Nomadix, Inc. v. Guest-Tek Interactive Entm't ( 2021 )

NOT FOR PUBLICATION FILED
UNITED STATES COURT OF APPEALS SEP 3 2021
MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
NOMADIX, INC., No. 20-55439
Plaintiff-Appellee, D.C. No.
2:19-cv-04980-AB-FFM
v.
GUEST-TEK INTERACTIVE MEMORANDUM*
ENTERTAINMENT LTD.,
Defendant-Appellant.
Appeal from the United States District Court
for the Central District of California
Andre Birotte, Jr., District Judge, Presiding
Argued and Submitted August 4, 2021
Pasadena, California
Before: PAEZ, CALLAHAN, and BENNETT, Circuit Judges.
In this diversity action, Nomadix, Inc. (“Nomadix”) sued Guest-Tek
Interactive Entertainment Ltd. (“Guest-Tek”), alleging that Guest-Tek had
breached the forum selection clause in the parties’ License Agreement by
challenging the validity of Nomadix’s patents before the U.S. Patent and
Trademark Office’s Patent Trial and Appeal Board (“PTAB”). The district court
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
granted summary judgment to Nomadix and, applying California Civil Code
§ 3422, entered a permanent injunction enjoining Guest-Tek from filing certain
petitions with the PTAB. Guest-Tek challenges the district court’s summary
judgment and permanent injunction orders. We have jurisdiction under 28 U.S.C.
§ 1291 and affirm.1
We review de novo the district court’s grant of summary judgment and its
interpretation of the forum selection clause in the License Agreement. See Curley
v. City of North Las Vegas, 772 F.3d 629, 631 (9th Cir. 2014); Sun v. Advanced
China Healthcare, Inc., 901 F.3d 1081, 1086 (9th Cir. 2018). “We review the
district court’s decision to grant a permanent injunction for abuse of discretion.”
Ariz. Dream Act Coal. v. Brewer, 855 F.3d 957, 965 (9th Cir. 2017). But
“questions of law underlying the district court’s decision” are reviewed de novo.
Id.
1. The forum selection clause provides: “[A]ll disputes arising . . . in
connection with this [License] Agreement shall be brought in the United States
District Court for the Central District of California . . . .” (emphasis added).2 “We
1
We grant Nomadix’s unopposed motion to take judicial notice of certain
documents that have been filed in related district court and PTAB proceedings
involving Nomadix and Guest-Tek. Dkt. No. 47.
2
The forum selection clause also provides that “[t]o the extent that any dispute
arising out of this Agreement may not be brought in the District Court, such
dispute shall be brought in a California Superior Court in Los Angeles County or
Orange County . . . .”
2
apply federal contract law to interpret the scope of a forum-selection clause even in
diversity actions, such as this one.” Sun, 901 F.3d at 1086. In Sun, we interpreted
a forum selection clause that used analogous language and held that “forum-
selection clauses covering disputes ‘relating to’ a particular agreement apply to any
disputes that reference the agreement or have some ‘logical or causal connection’
to the agreement.” Id. (citation omitted); see also id. (“relating to” is synonymous
with “in connection with” (citation omitted)). Here, the patent validity disputes
have a “logical or causal connection” to the License Agreement because the
validity of the patents affects Guest-Tek’s obligation to pay royalties under the
License Agreement. Thus, the forum selection clause required Guest-Tek to bring
the patent validity disputes in the Central District of California, and Guest-Tek
breached the License Agreement by instead bringing its patent validity challenges
before the PTAB. The district court therefore properly granted summary judgment
to Nomadix.
Guest-Tek counters that the PTAB proceedings do not arise in connection
with the License Agreement because the PTAB determines only patent invalidity
and interpreting or analyzing contracts like the License Agreement are outside the
scope of the PTAB’s authority. But we rejected that argument in Sun: “The
dispute need not grow out of the contract or require interpretation of the contract in
order to relate to the contract.” Id. Thus, whether the PTAB would have to
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analyze or interpret the License Agreement says nothing about whether the PTAB
proceedings arise in connection with the License Agreement. See id. The relevant
question is whether the validity of the patents has a logical or causal connection to
the License Agreement. As we have already found, they do, because the validity
of the patents affects Guest-Tek’s obligation to pay royalties under the License
Agreement.
