Compelling Patent Arbitration — You Have to Talk to Me Sooner or Later

Compelling Patent ArbitrationPromega Corp. v. Life Technologies Corp. , No. 2011–1263 (Fed. Cir. Mar. 28, 2012) (Chief Judge Rader, and Judges Newman and Dyk)

When companies merge and split, it can be confusing to figure out where IP rights have gone. Although this case is technically about a motion to compel arbitration, it’s really about following the trail of assignments.

Back in 1996, Research Genetics exclusively licensed some patents to Promega, in exchange for royalties based on products sold. There were three provisions in the license that matter here: 1) the agreement couldn’t be assigned without the consent of the other party, 2) Promega could sublicense the patents, and 3) there was an arbitration clause.

In 2001, Research Genetics merged into its parent company Invitrogen, and Promega consented to assigning the license to Invitrogen. In 2003, Promega agreed to let Invitrogen assign the license to a subsidiary, IP Holdings. In 2008, Invitrogen merged with Applied Biosystems, and changed its name to Life Technologies. Applied Biosystems had actually sublicensed the patents from Promega at some point. IP Holdings still existed as a subsidiary of Life Technologies.

Here’s a diagram of what happened that might make things a little clearer:

 Shows the history of the license agreement between Promega and Research Genetics

After the merger, Life Technologies learned from the records at Applied Biosystems that Promega wasn’t properly reporting its sublicensee income. The parties started negotiations about the amount owed, but the talks broke down. Life Technologies demanded arbitration, and Promega responded by suing for a declaratory judgment that it didn’t have to arbitrate. It also sued for patent infringement.

Life Technologies realized that IP Holdings had never assigned its rights in the license, so IP Holdings served a demand for arbitration, and moved the court to compel arbitration. The district court eventually granted the motion, and Promega appealed.

Promega tried a few different arguments, but the Federal Circuit didn’t buy any of them. IP Holdings still exists as a company, and Promega consented to the assignment of rights to IP Holdings. Even though Life Technologies meant to assign the license to IP Holdings, it never did. That means that there’s still an enforceable arbitration agreement between Promega and IP Holdings.

Judge Newman dissented with just four sentences. She felt that the real parties-in-interest are Promega and Life Technologies. There’s no agreement between them, so there’s no grounds to compel arbitration.

Photo credit: Mark Coggins

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