The contract at issue was a nondisclosure agreement (NDA) that the parties had entered into “for the purpose of sharing confidential information to further [their] business relationship,” including information related to the patent owner’s proprietary technology. The NDA contained a forum selection clause under which the parties “agreed to resolve any disputes regarding the NDA and ‘the transactions contemplated hereby’ . . . in ‘a court of competent jurisdiction, federal or state, located within the Borough of Manhattan, City of New York.’” After the parties’ dealings eventually fell apart, the patent owner sued the petitioner for infringement and breach of contract in New York federal court. The petitioner countered by seeking an IPR on one of the allegedly infringed patents.
Invoking the NDA’s forum selection clause, the patent owner argued that contractual estoppel barred the petition, and it asked the board to deny institution under § 314(a), which allows discretionary denials where the information presented shows that the petitioner lacks a “reasonable likelihood” of success. The patent owner asserted that, although the board previously had rejected similar arguments, it had never “considered whether it may take into account such forum selection clauses under its plenary, discretionary authority . . . to decide when to institute IPR proceedings,” and that “the circumstances in this case warrant [it] doing so.”
In rejecting the patent owner’s contractual estoppel defense, the board first highlighted its prior decisions holding “that contractual estoppel is not a defense to inter partes review.” The board noted that some of those decisions even involved “contractual bar argument[s]” based on forum selection clauses specifically. As the board explained, it is not bound by such clauses and does not have “independent jurisdiction to resolve any contractual dispute” regarding them.
The board next reasoned that the relevant “equitable considerations” under § 314(a)—which include “factors related to . . . efficiency, fairness, and the merits”—did not justify a discretionary denial. The board emphasized that it could not, and would not, blindly accept that the district court in the parallel proceeding likely “would enjoin [the] Petitioner from participating in the IPR,” as the patent owner argued. Rather, the board would have to assess the merits of the patent owner’s estoppel defense, including by interpreting the forum selection clause “and the scope of the parties’ NDA under New York and 2nd Circuit law, as well as [the] Petitioner’s contentions to the contrary.” The board explained that making such determinations would be inconsistent with its prior decisions “expressly declining to consider forum selection clauses,” and that the equitable factors simply did not support denying the petition.
Practice Tip: The board’s ruling is a stark reminder that a contractual forum-selection clause, by itself, likely will not shield a patent owner from inter partes review. Patent owners should keep this in mind, not only when formulating their arguments for opposing an IPR petition, but also when drafting NDAs or other agreements with potential infringers. For instance, a patent owner should additionally consider negotiating for an express covenant not to challenge its patents before the Patent Office. The patent owner may then seek enforcement of such a covenant via injunctive relief in the agreed-upon forum.
Case: Samsung Elecs. Am, Inc. v. Kannuu Pty, Ltd., IPR2020-00738, Paper 22 (PTAB Sept. 23, 2020)