Can Forum Selection Clauses Preclude a PTAB Challenge?

Fitch, Even, Tabin & Flannery LLP

Patent licenses, technology transfer agreements, and non-disclosure agreements often include forum selection clauses as a matter of course, and sometimes include an arbitration clause requiring private arbitration of disputes. Petitioners and patent owners both will want to know: Can these clauses preclude a challenge at the Patent Trial and Appeal Board (PTAB)? The federal district courts routinely enforce the parties’ selected forum in patent lawsuits. The PTAB, however, has been reluctant to do so for inter partes and post-grant review proceedings. The Federal Circuit has not yet ruled on whether the PTAB must directly consider and enforce forum selection clauses. Patent owners seeking to avoid the PTAB may have recourse through the district courts, but results on this path are uncertain. Petitioners have frequently been successful in maintaining challenges at the PTAB, despite prior agreements that include forum selection or arbitration clauses. Patent owners who want a contractual bar against PTAB challenges must tread carefully.

To date, the PTAB has refused to enforce forum selection and arbitration clauses in technology license agreements,1 non-disclosure agreements,2 and settlement/license agreements.3 In each case, the PTAB has found that it lacks authority to evaluate and enforce contracts between the parties. Declining to enforce an arbitration clause, for example, the PTAB recently reasoned that it did not find “a statute, rule, or policy that would preclude the Office from acting on the Petition [by instituting an IPR].”4 The PTAB has similarly refused to apply issue preclusion, where a district court had previously enforced the forum selection clause between the parties by transferring the case to the parties’ selected forum.5 And it has refused to assert its power to exercise its discretion to deny institution under 35 U.S.C. § 314(a), despite acknowledging that “equitable considerations” underlie that discretion when considering parallel district court proceedings.6 Further, the PTAB’s precedential opinion panel has refused to take up the issue of whether the PTAB can or should deny institution based on contractual agreements.7 In short, patent owners should not expect success at the PTAB if they seek to enforce a forum selection clause.

The Federal Circuit has not opined on whether the PTAB has authority to enforce forum selection or arbitration clauses. But the court has not been entirely silent. In the recent New Vision Gaming case, Judge Newman dissented in part to argue that before remanding, the panel should have considered the patent owner’s threshold forum selection arguments.8 She argued that efficiency dictated addressing the parties’ forum selection arguments first, as a jurisdictional issue.9 Both the petitioner and the USPTO argued that the PTAB’s analysis of a forum selection clause (or lack thereof) is unreviewable under the “no appeal” rule in 35 U.S.C. §§ 314(d) and 324(e), which prevents appeal of decisions “closely related” to the decision whether to institute.10 If it adopts this reasoning, the Federal Circuit may find that it cannot review the issue at all.

Even if it reviews the PTAB’s authority to enforce the parties’ contractual choice of forum, the Federal Circuit ultimately may not find authority for PTAB review of forum selection or arbitration clauses. The question will likely turn on whether the statutory scheme governing PTAB proceedings allows for contractual estoppel. The court previously found that assignor estoppel does not apply to PTAB petitioners.11 The Federal Circuit reasoned that the plain language of 35 U.S.C. § 311(a) eliminates assignor estoppel at the PTAB because the statute allows any person “who is not the owner of a patent” to file an IPR petition.12 The court contrasted Congress’s express incorporation of equitable doctrines in other contexts, including the statute governing the International Trade Commission’s investigations.13

Patent owners should not despair, however. While the Federal Circuit has not addressed the PTAB’s authority to directly review forum selection clauses, it has endorsed indirect challenges through the district courts. In its non-precedential decision in Dodocase VR, Inc. v. MerchSource, LLC, the Federal Circuit affirmed a district court preliminary injunction that required a patent infringement defendant to withdraw its petitions for IPR.14 There the parties had entered a Master License Agreement that included a “no-challenge” clause and a forum selection clause. The forum selection clause governed “any dispute arising out of or under this Agreement,” which “shall be litigated before the courts in San Francisco County or Orange County, California.”15 The Federal Circuit held that the district court did not err in concluding that this language covered invalidity disputes and therefore encompassed PTAB proceedings.16 Forum selection clauses may, then, be amenable to enforcement through the district courts.

