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Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 1 of 8
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`TRADING TECHNOLOGIES
`INTERNATIONAL, INC.,
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`Plaintiff,
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`vs.
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`CQG, INC., and CQGT, LLC,
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`Defendants.
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`No. OS C 4811
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`MEMORANDUM OPINION AND ORDER
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`PlaintiffTrading Technologies International, Inc. ("Trading Tech") brought an action
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`alleging patent infringement against defendants CQG, Inc. and CQGT, LLC. Defendants
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`move to dismiss for improper venue pursuant to FED. R. CIV. P. 12(b )(3), or, in the alternative,
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`to transfer venue pursuant to 28 U.S.C. § 1404(a). For the reasons set forth below, we deny
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`defendants' motion to dismiss or transfer.
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`BACKGROUND
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`Defendants move to dismiss this claim for improper venue. In analyzing such a claim,
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`we take all allegations in the complaint as true unless contradicted by defendants' affidavits,
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`wherein we must resolve all factual conflicts and draw all reasonable inferences in favor of
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`plaintiff. lnterlease Aviation Investors II (Aloha) L.L.C. v. Vanguard Airlines, Inc., 262
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`F.Supp.2d 898, 913 (N.D.III.2003). Additionally, we may examine facts outside of the
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`complaint. I d. It is plaintifrs burden to establish proper venue. /d.
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`Defendants contend that venue is improper in the Northern District of Illinois because
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`defendants first filed a declaratory action on infringement and validity of the same patents in
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`the federal district court for the District of Colorado. In light of this claim, the time line of
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`TRADING TECH EXHIBIT 2007
`CQG & CQGT v. Trading Technologies
`CBM2015-00057
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`Page 1 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 2 of 8
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`l'io. OS C 4811
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`J•agt· 2
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`negotiation and litigation is of the foremost importance.
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`Plaintiff currently owns U.S. Patent Nos. 6,766,304 and 6,772,132 (both for "Click
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`Based Trading with Intuitive Grid Display of Market Depth"). Plaintiff alleges that
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`defendants have and continue to infringe such patents by making, using, selling, and/or
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`offering for sale products and methods covered by claims of those patents in violation of 35
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`U.S.C. § 271. Commencing in July 2005, the parties engaged in discussion and negotiation to
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`resolve any patent disputes between them. They discussed a communication schedule to form
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`a structure for the negotiations. Plaintiff initially suggested a communication deadline of
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`August 12, 2005, but eventually agreed to an August 19, 2005, deadline (Geannopulos aff. ~I
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`13; Fischer aff. , 4). The parties dispute the tenor of the discussion, plaintiff describing
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`cooperative and forward-moving negotiation, and defendants depicting threatening and
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`onerous conversations.
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`On August 17,2005, the parties conversed about the most recent proposals. According
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`to plaintiff, defendants turned down plaintifrs most recent proposal, but did not oppose
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`further discussions with plaintifrs CEO, and agreed to continue working on the agreement
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`that night (Gennopulos aff. ,, 15-17). Defendants deny agreeing to continue such discussions,
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`stating that they "made it clear that all discussions were over" as of the refusal of plaintifrs
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`offer (Fischer aff. , 5). Thereafter, on August 17, 2005, defendants filed a declaratory
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`judgment action to resolve any obligations between the parties in the federal district court for
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`the District of Colorado. Such action is currently pending. Plaintiff was taken by surprise at
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`the commencement of defendants' suit, stating that "[a[t the time that CQG filed its Colorado
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`declaratory judgment action against TT on August 17, 2005, I was under the impression that
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`the negotiation schedule the parties had agreed to was still in place and that negotiations would
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`continue until at least August 19, 2005" (Gennopulos aff., 18). Because this is Rule 12(b)(3)
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`Page 2 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 3 of 8
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`No. 05 C 4811
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`Pag:e 3
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`motion, and there is significant dispute as to the nature and termination of the negotiation, we
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`resolve the above disputes in favor of the plaintiff.
