Contract Terms

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A recent decision from the Federal Circuit highlights the importance of carefully considering the terms of an agreement prior to signing the document. In Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc., the parties entered into a confidentiality agreement with the intention of forming a business relationship.[1] The confidentiality agreement included a provision not to sue that included a provision noting validity challenges before the U.S. Patent and Trademark Office in included in the restrictions,[2] and a separate provision requiring all causes of action be brought in Delaware for a two-year period following the expiration of the agreement.[3]  Upon expiration of the agreement, Sarepta filed numerous IPR proceedings with the U.S. Patent and Trademark Office challenging the validity of Nippon Shinyaku’s patents.[4] The Federal Circuit analyzed the forum selection, noting “all Potential Actions” were required to be filed in the courts of Delaware, which included invalidity challenges.[5] The Court was unpersuaded by arguments that the interpretation of the agreement would effectively eliminate a party’s ability to bring an action before the U.S. Patent and Trademark Office, noting that parties can bargain away rights, such as contracting away IRP challenge rights.[6]

The Federal Circuit’s opinion highlights the criticality of understanding the terms of an agreement prior to signing.  Sarepta’s arguments relating to public policy of permitting a party access to all avenues of action fell flat, and the court countered that the parties were held to the terms that they agreed to, even if those terms restricted one party’s rights. Given the ubiquity of forum selection provisions in contracts- including many licensing agreements, joint ventures, confidentiality agreements, transfer agreements, etc.- parties must understand what they are signing and what rights the party is signing away in its contracts.

[1] Nippon Shinyaku Co., Ltd. v. Sarepta Therapeutics, Inc., No. 2021-2369; page 2 (Fed. Cir. February 8, 2022

[2] Id. at pages 2-3.

[3] Id. at page 3.

[4] Id. at page 4.

[5] Id. at pages 9-10.

[6] Id. at page 13.