Dodocase VR, Inc. v. Merchsource, LLC
3:17-cv-07088
| N.D. Cal. | Mar 23, 2018Background
- Dodocase VR, Inc. (Dodocase) holds three patents for VR smartphone viewers and licensed MerchSource under a Master License Agreement (MLA) that (a) included a no-challenge clause forbidding validity attacks and (b) required disputes to be litigated in San Francisco or Orange County, California.
- MerchSource (Wholly owned by ThreeSixty) sought to renegotiate royalties, then filed three PTAB petitions on January 15, 2018 challenging validity of the three patents; defendants also asserted invalidity in a counterclaim in district court.
- Dodocase filed suit for breach and declaratory/judgment relief and moved for a TRO/preliminary injunction to require withdrawal of the PTAB petitions as violating the MLA.
- The court analyzed whether (1) the MLA’s no-challenge clause or (2) its forum-selection clause precluded MerchSource from pursuing PTAB review, and applied the Winter preliminary-injunction factors.
- The court rejected enforcement of the no-challenge clause (Lear/Medimmune principles) but found the MLA’s forum-selection clause mandatory, concluded PTAB petitions “arise out of or under” the MLA, and granted a preliminary injunction requiring MerchSource/ThreeSixty to seek PTAB permission to withdraw and, if allowed, file motions to dismiss on a short schedule.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of MLA no-challenge clause | Clause bars MerchSource from challenging validity or assisting third-party challenges | Lear/Medimmune allow licensees to challenge patents; clause unenforceable | No — equitable/licensing doctrines (Lear/Medimmune) bar enjoining validity challenges by a licensee |
| Forum-selection clause exclusivity | MLA requires disputes to be litigated in SF or Orange County (mandatory, exclusive) | Clause does not apply to PTAB or is permissive/non-exclusive | Yes — clause is mandatory/exclusive (language "disputes shall be litigated") |
| Scope: Do PTAB petitions "arise out of or under" the MLA? | PTAB petitions are tied to royalty dispute and thus arise under the MLA | PTAB is independent agency forum; other parties can file PTAB petitions so clause shouldn't bind MerchSource | Yes — petitions arise out of/under the MLA given the licensor-licensee context and linkage to royalties/defenses |
| Public policy / preliminary-injunction factors (irreparable harm, balance, public interest) | PTAB proceedings cause irreparable harm (duplicative litigation, expense, loss of bargained forum); equities/public interest favor enforcement | Public policy favors PTO review; defendants lose PTAB forum and procedural advantages; bond should be required | Granted preliminary injunction: injunction enforces forum clause, irreparable harm shown, equities/public interest favor plaintiff; no bond required at this time |
Key Cases Cited
- Winter v. Natural Resources Defense Council, 555 U.S. 7 (establishes preliminary injunction test requiring likelihood of success, irreparable harm, balance of equities, public interest)
- Lear, Inc. v. Adkins, 395 U.S. 653 (licensee estoppel rejected; public policy favors permitting licensees to challenge patent validity)
- Medimmune, Inc. v. Genentech, Inc., 549 U.S. 118 (licensee may challenge validity without breaching license while paying royalties)
- Manetti-Farrow, Inc. v. Gucci Am., Inc., 858 F.2d 509 (forum-selection clause interpretation principles under Ninth Circuit)
- Docksider Ltd. v. Sea Tech., Ltd., 875 F.2d 762 (forum-selection clause may be mandatory even without word "exclusive")
- Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75 (forum-selection language interpreted as permissive when jurisdiction alone specified)
- Simula, Inc. v. Autoliv, Inc., 175 F.3d 716 (interpretation of broad "arising under" language and reliance on Ninth Circuit arbitration clause cases)
- Republic of Nicaragua v. Standard Fruit Co., 937 F.2d 469 ("arising under" construed liberally)
- Gen. Protecht Grp., Inc. v. Leviton Mfg. Co., 651 F.3d 1355 (irreparable harm from parallel proceedings; enforcement of forum-selection clause justified)
- MCM Portfolio LLC v. Hewlett-Packard Co., 812 F.3d 1284 (Federal Circuit on PTAB’s purpose and Congress’s intent to enable PTAB review)
- Cuozzo Speed Techs., LLC v. Lee, 136 S. Ct. 2131 (Supreme Court on PTAB standards and interplay with district-court proceedings)