Forum Selection Clauses in Non-Disclosure Agreements May Void the Right to File an IPR Claim | Vinson & Elkins LLP
On February 8, the Federal Circuit ruled that a forum selection clause in a nondisclosure agreement (“NDA”) nullified the parties’ right to file motions for inter partes examination (“IPR”) to challenge the validity of patents before the United States Patent and Trademark Office (“USPTO”). Nippon Shinyaku Co., Ltd. vs. Sarepta Therapeutics, Inc., no. 2021-02369 (Fed. Cir. 8 February 2022). This is the second case of precedent issued by the Federal Circuit in the last twelve months on this issue, and the first to assert that a forum selection clause can forfeit the right to file an IPR petition. .
Nippon Shinyaku Co. Ltd. (“Nippon”) and Sarepta Therapeutics, Inc. (“Sarepto”) have entered into a mutual NDA to consider a commercial relationship relating to therapies to treat Duchenne muscular dystrophy. The NDA contained a forum selection clause which read: “all potential actions arising under United States law relating to the infringement or invalidity of a patent, and filed within two (2) years after the end of the [covenant not to sue] shall be filed in the United States District Court for the District of Delaware and neither party will contest personal jurisdiction or venue in the District of Delaware nor will either party seek to transfer any potential actions on the ground of forum not conveniens.”
The covenant not to sue expired on June 21, 2021. On the same day, Sarepta filed seven IPR petitions challenging patents held by Nippon. On July 13, 2021, Nippon filed a patent infringement action against Sarepta in Delaware, including claims for breach of nondisclosure agreement. Nippon sought a preliminary injunction to compel Sarepta to withdraw its IPR claims. The district court denied Nippon’s motion because Nippon had not demonstrated that it was likely to prevail by showing that IPR claims were prohibited by the NDA. The district court held that the forum selection clause should not prohibit the filing of IPR claims because (1) the covenant not to sue for the original term expressly mentions IPR claims , while the forum selection clause is silent, (2) the forum selection clause does not limit federal prosecutions because it mentions personal jurisdiction and venue, which are not issues in motions. of IPR, and (3) the two-year term of the forum selection clause could lead to a circumstance where a party loses the right to file an IPR even outside of that term if a year elapses between the filing of a complaint and the end of the term of the forum selection clause, a detrimental effect which should be avoided.
The Federal Circuit backtracked, finding that Sarepta had lost its right to file IPR petitions under the NDA. Any challenge to the validity of the patent must be filed in Delaware, which excludes IPR petitions that must be filed with the USPTO. This result follows from the plain language of the forum selection clause, which by its terms applies to actions “relating to patent infringement or disability.” IPR claims are clearly linked to the invalidity of the patent and therefore fall within the scope of the clause. Given the clarity of the wording, it was not necessary to consider further provisions to clarify what was meant by the choice of court clause. Further, the reference to personal jurisdiction and venue in the forum selection clause does not limit it to federal suits. The best reading is that the sentence first requires all actions to be brought in Delaware, and then once brought, the jurisdiction of the Court cannot be challenged. Finally, the plain language of the clause could not be overcome by a possible detrimental effect on the parties who had negotiated this wording.
In a case decided last October, the Federal Circuit ruled that another forum selection clause did not forfeit the right to file IPR petitions. Kannuu Pty. ltd. against Samsung Elecs. Co.Ltd.15 F.4and 1101 (Fed. Cir. 7 October 2021). In this case, the forum selection clause required that “any legal action, suit or proceeding arising out of or relating to [the NDA] or the transactions contemplated herein shall be instituted exclusively in court. . . located in the Borough of Manhattan, New York City, New York State and no other jurisdiction. The NDA was signed to facilitate discussion of a possible patent license between the parties. After negotiations failed, Samsung filed an IPR petition challenging the validity of one of Kannuu’s patents. Kannuu responded by filing a patent infringement suit and seeking a preliminary injunction to compel Samsung to withdraw its IPR claims under the NDA. In that case, the Federal Circuit ruled that the forum selection clause does not have prohibit the filing of an IPR. The Federal Circuit held that challenging the validity of a patent “arises from or is related to [the NDA] or the transactions contemplated herein”, as required by the choice of court clause.
What this means for you
This case recalls that choice of court clauses can also limit substantive rights. Choice of court clauses for patent claims can be extremely valuable in avoiding being dragged into a lawsuit somewhere friendly to plaintiffs or far away. But given the popularity of IPR claims as a defense against such lawsuits, care should be taken to ensure that the right to file such claims is not inadvertently lost. The examples given in Japanese and Kannuu suggests avenues which can achieve one or the other result – either prevent the filing of IPR claims by expressly placing patent invalidity within the scope of the venue clause as in Japaneseor authorize them by limiting the scope of the clause to disputes under the NDA as in Kannuu. Of course, the NDA could also deal separately and expressly with the question of whether IPR claims should be allowed notwithstanding a choice of court clause. In any case, the Federal Circuit is unlikely to allow an IPR petition to be filed when the plain language of the forum selection clause excludes USPTO filings.