Forum Selection Clauses in Nondisclosure Agreements Can Forfeit the Right to File an IPR Petition
On February 8, the Federal Circuit held that a forum selection clause in a nondisclosure agreement (“NDA”) forfeited the parties’ right to file petitions for inter partes review (“IPR”) to challenge the validity of patents at the United States Patent & Trademark Office (“USPTO”). Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc., No. 2021-02369 (Fed. Cir. Feb. 8, 2022). This is the second precedential case issued by the Federal Circuit in the last twelve months on this issue, and the first to hold that a forum selection clause can forfeit the right to file an IPR petition.
Nippon Shinyaku Co. Ltd. (“Nippon”) and Sarepta Therapeutics, Inc. (“Sarepta”) entered into a mutual NDA to contemplate a business relationship relating to therapies to treat Duchenne Muscular Dystrophy. The NDA contained a forum selection clause which read: “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 not to sue] 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.”
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 lawsuit against Sarepta in Delaware, including claims for breach of the nondisclosure agreement. Nippon requested a preliminary injunction to require Sarepta to withdraw its IPR petitions. The district court denied Nippon’s motion because Nippon had not shown that it was likely to prevail in showing that the IPR petitions were prohibited by the NDA. The district court reasoned that the forum selection clause should not bar filing IPR petitions because (1) the covenant not to sue during the initial term expressly mentions IPR petitions, while the forum selection clause is silent, (2) the forum selection clause only limits federal lawsuits because it mentions personal jurisdiction and venue, which are not issues in IPR petitions, and (3) the two-year term for the forum selection clause could lead to a circumstance where a party loses the right to file an IPR even outside that term if a year elapses between the filing of a complaint and the end of the forum selection clause term, an adverse effect that should be avoided.
The Federal Circuit reversed, holding that Sarepta had forfeited its right to file IPR petitions under the NDA. Any challenge to the validity of the patent must be brought in Delaware, which excludes IPR petitions that must be filed with the USPTO. This result flows from the plain language of the forum selection clause, which by its terms applies to actions “relating to patent infringement or invalidity.” IPR petitions are clearly related to patent invalidity, and thus fall within the scope of the clause. Given the clarity of the language, there was no need to look to other provisions to clarify what was meant by the forum selection clause. Further, the mention of personal jurisdiction and venue in the forum selection clause does not limit it to federal lawsuits. The better reading is that the sentence first requires all actions to be brought in Delaware, and then once brought, the Court’s jurisdiction cannot be challenged. Finally, the plain language of the clause could not be overcome by any potential adverse effect on the parties who had negotiated that language.
In a case decided last October, the Federal Circuit held that a different forum selection clause did not forfeit the right to file IPR petitions. Kannuu Pty. Ltd. v. Samsung Elecs. Co. Ltd., 15 F.4th 1101 (Fed. Cir. Oct. 7, 2021). In that case, the forum selection clause required any “legal action, suit, or proceeding arising out of or relating to [the NDA] or the transactions contemplated hereby must be instituted exclusively in a court . . . located within the Borough of Manhattan, City of New York, State of New York, and in no other jurisdiction.” The NDA was signed to facilitate the discussion of a possible patent license between the parties. After the negotiations failed, Samsung filed an IPR petition challenging the validity of one of Kannuu’s patents. Kannuu responded by filing a patent infringement lawsuit and seeking a preliminary injunction to require Samsung to withdraw its IPR petitions under the NDA. There, the Federal Circuit held that the forum selection clause did not prohibit the filing of an IPR. The Federal Circuit held that the challenge to the validity of a patent was “arising out of or relating to [the NDA] or the transactions contemplated hereby” as required by the forum selection clause.
What This Means For You
This case is a reminder that forum selection clauses may also limit substantive rights. Forum selection clauses for patent claims can be extremely valuable to avoid being dragged into a lawsuit in a plaintiff-friendly or distant venue. But given the popularity of IPR petitions as a defense against such lawsuits, care should be exercised to ensure that the right to file such petitions are not inadvertently forfeited. The examples provided in Nippon and Kannuu suggests paths that may achieve either result – either to prevent the filing of IPR petitions by expressly putting patent invalidity within the scope of the venue clause as in Nippon, or allowing them by limiting the scope of the clause to disputes under the NDA as in Kannuu. Of course, the NDA could also separately and expressly address whether IPR petitions should be permitted notwithstanding a forum selection clause. In any case, the Federal Circuit is unlikely to allow an IPR petition to be filed where the plain language of the forum selection clause excludes filings at the USPTO.
This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.