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Arbitration Clause Terminates ITC Investigation Where Assertion Was Not "Wholly Groundless"

By William F. Heinze

Thanks to PatRacer for pointing out CERTAIN PESTICIDES AND PRODUCTS CONTAINING CLOTHIANIDIN, USITC Inv. No. 337-TA-634, (Order No. 5, May 8, 008) where an unreviewed initial determination from Administrative Law Judge Bullock terminated the investigation for the existence of an arbitration agreement:

In determining whether to stay or termination an investigation in favor of arbitration, the undersigned [ALJ] must ?first inquire as to who has the primary
power to decide arbitrability under the parties? agreement.? Qualcomm Inc. v.
Nokia Corp., 466 F.3d 1366, 1371 (Fed. Cir. 2006) [pdf]. If the parties did not clearly and unmistakably intend to delegate the arbitrability decision to an arbitrator, then the undersigned must undertake a full arbitrability inquiry. Id. If the parties have clearly and unmistakably intended to delegate the arbitrability decision to an arbitrator, then the undersigned must make a secondary inquiry to determine whether the assertion of arbitrability is ?wholly groundless.? Id.

. . . In Qualcomm, the license at issue similarly incorporated specific arbitration rules. 466 F.3d at 1372-73. Like the ICC Rules, the incorporated arbitration rules in Qualcomm made clear that the arbitral tribunal determined its own jurisdiction. Id. The court found that the incorporation of the arbitration rules into the license agreement demonstrated that the parties clearly and unmistakably intended to delegate the issue of arbitrability to an arbitrator. Id. at 1373. Because there is a similar situation here, the undersigned finds that the parties have clearly and unmistakably delegated the determination of arbitrability to the arbitrator. See also Shaw Group Inc. v. TripleJine Int'l Corp., 322 F.3d 115, 122 (2d Cir. 2003) (finding that the incorporation of the ICC Rules into a license agreement evidenced the parties? intent to delegate arbitrability to the arbitrator.

. . . The ?wholly groundless? inquiry is a limited one, and is not intended to be a actual determination of arbitrability:

"[I]n undertaking the ?wholly groundless? inquiry, the district court should look to the scope of the arbitration clause and the precise issues that the moving party asserts are subject to arbitration. Because any inquiry beyond a ?wholly groundless? test would invade the province of the arbitrator ... the district court need not, and should not, determine whether Nokia?s defenses are in fact arbitrable. "

Qualcomm, 466 F.3d at 1374. Examining the license, the undersigned finds that the ?arising out of or relating to? language in the arbitration clause supports a broad interpretation. Certain Nickel Metal Hydride Consumer Batteries, Components Thereof and Consumer Electronic Products Containing Same, Inv. No. 337-TA-579, Order No. 4, at 6, n. 6 (May 30,2007) (stating that ?arising out of? arbitration clauses are interpreted broadly).

The undersigned acknowledges that there are still many issues to be resolved before the arbitrability determination can be made. . . . Further, the parties provide no discussion as to whether Respondents? thiamethoxam products can be made in such a way so as to not allegedly infringe the ?404 patent. This fact will be relevant in determining whether Respondents? license rights would be truly derogated by a finding of infringement of the ?404 patent. These questions, and others, will be addressed and resolved by the arbitrator during the arbitrability analysis. Because the parties have delegated the question of arbitrability to the arbitrator, the undersigned cannot and will not resolve these issues. See Qualcomm, 466 F.3d at 1374. The undersigned is restricted to the limited ?wholly groundless? inquiry, and Respondents have shown that their arbitration claim is not wholly groundless.7

footnote 7. If the arbitrator determines that the dispute is not subject to arbitration, then Complainants are free to re-file their complaint.

Full post as published by I/P Updates on August 29, 2008 (boomark / email).