Nitride Semiconductors Co., Ltd. v. Digi-Key Corporation

Background

Nitride brought a patent-infringement case against Digi-Key, alleging that Digi-Key infringed claims 2 and 9 of U.S. Patent No. 6,861,270 by selling products made by several manufacturers, including Crystal IS, Inc. Crystal IS later filed a separate action against Nitride in the Northern District of New York seeking a declaration that its products did not infringe the patent. Digi-Key described itself as unrelated to Crystal IS and as a customer that resold Crystal IS’s allegedly infringing ultraviolet light-emitting diodes.

Digi-Key moved to dismiss the claims involving Crystal IS products or, alternatively, to stay those claims until the New York action was resolved. Nitride opposed dismissal but agreed to a stay concerning products also involved in the New York case.

Court’s Analysis

The court explained that courts generally give priority to the first-filed case, but patent cases have a “customer-suit exception.” That exception can allow a case involving a manufacturer and the patent holder to take priority over an earlier case against the manufacturer’s customer. The exception creates a presumption favoring the manufacturer’s case in its home jurisdiction, subject to factors identified by the Court of Appeals for the Eighth Circuit.

The court found that Nitride had not rebutted that presumption. Nitride argued that Digi-Key was a nationwide retailer and had continued selling products allegedly infringing the patent even after litigation involving other manufacturers. But Nitride did not address the other six factors. The court agreed with Digi-Key that those factors did not favor rejecting the customer-suit exception.

Disposition

The court stated that a stay was more appropriate than dismissal because the New York action could resolve, make unnecessary, or advance major issues in the Minnesota case, including invalidity and infringement. It therefore granted Digi-Key’s motion to stay the claims regarding Crystal IS products and stayed the case pending resolution of the New York action.

Within 21 days after the New York action is resolved, the parties must jointly file a status report. While that action remains pending, they must file yearly updates on March 1. Nitride may petition the court to lift the stay before the New York action ends if it believes circumstances warrant a change.