Magazine article Dispute Resolution Journal

Arbitrability Determined by Court

Magazine article Dispute Resolution Journal

Arbitrability Determined by Court

Article excerpt

LICENSING

The Federal Circuit held that the district court, not the arbitrator, should decide whether the plaintiff was a successor to an agreement that required arbitration of a dispute.

In 1983, U.S. Philips Corp., the owner of two patents, entered into a non-exclusive patent licensing agreement with General Instrument Corp. The licensing agreement contained an arbitration clause calling for all disputes regarding the agreement to be finally settled by arbitration at the International Chamber of Commerce. In December 2002, Philips commenced an ICC arbitration against Microchip Technology, alleging patent infringement and seeking a determination that Microchip succeeded General Instrument as a party to the license agreement.

A year before filing this arbitration claim, Philips filed a patent infringement action against numerous other parties in federal court in New York. Microchip, which was not named in this lawsuit, subsequently brought a declaratory relief action in federal court in Arizona, seeking a declaration that it was licensed to use the same patent. Microchip claimed that it was a successor party to the license agreement because General Instrument "spun off" Microchip off from a "wholly owned subsidiary."

When Microchip refused to participate in the ICC arbitration, Philips moved to compel arbitration in the Arizona litigation, asserting that the arbitrator should determine whether Microchip was a proper successor licensee, while Microchip moved to stay the arbitration so that the court could decide the arbitrability issue. Microchip also argued that the arbitration clause had expired, although license itself remained in effect.

The district court denied Philips' motion to compel arbitration, but did not finally decide the issue of arbitrability, successorship, or expiration of the arbitration clause because, in its view, before arbitrability could be determined, the court had to determine if Microchip and Philips were parties to the license agreement. …

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