Arbitration Clauses in License Agreements (Part 1)

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This 2010 case is a good reminder that courts will give effect to arbitration clauses if that’s what the parties have chosen in their license agreements.

  • In PRM Energy Sys., Inc. v. Primenergy, LLC, 592 F.3d 830 (8th Cir. 2010) , the United States Court of Appeals, Eighth Circuit decided to uphold an arbitration clause in a patent license agreement, which was drafted to cover “all disputes arising under” the agreement. A complex series of agreements and disputes led PRM to sue Kobe Steel, a non-party or ”non-signatory” to the original license agreement that contained the arbitration clause. However, Kobe Steel convined the court that the arbitration clause should be enforced. The court decided that PRM’s claims were so intertwined with patent license that contained the arbitration clause that it would be unfair to allow PRM to rely on the license agreement in making its claims, but to avoid the arbitration clause of that same agreement.

In Canada, courts have also shown that they are prepared to uphold arbitration clauses. Consider this case:

  • The case of University of Toronto v. John N. Harbinson Ltd. 2005 CanLII 47089 (ON SC), dealt with a broad arbitration clause that said: “Any dispute, controversy or claim arising from this Agreement or its breach, termination or alleged invalidity shall be settled by arbitration in accordance with the Arbitrations Act of Ontario, as amended.” In this case, the court decided that the arbitration clause should be upheld, particularly since no Patent Act claims or remedies were being sought.

Related reading: See Did You Say Arbitration in Kazakhstan?, reviewing a case where arbitration was triggered by one of the parties, and the Alberta Court decided that the breach of contract questions fell within the scope of the arbitration under the law of Kazakhstan.