ArentFox Schiff Secures Victory for AlexSam Inc. in Estoppel Dispute

On March 3, the US Court of Appeals for the Federal Circuit overturned a New York federal court’s decision dismissing AlexSam’s breach of contract claims unpaid royalties. ArentFox Schiff litigation partner and co-chair of the firm’s International practice, Hunter T. Carter, argued the case for AlexSam.

AlexSam licensed U.S. Patent Nos. 6,000,608 and 6,189,787 to Mastercard in exchange for royalties. After Mastercard failed to pay the royalties it owed AlexSam, AlexSam filed suit in US District Court in Brooklyn for breach of contract, and Mastercard filed declaratory judgment counterclaims alleging non-infringement and patent invalidity. Mastercard asserted the same arguments before the Patent Trial and Appeal Board of the US Patent Office (PTAB), but the PTAB agreed with AlexSam that Mastercard had no standing as AlexSam did not sue for infringement, in light of a covenant not to sue contained in the license agreement. Mastercard then asked the District Court for summary judgment, which was granted on the theory of judicial estoppel, that AlexSam’s reliance on the covenant not to sue to defeat Mastercard’s standing in the PTAB also prevented its contract claims.

On appeal, the Federal Circuit, which included Judges Pauline Newman, Alan David Lourie, and Kara Farnandez Stoll, found that the lower court abused its discretion when it invoked “estoppel based on an erroneous fact finding unsupported by the record.” The case returns to the District Court for AlexSam to pursue its damages claims.

Hunter is a veteran litigator with broad experience who regularly advises clients in foreign and domestic arbitration and has served as an arbitrator appointed by the International Chamber of Commerce.