Guest-Tek also contends that the forum selection clause is inapplicable
because the PTAB proceedings have no causal connection to this lawsuit. That
argument, however, misapprehends the relevant inquiry. In determining the scope
of the forum selection clause, the relevant inquiry is whether the PTAB disputes
over patent validity arise in connection with the License Agreement, not whether
the PTAB disputes relate to this lawsuit.
Guest-Tek’s remaining arguments are also unpersuasive. We reject Guest-
Tek’s argument that the forum selection clause essentially limits “disputes” to
court proceedings, thereby allowing the contracting parties to litigate other types of
disputes arising in connection with the License Agreement elsewhere. First, the
clause could have specifically limited its application to “court proceedings,” but it
did not. Second, “disputes” is not defined in the License Agreement, so we look to
its ordinary meaning. See Klamath Water Users Protective Ass’n v. Patterson, 204
F.3d 1206, 1210 (9th Cir. 1999). Dispute means “[a] conflict or controversy, esp.
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one that has given rise to a particular lawsuit.” Dispute, Black’s Law Dictionary
(11th ed. 2019). Such a definition, which is not limited to court proceedings, fits
with the common understanding of the term “disputes” in the context of a forum
selection clause, especially considering that administrative as well as court fora
exist for resolving patent disputes.
Guest-Tek asserts, however, that the forum selection clause does not cover
PTAB proceedings because the PTAB and the inter partes review process did not
exist when the License Agreement was executed. See Cuozzo Speed Techs., LLC
v. Lee, 136 S. Ct. 2131, 2137–38 (2016) (describing the establishment of the PTAB
and inter partes review process). But “the intent of the parties must be ascertained
from the contract itself.” Klamath, 204 F.3d at 1210. The forum selection clause
requires “all disputes” to be brought in the Central District of California, with no
suggestion that the parties intended to create an exception for disputes that could
be brought in new forums established in the future. Moreover, when the parties
executed the License Agreement, the U.S. Patent and Trademark Office (“PTO”)
had a process called inter partes reexamination, which was similar to the inter
partes review process. See Cuozzo, 136 S. Ct. at 2137. If the parties had agreed,
they could have carved out an exception preserving Guest-Tek’s right to challenge
the validity of Nomadix’s patents before bodies like the PTO, but they did not. We
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therefore cannot conclude that the parties intended to carve out an exception for
PTAB proceedings.
Guest-Tek argues that applying the forum selection clause conflicts with
Congress’s intent that PTAB proceedings have “primacy” over district court
proceedings. But even assuming Congress intended for the PTAB to have
“primacy,” enforcing the forum selection clause does not frustrate that purpose
because the PTAB retains authority to invalidate Nomadix’s patents. We also see
no unfairness in enforcing the forum selection clause. Guest-Tek voluntarily
bargained away its right to challenge the validity of Nomadix’s patents other than
in specified fora, and it can still pursue its patent validity challenges in the district
court, which it is doing in a separate lawsuit.
Finally, the License Agreement’s “no challenge” clause does not conflict
with our interpretation of the forum selection clause. The no challenge clause says
nothing about where Guest-Tek may bring its claims when it is no longer bound by
the no challenge clause. Thus, requiring Guest-Tek to bring its patent validity
claims in the Central District of California under the forum selection clause does
not conflict with the no challenge clause.
2. We reject Guest-Tek’s arguments that the principles of judicial
estoppel or forfeiture bar Nomadix from asserting the forum selection clause.
