Judge Ramos Finds Forum Selection Clause of NDA Implicates Confidentiality and Not IP Rights and Allows IPRs to Proceed

On January 19, 2021, United States District Judge Edgardo Ramos (S.D.N.Y.) denied Kannuu Pty Ltd. (“Kannuu”)’s motion for preliminary injunction and instead granted Samsung Electronics Co., Ltd. (“Samsung”)’s motion to stay pending resolution of two instituted IPRs.

Kannuu argued that a forum selection clause of an NDA between the parties precluded Samsung from pursuing the IPRs.  However, the Court found that “the IPR proceedings do not ‘relat[e] to’ the [NDA] or transactions contemplated under it, and thus do not fall within the scope of the forum selection clause.”  As a result, the Court denied Kannuu’s motion for preliminary injunction to enjoin the IPRs.  The Court further found that a stay was warranted because it would simplify the issues before the court, the proceeding was at an early stage, and Kannuu would not be unduly prejudiced.

Background

Kannuu developed “search-and-navigation technology for [] media-related products, including Smart TVs and Blu-ray players.”  In 2012, Kannuu and Samsung entered into an NDA to allow them to freely discuss the related technology.  The NDA included a forum selection clause that required “any legal action, suit, or proceeding ‘arising out of or relating to [the NDA] or the transactions contemplated . . . 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.’”  Discussion apparently ended and Kannuu sued on May 10, 2019, ultimately claiming infringement of five patents.  On March 17, 2020, Samsung filed IPRs challenging all asserted patent claims.  Only two of the IPRs were instituted.

Preliminary Injunction

In considering Kannuu’s preliminary injunction motion, the Court assessed: (1) the likelihood of success on the merits; (2) the likelihood of irreparable injury in the absence of an injunction; (3) the balance of hardships; and (4) the public interest.  It found each factor weighed against an injunction. 

First, while district courts have granted “a preliminary injunction restraining a party from prosecuting a petition before the PTAB where the parties have a valid and enforceable forum selection clause that forecloses that forum,” the Court was not convinced that the IPR proceedings fell within the scope of the NDA’s forum selection clause.  In particular, the Court concluded that the NDA implicated “confidentiality and not the intellectual property rights of the parties” and was not related to the IPR proceedings.  Because “IPR proceedings concern the validity of patents, not confidentiality,” the forum selection clause did not apply to the IPRs and there was no likelihood of success.

The same reasoning led the Court to conclude that there would be no irreparable harm and no shift in the balance of the hardships.  Although it acknowledged some risk of inconsistent rulings or duplicative proceedings, the Court noted that Samsung’s proposed stay mitigated those risks.  Further, the Court found no public interest that favored the injunction.  As a result, the Court concluded that “Kannuu [] failed to show that a preliminary injunction should be issued” and denied its motion.

Stay

The Court also considered Samsung’s motion to stay the litigation.  Courts in the Southern District of New York typically “consider three factors in determining whether a stay pending resolution of IPR proceedings is appropriate”: (1) whether the stay will simplify the issues for trial; (2) the stage of the proceedings; and (3) whether a stay will prejudice the nonmoving party.  The Court found that each factor favored a stay. 

First, although only two of the five asserted patents (14 of 37 asserted claims) were instituted, the Court found that a stay would simplify the issues enough to satisfy the first factor.  It reasoned that if any claims are cancelled that “would at least narrow the issues before the Court regarding those claims” and “if the PTAB upholds . . . the patent claims, Samsung ‘will be estopped from challenging the validity of the claims on any ground that was raised or reasonably could have [been] raised during the IPR proceedings.’”  The Court further noted that the asserted patents were closely related, and four of the five were members of the same family and share the same title, inventor, and specification. 

The Court explained that the case was in the early stages and found no prejudice or disadvantage because the IPR petitions were filed within the one-year statutory window and Samsung sought to file its motion for a stay within five days of receiving the institution decisions, the petitions had been instituted, and the parties were not direct competitors.  As such, the Court granted the stay.

The case is Kannuu Pty Ltd. v. Samsung Elecs. Co., Ltd., et al., No. 19-cv-4297 (S.D.N.Y.).