Federal Circuit sides with Samsung in NDA—IPR challenge
A non-disclosure agreement containing a forum selection clause does not prevent Samsung from challenging the validity of the other party’s patents in inter partes review (IPR) proceedings, according to a decision delivered by the US Court of Appeals for the Federal Circuit yesterday.
In 2012, electronics company Samsung and software provider Kannuu entered into a non-disclosure agreement (NDA) during the course of business negotiations. Samsung had been considering taking out a licence to navigation technology owned by Kannuu.
The agreement contained a clause stating that any legal action arising out of the agreement “must be instituted exclusively in a court of competent jurisdiction, federal or state, located within the Borough of Manhattan, City of New York, State of New York and in no other jurisdiction”.
Following negotiations, the parties did not enter into any agreement and, in 2019, Kannuu filed a lawsuit against Samsung at the US District Court for the Southern District of New York. The software provider accused Samsung of patent infringement and breach of the NDA.
In response, Samsung sought to institute IPRs of five of Kannuu’s patents. Kannuu argued that the IPRs should not be instituted because, by filing for such reviews, Samsung had violated the terms of the non-disclosure agreement.
Although the US Patent Trial and Appeal Board declined to launch IPRs for three of the patents on the merits of the petitions, it did institute IPRs of the other two.
In October 2020, Kannuu filed a preliminary injunction motion at the US District Court for the Southern District of New York. The software provider asked that Samsung be compelled to ask for the two IPRs to be dismissed.
The court denied the motion in January 2021, having found that the forum selection clause was valid and enforceable but that it did not cover IPR proceedings.
Kannuu appealed against this decision to the Federal Circuit.
The Federal Circuit heard arguments in the matter in July and, yesterday, announced that it was upholding the decision of the district court.
Explaining its decision, the Federal Circuit said: “The connection between the two—the IPR proceedings and the non-disclosure agreement—is too tenuous for the IPR proceedings to be precluded by the forum selection clause in the non-disclosure agreement, which is a contract directed to maintaining the confidentiality of certain disclosed information, and not related to patent rights.”
Kannuu had sought to claim the evidence that might be presented in the IPRs could fall within the scope of the non-disclosure agreement, because the agreement had related to a potential licence of Kannuu’s patents.
However, the Federal Circuit was unpersuaded by this argument. It reiterated that the agreement sought to protect confidential information and “was never about patent rights”.
“The issues underlying patent infringement and invalidity fall outside the scope of the non-disclosure agreement,” the Federal Circuit concluded.
Notably, a footnote to the judgment reads: “Had Kannuu and Samsung entered a contract which applied to IPR proceedings, a forum selection clause in that hypothetical contract might permit Kannuu to avoid IPR and its inherent features. But, they did not enter such a contract.”
The Federal Circuit affirmed the district court’s denial of a preliminary injunction compelling Samsung to seek dismissal of its IPRs.
In a dissenting opinion, Circuit Judge Pauline Newman said that the forum selection clause in the non-disclosure agreement was clear and unambiguous, and so should be respected and enforced.
In her view, the majority—comprising Circuit Judge Raymond Chen and Circuit Judge Sharon Prost—erred in finding that the contractual forum selection does not apply.
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