IPR tricks of the trade: Contractual obligations v. PTAB trial practice

October 7, 2021 – Any person, other than a patent owner, can request an inter partes review (IPR) or post grant review (PGR) trial at the Patent Trial and Appeal Board. There is no statutory or constitutional standing requirement, aside from various estoppel considerations based on prior actions, that a petitioner must meet. This does not mean, however, that a would-be petitioner is always free to request a PTAB trial. Here, we discuss two considerations that may limit a petitioner: mediation/arbitration clauses and forum selection clauses arising out of contracts between the petitioner and patent owner.

Parties enter into contracts to describe the metes and bounds of a business relationship all the time. These contracts often detail obligations related to patent rights, e.g., the right to make and use some claimed invention. They can also, and often do, include clauses that require that any disputes related to the contract, including the stated patent rights, must first be mediated or submitted to arbitration before other legal action is taken. The contracts can further specify a specific court that the parties agree has exclusive jurisdiction to resolve such disputes. These are often referred to as a forum selection clause.

If all goes well, the mediation/arbitration and forum selection clauses never see the light of day. Things become much more interesting when things go wrong. Take, for example, a contract between a supplier A and a distributor B. Supplier A agrees to provide some product — which is covered by various supplier A-owned patents — and distributor B agrees to use and/or sell the product to its customers. The contract is unlikely to be perpetual in duration, and it is possible that distributor B may find a different product to use and/or sell and terminates its contract with supplier A. It is then possible that supplier A can accuse distributor B and/or new supplier C of patent infringement. Distributor B and/or new supplier C may, in turn, challenge supplier A’s patents in a PTAB trial.

A relatively new question must be asked: Assuming that the obligations under the original contract between supplier A and distributor B remain, how do the mediation/arbitration and forum selection clauses included in that contract impact the PTAB trials?

The PTAB has so far held that contractual obligations between the parties, that do not involve the PTAB itself, do not deprive a petitioner of standing to file and maintain a PTAB trial. In Ford Motor Co. v. Paice LLC, for example, the PTAB held that a petitioner had standing to file an IPR petition even where a contract between the petitioner and the patent owner may prohibit the petitioner from maintaining the PTAB trial. IPR2014-00570, Paper 10 at 6 (Sept. 30, 2014).

The PTAB stated that a purported violation of an arbitration agreement limiting how and whether the petitioner may challenge the patent at issue “falls outside the purview of [the PTAB’s] authority under the [] America Invents Act.” Id.

Just because a petitioner has standing to file and maintain a PTAB trial, does not mean that it’s off the hook, however. Recent case law acknowledges the availability of injunctive relief where the patent owner can request a district court to enjoin the petitioner from maintaining the PTAB trial request. In Dodocase VR, Inc. v. MerchSource, LLC, 2018 WL 1475289 (N.D. Cal., Mar. 26, 2018), for example, the plaintiff moved for a temporary restraining order or preliminary injunction against defendants requesting that the court order the defendants to withdraw PGR and IPR petitions they filed against the asserted patents. Plaintiff’s motion was based on a license agreement it had in place with the defendants that included a “no challenge” and “forum selection” clauses.

The “no challenge” clause prohibited the defendants from challenging the validity of the patents. The court noted that the defendants attempted to renegotiate the license and, once negotiations failed, “cannot be enjoined under principles of equity from mounting these validity challenges by enforcement of the ‘no-challenge’ clause.”

The “forum selection” clause, on the other hand, limited the defendants to challenges before the courts in California. The court concluded that the “forum selection” clause was valid and covered PTAB trials. On that basis, the court concluded that the plaintiff was successful in showing entitlement to a preliminary injunction. The court ordered the defendants to email the PTAB requesting permission to withdraw its petitions and, if permitted, to file such motions with haste. Id. at *1, *13-*14.

The Federal Circuit affirmed Dodocase in a non-precedential decision. 767 Fed. Appx. 930 (Fed. Cir. 2019); see also Nomadix, Inc. v. Guest-Trek Interactive Ent’mt Ltd., Appeal No. 20-55439 (9th Cir. Sept. 3, 2021) (affirming district court’s holding that a forum selection clause that identifies a specific court to handle all disputes without mentioning the PTAB prevented the PTAB petitioner from seeking review); MerchSource, LLC v. DDC Tech, LLC, IPR2018-00494, Paper 49 (Aug. 16, 2019) (granting Petitioner’s Motion in Compliance with the District Court’s Order requesting to withdraw and dismiss its Petitions for violating a forum selection clause).

The availability of injunctive relief is a real tool at a patent owner’s disposal, in the proper circumstances. Practitioners should consider whether it makes sense to include an arbitration/mediation and/or forum selection clause, or other limit on the would-be petitioner’s ability to challenge its patents. If such clause is breached, the patent owner can consider whether it makes sense to seek injunctive relief.

This article reflects only the present personal considerations, opinions, and/or views of the authors, which should not be attributed to any of the authors’ current or prior law firm(s) or former or present clients.