Case: 21-1785 Document: 44 Page: 1 Filed: 03/03/2022
NOTE: This disposition is nonprecedential.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
______________________
HUNTER T CARTER, Arent Fox LLP, New York, NY, ar-
gued for plaintiff-appellant. Also represented by
JACQUELINE KNAPP BURT, Heninger Garrison Davis, LLC,
Atlanta, GA; TIMOTHY C. DAVIS, W. LEE GRESHAM, III, Bir-
mingham, AL; JONATHAN ROBERT MILLER, Rozier Hardt
McDonough PLLC, Atlanta, GA, STEVEN WHITEFIELD
RITCHESON, Insight, Chatsworth, CA.
ELIOT DAMON WILLIAMS, Baker Botts LLP, Palo Alto,
Case: 21-1785 Document: 44 Page: 2 Filed: 03/03/2022
2 ALEXSAM, INC. v.
MASTERCARD INTERNATIONAL INCORPORATED
CA, argued for defendant-appellee. Also represented by
MICHAEL HAWES, Houston, TX; CHRISTOPHER PATRICK,
ROBERT C. SCHEINFELD, JENNIFER COZEOLINO TEMPESTA,
New York, NY
______________________
Before NEWMAN, LOURIE, and STOLL, Circuit Judges.
STOLL, Circuit Judge.
In this appeal, we consider MasterCard 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 dismiss-
ing AlexSam’s complaint with prejudice. On appeal,
AlexSam argues that the district court abused its discre-
tion 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.
BACKGROUND
AlexSam is the owner of U.S. Patent Nos. 6,000,608
and 6,189,787 (the “licensed patents”), both titled “Multi-
function 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, Ab-
stract.
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
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transaction and to provide AlexSam with monthly reports
itemizing the number of licensed transactions and the cor-
responding royalties owed for the relevant time period.
J.A. 202–03 ¶¶ 4.1–4.2.
A couple of years later, AlexSam contacted Master-
Card, complaining that the monthly reports did not ac-
count 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. In 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 pa-
tents are invalid and not infringed.
AlexSam moved to dismiss MasterCard’s patent-re-
lated declaratory judgment counterclaims, arguing that a
covenant not to sue contained in the license agreement
stripped MasterCard of standing to sue for declaratory re-
lief. The covenant recites:
Alex[S]am hereby agrees and covenants to not at
any time initiate, assert, or bring any claim (in any
court, administrative agency, or other tribunal, an-
ywhere in the world) against MasterCard, for any
claim or alleged liabilities of any kind and nature,
at law, in equity, or otherwise, known and un-
known, 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, this covenant prevented AlexSam
from suing MasterCard for patent infringement and, ac-
cordingly, MasterCard could have no reasonable apprehen-
sion of a patent infringement suit. Continuing, AlexSam
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4 ALEXSAM, INC. v.
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argued, 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 Su-
preme 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 declara-
tory relief would ultimately be appropriate would “depend,
in part, on how the [c]ourt (or a jury) interprets” the par-
ties’ 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 pe-
titioned for covered business method (CBM) review of the
licensed patents. AlexSam opposed institution in its pre-
institution patent owner response, arguing that Master-
Card lacked standing under 37 C.F.R. § 42.302(a)—a re-
quirement for CBM review. In particular, AlexSam
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 petition
to institute a covered business method patent re-
view of the patent unless the petitioner, the peti-
tioner’s real party-in-interest, or a privy of the
petitioner has been sued for infringement of the pa-
tent or has been charged with infringement under
that patent. Charged with infringement means a
real and substantial controversy regarding in-
fringement of a covered business method patent ex-
ists such that the petitioner would have standing
to bring a declaratory judgment action in Federal
court.
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Id. 1 (emphases added). As it had argued to the district
court, AlexSam argued to the Board that it had not actually
sued MasterCard for patent infringement. AlexSam also
argued that it had not “charged” MasterCard with patent
infringement, asserting that the covenant not to sue pre-
vented AlexSam from doing so.
The Board requested supplemental briefing on the
question of MasterCard’s standing to petition for CBM re-
view, specifically regarding the effect of the covenant not to
sue. Ultimately, in September 2017, the Board denied in-
stitution for both patents, determining that MasterCard
did not have CBM standing under § 43.302(a). See Master-
card 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 promul-
gated § 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 Im-
plement Inter Partes Review Proceedings, Post-Grant Re-
view 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
proceeding with respect to a covered business
method patent unless the person or the person’s
real party in interest or privy has been sued for in-
fringement of the patent or has been charged with
infringement under that patent.
125 Stat. at 330.
2 The Board issued a nearly identical decision deny-
ing institution for the ’608 patent. See Mastercard Int’l Inc.
v. Alexsam, Inc., No. CBM2017-00042, 2017 WL 4221130
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6 ALEXSAM, INC. v.
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In its decision, the Board began by noting that Master-
Card had not actually been sued with 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 infringe-
ment” 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 decision in MedImmune. Id. Ulti-
mately, 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 in-
fringement action against [MasterCard].” Id. at *5. In the
Board’s view, MasterCard faced no “imminent” threat of in-
fringement, and thus had no standing to petition for CBM
review under § 42.302(a).
In July 2018, MasterCard moved for summary judg-
ment in the district court, asserting that AlexSam’s argu-
ments to the Board regarding the covenant not to sue and
MasterCard’s standing to petition for CBM review judi-
cially estopped AlexSam from pursuing its breach of con-
tract 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 infringe-
ment (thus depriving MasterCard of standing to petition
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 de-
cision denying institution for the ’787 patent.
