N OTE : This disposition is nonprecedential. 

# United States **Court of Appeals**  **for the Federal Circuit**

______________________ ALEXSAM, INC., Plaintiff

- Appellant

v.

MASTERCARD INTERNATIONAL INCORPORATED, Defendant

- Appellee

______________________

2021

- 1785

______________________ Appeal from the United States District Court for the Eastern District of New York in No. 1:15

- cv

- 02799

- ILG

VMS, Senior Judge Israel Leo Glasser.

______________________

Decided: March 3, 2022

______________________

H UNTER T C ARTER , Arent Fox LLP, New York, NY, argued for plaintiff

- appellant. Also represented by J ACQUELINE K NAPP B URT , Heninger Garrison Davis, LLC, Atlanta, GA; T IMOTHY C. D AVIS , W. L EE G RESHAM , III, Birmingham, AL; J ONATHAN R OBERT M ILLER , Rozier Hardt McDonough PLLC, Atlanta, GA, S TEVEN W HITEFIELD R ITCHESON , Insight, Chatsworth, CA.

E LIOT D AMON W ILLIAMS , Baker Botts LLP, Palo Alto, Case: 21-1785 Document: 44 Page: 1 Filed: 03/03/2022ALEXSAM , INC

. v. MASTERCARD INT ERNATIONA L INC ORPORATED 2

CA, argued for defendant

- appellee. Also represented by M ICHAEL H AWES , Houston, TX; C HRISTOPHER P ATRICK , R OBERT C. S CHEINFELD , J ENNIFER C OZEOLINO T EMPESTA , New York, NY

______________________

Before N EWMAN , L OURIE , and S TOLL , Cir cuit Judges

. S TOLL , Circuit Judge

. In this appeal, we consider Master C ard International Inc.’s charge that AlexSam, Inc. took inconsistent positions before the Patent and Trial Appeal Board, on the one hand, and at the U.S. District Court for the Eastern District of New York, on the other , concerning the implications of a
covenant not to sue on standing

. The district court found that AlexSam had taken inconsistent positions and thus held it estopped and granted summary judgment dismissing AlexSam’s complaint with prejudice

. On appeal,AlexSam argues that the district court abused its discretion by crediting AlexSam with a position it never actually took before the Board. We agree . We therefore reverse the district court’s summary judgment and remand for further proceedings.

B ACKGROUND

AlexSam is the owner of U.S. Patent Nos. 6,000,608 and 6,189,787 (the “licensed patents”) , both titl ed “Multifunction Card System .” Generally speaking, the licensed patents are directed to pre

- paid cards (like a gift card ) that can be used with point -of- sale devices. See ’608 patent, Abstract.
Back in 2005, AlexSam and MasterCard entered into a

non

- exclusive license agreement permitting MasterCard “to process and enable others to process ” certain licensed transactions, J.A. 200 ¶ 2.1, that are “covered by one of the” licensed patents, id. ¶ 1.3. MasterCard , in exchange, agreed to pay AlexSam royalties for each licensed Case: 21-1785 Document: 44 Page: 2 Filed: 03/03/2022ALEXSAM , INC

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transaction and to provide AlexSam with month ly reports itemizing the number of licensed transactions and the corresponding royalties owed for the relevant time period. J.A. 202

– 03 ¶¶ 4.1

– 4.2. A couple of years later, AlexSam contacted MasterCard , complaining that the monthly reports did not account for all of the applicable licensed transactions and, as a result, MasterCard had not paid all the royalties it owed under the license. MasterCard disagreed . I n May 2015, AlexSam sued MasterCard in the Eastern District of New York for breach of contract

, seeking the allegedly unpaid royalties

. MasterCard filed counterclaims seeking (among other things) a declaratory judgment that the licensed patents are invalid and not infringed.

AlexSam moved to dismiss MasterC ard’s patent

- related declaratory judgment counterclaims, arguing that a covenant not to sue contained in the license agreement stripped MasterCard of standing to sue for declaratory relief . The covenant recites :
Alex [S] am hereby agrees and covenants to no t at any time initiate, assert, or bring any claim (in anycourt, administrative agency, or other tribunal, anywhere in the world) against MasterCard, for any claim or alleged liabilities of any kind and nature, at law, in equity, or otherwise, known and u nknown, suspected and unsuspected, disclosed and undisclosed, relating to Licensed Transactions arising or occurring before or during the term of this Agreement.

