Verinata Health, Inc. / Stanford / Illumina, Inc. v. Ariosa Diagnostics, Inc.


Docket No. 2015-1970

REYNA, CLEVENGER, WALLACH
July 26, 2016

Brief Summary: DC order denying Illumina’s request to compel arbitration with Ariosa affirmed because Ariosa’s “counterclaims all rise or fall on the scope determination of licensed intellectual property rights, a matter that the parties expressly agreed to exempt from arbitration.”

Summary: Illumina appealed DC order denying its request to compel arbitration with Ariosa. Illumina sued Ariosa for infringement of US 7,955,794 encompassing DNA assay optimization techniques. Ariosa countersued, arguing it had a license to the ‘794 patent under a supply agreement. That agreement included an arbitration clause that Illumina invoked with respect to Ariosa’s countersuit, but the DC denied that request. The FC panel reviewed the DC decision de novo and factual findings for clear error (Promega, FC 2012). The opinion explains that “a court may order arbitration of a particular dispute only where the court is satisfied that the parties agreed to arbitrate that dispute” (emphasis on “that”) (Fed. Arb. Act; Mitsubishi, US 1985; Granite Rock, US 2010; Goldman Sachs, 9th Cir. 2014). The FC panel agreed with Ariosa that its counterclaims were not subject to the arbitration clause of the supply agreement because “[t]he pertinent language” thereof “in unambiguous and makes clear that ‘disputes relating to issues of’ patent scope and infringement are not subject to mandatory arbitration”. It found that “[t]he arbitration clause applies to issues…that are not patent-related, such as failure of performance and defenses against the enforceability or validity of the supply agreement itself” and “Illumina’s argument fails to appreciate that the excluded issues are about disputes over the scope of the licensed intellectual property-not whether a party lacked capacity to contract or failed to ship product under agreed upon terms and conditions.” And “[t]he nucleus of Ariosa’s counterclaims is the patent infringement lawsuit filed by Illumina.” “Illumina cannot hijack the counterclaims and make them its own for purposes of compelling arbitration…[t]he counterclaims all rise or fall on the scope determination of licensed intellectual property rights, a matter that the parties expressly agreed to exempt from arbitration.” Thus, the DC decision was affirmed.

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