Forum Selection Clauses: Are You Sure That Is What You Want?

It happens all the time. Two parties in a related field are contemplating working together and want to get a “look under the hood” at each other’s intellectual property. So they execute a “quick-and-dirty” non-disclosure and/or confidentiality agreement before working out the final agreement. A recent Federal Circuit decision tells a cautious tale about these precursor agreements and their effect on whether certain patent validity issues are litigated in the USPTO’s Patent Trial and Appeals Board (PTAB) or district court.

Indeed, in precedential decision Nippon Shinyaku v. Sarepta Therapeutics, No. 2021-2369 (February 8, 2022), the Federal Circuit held that—in one such agreement—Sarepta waived its right to file Inter Partes Review (IPR) petitions at the USPTO’s Patent Trial and Appeals Board (PTAB). That is because the parties’ precursor agreement, a Mutual Confidentiality Agreement (MCA), included a forum selection clause whereby:

[T]he Parties agreed that all Potential Actions arising under U.S. law relating to patent infringement or invalidity…shall be filed in the United 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 MCA defined Potential Actions as “any patent or other intellectual property disputes between [the parties], other than EP Oppositions or JP Actions, filed with a court or administrative agency prior to or after the Effective Date in the United States, Europe, Japan or other countries in connection with the Parties’ development and commercialization of [the technology].” The MCA also included a time-limited covenant not to sue that prevented the parties from bringing “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 [USPTO].”

This MCA is not atypical. While the parties were considering whether to join forces, they agreed not to sue each other for disputes over intellectual property. When the “look under the hood” was over, the parties agreed that any disputes over intellectual property would be resolved in Delaware.

The problem arose when, on the day after the covenant not to sue ended, Sarepta filed seven IPR petitions in the PTAB. Nippon immediately sued in the District of Delaware to enforce the forum selection clause. The district court sided with Sarepta and its interpretation of the forum selection clause, essentially finding that Sarepta had not waived its right to file IPR petitions.

After expedited briefing, the Federal Circuit reversed that decision based on its plain reading of the MCA. “Under the plain language of [the forum selection clause], Sarepta was required to bring all disputes regarding the invalidity of Nippon Shinyaku’s patents—including the allegations and contentions contained in Sarepta’s IPR petitions—in the District of Delaware.”

This reversal was impactful because, during the appeal, the PTAB had granted institution in all seven of Sarepta’s IPR petitions. Sarepta will now have to litigate those issues in the District of Delaware if it so chooses.

Spring cleaning season is almost upon us. With this decision in mind, it may be wise to review any forum selection clauses in intellectual property agreements to ensure they align with the desire to pursue, or not pursue, IPR challenges at the PTAB.