J.A. 201 ¶ 2.2.
In AlexSam’s view, th is covenant prevented AlexSam from suing MasterCard fo r patent infringement and

, accordingly , MasterCard could have no reasonable apprehension of a patent infringement suit

. Continuing

, AlexSam Case: 21-1785 Document: 44 Page: 3 Filed: 03/03/2022ALEXSAM , INC

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argue d

, if there is no threat of infringement suit, there is no justiciable case or controversy and thus no standing.

In November 2015 , the district court, citing the Supreme Court’s decision in MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118 (2007), denied AlexSam’s motion . The court determined that MasterCard’s counterclaims met the requirements to bring claims for declaratory relief under the Declaratory Judgment Act , 28 U.S.C. § 2201

. J.A. 3–4 ¶ 2

. It went on to explain, however, that whether declaratory relief would ultimately be appropriate would “depend, in part, on how the [c]ourt (or a jury) interpr ets” the parties’ license agreement, something the court could not do “as a matter of law in the context of ” AlexSam’s motion. Id.
A couple of years later, in March 2017, MasterCard petitioned for covered business method (CBM) review of the licensed pat ents. AlexSam opposed institution in its pre

institution patent owner response, arguing that MasterCard lacked standing under 37 C.F.R. § 42.302(a)

— a requirement for CBM review . In particular, Alex S am asserted that standing was not established under § 43.302(a) because AlexSam had not “sued ” or “ charged” MasterCard with patent infringement . Section 43.302(a)
states : A petitioner may not file with the Office a petitionto institute a covered business method patent review of the patent unless the petitioner, the petitioner’ s real party

- in

- interest, or a privy of the petitioner has been sued for infringement of the patent or has been charged with infringement under that patent. Charged with infringement means areal and substantial controversy regarding infringement of a covered business method patent exists such that the petitioner would have standing to bring a declaratory judgment action in Federal
court. Case: 21-1785 Document: 44 Page: 4 Filed: 03/03/2022ALEXSAM , INC

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Id. 1 (emphas e s added). As it had argued to the district court, AlexSam argued to the Board that it had not actually sued MasterCard for patent infringement. Alex Sam also argued that it had not “charged” MasterCard with patent infringement, asserting that the covenant not to sue prevented AlexSam from doing so

. The Board requested supplemental briefing on thequestion of MasterCard’s standing to petition for CBM review

, specifically regarding the effect of the covenant not to

sue

. Ultimately, in September 2017, the Board denied institution for both patents , determining that MasterCard did not have CBM standing under § 43.302(a)

. See Mastercard Int’l Inc. v. Alexsam, Inc.

, No. CBM2017

- 00041, 2017 WL 4221401 (P.T.A.B. Sept. 21, 2017). 2

1 The U.S. Patent and Trademark Office promulgated § 42.302(a) in 2012, citing Section 18 of the Leahy

– Smith America Invents Act, Pub. L. No. 112

– 29, 125 Stat. 284, 329 (2011) as authority. See Changes to Implement Inter Partes Review Proceedings, Post

- Gra nt Review Proceedings, and Transitional Program for Covered Business Method Patents

, 77 Fed. Reg. 48,680, 48,727, 48,731 (Aug. 14, 2012). AIA Section 18(a)(1)(B) relates to standing and recites:
A person may not file a petition for a transitional proceedi ng with respect to a covered business method patent unless the person or the person’sreal party in interest or privy has been sued for infringement of the patent or has been charged with infringement under that patent.

