This past Thursday, the court heard oral argument in Kannuu Pty Ltd. v. Samsung Electronics Co., an appeal from the United States District Court for the Southern District of New York. We have been following the case because it attracted amicus briefs. On appeal, Kannuu argues that inter partes review proceedings brought by Samsung should have been enjoined due to a forum selection clause in a contract among the parties. Kannuu contends that the district court erroneously denied its related motion for a preliminary injunction. The arguments regarding the forum selection clause in the parties’ contract attracted dueling amicus briefs. Judges Newman, Prost, and Chen heard Thursday’s argument. This is our argument recap.
Perry Goldberg argued for Kannuu. Goldberg started the argument by explaining how Kannuu and Samsung both signed a non-disclosure agreement to discuss Samsung licensing Kannuu’s technology. Goldberg discussed how Kannuu created a proof of concept for Samsung as part of this process.
Judge Prost interjected to clarify that the agreement was a non-disclosure agreement and not a licensing agreement. Goldberg agreed. Judge Prost then inquired about how the NDA related to the later IPR. Goldberg argued that the forum selection clause in the NDA is relevant to the IPR because the clause is for the “agreement and the transactions contemplated in the agreement,” and it is “undisputed that the transaction contemplated is a patent license agreement relating to the patents at issue in the IPR.” Goldberg then noted that Kannuu has also sued Samsung for breach of the NDA and patent infringement.
Judge Chen noted that a patent licensing agreement is different from an NDA and asked how an IPR will impact the obligations of an NDA given that Kannuu can sue for breach of contract. Goldberg argued that, rather than the type of agreement, the forum selection clause language determines what is relevant. Here, Goldberg noted that the forum selection clause is broad, including circumstances “arising under the agreement or relating to contemplated transactions.”
Judge Chen then interjected, asking why the only mention of patents in the agreement was to say that the agreement does not confer any patent rights. Goldberg answered that copying of the technology has featured “prominently in the IPR proceedings.” Goldberg further maintained the NDA is broad enough to cover claims for patent infringement.
Goldberg also noted that, under New York law, NDAs are to be construed broadly. He further noted that Samsung had argued his position for the same NDA language in NuCurrent Inc. v. Samsung Electronics Co., a 2019 case before the Southern District of New York.
Goldberg concluded by noting that the contract’s selected forum is “exclusively” the Borough of Manhattan.
Judge Prost quickly interjected to ask her response to Goldberg’s claim that copying of information connects the IPR and NDA given that the copying of information might weigh on the adjudication of the IPR. Maroulis responded that one can breach an NDA without copying, and maintained that the IPRs will not impact the claim of a breach of the NDA. Maroulis further argued that most of the IPR issues relate to anticipation and not obviousness. Judge Chen noted, however, that Samsung had not waived its obviousness arguments in the IPR, and Maroulis agreed.
Maroulis contended that New York law does not allow “arising out of” and “contemplated hereby” to have unlimited reach, and she maintained that the court must construe the language in light of what the agreement contemplates, which here is confidentiality rather than a license. She also noted that a section of the NDA states that there is no “no guarantee or commitment that there will be any business relationship.”
Judge Newman asked if Kannuu, a Texas firm, would be able to sue Samsung in Texas or would have to follow the NDA and file in New York for any claims against Samsung. Maroulis answered that it would depend on the facts of the claim. She noted that a claim of breach of the NDA had to be brought in New York, but that a bare patent case could have been filed in Texas.
Judge Newman followed up to ask if Samsung was motivated to use a similar NDA to remove the prior NuCurrent case from Texas. Maroulis noted the claim in NuCurrent was different given that it was related to trade secrets involving multiple NDAs. She further contended that the trade secrets directly related to the NDA in NuCurrent. Maroulis further argued that no circuit or trial court has ever allowed an injunction against an IPR based on a forum selection clause in an NDA.
Judge Prost asked about the status of the IPR. Maroulis noted that a hearing was held on June 30 and the final written decision is expected by September.
Maroulis closed by noting the factors required to be considered before a court grants an injunction. Specifically, she claimed the irreparable harm factor could not be met here due to a seven-month delay in filing the claim for an injunction. She also noted that the cost of litigation preparation, cost of litigating in two forums, and risk of patent invalidity cannot be irreparable harm for Kannuu. On the balance of hardship factor, she argued Samsung only has one year to bring an IPR, and so an injunction would hamper this right. Finally, Maroulis claimed the public policy factor should be ruled to be in Samsung’s favor given that the need to challenge patents through the Patent Trial and Appeal Board.
In his rebuttal time, Goldberg contended there was abuse of discretion by the lower court because the contract was erroneously interpreted. In this regard, he reminded the court that contract interpretation is reviewed de novo.
Goldberg also claimed the IPR proceeding would not be moot because there could be an appeal even after the final written decision later this year.
Judge Prost asked about a provision in the agreement discussing an award of attorneys’ fees based on “legal rights arising out of or relating to the agreement.“ Judge Prost asked if this provision is different from the forum selection clause later in the same section of the contract. Goldberg answered that the two are different because the attorneys’ fees must relate to matters arising out of the agreement while the forum selection clause must relate to either matters rising out of or transactions contemplated by the agreement.
Goldberg also noted that there was no undue delay by Kannuu in filing suit because Kannuu first sought the injunction at the PTAB and its claim arose only after it was told to go to the District Court.
Finally, Goldberg argued that the NDA is clear and does not include language limiting the forum selection clause. He contended that the use of “any” without any narrowing language invokes the rule of construction that “the general . . . includes the specific.”
We’ll continue to monitor the case and report on any developments.