Kannuu Pty Ltd. v. Samsung Electronics Co., Ltd.

Background

Kannuu developed search-and-navigation technology for media products. Kannuu and Samsung Electronics America, Inc. entered into a nondisclosure agreement in 2012. The agreement addressed confidential information, stated that it did not grant either party a license to the other’s patents or other intellectual-property rights, and required covered legal proceedings to be brought exclusively in a court located in Manhattan, New York.

Kannuu later sued Samsung for infringing five patents and breaching the nondisclosure agreement. Kannuu alleged that Samsung improperly accessed or used confidential technology. Samsung petitioned the Patent Trial and Appeal Board (PTAB) for inter partes review, a process for reviewing patent validity. The PTAB declined to review three patents but instituted review of the ’354 and ’393 patents. Kannuu sought rehearing of the decisions concerning some of the patents, and those requests were pending when the court considered the motions.

Preliminary-Injunction Motion

Kannuu asked the court to enjoin, or prohibit, Samsung from pursuing the PTAB proceedings. The court held that a preliminary injunction requires, among other things, a likelihood of success or serious merits questions, likely irreparable harm, a favorable balance of hardships, and consistency with the public interest.

The court applied New York law because the agreement selected that law. It found that the forum-selection clause was mandatory and had been communicated to Kannuu. But the court concluded that the PTAB proceedings did not arise from or relate to the agreement or the transactions contemplated by it. The agreement concerned confidentiality, not patent validity, and the parties had not entered into a patent-license agreement. The alleged connection between Samsung’s use of confidential information and its later patent-validity petitions was too indirect. The court also stated that the PTAB proceedings would not determine whether Samsung breached the confidentiality obligations.

Because the clause did not cover the PTAB proceedings, Kannuu was not losing a contractual forum right. The court further concluded that the possibility of parallel proceedings, inconsistent results, or duplicated efforts did not establish irreparable harm. Kannuu also did not show that the balance of hardships favored an injunction. The court determined that the public interest favored allowing Samsung to use the PTAB process to litigate patent validity. It therefore denied Kannuu’s motion for a preliminary injunction.

Motion to Supplement the Complaint

Kannuu sought leave under Federal Rule of Civil Procedure 15(d) to add a claim that Samsung breached the forum-selection clause by filing the PTAB petitions. The court evaluated whether the proposed claim would be futile, meaning that it could not survive a motion to dismiss for failure to state a legally sufficient claim.

The court relied on its earlier conclusion that the forum-selection clause did not apply to the PTAB proceedings. Because filing the petitions did not violate the agreement, the proposed supplemental complaint failed to state a claim. The court denied Kannuu’s motion for leave to file the supplemental First Amended Complaint and did not address the other Rule 15 factors.

Motion to Stay

Samsung asked the court to stay, or pause, the lawsuit while the PTAB proceedings concerning the ’354 and ’393 patents continued. The court considered whether a stay would simplify the case, the stage of the litigation, and possible prejudice or tactical disadvantage to Kannuu.

The court found that a stay would at least slightly simplify the issues. The PTAB was reviewing fourteen of the thirty-seven patent claims identified in the First Amended Complaint. If the PTAB cancelled claims, some of Kannuu’s claims could become moot; if it cancelled only some claims, the issues could be narrowed; and if it upheld the claims, Samsung would face limits on later validity challenges based on grounds raised or reasonably available during the review. The court also found significant overlap among the five patents. Although the breach-of-contract claim would not be simplified, patent claims made up fifteen of the sixteen causes of action, so a stay would simplify most of the case.

The court found that the litigation was still at an early stage because fact discovery had not closed, expert discovery had not begun, and no claim-construction hearing or trial had been scheduled. It also found no undue prejudice to Kannuu. Samsung filed its PTAB petitions within the statutory deadline and sought a stay promptly after the PTAB instituted review. The PTAB’s review was expected to produce a final decision within the applicable period, and Kannuu did not practice its patents or compete directly with Samsung.

Disposition

Judge Edgardo Ramos denied Kannuu’s motion for a preliminary injunction, denied Kannuu’s motion for leave to file a supplemental First Amended Complaint, and granted Samsung’s motion to stay. The matter was stayed pending resolution of the PTAB proceedings concerning the ’354 and ’393 patents. The parties were directed to file a joint status report within 48 hours after the PTAB issued its final written decision and to provide an updated discovery schedule. The court also denied as moot the parties’ requests for oral argument.