Rolling the Dice – Discretionary Opt-Out and Forum Selection Clauses

* The Federal Circuit today issued an additional ruling in this dispute. We will cover this development in more detail shortly.

In a recent decision, the Patent Trial and Appeal Board granted the institution of inter partes examination, after having refused to exercise its discretion to refuse institution on the basis of a choice of court clause. Sarepta Therapeutics, Inc. v. Nippon Shinyaku Co., Ltd.et al.IPR2021-01136, Document 19 (January 13, 2022). The Nippon patent holder urged the PTAB to exercise its discretion to deny the institution based on a choice of court clause in an agreement between the parties. Concluding that the facts of this case did not warrant a discretionary denial, the PTAB instituted Nippon’s patent IPRs.

Sarepta Therapeutics, Inc. filed an application for IPR of claims 1 and 2 of we Patent No. 10,407,461 (“the ‘461 patent”). The ‘461 patent belongs to Nippon Shinyaku Co., Ltd. The parties are currently engaged in litigation in a district court regarding the ‘461 patent and the parties’ mutual confidentiality agreement (“Agreement”). See Nippon Shinyaku Co., Ltd., et al. v. Sarepta Therapeutics, Inc.case no. 1-21-cv-01015 (D. Del. filed July 132021).

Nippon argued in its Patent Owner’s Preliminary Response (“POPR”) that the PTAB should exercise its discretion to deny the institution under 35 USC § 314(a), based on a choice of court clause in the parties’ agreement. The clause requires that all potential actions between the parties be filed in the district of Delaware. Nippon alleged that this requirement precluded filing an IPR application. Prior to filing its POPR, Nippon filed a motion for a preliminary injunction requesting the withdrawal of this and related motions. the Delaware the district court denied the motion. Acknowledging the denial, Nippon argued that this petition should be dismissed to allow the Federal Circuit to hear the matter on appeal. Sarepta responded, arguing that the PTAB has consistently refused to interpret and apply choice of court clauses when making institutional decisions. Sarepta also pointed to the denial of the preliminary injunction as evidence that the district court had already found that the agreement allowed the IPRs to continue.

The PTAB considered the arguments of the parties but decided that the choice of court clause of the agreement did not justify the exercise of its discretion to refuse the institution. The PTAB noted that its decision was “due to the particular facts of this case, including the district of from Delaware denial of preliminary injunction. The Board ultimately determined that Sarepta demonstrated a reasonable likelihood of success by proving that claims 1 and 2 of the ‘461 patent are unpatentable. Accordingly, an IPR of claims 1 and 2 of the ‘461 patent was instituted.

The PTAB referred to Serapta’s citations to three prior PTAB decisions that forum selection clauses cannot form the basis of a discretionary refusal because no part of the AIA or any other authority explicitly provides a defense of contractual estoppel in post-grant proceedings. One of the decisions cited, Bally Gaming, Inc. against New Vision Gaming & Dev., Inc.CBM2018-00006, Document 47, 8 (PTAB June 19, 2019) distinguished cases in which a district court issued a preliminary injunction requiring the withdrawal of an IPR claim based on a choice of court clause from cases such as the present, where there is no no court order requiring the withdrawal of an IPR claim.

In light of this decision, the assertion of forum selection clauses as a means to prevent post-grant PTAB trials should be carefully considered before moving forward. Pursuing a preliminary injunction in the district court against IPR proceedings has the potential to be very rewarding but carries significant risk. The granting of a preliminary injunction by a district court may be the best way for a patent holder to avoid the institution of intellectual property rights based on a choice of court clause. However, as seen in this decision, a district court’s denial of a motion for a preliminary injunction may also condemn the institution’s discretionary denial of IPRs based on a choice of court clause.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.