125 Stat. at 330.

2 The Board issued a nearly identical decision denying institution for the ’608 patent. See Mastercard Int’l Inc.

v. Alexsam, Inc. , No. CBM2017

- 00042, 2017 WL 4221130 Case: 21-1785 Document: 44 Page: 5 Filed: 03/03/2022ALEXSAM , INC

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In its decision, t he Board began by noting that MasterCard had not actually been sued wit h patent infringement, and thus focused its inquiry on whether MasterCard had been “charged with infringement” under § 42.302(a). The Board explained that § 42.302(a)’s “charged with infringement” inquiry requires consideration of whether a party has “the ability to seek relief in Federal court ” for patent infringement. Id. at *4. Accordingly, the Board considered “case law addressing when a party might have Article III standing to bring a declaratory judgment action,” including the Supreme Court’s decis ion in MedImmune

. Id. Ultimately

, in determining that MasterCard had not been “charged with infringement” under § 42.302(a), the Board determined that “the broad language of the covenant not to sue provision” in the parties’ license agreement “remove[d]any imminent possibility that [AlexSam] could bring an infringement action against [MasterCard].” Id. at *5. In the Board’s view, MasterCard faced no “imminent” threat of infringement, and thus had no standing to petition for CBM review under § 42.302(a)

.In July 2018, MasterCard moved for summary judgment in the district court, asserting that AlexSam’s arguments to the Board regarding the covenant not to sue and MasterCard’s standing to petition for CBM review judicially estopped AlexSam from pursuing its breach of contract claim against MasterCard . In MasterCard’s view, because AlexSam argued that the breadth of the covenant not to sue removed any threat of a suit for patent infringement (thus depriving MasterCard of standing to petitio n for CBM review), AlexSam’s decision to press forward with its breach of contract claim and claim for royalties despite the breadth of the covenant amounted to an inconsistent position warranting judicial estoppel.

(P.T.A.B. Sept. 21, 2017). For brevity, we cite only the decision denying institution for the ’787 paten t. Case: 21-1785 Document: 44 Page: 6 Filed: 03/03/2022ALEXSAM , INC

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The magistrate judge recommended denyi ng MasterCard’s motion for summary judgment. The district court

, however, agreed with MasterCard and entered judgmentdismissing AlexSam’s complaint with prejudice and dismissing MasterCard’s patent

- related counterclaims without prejudice

. Alexsam, Inc. v. Master c ard Int’l Inc. , 15

- CV

- 2799 (ILG) (SMG), 2020 WL 3286785 (E.D.N.Y. June 17, 2020) ( Judgment Op. ).
AlexSam appeals. We have jurisdiction under 28 U.S.C. § 1295(a ) (1).

D ISCUSSIONWe review the district court’s summary judgment under the law of the regional circuit, here the Second Circuit. See Convolve, Inc. v. Compaq Comput. Corp. , 812 F.3d 1313, 1317 (Fed. Cir. 2016). The Second Circuit reviews the grant or denial of summary judgment de novo. Ashmore v. CGI Grp., Inc. , 923 F.3d 260, 271 (2d Cir. 2019). We also apply regional circuit law to questions of judicial estoppel. Egenera , Inc. v. Cisco Sys., Inc. , 972 F.3d 1367,1378 (Fed. Cir. 2020). The Second Circuit reviews a “district court’s decision to invoke judicial estoppel .

. . for abu se of discretion.” Ashmore , 923 F.3d at 271. “W hile deferential, abuse of discretion review is not a rubber stamp. A district court may not do inequity in the name of equity.” Id. (quoting Clark v. All Acquisition, LLC , 886 F.3d 261, 266 (2d Cir. 2018) ). In addition, a district court’s decision to invoke judicial estoppel is an abuse of discretion when itrests on an error of law or clearly erroneous factual findings. See, e.g.

, id. at 277, 283.
The Supreme Court in New Hampshire v. Maine outlined several factors that “typically inform the decision whether to apply” judicial estoppel. 532 U.S. 742, 750 (2001) . The Second Circuit has adopted the so

- called New Hampshire factors, explaining that “[j]udicial estoppel is properly invoked wher e: (1) a party’s later position is clearly inconsistent with its earlier position, and (2) the Case: 21-1785 Document: 44 Page: 7 Filed: 03/03/2022ALEXSAM , INC

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party’s former position has been adopted in some way by the court in an earlier proceeding.” Ashmore , 923 F.3d
at 272 (citing New Hampshire , 532 U.S. at 750

