances to determine whether dismissal is warranted.
- Under the first-to-file rule, when substantially similar actions involving the same parties and issues are filed in different federal courts, the first-filed action is generally favored absent equitable considerations counseling otherwise.
- Under 28 U.S.C. § 1404(a), the moving party bears the burden to show the proposed transferee forum is clearly more convenient and that transfer would serve the interest of justice.
- Section 1404(a) analysis commonly weighs factors including the plaintiff’s choice of forum (especially when it is the plaintiff’s home district), convenience to parties and nonparty witnesses, access to evidence, and the efficient administration of justice; transfer is disfavored when it would mainly shift inconvenience from one side to the other.

## Conclusion

The Northern District of California kept Surface’s first-filed declaratory-judgment case, finding no sufficient basis to decline jurisdiction under the Declaratory Judgment Act and concluding that Kirby had not met its burden under § 1404(a) to show the Central District was clearly more convenient or that transfer would better serve the interest of justice.


Surface Supplied Inc. v. Kirby Morgan Dive Systems, Inc., 2013 WL 2355446 (2013)