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`DISCUSSION
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`Venue is proper "in the judicial district where the defendant resides, or where the
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`defendant has committed acts of infringement and has a regular and established place of
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`business." 28 U.S.C. § 1400(b). Thus, because defendants have an established place of business
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`in Illinois and a principal place of business in Colorado, venue would be proper in either
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`district.
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`Defendants argue, however, that this case should be dismissed for improper venue "in
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`light of Defendants' first-filed declaratory judgment action in the District of Colorado which
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`involves the same parties and addresses the very same issues in this action." (defs' mot. at 3).
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`In order to save judicial resources and provide consistent judgment, two identical lawsuits
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`should not proceed in federal courts in two different districts. The general rule is that the case
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`first filed takes priority, and the subsequently filed suit should be dismissed or transferred.
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`Schnadig Corp. v. Collezione Europa U.S.A., 2001 WL 766898, *1 (N.D.Ill.2001 ); Design
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`Automotive Group, Inc. v. Lund Industries, Inc., 1996 WL 377063, *1-2 (N.D.IIl.1996);
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`Col borne Corp. v. Me Retail Foods, 1995 WL 470226, *1 (N.D.Ill.1995). This rule applies even
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`where the first filed action is a suit for declaratory judgment. Genentech, Inc. v. Eli Lilly &
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`Co., 998 F.2d 931,937-38 (Fed.Cir.1993); Design Automotive Group, Inc. v. Lund Industries,
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`Inc., 1996 WL377063, *1-2 (N.D.Ill.,1996). In patent infringement actions the Federal Circuit
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`has strongly endorsed the first-to-file doctrine.' See Genetech, 998 F.2d 931; Electronics for
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`1Both parties agree that patent cases are bound by Federal Circuit, rather than regional circuit, law.
`See Serco Services Co .• L.P. v. Kelley Co .• Inc., 51 F.3d 1037, 1038 (Fed.Cir.l995) ("The proper relationship
`between an action under this act for a declaration of patent rights and a later-filed infringement suit triggers
`this court's special responsibility to foster national uniformity in patent practice; we do not defer to the
`procedural rules of other circuits").
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`Page 3 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 4 of 8
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`No. 05 C 4811
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`Page 4
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`Imaging. Inc. v. Coyle, 394 F.3d 1341 (Fed.Cir.2005). In fact, the Federal Circuit explicitly
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`rejected applying Tempco Electric Heather Corp. v. Omega Engineering, Inc., 819 F.2d 746,
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`749 (7'" Cir.1987)(holding that where "the declaratory judgment action is filed in anticipation
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`of an infringement action, the infringement action should proceed, even if filed four days
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`later"), to patent actions. Rather, the Federal Circuit found that consideration of anticipatory
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`filing and preemption of another's suit is only one factor in determining whether to dismiss
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`a declaratory judgment action in favor of a subsequently filed patent infringement suit
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`involving the same parties and patents. Electronics for Imaging, Inc., 394 F.3d at 1347-48.
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`Because the Federal Circuit does not counsel "rigid mechanical solutions" to venue and
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`jurisdiction problems (Kerotest Mfg. Co. v. C-O-Two Fire Equipment Co., 342 U.S. 180, 183
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`(1952)), we consider other factors: convenience and availability of witnesses, absence of
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`jurisdiction over all necessary or desirable parties, possibility of consolidation with related
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`litigation, considerations relating to the real party in interest (Genetech. Inc., 998 F.2d at 938)
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`and the underlying purposes of the Declaratory Judgment Act. See EMC Corp. v. Norand
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`Corp., 89 F.3d 807, 814 (Fed.Cir.1996) (finding that the special flexibility granted district
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`courts in declaratory judgment actions does not limit courts to decline jurisdiction only when
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`special circumstances of convenience, jurisdiction or consolidation are present).
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`First and foremost, we note that CQG's declaratory judgment filing appears to be a
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`race to the courthouse in contravention of the purposes of the Declaratory Judgment Act.
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`That Act states:
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`In a case of actual controversy within its jurisdiction ... any court of the United
`States, upon the filing of an appropriate pleading, may declare the rights and
`other legal relations of any interested party seeking such declaration, whether
`or not further relief is or could be sought.
