Forum Selection Clause Stops Seven IPRs

Other provisions could not disturb plain language of the forum selection clause

The Federal Circuit reiterated that a party can enter into a contract that bars its ability to file an inter partes review (IPR) before the U.S. Patent and Trademark Office (USPTO).

When Nippon Shinyaku and Sarepta Therapeutics (“Sarepta”) were considering a potential business relationship relating to therapies for the treatment of Duchenne Muscular Dystrophy, they entered into a Mutual Confidentiality Agreement (“MCA”). The MCA barred actions against each other during the discussions with a covenant-not-to-sue (the “Covenant Term”) and also included a forum selection clause, which stated:

“[T]he Parties agree that all Potential Actions arising under U.S. law relating to patent infringement or invalidity, and filed within two (2) years of the end of the Covenant Term, shall be filed in the United States District Court for the District of Delaware and that neither Party will contest personal jurisdiction or venue in the District of Delaware and that neither Party will seek to transfer the Potential Actions on the ground of forum non conveniens.”

The same day that the covenant-not-to-sue ended, Sarepta filed seven IPRs against Nippon Shinyaku’s patents in the USPTO. Nippon Shinyaku then filed a patent infringement suit against Sarepta in the District of Delaware and asked for a preliminary injunction. Judge Stark, who has since been nominated to the Federal Circuit, felt that other provisions in the MCA were in tension with the forum selection clause and rendered it ambiguous. Accordingly, he denied preliminary injunctive relief.

The Federal Circuit reversed the decision and awarded the preliminary injunction. It felt that the plain language of the forum selection clause controlled. It was not troubled by a provision of the covenant-not-to-sue that specifically called out and barred challenges at the USPTO. That provision stated, “For clarity, this covenant not to sue includes, but is not limited to, patent infringement litigations, declaratory judgment actions, patent validity challenges before the U.S. Patent and Trademark Office or Japanese Patent Office, and reexamination proceedings before the U.S. Patent and Trademark Office.” The Federal Circuit reasoned that the covenant-not-to-sue barred all actions, and the clarification explained that those barred actions included USPTO actions. But when the covenant expired, actions could be brought, but only in the District of Delaware pursuant to the forum selection clause. Also, the Federal Circuit felt it was fine that the forum selection clause mentioned activities only applicable to district court proceedings, as those provisions governed how a case in Delaware would proceed.

Nippon Shinyaku was not the only beneficiary of the ruling. Because this decision halting the IPRs occurred after the USPTO issued seven decisions instituting the IPRs, the over a quarter of a million dollars in government fees paid by Sarepta will be lost without any obligation on the USPTO to issue final written decisions on the merits in the IPRs. Although the USPTO has discretion to continue IPRs without a petitioner--such as when a settlement occurs on the eve of the deadline for a final written decision--it seems unlikely that the USPTO would exercise that discretion where the IPRs should have never been filed.