Patent Law

Ninth Circuit Decides Comedy Club Arbitration Battle

By Les Weinstein, Michael Young, John Leo Wagner, Eric van Ginkel, and Victoria Pynchon

Mr. Thrifty and I have been known to walk to the IMPROV (Jerry Seinfeld, Sarah Silverman, and before Mr. T., even Rosanne Barr before she was Rosanne).  The club is right around the corner from our little neighborhood -- the one that's recently been renamed "Beverly Grove" in honor of the two shopping centers that anchor it firmly in L.A.'s march of progress to complete gentrification.   

The presence of the IMPROV in my own personal geography is strong -- I took my comedy-driving- school-class there from the now pretty famous Kathy Griffin back in the day when I used to power my cherry red RX-7 up and down PCH at speeds local law enforcement couldn't ignore.       

But I digress before I lede, a perilous practice when reporting not quite so exciting arbitration clause interpretation cases. 

So here it is:  Comedy Club, Inc. v. IMPROV West Associates, etc., the Ninth Circuit construing trademark licensing arbitration and non-compete clauses between an IMPROV licensee, the Comedy Club, and the IMPROV as follows:   

1. the arbitrator properly arbitrated the equitable claims where the "scope of arbitration" clause could reasonably be interpreted to embrace such claims;
2. the arbitrator’s award enforcing an exclusivity clause containing a restrictive covenant by terminating the Comedy Club's right to open other clubs could not be set aside as "completely irrational" since that's what the contract provided for;
3. the arbitrator exceeded the scope of his authority by enjoining non-party "affiliate" family members; and,
4. because enforcement of the agreement's covenant not to compete barred the Comedy Club from operating in a substantial portion of its market, that portion of the award violated California Business and Professions Code § 16600, was therefore entered in manifest disregard of the law and had to be vacated.   

The Ninth Circuit therefore,

vacat[ed] the district court’s order confirming the arbitration award and remand[ed the case back] to the district court  with instructions to vacate the Partial Final Arbitration Award in so far as it enjoin[ed the Comedy Store's] Affiliates, unless they [were] agents or otherwise acting for [it] and to the extent it prevent[ed the Comedy Store] from opening or operating non-Improv clubs in counties in which [the Comedy Store] does not now operate or own an Improv club.  

So who said arbitration awards can't be appealed?

With all due respect to those of us here at the IP ADR Blog who arbitrate IP disputes, these lengthly and complex proceedings make me want to mediate the darn thing.

Full post as published by IP ADR Blog on January 23, 2008 (boomark / email).