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`Page 4 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 5 of 8
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`No.O~ C 4811
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`28 U.S.C. § 2201(a).
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`Page~
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`Prior to the Declaratory Judgment Act, alleged patent infringers could not initiate legal
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`proceedings to define their rights and obligations with regard to potential infringement. They
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`were helpless to escape patentee's tactical maneuvering, whereby patentee hesitated in filing
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`an infringement action solely to harass alleged infringer's customers or increase bargaining
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`power. Allowing competitors to sue for declaratory judgment served to clear the air, protect
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`their customers, and to define their rights without accumulating injuries related to waiting for
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`patentee to decide whether to bring suit. See EMC Corp., 89 F.3d at 814-15; BP Chemicals Ltd.
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`v. Union Carbide Corp., 4 F.3d 975, 977 (The Act "accommodates the practical situation
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`wherein the interests of one side to the dispute may be served by delay in taking legal action").
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`The Declaratory Judgment Act was not intended to affix competitor with a right to feign
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`negotiation in order to delay patentee's filing of an infringement suit in an effort to secure a
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`preferable forum. In this case, defendants requested an extension of time for negotiation, then
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`simultaneously terminated negotiations prior to that date and filed a declaratory judgment
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`action. Although the Federal Circuit has found that commencing suit prior to a negotiation
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`deadline should not deprive the alleged patent violator of the right to sue (Electronics for
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`Imaging, Inc., 394 F.3d at 1347), the Supreme Court noted that "[t]he manufacturer who is
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`charged with infringing a patent cannot stretch the Federal Declaratory Judgments Act to give
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`him a paramount right to choose the forum for trying out questions of infringement and
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`validity. He is given an equal start in the race to the courthouse, not a headstart." Kerotest
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`Mfg.Co., 342 U.S. at 185. Thus, it appears to us that defendants were engaging in tactical
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`strategies similar to the maneuvering the Declaratory Judgment Act was designed to end.
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`Second, the balance of conveniences weighs in favor of consolidating the suits in Illinois,
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`not Colorado. Because both parties have offices in Chicago, and can access important
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`Page 5 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 6 of 8
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`No. 05 C 4811
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`documents from those offices, this weighs in favor of maintaining jurisdiction in Chicago.
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`Defendant argues that plaintiff's situs for developing and maintaining its patented technology
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`is irrelevant, stating that the focus in a patent infringement case is on "the activities of the
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`alleged infringer, its employees, and its documents." (defs' reply at 9) (citing Corp. Safe
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`Specialists, Inc. v. Tide! Techs .. Inc., 2005 WL 2124483, *2 (N.D.III.2005). While this is the
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`general rule, defendants fail to note that this court in the same case found that "the weight of
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`this factor is somewhat counterbalanced by (defendants'] declaratory judgment action, which
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`indicates tbat they will call the validity of (plaintiff's] patent into question." Corp. Safe
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`Specialists, Inc., 2005 WL 2124483 at *2. Additionally, while defendants dispute plaintiff's
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`statement that defendants' customer base in Chicago is greater than its customer base in
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`Colorado, defendants do not dispute that they maintain an office in Chicago, generate 30 per
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`cent of their revenue from the Chicago market, and manage some of those accounts from the
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`Chicago office. Therefore, although it would be more convenient for defendants to litigate this
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`case in Colorado, it would be less inconvenient for them to litigate in Chicago than it would
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`be to force plaintiff to litigate in Colorado, where they have no office, no client base, and
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`generate no revenue.
