Last week the Federal Circuit issued its opinion in Kannuu Pty Ltd. v. Samsung Electronics Co., a patent case we have been following because it attracted dueling amicus briefs. The case was argued before Judges Newman, Prost, and Chen. On appeal, Kannuu argued that due to a forum selection clause in a contract among the parties the Southern District of New York should have ordered Samsung to seek dismissal of inter partes review proceedings brought by Samsung. Judge Chen authored the majority opinion in the case, affirming the denial of the requested relief. Judge Newman authored a dissenting opinion. This is our opinion summary.
Judge Chen summarized the relevant background:
In 2012, Samsung contacted Kannuu . . . inquiring about Kannuu’s remote control search-and-navigation technology. Kannuu and Samsung entered into a non-disclosure agreement (NDA) . . . .
Of particular relevance, paragraph 15 of the agreement contains a forum selection clause: . . . “Any legal action, suit, or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby must be instituted exclusively in a court of competent jurisdiction, federal or state, located within the Borough of Manhattan, City of New York, State of New York and in no other jurisdiction. . . .”
Following over a year of discussions, in 2013, the parties ceased communications. No deal (i.e., intellectual property license, purchase, or similar agreement) over Kannuu’s technology was made. Six years later, on May 10, 2019, Kannuu filed suit in district court against Samsung, alleging patent infringement and breach of the NDA. Samsung then filed petitions for inter partes review at the Board on March 27, 2020, alleging that all claims of the asserted patents are unpatentable as obvious and not novel. Kannuu responded to Samsung’s petitions by arguing to the Board, inter alia, that review should not be instituted because Samsung violated the NDA’s forum selection clause in filing for such review. The Board denied institution for three patents (on the merits of failing to show unpatentability) but instituted review for the other two asserted patents. Kannuu sought rehearing on the basis of the forum selection clause but the Board denied the request. On October 21, 2020, Kannuu filed the preliminary injunction motion at issue in this appeal to compel Samsung to seek dismissal of the instituted inter partes reviews. The district court denied the motion on January 19, 2021. Kannuu timely appeals.
Judge Chen noted the issue in the case is if “the forum selection clause in the non-disclosure agreement between the entities prohibit Samsung from petitioning for inter partes review of Kannuu’s patents at the Board.” Judge Chen explained that the district court denied the preliminary injunction and that the Federal Circuit reviews this finding by the Second Circuit’s standard, which is de novo regarding legal conclusions and abuse of discretion regarding the ultimate determination of whether to grant the injunction. Here, he continued, the Federal Circuit reviews contract interpretation de novo, but ultimately applies the abuse of discretion analysis considering the following four factors: “‘[a] plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest.’” Judge Chen addressed these four factors in his opinion.
For the first factor, the likeliness to succeed, Judge Chen noted that the “the district court held the forum selection clause was valid and enforceable” and the “plain meaning of the forum selection clause in the NDA did not encompass the inter partes review proceedings.” Judge Chen explained that “[t]he district court relied on dictionary definitions in construing the relevant contractual terms ‘relating to’ and ‘arising out of’” to construe the forum selection clause. Judge Chen ultimately held that “[t]he connection between the two—the inter partes review proceedings and the NDA—is too tenuous for the inter partes review proceedings to be precluded by the forum selection clause in the NDA, which is a contract directed to maintaining the confidentiality of certain disclosed information, and not related to patent rights.”
For the second factor, irreparable harm, Judge Chen concluded that, “because the NDA’s forum selection clause does not govern the inter partes review proceedings, Kannuu is not being deprived of its bargained for forum.”
For the final two factors, Judge Chen noted that the “district court found that ‘Kannuu has failed to show that the balance of the hardships tilts in its favor’ and ‘the public interest favors allowing Samsung to litigate the validity of the patents at issue before the [Board].’” As such, Judge Chen found “the district court did not abuse its discretion on these factors.”
Judge Chen concluded by noting that, because the Federal Circuit “discerned no error by the district court, we affirm the district court’s denial of a preliminary injunction compelling Samsung to seek dismissal of its inter partes review petitions.”
Notably, Judge Newman authored a dissenting opinion. She pointed out that “[t]he Agreement does not require that there is a patent license in order for the forum selection clause to apply,” and, she continued, “[i]t is not disputed that the patents relate to the subject matter communicated under the Agreement.” Citing the oral argument transcript, Judge Newman maintained that “Samsung appears to agree that the patent issues in this litigation are subject to the forum selection of New York,” and she noted that the Majority Opinion “does not comport with Samsung’s position.” Judge Newman further argued that “[p]recedent on forum selection . . . assures the right of contracting parties to choose the forum that will resolve any disputes related to the contract.” Judge Newman cited numerous cases from the Second Circuit, the Southern District of New York, and the Federal Circuit to defend her assertion that the court should apply the forum selection clause in this case. She indicated her view that the majority holding, “that the forum selection clause does not bar the concurrent action in the PTAB,” is “devoid of any support, even by the majority.” Judge Newman concluded by stating that “[t]he majority errs in holding that this contracted forum selection does not apply.”