United States: UVA's Claim For Breach Of A Patent License Is Sent Back To Arbitration

A recent decision by Judge Glen Conrad of the Western District of Virginia is a reminder of how difficult it is to overcome an arbitration clause in a patent license. University of Virginia Patent Foundation v. DynaVox Systems, LLC, Case No. 3:15CV00015, 2015 U.S. Dist. LEXIS 134687 (W.D. Va. Oct. 1, 2015) (found here). If, as Judge Conrad held, the court cannot say with "positive assurance" that an arbitration clause does not apply, a claim will be subject to arbitration.

UVA entered into a license agreement with DynaVox's predecessor relating to UVA's patent for an "Eye Gaze Direction Tracker." The agreement provided that any dispute "concerning the validity, construction or scope" of the patent would be resolved in federal court, but all other claims were subject to arbitration.

UVA claimed that the licensed patent covered DynaVox's "EyeMax" line of eye-tracking technologies, which allowed users to control a computer screen or tablet by blinking or by causing the eye to remain on a section of the screen.

UVA instituted an arbitration action for unpaid royalties, and DynaVox responded by denying that UVA's patent covered its products. UVA filed suit, contending that DynaVox's response put the scope of the licensed patent at issue. DynaVox moved to dismiss or stay the suit pending the result of the arbitration, and Judge Conrad granted the motion.

Consistent with the policies underlying the Federal Arbitration Act, Judge Conrad construed the scope of the arbitration clause broadly and construed the exception for disputes "concerning the validity, construction or scope" of the patent narrowly. The arbitration clause, the judge held, brought in "the broadest possible range of claims," while the exception involved patent terms of art, supporting a narrow reading that limited the exception to patent-law related disputes.

DynaVox, the Court held, did not explicitly dispute the scope of the patent. In fact, the parties could stipulate to the scope of the patent and still have a dispute about whether DynaVox integrated UVA's patented technology into its products. Moreover, UVA's reading of the exception would encompass all infringement claims under the category of disputes about the "scope of the patent," contrary to a narrow reading of the exception.

Finally, Judge Conrad pointed out, the Court could only reach the issue of the scope of the patent, but UVA asserted a broader claim for breach of contract, which the Court could not resolve.

UVA's argument, at bottom, was a lawyerly effort to find a loophole in a contract clause where none existed. Though not groundbreaking, Judge Conrad's decision reinforces that any loopholes in arbitration clauses – if they exist at all – are very small.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.