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`Third, we must consider the necessity of consolidating these actions. Generally,
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`"[w]hen pending litigation involves the same parties and similar legal, technical and
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`infringement issues, transfer to thatvenue is logical and strongly favored." Berol Corp. v. BIC
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`Corp., 2002 WL 1466829, *5, n5 (N.D.III.2002). In this case, there is almost identical litigation
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`pending in this court and in Colorado. The actions are following a similar time line, with
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`essentially the same motion, fully briefed, awaiting decision by the courts. The Colorado
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`complaint was filed on August 17, 2005, and on September 7, 2005, defendant Trading Tech
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`made a motion to dismiss, transfer to the Northern District of Illinois, or stay. That motion
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`Page 6 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 7 of 8
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`No. 05 C 4811
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`Page 7
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`was fully briefed as of October 12, 2005. In an almost identical time line, the complaint in this
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`action was filed on August 19, 2005, defendant CQG made a motion to dismiss or transfer to
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`the District of Colorado, and the motion was fully briefed as of October 13, 2005. As noted
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`above, we do not believe that the Colorado action should proceed in lieu of this action simply
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`because it was filed first. Therefore, because the facts ofthis case suggest rejection of the first-
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`filed presumption, we risk engaging in a stalemate with the Colorado court, each waiting for
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`the other court to make a determination of the motion to dismiss or transfer before attending
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`to the mirror motion before it. Because defendant CQG did not make a motion to stay, we feel
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`compelled to decide this motion on the facts before us. In doing so, we accept jurisdiction and
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`believe that the Colorado court should transfer the related case to Illinois for consolidation
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`with this case. 2
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`Additionally, as plaintiff noted, seven additional related patent infringement actions
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`are currently pending in the Northern District of Illinois, two of which are before this court.
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`We agree that there is an efficiency benefit of maintaining all of the cases in the same district.
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`Finally, we note that this court has jurisdiction over all parties to this action.
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`Based on the facts of the case before us, weighing the convenience of the parties and
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`respecting the purposes of the Declaratory Judgment Act, we find that this case is properly
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`heard before this court. Thus, we deny defendants' motion to dismiss.3
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`2Unlike jurisdiction over coercive actions, a "district court is not required to exercise declaratory
`judgment jurisdiction, but has •unique and substantial discretion' to decline that jurisdiction." Electronics for
`Imaging. Inc., 394 F.3d at 1345. See also EMC Corp., 89 F.3d at 813 ("Simply because there is an actual
`controversy between the parties does not mean that the district court is required to exercise that
`jurisdiction").
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`3Defendants spend a significant amount of time trying to convince this court that a case or
`controversy existed at the time of the filing of their declaratory judgment suit. Because we find that this
`district is the proper venue for determining the rights and obligations of the interested parties, it is
`unnecessary to determine whether there was a case or controversy upon filing of the declaratory judgment
`suit such that Colorado would have had jurisdiction.
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`Page 7 of 8
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`

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`Case 1:05-cv-04811 Document 26 Filed 10/31/2005 Page 8 of 8
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`No.05C4811
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`Pag:e H
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`In analyzing a motion to transfer venue, we assess whether transfer would serve the
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`convenience of the parties and witnesses and would be in the interests of justice. See Santa's
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`Best Craft, LLC v. Janning, 2003 WL 21504522, *3 (N.D. Ill. 2003). In making such an
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`assessment we must consider the private interests of the parties and the public interests of the
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`courts. Georgouses v. NaTec Resources. Inc., 963 F.Supp. 728,730 (N.D.III.1997). Specifically,
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`we should look at plaintifrs choice of forum, access to proof, availability and convenience of
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`witnesses, situs of material events, convenience, each forum's interest in resolving the
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`controversy, familiarity with applicable law, and court resources and congestion. /d. The
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`defendants, as the moving party, bear the burden of demonstrating that a transfer to the
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`District of Colorado is clearly more convenient. Clearclad Coatings. Inc. v. Xontal, Ltd., 1999
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`WL 652030, *8 (N.D. III. 1999). Based on the discussion above regarding the convenience of
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`parties, access to proof, and possibility for consolidation, we do not believe that the defendants
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`have met that burden. Therefore, we deny defendants' motion to transfer venue.
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`CONCLUSION
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`For the foregoing reasons, defendants' motion to dismiss or transfer is denied.
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`0 :1:;. 3( , 2005.
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`JAMES B. MORAN
`Senior Judge, U.S. District Court
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`Page 8 of 8
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