Negotiated rights to file an IPR application may not be recovered | McDermott Will & Emery
In a notice of precedent, the United States Court of Appeals for the Federal Circuit reversed a district court’s denial of an injunction sought by a plaintiff to compel a patent plaintiff to abandon his motions for inter partes examination (PPE). Nippon Shinyaku Co. Ltd. vs. Sarepta Therapeutics, Inc.Case No. 2021-2369 (Fed. Cir. Feb. 8, 2022) (Newman, LourieStoll, JJ.)
Nippon Shinyaku and Sarepta Therapeutics have signed a Mutual Confidentiality Agreement (MCA) to facilitate discussion of “a potential commercial relationship related to therapies for the treatment of Duchenne muscular dystrophy”. The MCA has established a mutual covenant not to sue for “any legal or equitable cause of action, suit or claim or otherwise bring any litigation or any other form of judicial or administrative proceeding against the other party. . . . in any jurisdiction in the United States or Japan of or relating to intellectual property in the field of Duchenne muscular dystrophy” during the term of the engagement. The mutual pact “explicitly includes[d]corn [wa]s without limitation, patent infringement litigation, declaratory judgment actions, patent validity challenges before the United States Patent and Trademark Office or the Japanese Patent Office, and reexamination proceedings before the United States Patent and Trademark Office” (emphasis added). The MCA also included a forum selection clause to govern post-employment intellectual property disputes between the parties, which stated:
this all potential actions arising under US patent infringement or invalidity lawand filed within two (2) years of the end of the contract term, must be filed in the United States District Court for the District of Delaware and that neither party will contest personal jurisdiction or venue in the District of Delaware and neither party will seek to transfer any potential actions on the ground of forum not conveniens (emphasis added).
“Potential actions” have been defined as follows:
any patents or other intellectual property disputes between [Nippon Shinyaku] and Sarepta, or their Affiliates, other than EP Oppositions or JP Actions, filed with a court or administrative body before or after the effective date in the United States, Europe, Japan or other countries in connection with the parties’ development and commercialization of therapies for Duchenne muscular dystrophy (emphasis added) .
On the day the engagement term ended, Sarepta filed seven IPR applications with the Patent Trial & Appeal Board (Board). Nippon Shinyaku sued in the United States District Court for the District of Delaware for breach of contract, declaratory judgment of non-infringement and invalidity, and patent infringement. Nippon Shinyaku requested a preliminary injunction to restrain Sarepta from pursuing the intellectual property rights claims and to force Sarepta to withdraw them. The District Court dismissed Nippon Shinyaku under each of the preliminary injunction factors (likelihood of success on the merits, irreparable harm in the absence of extraordinary preliminary relief, balance of damages in its favor, and relief in the public interest ).
The district court explained that any irreparable harm argument fell under Nippon Shinyaku’s contract interpretation arguments, and that the balance of hardship and Nippon Shinyaku’s public interest arguments rested on Sarepta’s ability to file IPR requests – all items that have been contracted between the parties. Nippon Shinyaku appealed in a timely manner, and the Federal Circuit heard arguments expedited since the Commission had granted institution of all IPRs at issue in the meantime.
Under the precedent of the Federal Circuit and the applicable Regional (Third) Circuit, a demonstration of likelihood of success on the merits is required to establish entitlement to a preliminary injunction. Like the District Court, the Court held that this issue rested entirely on the contractual interpretation of the MCA, which it considered de novo before concluding that the plain language of the MCA’s choice of court clause resolved the dispute. The MCA’s Forum Selection Clause was found to be unambiguous, such that Sarepta was bound to bring all disputes regarding the invalidity of Nippon Shinyaku’s patents – including the allegations and assertions contained in Sarepta’s IPR petitions – in the district of Delaware. Sarepta instead presented these disputes as IPR applications to the Board. As the MCA section 10 choice of court clause prevented the filing of IPR claims during the two-year period following the expiration of the undertaking term on June 21, 2021, the Court ruled. concluded that Nippon Shinyaku was likely to succeed on the merits of its claim. for breach of contract.
The Federal Circuit also agreed with Nippon Shinyaku that absent a preliminary injunction, he would be deprived of his negotiated forum choice and forced to litigate his patent rights in multiple jurisdictions. The Court followed its own precedent from 2011 General Protecht Grp. vs. Leviton Mfg. that such harm constitutes irreparable harm sufficient to meet the standard of a preliminary injunction.
Likewise, the Federal Circuit agreed that the balance of hardship tipped in favor of Nippon Shinyaku since, absent a preliminary injunction, Sarepta would potentially have multiple disability apple bites (including in a forum that he had negotiated). The Court again cited General Protector: “Having contracted for a specific forum, [Sarepta] should not be heard to maintain that the execution of the contract which he freely entered into would cause difficulties.
Finally, with respect to the public interest, the Federal Circuit rejected the argument that it would be unfair to compel Sarepta to honor the bargain it had made, citing the 1972 Supreme Court opinion in M/S Bremen vs. Zapata Off-Shore for the proposition that choice of court clauses “are prima facie valid and must be applied” and that “[t]there is no public interest in condoning a party’s breach of its previously negotiated contractual commitment to litigate in a particular forum.
The Federal Circuit overturned the district court’s decision and remanded for entry of a preliminary injunction.