830 F.3d 1335
Fed. Cir.2016Background
- Illumina (patent owner of U.S. Patent No. 7,955,794) and Ariosa entered a 2012 three‑year supply agreement under which Illumina would exclusively supply certain goods and grant Ariosa a non‑exclusive license to "Core IP Rights in Goods" while excluding "Secondary IP Rights in Goods."
- The agreement contained an arbitration clause covering disputes "arising out of or relating to" the agreement, but expressly excluded "disputes relating to issues of scope, infringement, validity and/or enforceability of any Intellectual Property Rights."
- Illumina sued Ariosa in district court for infringement of the ’794 patent. Ariosa counterclaimed for declaratory judgment of non‑infringement/invalidity, breach of contract, and breach of the covenant of good faith and fair dealing, asserting express/implied license and estoppel defenses based on the supply agreement.
- Illumina moved to compel arbitration of Ariosa’s counterclaims under the supply agreement; the district court denied the motion, finding the counterclaims unambiguously related to patent scope/infringement and thus excluded from arbitration.
- On appeal, the Federal Circuit reviewed de novo whether the parties agreed to arbitrate and affirmed the district court, holding Ariosa’s counterclaims fall within the agreement’s patent‑related exclusion and therefore are not arbitrable.
Issues
| Issue | Illumina's Argument | Ariosa's Argument | Held |
|---|---|---|---|
| Whether Ariosa’s counterclaims are subject to the agreement’s arbitration clause | Arbitration clause ambiguous; counterclaims do not require patent‑scope or infringement determinations and thus are arbitrable | Counterclaims directly depend on whether Ariosa obtained a license under the agreement, which is a patent‑scope/infringement issue excluded from arbitration | Not arbitrable: counterclaims concern scope of licensed IP and fall within the exclusion |
| Whether the phrase "relating to" should be read broadly or narrowly | "Relating to" should be read narrowly to preserve federal policy favoring arbitration; exclusion limited to patent questions, not license defense | "Relating to" is broad under Ninth Circuit/California law and covers disputes about scope of licensed rights | Broad: "relating to" covers disputes about scope of licensed IP, so exclusion applies |
| Whether the word "issues" narrows the exclusion to particular enumerated patent issues | "Issues" limits exclusion and does not encompass license as a contract claim | The exclusion’s full phrase "disputes relating to issues of" links broadly to patent scope/infringement matters, including license scope | "Issues" does not narrow the exclusion; no ambiguity shown by Illumina |
| Whether contract counterclaims can be severed and arbitrated apart from patent‑related license defense | Contract claims distinct from license defense and should be severed and sent to arbitration | Counterclaims are tied to the patent license question and cannot be meaningfully severed | No severance: counterclaims rise or fall on licensed IP scope and are excluded from arbitration |
Key Cases Cited
- Promega Corp. v. Life Techs. Corp., 674 F.3d 1352 (Fed. Cir.) (standard for reviewing whether parties agreed to arbitrate)
- Flex‑Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir.) (apply Federal Circuit law to patent‑intimate issues and regional law otherwise)
- Circuit City Stores, Inc. v. Adams, 532 U.S. 105 (U.S. Supreme Court) (Federal Arbitration Act enforces written arbitration agreements)
- Mitsubishi Motors Corp. v. Soler Chrysler‑Plymouth, Inc., 473 U.S. 614 (U.S. Supreme Court) (court decides whether parties agreed to arbitrate particular dispute)
- Granite Rock Co. v. Int’l Bhd. of Teamsters, 561 U.S. 287 (U.S. Supreme Court) (arbitration ordered only where court is satisfied parties agreed to arbitrate that dispute)
- Preston v. Ferrer, 552 U.S. 346 (U.S. Supreme Court) (FAA establishes national policy favoring arbitration when parties contract for it)
- Goldman, Sachs & Co. v. City of Reno, 747 F.3d 733 (9th Cir.) (presumption of arbitrability applies only where scope is ambiguous)
- Deprenyl Animal Health, Inc. v. Univ. of Toronto Innovations Found., 297 F.3d 1343 (Fed. Cir.) (apply regional circuit law to scope questions of arbitration re: invalidity/non‑infringement)
- Endo Pharm., Inc. v. Actavis, Inc., 746 F.3d 1371 (Fed. Cir.) (burden of proving license defense rests with alleged licensee)
- Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914 (9th Cir.) ("relating to" language gives arbitration clauses broader reach than "arising hereunder")
- Tracer Research Corp. v. Nat’l Envtl. Serv., 42 F.3d 1292 (9th Cir.) (omission of "relating to" is significant in narrowing arbitration scope)
- Izzi v. Mesquite Country Club, 231 Cal. Rptr. 315 (Cal. Ct. App.) (broad arbitration clauses covering "arising out of or relating to" include claims rooted in contractual relationship)