Federal Circuit to Consider Whether Contract Bars Samsung’s IPR

Bizar Male

The Federal Circuit will hear arguments Thursday in a case between Samsung Electronics Co. and a patent owner that pits private contractual rights against the availability of U.S. Patent and Trademark Office challenges.

Samsung challenged Kannuu Pty Ltd.’s patents on predict-next-character technology at the Patent Trial and Appeal Board. Kannuu argued Samsung should be barred from seeking inter partes review at the board because a contract the parties entered during failed licensing negotiations limited suits to New York courts.

Kannuu wants the U.S. Court of Appeals for the Federal Circuit to rule that Samsung can’t participate in the IPR, arguing inventors rely on the certainty of negotiated contracts.

“Barring private agreements to select exclusive forums other than the USPTO to dispute patent validity would result in far-reaching, negative economic implications, particularly for innovating companies and individual inventors,” Kannuu told the court in its opening brief.

Samsung argues that rights to IPR proceedings can’t be foreclosed unless the parties expressly agree to forego that option.

Both sides attracted amicus briefs from groups of intellectual property professors making policy arguments on their behalf.

The court took the somewhat unusual step of expediting the appeal after Kannuu argued the preliminary injunction issue should be decided before the PTAB is statutorily required to issue its decision on the patents by September.

Certainty Versus Competition

Kannuu and Samsung signed a nondisclosure agreement to share confidential information for a potential licensing agreement on Kannuu’s patented navigation and search technology. The contract included a forum selection clause requiring any disputes arising under it to be brought in courts in New York.

Samsung chose not to license the patents. Kannuu sued in the U.S. District Court for the Southern District of New York alleging Samsung incorporated the technology into its smart TVs and Blu-Ray DVD players anyway. Samsung in return challenged the patents at the PTAB in Virginia.

Kannuu asked the district court to enjoin Samsung from participating in the IPRs based on the NDA’s forum restrictions, which it says forced it to sue in New York. The court denied Kannuu’s request for a preliminary injunction, finding that the IPRs don’t relate to the parties’ contract so its forum selection clause doesn’t apply.

Kannuu asked the Federal Circuit to weigh in and apply the forum selection clause. “By channeling disputes regarding validity solely into the district courts, private parties can reduce potential costs and uncertainty to patent owners, in turn reducing the costs not only in licensing and assigning patents, but in negotiating licenses and assignments as well,” it said.

A group of five IP professors backed Kannuu’s argument, saying that courts should apply parties’ privately negotiated contracts without rewriting key provisions. They cited their concern “about the proper interplay between private-party contractual rights and administrative agency action, especially in the context of post-grant challenges at the PTAB.”

Samsung argued the agreement expressly states it creates no rights or obligations with respect to any patents, unlike a licensing agreement. “The NDA specifically contemplates and is concerned with allowing the parties to freely exchange confidential information without fear of theft or disclosure of that information by the other party,” Samsung said.

The agreement has no clear statement of intent to waive IPR, Samsung said.

Samsung won the support of 18 professors who argued that patent law should “develop in a way that incentivizes innovation without unduly restricting competition or constricting the public domain.”

“Given the ubiquity of NDAs and their significance in early business negotiations, permitting boilerplate NDA forum selection clauses to bar IPR proceedings would frustrate the strong federal policy favoring free competition in ideas which do not merit patent protection,” they said.

Perry Goldberg of Progress LLP in Los Angeles will argue for Kannuu. Victoria Maroulis of Quinn Emanuel Urquhart & Sullivan LLP in Redwood Shores, Calif., will argue for Samsung.

The case is Kannuu Pty Ltd. v. Samsung Elecs. Co., Fed. Cir., No. 21-1638, argument 7/8/21.

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