But patent owners should be mindful that motions for preliminary injunction require heavily fact-specific analyses that remain within the district court’s discretion. As an example, the Southern District of New York denied a patent owner’s motion for a preliminary injunction that would have required a petitioner to submit a request to withdraw its IPR petitions.17 The court noted the prior expiration of the agreement that contained the forum selection clause, finding the forum selection clause did not survive the agreement’s expiration.18 The court also deferred to the “unique procedural benefits” afforded to petitioners at the PTAB as reason for finding that a preliminary injunction might undermine the public interest.19

In sum, the district courts provide the best avenue for enforcing a forum selection or arbitration clause to preclude PTAB challenges. Nearly 80% of PTAB challenges arise from co-pending district court litigation, meaning that a district court forum for enforcing the forum selection or arbitration clause already exists in many situations. But patent owners must act quickly if they intend to stop a PTAB challenge in its early stages. Based upon its actions to date, the PTAB is highly unlikely to give weight to a forum selection clause and will not wait for the district court to decide the issue. Further, applying a forum selection or arbitration clause to bar PTAB challenges requires a clear statement of intent in the language of the agreement. Petitioners should look for ambiguity in the clause, particularly if invalidity disputes are not contemplated in the forum selection language or in the context of the agreement. As with many issues that arise in PTAB litigation, careful planning and early action usually net the best results.

1 E.g., Rohm Semiconductor USA, LLC v. Maxpower Semiconductor Inc., Case No. IPR2020-01676, Paper 15 at 6 (PTAB Apr. 15, 2021).

2 E.g., Samsung Elecs. Am., Inc. v. Kannuu Pty Ltd., Case No. IPR2020-00738, Paper 22 at 8 (PTAB Sep. 23, 2020); Samsung Elecs. Co., Ltd. v. NuCurrent, Inc., Case No. IPR2019-00858, Paper 13 at 12–13 (PTAB Oct. 7, 2019).

3 E.g., Bally Gaming, Inc. v. New Vision Gaming & Dev., Inc., CBM2018-00006, Paper 47 at 8 (PTAB June 19, 2019); Dot Hill Sys. Corp. v. Crossroads Sys., Inc., IPR2015-00822, Paper 18 at 7–8 (PTAB Sep. 17, 2015); Ford Motor Co. v. Paice LLC, Case No. IPR2014-00579, Paper 12 at 6–7 (PTAB Sep. 30, 2014) (arbitration agreement arising out of settlement in an earlier patent infringement lawsuit).

4 Rohm Semiconductor, Case No. IPR2020-01676, Paper 15 at 6.

5 Samsung Elecs. Co., Case No. IPR2019-00858, Paper 13 at 17(PTAB Oct. 7, 2019) (“we have held that judicial estoppel is not a defense to inter partes review”).

6 Samsung Elecs. Am., Case No. IPR2020-00738, Paper 22 at 9.

7 Samsung Elecs. Am., Inc. v. Kannuu Pty Ltd., Case No. IPR2020-00738, Paper 32 (PTAB Dec. 23, 2020) (referring to the precedential opinion panel request in Ex. 3001).

8 New Vision Gaming & Development, Inc. v. SG Gaming, Inc., Case No. 20-1399, slip op. at *2–3 (Fed. Cir. May 13, 2021) (J. Newman, concurring in part, dissenting in part).

9 Id. at *5.

10 Id. at 4; see Thryv Inc. v. Click-to-Call Techs., LP, 140 S. Ct. 1367, 1370 (2020).

11 Arista Networks, Inc. v. Cisco Sys., Inc., 908 F.3d 792, 803 (Fed. Cir. 2018).

12 Id.

13 Id.

14 Dodocase VR, Inc. v. MerchSource, LLC, 767 Fed. Appx. 930, 936 (Fed. Cir. Apr. 18, 2019)

15 Id. at 932.

16 Id. at 934–35.

17 NuCurrent Inc. v. Samsung Elecs. Co., Ltd., Case No. 19-CV-798, 2019 WL 2776950, at *1 (S.D.N.Y. July 2, 2019).

18 Id. at *4.

19 Id. at *5–6.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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