674 F.3d 1352
Fed. Cir.2012Background
- 1996 license granted Promega exclusive worldwide rights to licensed patents for human identity/clinical markets; remaining uses licensed non-exclusively.
- Section 22.1 arbitration clause required disputes arising under the 1996 agreement to be resolved by arbitration; Wisconsin law governs the agreement.
- Promega consented to assign Research Genetics' rights to Invitrogen in 2001, and Invitrogen consented to assign those rights to IP Holdings in 2003.
- IP Holdings later served as an arbitration respondent; Promega challenged IP Holdings’ authority by asserting IP Holdings might be dissolved or lacked current rights.
- District court initially denied arbitration, then limited discovery showed Invitrogen assigned rights to IP Holdings and that IP Holdings remained in existence; district court later ordered arbitration between Promega and IP Holdings.
- Promega appealed the order compelling arbitration; the Federal Circuit reviewed de novo the arbitrability issue with respect for factual findings, applying Seventh Circuit law on arbitrability.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Existence of arbitration agreement between Promega and IP Holdings | Promega never consented to assignment to Life Technologies; no direct agreement to arbitrate with IP Holdings. | IP Holdings validly held the rights under the 1996 agreement and Promega consented to IP Holdings’ exercise of those rights. | Yes; IP Holdings had a valid right to arbitrate under the 1996 agreement. |
| Validity of IP Holdings’ assignment to Life Technologies | There was no consent to assign to Life Technologies; IP Holdings could not arbitrate on Life Technologies’ behalf. | Promega consented to the assignment to IP Holdings; Life Technologies’ control was through IP Holdings; assignment to Life Technologies was not effective without Promega’s consent. | Promega consented to the IP Holdings assignment; IP Holdings remained the assignee with authority to arbitrate. |
| Scope of the arbitration clause to royalties dispute | Broad claims include non-arbitrable or specialized disputes; the clause should be limited. | Clause broadly covers all controversies arising under the agreement; scope not limited to small disputes. | Arbitration clause is broad and governs all disputes under the agreement. |
| Discovery limitations under Appendix E vs. arbitration fairness | Third-party discovery is essential; Appendix E limits discovery unlawfully. | Parties agreed to limited discovery; discovery in arbitration must be within terms of agreement. | Discovery limitations do not defeat arbitrability; terms enforceable under FAA. |
| Piecing arbitrable and non-arbitrable claims | Non-arbitrable patent claims may bar arbitration of related issues. | Arbitrable and non-arbitrable claims may proceed separately; piecemeal resolution permitted to enforce arbitration. | The arbitrable claims may be compelled to arbitration; non-arbitrable claims may remain in district court. |
Key Cases Cited
- Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) (central to enforcement of arbitration agreements; scope and existence of agreement)
- Datatreasury Corp. v. Wells Fargo & Co., 522 F.3d 1368 (Fed. Cir. 2008) (review of arbitrability; de novo with factual findings reviewed for clear error)
- Granite Rock Co. v. International Bhd. of Teamsters, 130 S. Ct. 2847 (2010) (two-step arbitrability framework; formation and applicability of arbitration clause)
- AT&T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643 (1986) (presumption in favor of arbitration; narrow exceptions must be express)
- Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1 (1983) (federal policy favoring arbitration and piecemeal resolution when necessary to enforce agreement)