Guest-Tek forfeited its judicial estoppel argument by failing to raise it below. See
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United States v. Echavarria-Escobar, 270 F.3d 1265, 1267 (9th Cir. 2001). In any
event, it is meritless. Nothing in the record shows that Nomadix took a “clearly
inconsistent” position with its earlier position. See New Hampshire v. Maine, 532
U.S. 742, 750 (2001). As to forfeiture, Guest-Tek cites no authority that a party
can forfeit a claim through delay when such claim is brought within the statute of
limitations.3
3. Guest-Tek argues that in deciding whether to issue the permanent
injunction the district court should have applied federal instead of California law,
noting that the California injunction test is easier to satisfy. Compare eBay Inc. v.
MercExchange, L.L.C., 547 U.S. 388, 391 (2006) (conjunctive test), with Cal. Civ.
Code § 3422 (disjunctive test). We need not decide this choice-of-law issue
because the permanent injunction was properly issued under either standard.
Federal law requires a plaintiff to satisfy five factors. Indep. Training &
Apprenticeship Program v. Cal. Dep’t of Indus. Rels., 730 F.3d 1024, 1032 (9th
Cir. 2013). Nomadix satisfies the first factor, actual success on the merits, see id.,because Guest-Tek breached the License Agreement’s forum selection clause by
filing the PTAB proceedings.
Nomadix also satisfies the next two factors, irreparable injury and
inadequate legal remedies. See id. Without an injunction, the PTAB would have
3
Guest-Tek made no laches argument below and makes none on appeal.
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issued a decision on the validity of Nomadix’s patents, causing Nomadix to be
permanently deprived of its right to litigate patent validity disputes with Guest-Tek
only in court. As the district court correctly found, the loss of this right would
have also deprived Nomadix of related bargained-for benefits, including the
presumption of patent validity that applies in district court proceedings, the ability
to assert contract-based defenses, and the opportunity to have a jury decide patent
validity. Because these harms are unquantifiable, they cannot be remedied with
money and are thus irreparable. See Brewer, 855 F.3d at 978; Gilder v. PGA Tour,
Inc., 936 F.2d 417, 423 (9th Cir. 1991).
The fourth factor, balance of the hardships, also favors Nomadix. See Indep.
Training & Apprenticeship Program, 730 F.3d at 1032. As discussed above,
Nomadix will suffer irreparable harm without a permanent injunction. Guest-Tek,
however, fails to show that it will suffer any irreparable harm from the issuance of
a permanent injunction.
Finally, Nomadix has shown that the public interest would not be disserved
by a permanent injunction. See id. Although there is an important public interest
in allowing licensees to challenge invalid patents, see Lear, Inc. v. Adkins, 395
U.S. 653, 670 (1969), there is a “strong federal policy of enforcing forum-selection
clauses,” Sun, 901 F.3d at 1090. Nor does the permanent injunction bar Guest-Tek
from challenging the patents, it only bars Guest-Tek from challenging them in fora
8
other than those to which it contractually agreed. Nomadix has therefore satisfied
all of the permanent injunction factors under federal law.4
If the California test is the correct one, the district court did not abuse its
discretion in issuing the permanent injunction. California allows a court to grant a
permanent injunction to prevent a breach of an obligation: “1. Where pecuniary
compensation would not afford adequate relief; 2. Where it would be extremely
difficult to ascertain the amount of compensation which would afford adequate
relief; 3. Where the restraint is necessary to prevent a multiplicity of judicial
proceedings; or, 4. Where the obligation arises from a trust.” Cal. Civ. Code
§ 3422 (emphasis added). Because Nomadix has satisfied the second and third
federal factors (irreparable injury and inadequate legal remedies), which Guest-Tek
concedes “mirror” the first criterion under California Civil Code § 3422, Nomadix
has also satisfied California’s test.
AFFIRMED.
4
Given the circumstances, we may consider in the first instance whether Nomadix
has satisfied the federal permanent injunction standard. The parties have fully
briefed the federal factors, and the relevant facts have been sufficiently developed.
Cf. Flexible Lifeline Sys., Inc. v. Precision Lift, Inc., 654 F.3d 989, 1000 (9th Cir.
2011) (declining to consider irreparable harm in the first instance because of the
“incomplete record” and lack of briefing). Moreover, given the record, it would
have been an abuse of discretion had the district court applied the federal test and
denied the permanent injunction.
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