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The magistrate judge recommended denying Master-
Card’s motion for summary judgment. The district court,
however, agreed with MasterCard and entered judgment
dismissing AlexSam’s complaint with prejudice and dis-
missing MasterCard’s patent-related counterclaims with-
out prejudice. Alexsam, Inc. v. Mastercard 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).
DISCUSSION
We review the district court’s summary judgment un-
der 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. Ash-
more 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 “dis-
trict court’s decision to invoke judicial estoppel . . . for
abuse of discretion.” Ashmore, 923 F.3d at 271. “While def-
erential, 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 it
rests on an error of law or clearly erroneous factual find-
ings. See, e.g., id. at 277, 283.
The Supreme Court in New Hampshire v. Maine out-
lined 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 where: (1) a party’s later position is
clearly inconsistent with its earlier position, and (2) the
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8 ALEXSAM, INC. v.
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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] a
showing that the party asserting the two inconsistent posi-
tions 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 its
core, AlexSam’s argument is that its position has been con-
sistent throughout: the covenant not to sue precludes
AlexSam from suing MasterCard for patent infringement,
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 argu-
ments have been consistent. The district court’s contrary
finding—crediting AlexSam with a position that it never
actually took before either the Board or district court—is
clearly erroneous, and therefore its decision to invoke judi-
cial 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 MasterCard’s standing for declaratory re-
lief, it also necessarily took the position that the same cov-
enant prohibits a claim for royalties under the license
agreement.” Judgment Op., 2020 WL 3286785, at *5 (em-
phasis 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.
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According to MasterCard, this was so because the covenant
was broad enough to bar AlexSam for suing for any claim
relating to the licensed transactions arising out of the par-
ties’ agreement, including a breach of contract claim.
J.A. 1485–86. AlexSam pushed back on this in its respon-
sive supplemental brief. Specifically, AlexSam argued that
the covenant prevented AlexSam from suing for patent in-
fringement (and only patent infringement), stating: “On
the one hand, the [covenant] was included to provide [Mas-
terCard] with assurance that it would not be sued for pa-
tent 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 “further evidence” that AlexSam could not
sue MasterCard for patent infringement. J.A. 1500; see
also J.A. 1503 (“The [covenant not to sue] further clarifies
that [AlexSam] cannot sue [MasterCard] for patent in-
fringement.”). 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, Master-
Card 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 enough 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 sentence
comes from a section of AlexSam’s supplemental brief di-
rectly responding to what it characterized as MasterCard’s
“misleading” arguments. MasterCard argues that this
statement, in combination with the Supreme Court’s deci-
sions in MedImmune and Already, shows AlexSam should
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10 ALEXSAM, INC. v.
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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 ar-
gues that it has declaratory judgment standing to chal-
lenge 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]” Mas-
terCard’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 cov-
enant at issue in Already. As MasterCard put it:
“Alex[S]am’s PTAB argument presented a broad, uncondi-
tional and irrevocable covenant 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 Mas-
ter[C]ard related to its IP, i.e., for disputed patent royal-
ties.” Id. at 26. MasterCard argues that because it would
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 declara-
tory relief,” J.A. 1501, AlexSam’s assertion amounted to
taking a position that would estop it from pursuing its roy-
alty claims. See id. at 35 (“[B]y arguing that the . . . cove-
nant 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 admit-
ted, refusal to pay royalties it owes supports a
claim for breach, not patent infringement. Fur-
ther, the [covenant] provides no explicit means for
its revocation. The [covenant] also is sufficient to
moot a claim for declaratory relief. . . . The facts do
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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 con-
tends that the [covenant] is both “not uncondi-
tional” and “void and not irrevocable.” Petitioner
provides no evidence or support for its position that
the parties intended the [covenant] to be condi-
tional or revocable. Petitioner simply lacks stand-
ing 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. 1501–02 (citation omitted) (emphasis altered). Read-
ing this sentence in context, it is abundantly clear that
AlexSam was continuing to argue only that the covenant
precluded a claim for patent infringement, a position which
the Board adopted and which AlexSam maintained in dis-
trict 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, the district court’s conclusion that AlexSam
“necessarily took” an inconsistent position was clearly er-
roneous in view of the record, and accordingly its invoca-
tion of judicial estoppel was an abuse of discretion. 3
3 To be sure, the district court may be entirely cor-
rect that the broadly worded covenant not to sue “prohibits
a claim for royalties under the license agreement.” Judg-
ment Op., 2020 WL 3286785, at *5. But that question—one
which requires contract interpretation under the applica-
ble 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 crediting AlexSam with a
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12 ALEXSAM, INC. v.
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CONCLUSION
We have considered the parties’ remaining arguments
and find them unpersuasive. 4 For the above reasons, we
agree with AlexSam that the district court abused its dis-
cretion by invoking judicial estoppel based on an erroneous
fact finding unsupported by the record. We therefore re-
verse the district court’s summary judgment and remand
for further proceedings.
REVERSED AND REMANDED
position it never took, thus abusing its discretion in invok-
ing judicial estoppel.
4 We specifically note that AlexSam argues on ap-
peal 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 transactions as those “covered” by one of the li-
censed patents. J.A. 200 ¶ 1.3. The district court correctly
determined that claim construction was a necessary pre-
requisite for determining whether any alleged transaction
was a licensed transaction for which MasterCard owed roy-
alties. We are not, however, reviewing the legal question
of claim construction, which may affect the amount of roy-
alties MasterCard owes as well as the validity of the li-
censed patents. Because this appeal is focused on the
threshold issue of whether AlexSam can bring its suit in
the first instance, the question of claim construction is not
subject to interlocutory review.