– 51 ). The Second Circuit also “often, but not always, require[s] ashowing that the party asserting the two inconsistent positions would derive an unfair advantage against the party seeking estoppel.” Id. (citing New Hampshire , 532 U.S.
at 751).
On appeal, AlexSam argues that the district court abused its discretion by invoking judicial estoppel. At itscore, AlexSam’s argument is that its position has been consistent throughout : the covenant not to sue precludes AlexSam from suing MasterCard for patent in fringement, thus depriving MasterCard of standing to petition for CBM review and to bring declaratory judgment counterclaims of patent noninfringement and invalidity. At the same time, AlexSam contends that the covenant not to sue does not preclude it from suing for breach of contract and seeking royalties for the breach. We agree that AlexSam’s arguments have been consistent . The district court’s contrary finding

— credit ing AlexSam with a position that it never actually took before either the Board or di strict court

— is clearly erroneous, and therefore its decision to invoke judicial estoppel was an abuse of discretion.
In its decision, the district court stated: “When Alex [S] am argued before the [Board] that the covenant not to sue eliminates MasterCar d’s standing for declaratory relief, it also necessarily took the position that the same covenant prohibits a claim for royalties under the license agreement.” Judgment Op. , 2020 WL 3286785, at *5 (emphasis added ) . This conclusion is wholly inconsistent with the record.
In response to the Board’s request for supplemental briefing on the effect of the covenant, MasterCard (who filed its brief first) argued that AlexSam’s decision to sue for breach of contract voided the covenant not to sue

. Case: 21-1785 Document: 44 Page: 8 Filed: 03/03/2022ALEXSAM , INC

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According to MasterCard, t his was so because the covenant was broad enough to bar AlexSam for suing for any claimrelating to the licensed transactions arising out of the parties’ agreement , including a breach of contract claim

. J.A. 1485

– 86

. AlexSam pus hed back on this in its responsive supplemental brief . Specifically, AlexSam argued thatthe covenant prevented AlexSam from suing for patent infringement (and only patent infringement) , stating : “ On the one hand, the [covenant] was included to provide [ MasterCard] with assurance that it would not be sued for patent infringement. On the other hand, [AlexSam] intended to enter into a [l]icense [a]greement and have the ability to enforce its terms.” J.A. 1502

. Thus, AlexSam argued, the covenant was “furt her evidence” that Al e xSam could not sue MasterCard for patent infringement. J.A. 1500 ; see also J.A. 1503 (“The [covenant not to sue] further clarifiesthat [AlexSam] cannot sue [MasterCard] for patent infringement.”). None of this supports the district court’s conclusion that AlexSam “necessarily took” the position that the covenant prohibits a claim for royalties under the license agreement. AlexSam argued only that the covenant barred it from suing MasterCard for patent infringement.

In defense of the district court’s conclusion, MasterCard repeatedly quotes (without context) a single sentence from AlexSam’s supplemental briefing before the Board

. According to Mastercard

, this single sentence shows that AlexSam argued that the covenant was broad en ough to bar it from suing for royalties. E.g.

, Appellee’s Br. 13, 16, 24

– 28, 35

. The sentence is not limited to “infringement” and states : “The [covenant] is also sufficient to moot a claim for declaratory relief.” J.A. 1501 (citing Already, LLC v. Nike, Inc. , 568 U.S. 85, 93 (2013))

. This sentencecomes from a section of AlexSam’s supplemental brief directly responding to what it characterized as MasterCard’s “misleading” arguments. MasterCard argues that this statement, in combination with the Supreme Court’s decisions in MedImmune and Already , shows AlexSam should Case: 21-1785 Document: 44 Page: 9 Filed: 03/03/2022ALEXSAM , INC

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be judicially estopped from pursuing its breach of contract claim because it was taking inconsistent positions

. Specifically, relying on MedImmune

, MasterCard argues that it has de claratory judgment standing to challenge the licensed patents (either in district court or by petitioning for CBM review) , Appellee’s Br. 23

– 24, and that AlexSam can defeat that standing only by “moot [ing] ” MasterCard’s declaratory claim

, id. at 25

– 26. According to MasterCard, AlexSam attempted to do just that , likening the covenant not to sue in the license agreement to the covenant at issue in Already

. As MasterCard put it:“Alex[S]am’s PTAB argument presented a broad, unconditional and irrevocable c ovenant not to sue – as was the case in Already – broad enough to prohibit Alex[S]am from bringing any claim or making any demand against Master[C]ard related to its IP, i.e., for disputed patent royalties.” Id. at 26. MasterCard argues that because it w ould have declaratory judgment standing under MedImmune in the absence of AlexSam’s assertion that the covenant was broad enough under Already to “moot a claim for declaratory relief,” J.A. 1501 , AlexSam’s assertion amounted to taking a position that would estop it from pursuing its royalty claims. Se e id. at 35 (“[B]y arguing that the .

