Avery sued EVRYTHNG in April 2021, seeking declaratory judgment that Avery’s cloud platform atma.io™ does not infringe EVRYTHNG’s alleged patent and trademark rights. Avery and EVRYTHNG entered into an agreement in 2015 whereby EVRYTHNG provided access and a limited license to use its ADI Platform and Subscription service, although neither party argued that the license covered any patents or trademarks. This agreement included a forum selection and choice of law clause specifying that any legal proceeding brought by either party “relating to or arising out of” the agreement would be brought in New York and decided under New York law.
The relationship soured over the years, and Avery began developing its own software solution in 2019, which resulted in Avery’s atma.io product. When EVRYTHNG found out about the product, it offered a patent license to Avery, which Avery understood to be a threat of an infringement claim. Avery filed its declaratory judgment action in Massachusetts on April 29, 2021, and EVRYTHNG responded with its own complaint for breach of contract, fraudulent concealment, and misappropriation of trade secrets in the Southern District of New York almost a month later.
Judge Sorokin granted EVRYTHNG’s motion to transfer the declaratory judgment action to New Yor based on the forum selection clause. Avery apparently chose Massachusetts as the forum state because it was headquartered there for much of the relevant time, and still has key employees who reside in Massachusetts. As EVERYTHING is a UK entity that lacks a physical location in the United States, it would be susceptible to personal jurisdiction in Massachusetts under Fed. R. Civ. P. 4(k)(2) absent something like the forum selection clause.
Judge Sorokin determined that the declaratory judgment claims (patent and trademark non-infringement) were not claims that “arose out of” the agreement, as the agreement did not purport to grant a patent or trademark license. This phrase is narrow, and effectively requires that the claim involve a breach of the agreement itself. He determined that the second phrase of the forum selection clause, “related to,” is broader and can encompass claims that are not specifically set forth in the underlying agreement. He noted that courts routinely apply such a clause to claims where the contract would be relevant as a defense, and that Avery’s access to EVRYTHNG’s confidential information may bear on whether Avery’s alleged patent infringement was willful. He further noted that Avery had alleged personal jurisdiction over EVRYTHNG in Massachusetts because the “declaratory judgment claims arise out of… their business relationship and EVRYTHNG’s communications regarding its alleged patent and trademark rights,” tying those rights to the agreement and the resulting business relationship that was governed by the agreement. Finally, Judge Sorokin refused to separate the patent claims from the trademark claims (which Avery asserts have no relationship to the agreement in any way) because the forum selection clause relates to “legal actions or proceedings” and not simply to claims. Accordingly, Judge Sorokin transferred the declaratory judgment case to the Southern District of New York.
This case highlights the importance of parsing language in an agreement that many might consider “boilerplate” and not sufficiently scrutinize.
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