A recent decision by the Federal Circuit confirmed the ability of patent licensors to use forum-selection clauses to have licensees contractually waive the ability to challenge the validity of the licensed patents through inter partes review (IPR) proceedings before the United States Patent and Trademark Office (USPTO). We discuss the decision below and then provide a model licensor-friendly forum-selection provision for inclusion in license agreements.
The USPTO has declined to enforce agreements that a licensee will not challenge the validity of a licensed patent, and, under the Supreme Court’s decision in Lear, Inc. v. Adkins, 395 U.S. 653 (1969), such “no-challenge” provisions are disfavored. For example, in a 2015 decision, the USPTO permitted an IPR to proceed notwithstanding that the petitioner contractually agreed not to challenge validity. The USPTO found that the statute providing for IPRs did not include private contracts as a basis for denying to review a patent. Dot Hill Sys. Corp. v. Crossroads Sys., Inc., IPR2015-00822, No. 18 (P.T.A.B. Sept. 17, 2015).
Forum-selection clauses present a vehicle for contractually waiving a licensee’s ability to use an IPR to challenge the validity of the licensed patent. In Dodocase VR, Inc. v. Merchsource LLC, 2018-1724 (Fed. Cir. Apr. 18, 2019), the Federal Circuit affirmed a decision by the District Court for the Northern District of California to enjoin a licensee from proceeding with an IPR to attempt to invalidate a licensed patent. Both the District Court and the Federal Circuit relied on the forum selection clause in the license, which stated that all disputes “arising out of or under this Agreement” could be litigated only in California courts under state-law contract principles. The Courts found that the licensee’s invalidity challenge related to the license and therefore was subject to the forum selection clause, which precluded the licensee from bringing an invalidity challenge before the USPTO.
In light of this decision, and to avoid any ambiguity under state or federal law before any tribunal, we recommend including the following underlined addition to the forum selection clause in patent license agreements:
This Agreement shall be governed by, and construed in accordance with, the law of [State of Choice]. The laws of [State of Choice] shall govern any dispute, controversies, claims or differences arising from, under, out of or in connection with this agreement, without giving effect to principles of conflicts of law. Any disputes, controversies, claims or differences shall be exclusively litigated before the courts of [Venue of Choice], and the parties consent to the exclusive jurisdiction and venue of [Venue of Choice]. [Licensee] agrees not to challenge the validity of the asserted patents before any other court, tribunal or agency, including through reexamination, inter partes review or post-grant review before the United States Patent and Trademark Office.