The Federal Circuit Court enforced the plain language of a confidentiality agreement to prevent an IPR proceeding from going before the PTAB.
In the summer of 2020, Nippon Shinyaku Co., Ltd. and Sarepta Therapeutics, Inc. entered into a mutual confidentiality agreement relating to a potential partnership for a Duchenne Muscular Dystrophy therapy. As a part of the deal, the parties settled on a two-year covenant not to bring any lawsuits relating to the treatment and its intellectual property. The agreement also included a forum-selection clause that required the parties to bring suits, including any patent disputes, to the District Court of Delaware following the two-year period.
Immediately following the conclusion of the two-year covenant, Sarepta filed seven inter partes review (IPR) petitions with the Patent Trial and Appeals Board (PTAB) in protest of Nippon’s patents. An IPR petition allows the challenger to protest the validity of a patent. In response, Nippon filed suit in the District of Delaware for patent infringement, breach of contract, and requested a preliminary injunction against Sarepta filing the IPR petitions.
Initially, the District Court of Delaware heard the case and rejected Nippon’s request for a preliminary injunction. It determined that the contract intended to preserve the ability to file IPR petitions because the forum-selection clause referred to federal district court litigation, not IPR proceedings. Rather, including IPR petitions in the forum-selection clause would time-bar the ability to file the petitions. In the interest of policy and public interest, the district court concluded that Sarepta should be allowed to file IPR petitions with the PTAB.
However, the Federal Circuit disagreed. In reversing the district court’s decision, the federal circuit held that the plain language of the agreement prevented filing outside the District of Delaware. The forum selection clause clearly provided the terms of the disputes. Because patent disputes were included in the forum requirement, they too had to filed with the District of Delaware. The court justified it decision based on past cases that upheld the ability for parties to waive their right to file an IPR petition. It concluded by noting that the policy factors actually weighed in favor of Nippon because Sarepta would otherwise have multiple opportunities to invalidate Nippon’s patent.
The opinion was precedential, and the court distinguished its decision from cases like Kannuu v Samsung based on the specific language of the agreement. And the decision will undeniably impact future contracts involving patent and intellectual property agreements. On one hand, the court’s decision benefits patents owners by increasing the burden of proof when arguing the invalidity of a patent. In district courts, the burden of proof requires the higher, “clear and convincing evidence” standard to find invalidity. However, the PTAB requires only a “preponderance of the evidence” to find a patent invalid, an easier standard to meet.[1] Patent owners who contract for a forum-selection clause in district courts will be better off when defending the validity of their patents.
The decision creates clear implications for contractual concerns when negotiating around intellectual property. Parties will have to be more aware of their agreements and the ease at which they can contract away their rights, even with a simple forum-selection clause. The Court has made clear that the plain language of a contract dominates. Parties should be intentional and considerate when negotiating their rights and agreements going forward considering that certain filings are not guaranteed and can be bargained away.
[1] https://www.jdsupra.com/legalnews/federal-circuit-rehearing-denial-in-6183834/
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