Can a dispute resolution provision in a contract between two parties that states that “any dispute arising out of or relating to patents” shall be resolved through negotiations and mediation and should mediation fail to reach a result, either party may institute legal proceedings “but only in the United States District Court of Delaware, and no other” prohibit a party from filing a request for inter partes reexamination? The Court recently answered yes, despite a finding by the USPTO that such a provision is contrary to public policy and therefore the request for reexamination should be honored.
In Callaway Golf Company v. Acushnet Company, C.A. No. 06-091-SLR, Memo. Opinion (D. Del. Nov. 20, 2007), the defendant had entered into a prior settlement agreement with plaintiff’s predecessor-in-interest to resolve certain patent claims. Id. at 3. This agreement contained the language described above. Following two attempts at resolving their dispute via mediation, the defendant filed an inter partes reexamination request for each patent at issue in the lawsuit and then plaintiff subsequently filed the instant lawsuit. Callaway Golf moved for summary judgment for breach of contract and Acushnet moved for summary judgment of no breach of contract.
As a threshold matter, the Court found that because the plaintiff, Callaway was a “successor” as defined by the Agreement and further because the parties had previously engaged in two mediations as required by the Agreement that both parties are bound to the terms of that contract. Id. at 24-25.
Callaway, in addition to its summary judgment motion had also filed a petition with the USPTO to vacate the reexamination that was filed by Acushnet based on the provisions in the Agreement. The PTO dismissed the petition for many reasons including that there was no authority for private parties to abrogate the PTO’s statutory jurisdiction and that such a provision would be contrary to public policy. Id. at 26. Judge Robinson held that the Court “owes no deference to the PTO’s interpretation of the legal effect of the Agreement or, more generally, the legality of a provision that purports to prevent parties from filing inter partes reexaminations’ the PTO was clearly within its jurisdiction to dismiss plaintiff’s request to halt the proceedings. It does not follow, however, that defendant was not in breach when it filed its inter partes reexamination request in the first instance.” Id.
Ultimately, the Court found that because reexamination was not listed as a possible procedure for resolution of a dispute between the parties (only mediation and litigation in the D. Del. were), it is precluded as a possible remedy for any dispute involving the patents-at-issue. Id. at 27. The Court compares such a provision as “akin to a forum selection clause” as it does not effect either party’s interest in adjudicating the validity of the patent it just requires them to do so before a Court instead of the PTO. Id. at 28. Finally, the Court finds that such a holding is not against public policy since: (1) the public is not a party to the Agreement and (2) any third party can still challenge the validity of the patents through a request for reexamination. Id. at 29.