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

• Court: Court of Appeals for the Ninth Circuit
• Decided: September 3, 2021
• Docket: 20-55439
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS SEP 3 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT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

3 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.

4 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

5 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

6 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.

7 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.