Patent-Specific Arbitration Law in the United States —€“ What You Need To Know


  • Name
    DJ Healey
    Person title
    Senior Principal
    Headshot of DJ Healey

In the United States, there are three patent specific statutes, two patent specific cases, and one treaty governing arbitration that every patent litigator, licensee, and licensor should know cold.

The Statutes: The first is 19 U.S.C. § 1337(c), which requires termination of ITC Section 337 Unfair Competition cases when there is an arbitration agreement that applies to the dispute. The second and third are 35 U.S.C. § 135(f) and 25 U.S.C. § 294. Section 294 is the broader of the two, and specifically requires all disputes involving patents, including infringement and invalidity that are subject to an arbitration agreement, be arbitrated under the Federal Arbitration Act (Title 9, U.S.C.)("FAA"). Section 294(a) specifically makes interference proceedings ("interferences") arbitrable. Similarly, although interferences will eventually disappear post-AIA, Section 135(f) makes derivation proceedings arbitrable. Thus, knowledge of Section 294 and Section 135(f) is critical not just to compelling arbitration and drafting arbitration clauses, but also to the enforcement of awards.  For example, Section 294 specifically provides that an arbitration award concerning infringement or invalidity must be filed with the Director before it is effective. See also 37 C.F.R § 1.335 (requiring filing of notice of arbitration awards).

Currently, there is no case discussing whether Section 294 applies to AIA post-grant review procedures. However, the PTO's (PTAB) procedures on how to deal with arbitration in derivation proceedings are not on their face limited to derivation; and in any event, these procedures could easily be used in all types of PTAB proceedings as currently written. 37 C.F.R. § 42.410. If PTAB proceedings on interference or derivation can be compelled to arbitration, why not inter partes or other post-grant review on validity? As in interferences or derivation, inter partes review has no role for the government as a party, the parties control termination of the proceeding, and the PTAB conducts a trial. Arguably, the law on claim amendment in post-grant review, which is murky at best, presents challenges here. Aqua Prod., Inc. v. Matal, No. 2015-1177, 2017 WL 4399000 (Fed. Cir. Oct. 4, 2017) (holding that petitioner has the burden of persuasion with respect to the patentability of amended claims). However, motions to amend claims are permitted in interferences. MPEP 2308.2. Further, 37 C.F.R. § 42.410 has specific provisions to deal with issues that cannot be or were not decided in arbitration. Based on the breadth of the FAA, the language of Section 294, available PTAB procedures, and the strong federal policy in favor of arbitration, post-grant review procedures are likely arbitrable, even when some issues must be reserved to the PTAB. See generally and compare AT&T Mobility LLC v. Concepcion, 563 U.S. 333, 344-46 (2011) (describing that the FAA promotes arbitration and embodies a national policy favoring arbitration).

The Cases: Qualcomm Inc. v. Nokia Corp., is the first case you need to know, which sets the standard for compelling a dispute to arbitration. 466 F.3d 1366, 1366 (Fed. Cir. 2006). A district court should first determine whether the parties delegated arbitrability decisions to an arbitrator. Id. at 1371. What's noteworthy here is the fact that the rules of nearly all arbitration forums delegate arbitrability to the arbitrator. If arbitrability is to be arbitrated, the court should only perform a limited inquiry to determine whether the assertion of arbitrability is "wholly groundless;" and if the assertion is not "wholly groundless," the court should stay the action "pending a ruling on arbitrability by an arbitrator." Id.

The second case you need to know is Bayer CropScience AG v. Dow AgroSciences LLC, 851 F.3d 1302 (Fed. Cir. 2017) (cert. pending), which holds that a proceeding where an arbitration clause applies should be stayed not dismissed. In contrast, 19 U.S.C. § 1337(c)  requires an ITC proceeding be terminated if an arbitration agreement applies to the dispute. Bayer Cropscience AG also shows that at the conclusion of the arbitration, the prevailing party should file the award in the stayed case. Alternatively, when there was no pre-existing proceeding, the party can bring the award to an appropriate United States District Court under 9 U.S.C. § 16.  In all patent cases, Section 294 requires the award be filed with the Director of the PTO. Finally, 37 C.F.R. § 42.410 specifically provides for the parties to bring an award impacting or resolving a PTAB proceeding to the PTAB.

The Treaty: Under the "New York Convention" (Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38), arbitration awards are enforceable in more than 100 countries. See also FAA, 9 U.S.C.A. §§ 1, 2, 200-208. Because there is no treaty on reciprocal enforcement of judgments, this is a tremendous advantage of arbitration over litigation in international disputes.