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Contracting Out of an IPR

Posted by Thomas P. Howard | Feb 09, 2022 | 0 Comments

By James Juo.

Inter Partes Review (“IPR”) is an administrative process before the Patent Trial and Appeal Board (“PTAB”) which handles patent validity challenges as an alternative to litigation.

A forum selection clause in a contract, however, might prohibit the filing of an IPR petition; depending on the nature of the agreement and the actual language of the forum selection clause.

In Kannuu Pty. Ltd. v. Samsung Electronics Co. Ltd., 15 F.4th 1101 (Fed. Cir. 2021), the Federal Circuit held that the forum selection clause in a Non-Disclosure Agreement (“NDA”) between Kannuu and Samsung in that case did not extend to IPRs because the “connection” between confidential information exchanged under an NDA and an IPR “is too tenuous for the inter partes review proceedings to be precluded by the forum selection clause in the NDA.”

Had Kannuu and Samsung entered a contract which applied to inter partes review proceedings, a forum selection clause in that hypothetical contract might permit Kannuu to avoid inter partes review and its inherent features. But, they did not enter such a contract.

Writing in dissent, however, Judge Newman argued that “the forum selection clause is clear and unambiguous, and law and precedent require that it be respected and enforced.”

The relevant clause was as follows:

[N]othing contained in this Agreement will be construed as granting any rights to the receiving party, by license or otherwise, to any of the Confidential Information disclosed by the disclosing party except as specified in this Agreement. Additionally, this Agreement imposes no obligation on either party to purchase, sell, license, transfer or otherwise dispose of any technology, services or products, or to engage in any other business transaction. Nothing in this Agreement shall be deemed to grant to either party a license under the other party's copyrights, patents, trade secrets, trademarks or other intellectual property rights.

* * *

If either party employs attorneys to enforce any rights arising out of or relating to this Agreement, the prevailing party shall be entitled to recover reasonable attorneys' fees. This Agreement shall be construed in accordance with and all disputes hereunder shall be governed by the laws of the State of New York, without giving effect to any choice of laws principles that would require the application of the laws of a different country or state. Any legal action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby must be instituted exclusively in a court of competent jurisdiction, federal or state, located within the Borough of Manhattan, City of New York, State of New York and in no other jurisdiction. Each party further irrevocably consents to personal jurisdiction and exclusively in, and agrees to service of process issued or authorized by, any such court

The following year, however, the Federal Circuit later found that the forum selection clause did preclude an IPR filing in Sarepta Therapeutics, Inc. v. Nippon Shinyaku Co., Ltd., No. 21-2369 (Feb. 8, 2022).

Sarepta and Nippon had signed a Mutual Confidentiality Agreement (“MCA”) in the lead-up to a marketing deal for a gene therapy for treating Duchenne Muscular Dystrophy. The deal never came together, but the MCA included a two-year “covenant not to sue” with respect to “patent infringement litigations, declaratory judgment actions, patent validity challenges before the U.S. Patent and Trademark Office or Japanese Patent Office, and reexamination proceedings before the U.S. Patent and Trademark Office …”

After the expiration of the covenant-not-to-sue, a “forum selection clause” would govern disputes between the parties, as follows:

[T]he Parties agree that all Potential Actions arising 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 and that neither Party will contest personal jurisdiction or venue in the District of Delaware and that neither Party will seek to transfer the Potential Actions on the ground of forum non conveniens.

And the MCA defined “Potential Actions” as encompassing patent disputes “filed with a court or administrative agency.”

The Federal Circuit held that the forum selection clause here precluded the filing of IPR petitions. “In essence, the covenant not to sue broadly prohibited the parties from litigating any issue relating to patents, regardless of the forum.” The Court noted there was not anything unfair about “holding Sarepta to its bargain.”

While it is certainly true that Congress desired to serve the public interest by creating IPRs to allow parties to quickly and efficiently challenge patents, it does not follow that it is necessarily against the public interest for an individual party to bargain away its opportunity to do so.

Distinguishing this case from Kannuu, the Court explained:

Inherent in our holding in Kannuu was an understanding that a differently worded forum selection clause would preclude the filing of IPR petitions. See id. In the case before us now, we have such a forum selection clause, which uses a defined term that the district court acknowledged “literally encompasses IPRs.”

Interestingly, Judge Newman, who had dissented in Kannuu, also was part of the panel for Sarepta.

The attorneys at Thomas P. Howard, LLC are experienced in enforcing patents or defending against infringement claims in litigation nationwide including in Colorado.

About the Author

Thomas P. Howard

Thomas Howard is an experienced trial lawyer that handles intellectual property litigation nationwide, including copyright, trademark, trade secret and patent litigation, as well as complex civil litigation, including breach of contract, interference with contract, breach of fiduciary duty, conspiracy, fraud and fraudulent transfer of assets.


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