In light of recent Federal Circuit case law, parties involved in licensing, settlement, or confidential business discussions involving patents should carefully consider the impact a forum selection clause may have on the ability to seek an IPR.
Almost anyone can, by statute, request an inter partes review (IPR) of an issued patent, but may limit their right to do so contractually, such as through licensing agreements or non-disclosure agreements (NDAs). These agreements may contain clauses that limit the forum in which any dispute between the parties can be litigated. The Patent Trial and Appeal Board (PTAB) itself has consistently declined to enforce such forum selection clauses, finding that it lacks authority to enforce contracts between the parties, and, in any case, its jurisdiction is statutory and not limited by private agreements between the parties. See, e.g., Rohm Semiconductor USA, LLC v. Maxpower Semiconductor, IPR2020-01676, Paper 15 at 6-7 (PTAB Apr. 15, 2021); Samsung Elecs. Am., Inc. v. Kannuu Pty Ltd., IPR2020-00738, Paper 22 at 8 (PTAB Sept. 23, 2020); Ford Motor Co. v. Paice LLC, IPR2014-00579, Paper 12 at 6 (Sept. 30, 2014).
However, in Nippon Shinyaku Co. v. Sarepta Therapeutics, Inc., the U.S. Court of Appeals for the Federal Circuit recently held that a petitioner was barred from bringing an IPR as a result of a contractual agreement with the patent owner. Appeal No. 21-2369, 2022 WL 363858 (Fed. Cir. Feb. 8, 2022).
Federal Circuit Decisions Pre-2022: Mixed Results
The Federal Circuit has addressed the intersection of forum selection clauses and IPRs over the past few years. In Dodocase VR, Inc. v. MerchSource, LLC, the Federal Circuit held in a non-precedential decision that a district court did not abuse its discretion in granting an injunction compelling a petitioner to withdraw its IPR petitions based on a forum selection clause contained in a licensing agreement between the petitioner and the patent owner. 767 F. App’x. 930 (Fed. Cir. 2019). The forum selection clause, which applied to all challenges arising out of the agreement, was found to encompass PTAB proceedings and thus precluded the petitioner from filing IPR petitions. Id. at 932, 935.
On the other hand, in Kannuu Pty Ltd. v. Samsung Electronics Co., the Federal Circuit declined to reverse a district court’s decision not to enjoin the petitioner from maintaining its IPR petitions. 15 F.4th 1101 (Fed. Cir. 2021). There, the parties entered into an NDA that contained a forum selection clause indicating that any dispute “arising out of or relating to this Agreement” would be litigated in certain New York courts. Id. at 1104–05. Patent Owner moved to enjoin the petitioner from maintaining its IPR petitions based on the forum selection clause in the NDA. The Federal Circuit affirmed the district court’s denial of injunction, finding that the IPR proceedings “do not relate to the Agreement itself,” because “the Agreement implicates confidentiality and not the intellectual property rights of the parties.” Id. at 1107. The court distinguished the NDA in Kannuu from the licensing agreement in Dodocase, finding that the NDA in Kannuu did not amount to a licensing agreement about specific intellectual property rights in dispute between the parties. Id. at 1108.
Post-Nippon Shinyaku: Forum Selection Clauses May Bar an IPR
In Nippon Shinyaku Co. v. Sarepta Therapeutics, the Federal Circuit held that forum selection clauses may bar IPRs, under appropriate circumstances. 2022 WL 363858. There, the parties entered into a mutual confidentiality agreement under which the parties would negotiate a “potential business relationship.” The agreement included a time-limited covenant not to sue and a forum selection clause for any dispute that arose within two years after the expiration of the covenant not to sue. The forum selection clause indicated that “all Potential actions under U.S. law relating to patent infringement or invalidity, and filed within two (2) years of the end of the Covenant Term, shall be filed in the United States District Court for the District of Delaware.” Id. at *1.
When the covenant expired, the petitioner challenged seven of patent owner’s patents in IPR. Patent owner responded by suing the petitioner for breach of contract and infringement of the challenged patents. Id. at *2. The district court declined to enjoin the petitioner from maintaining its IPRs, finding that there was “tension” between the covenant not to sue and the forum selection clause.
On appeal, the Federal Circuit reversed and remanded the district court’s decision for the lower court to enter a preliminary injunction ordering the petitioner to withdraw its IPRs. Id. at *7. The court found that the forum selection clause required “all Potential Actions . . . relating to patent infringement or invalidity” to be brought in Delaware, and the agreement defined “Potential Actions” to include “patent or other intellectual property disputes . . . filed with a court or administrative agency.” Id. at *4. Unlike the district court, the Federal Circuit found no “tension” between the covenant not to sue and the forum selection clause, because the forum selection clause unambiguously limited the forum for validity challenges to the District of Delaware. Id. at *6.
The court found that a preliminary injunction was appropriate because the patent owner would face irreparable harm if the forum selection clause were not enforced. Indeed, according to the court, the patent owner would be “deprived of its bargained-for choice of forum and forced to litigate its patent rights in multiple jurisdictions.” Id. at *7. As a general principle, “parties are entitled to bargain away their rights to file IPR petitions, including through the use of forum selection clauses.” Id. at *6. Any potential “public interest” in determining the validity of patents cannot take precedence over enforcing agreements between parties. It is therefore not “against the public interest for an individual party to bargain away its opportunity to” challenge patents in an IPR. Id. at *7.
The Bottom Line, For Now
In Dodocase, Kannuu, and Nippon Shinyaku, the Federal Circuit consistently analyzed the language of the forum selection clauses at issue. In Dodocase, the broad language and scope of the licensing agreement resulted in a finding that the forum selection clause prevented IPR. On the other hand, the opposite result was reached in Kannuu because the language of the agreement was directed to general confidentiality between the parties, rather than the patents at issue.
The forum selection clause in Nippon Shinyaku, like that in Dodocase, explicitly accounted for all actions “relating to patent infringement or invalidity.” The type of agreement, i.e., licensing agreement or mutual confidentiality agreement, was not dispositive.
Parties involved in licensing, settlement, or confidential business discussions involving patents should carefully consider the impact a forum selection clause may have on the ability to seek inter partes review.
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Josh MaloneMarch 9, 2022 09:14 am
It’s time to put a stop to attacking patents at the corrupt USPTO as a business strategy.