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Kannuu Pty Ltd. v. Samsung Electronics Co., Appeal No. 2021-1638 (Fed. Cir. Oct. 7, 2021)

In our Case of the Week, the Federal Circuit addressed whether a forum selection clause in an NDA may prohibit a party from petitioning for an inter partes review with the PTAB.  Kannuu filed a motion for a preliminary injunction, asking the district court to compel Samsung to withdraw their petitions.  The district court denied the motion, and Kannuu appealed.  The Federal Circuit affirmed the decision on the merits (the express language in the NDA), and did not address the larger issue of whether such an approach would ever be appropriate.

In 2012, Kannuu and Samsung engaged in business discussions regarding Kannuu’s technology and the possibility of licensing its patents. The discussions commenced under the protection of an NDA containing a forum selection clause that was to govern “any legal action, suit or proceeding arising out of or relating to this Agreement or the transactions contemplated[t]hereby.” In 2013, the parties ceased communications without having reached a deal over Kannuu’s technology and patents. In 2019, Kannuu sued Samsung in federal court for patent infringement and breach of the NDA. In 2020, Samsung filed petitions for inter partes review with the Board, “alleging that all claims of [Kannuu’s] asserted patents [were] unpatentable as obvious and not novel.” Kannuu argued that the Board should not institute review because Samsung violated the NDA’s forum selection clause in filing the petitions for inter partes review with the Board. The Board instituted review nonetheless. “Kannuu sought rehearing on the basis of the forum selection clause.” The Board denied Kannuu’s request. Shortly thereafter, Kannuu filed a preliminary injunction motion with the district court seeking to compel Samsung to seek dismissal of the inter partes reviews. The district court denied Kannuu’s motion, finding that the inter partes review proceeding did not sufficiently relate to the NDA “or transactions contemplated under it” as required by the forum selection clause. Kannuu appealed.

On appeal, the Court addressed the question of whether the NDA’s forum selection clause prohibited Samsung from filing the inter partes review proceeding. Kannuu argued that the district court failed to “adequately consider the ways in which the validity issues related to the parties’ discussions under the NDA.” The Court disagreed, explaining that the district court correctly found that the NDA implicated “confidentiality and not the intellectual property rights of the parties.” The Court emphasized that “[t]he connection between the two—the inter partes review proceedings and the NDA—is too tenuous for the inter partes review proceedings to be precluded by the forum selection clause in the NDA, which is a contract directed to maintaining the confidentiality of certain disclosed information, and not related to patent rights.” Kannuu made several arguments attempting to connect the NDA to the inter partes review petitions. The Court addressed each in turn.

First, Kannuu argued that the NDA related to the inter partes review proceeding because “the NDA pertained to a potential license of Kannuu’s patents.” However, the NDA expressly stated that it did not impose any obligation on either party to enter into any sort of intellectual property license. Thus, the Court rejected this argument, explaining that “future, hoped-for transactions” did not fall within the scope of the NDA.

Second, Kannuu argued that “the inter partes reviews relate to the infringement lawsuit that, in turn, relates to the NDA.” The Court rejected this argument, finding that the issue of patent infringement was not within the scope of the NDA. In support of its argument to the contrary, Kannuu cited several cases pertaining to forum selection clauses in patent license agreements where the Court found that the forum selection clauses covered patent infringement disputes because it found that such disputes are likely to arise from license agreements. The Court distinguished the cited case law primarily on the basis that “an invalidated patent or non-infringement determination does not change, disrupt, or otherwise impact the parties’ NDA obligations.” The Court further emphasized that “a finding that a party has breached an NDA is devoid of undertaking any patent-related determinations such as infringement or validity.”

Finally, Kannuu argued that the inter partes review proceeding implicates the NDA because Kannuu would potentially rebut Samsung’s obviousness argument with evidence of copying, which derive from Kannuu’s allegation of breach of the NDA. The Court rejected this argument, explaining that, “[t]he connection here—namely the mere possibility of some factual relevancy between the allegations of breach of the NDA and potential evidence in the inter partes review—is too attenuated to place the inter partes review petitions within the scope of an agreement that was always about protecting confidential information and was never about patent rights.”

The Court briefly addressed the factors of irreparable harm and balance of the equities and public interest, and found that the district court did not abuse its discretion on either factor.

Accordingly, the Court affirmed, finding that the forum selection clause did not exclude the forum of the PTAB.

Circuit Court Judge Newman dissented. In his opinion, Judge Newman explained that the majority erred in “ruling that the forum selection clause [ ] does not apply to the issues of validity of the patents on technology disclosed under the [NDA].” Specifically, Judge Newman found that it was undisputed that the “transactions contemplated” by the NDA included the licensing of Kannuu’s patents, and as such, any disputes arising from such should be governed by the forum selection clause.

A copy of the opinion can be found here.

By Annie White

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