In a recent Northern District of California case, the Court granted a restraining order requiring the defendant to dismiss a set of PTAB petitions. Dodocase VR, Inc. v. Merchsource, LLC, et al., No. 17-cv-07088-EDL (N.D. Cal.). The defendant previously licensed the challenged patents, and the license agreement contained a no-challenge provision and a forum selection clause. About a year after entering into the license, the licensee attempted to renegotiate the license and eventually stopped paying royalties. Slip Op. at 3. The licensor sued, and the licensee filed PTAB petitions. Id. at 4.
The “no-challenge” clause, prohibited the licensee from challenging the validity of the licensed patents. Id. at 7. The forum selection clause provided that “the laws of the State of California shall govern any dispute arising out of or under this Agreement,” which “disputes” “shall be litigated before the courts in San Francisco County or Orange County, California.” Id. at 11. The court contrasted this language with a permissive forum selection clause, e.g., “The courts of California, County of Orange, shall have jurisdiction over the parties in any action at law relating to the subject matter or the interpretation of this contract.” Id. at 9.
The court found that under principles of equity, the licensee could not be enjoined from mounting validity challenges. Id. at 12. However, the forum selection clause was mandatory – the selected forum is the sole location in which to litigate the dispute. Id. at 9-10. The Petitions to the PTAB constitute a dispute that arose under the license agreement. Id. at 12. The court thus ordered that the licensee terminate the PTAB proceedings. Id. at 24. This case illustrates that great care must be taken in crafting forum selection clauses to ensure that licensors and licensees are not unknowingly limiting their available options in the event of a dispute.
