Judge Glasser Holds Judicial Estoppel Does Apply Retroactively

Patterson Belknap Webb & Tyler LLP

Patterson Belknap Webb & Tyler LLP

On October 5, 2020, United States District Judge I. Leo Glasser (E.D.N.Y.) denied plaintiff Alexsam, Inc.’s (“Alexsam”) motion for reconsideration of the court’s June 17, 2020 summary judgment ruling.

Alexsam sued defendant Mastercard International Inc. (“Mastercard”) in May 2015, alleging that Mastercard failed to pay royalties owed under a 2005 patent license agreement.  The business method claimed by the licensed patents allows prepaid cards—like phone cards, gift cards, and medical cards—to be processed on devices normally used for credit card transactions.  In addition to asserting counterclaims, Mastercard petitioned the Patent Trial and Appeal Board (the “PTAB”) for covered business method review of the licensed patents.  The PTAB denied Mastercard’s petition, however, agreeing with Alexsam that because the licensing agreement contained Alexsam’s “covenant not to sue,” there was no imminent possibility that Alexsam could bring an infringement action against Mastercard, and therefore Mastercard lacked standing before the PTAB.  In the court’s June 17, 2020 ruling, Judge Glasser held that Alexsam’s arguments before the PTAB—that the agreement’s covenant not to sue stripped Mastercard of standing to seek declaratory relief—meant that Alexsam was judicially estopped from seeking royalty payments.

In its reconsideration motion, Alexsam argued that the court’s finding of judicial estoppel should not be retroactive, i.e., should not preclude Alexsam from seeking royalties that accrued prior to the patents expiring.  The court rejected this argument, finding that “[j]udicial estoppel is not constrained by any doctrine of retroactivity.”  The court also rejected Alexsam’s argument that judicial estoppel would “overreward” Mastercard:  rather than eliminating royalties prior to Mastercard’s filing of its Answer, “Alexsam is judicially estopped from pursuing all royalties owed from the date that Mastercard actually ceased payment of royalties and provided the appropriate notice thereof.”

Case:  Alexsam, Inc. v. Mastercard Int’l Inc., 15-CV-2799 (ILG) (SMG) (E.D.N.Y. Oct. 5, 2020).

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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