. . covenant was ‘sufficient to moot a claim for declaratory relief,’ Alex[S]am could not collect disputed royalties.”)
The problem with MasterCard’s argument is that it reads too much into a single sentence , stripping it of any
context . Here’s that same sentence in context: The payment of royalties is Petitioner’s obligation under the License Agreement – not a condition of the [covenant]

. Petitioner’s intentional, and admitted, refusal to pay royalties it owes supports a claim for breach, not patent infringement. Further, the [covenant] provides no explicit means for its revocation. The [covenant] also is sufficient to moot a claim for declaratory relief

. . . . The facts do Case: 21-1785 Document: 44 Page: 10 Filed: 03/03/2022ALEXSAM , INC

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not support the conclusion that the [covenant] was, or could be, revoked by the filing of Patent Owner’s breach of contract claim. Finally, Petitioner contends that the [covenant] is both “not unconditional” and “void and not irrev ocable.” Petitioner provides no evidence or support for its position that the parties intended the [covenant] to be conditional or revocable. Petitioner simply lacks standing and its attempts to manufacture it are wrong. Petitioner has not been sued for infringement and the [covenant] is further evidence that Patent Owner cannot sue Petitioner, who is a licensee, for infringement.

J.A. 1 501

– 02 (citation omitted) ( emphasis altered ). Reading this sentence in context , it is abundantly clear that AlexSam wa s continuing to argue only that the covenant precluded a claim for patent infringement, a position whichthe Board adopted and which AlexSam maintained in district court. AlexSam did not argue that the covenant also precluded its breach of contract claim. The district court’s finding to the contrary was clearly erroneous.
As such, t he district court’s conclusion that AlexSam “necessarily took” an inconsistent position was clearly erroneous in view of the record, and accordingly its invocation of judicial estoppel was an abuse of discretion. 3

3 To be sure, the district court may be entirely correct that the broadly worded covenant not to sue “prohibits a claim for royalties under the license agreement.” Judgment Op. , 2020 WL 3286785, at *5. But that question —onewhich requires contract interpretation under the applicable law

— is not before us. Indeed , the district court has not had briefing or the opportunity to consider this unresolved question but can do so on remand . All we decide today is that the district court erred in cr editing AlexSam with a Case: 21-1785 Document: 44 Page: 11 Filed: 03/03/2022ALEXSAM , INC

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C ONCLUSION We have considered the parties ’ remaining arguments and find them unpersuasive. 4 For the above reasons, weagree with AlexSam that the district court abused its discretion by invoking judicial estoppel based on an erroneous fact finding unsupported by the record. We therefore reverse the district court’s summary judgment and remand for further proceedings.

REVERSED AND REMANDED

position it never took , thus abusing its discretion in invoking judicial estoppel.

4 We specifically note that AlexSam argues on appeal that it was improper for the district court to construe the claims of the licensed patents prior to determining whether MasterCard breached the terms of the license agreement. We disagree. The license specifically defines licensed trans actions as those “covered” by one of the licensed patents. J.A. 200 ¶ 1.3. The district court correctlydetermined that claim construction was a necessary prerequisite for determining whether any alleged transactionwas a licensed transaction for which MasterCard owed royalties. We are not, however, reviewing the legal questionof claim construction, which may affect the amount of royalties MasterCard owes as well as the validity of the licensed patents. Because this appeal is focused on the threshold i ssue of whether AlexSam can bring its suit in the first instance, the question of claim construction is not subject to interlocutory review. Case: 21-1785 Document: 44 Page: 12 Filed: 03/03/2022