Federal Circuit Report

• Jurisdiction: United States,Federal
• Citation: Vol. 46 No. 4
• Publication year: 2021
• Author: Rex Hwang
• topic: Contracts,Intellectual Property,Federal,Civil Procedure

FEDERAL CIRCUIT REPORT

Rex Hwang
Skiermont Derby LLP

This article explores the Federal Circuit's recent order from In Re: Maxpower Semiconductor Inc.¹ In this matter, a Federal Circuit panel declined to stay or terminate IPR proceedings despite a prior agreement between the parties to arbitrate disputes involving patent validity. The Federal Circuit concluded that the Board was not required to enforce or comply with private arbitration agreements, and therefore did not exceed its authority in allowing IPR proceedings to proceed. In her dissent, Judge Kathleen O'Malley argued that the majority got it wrong because allowing the IPRs to proceed despite the parties' agreement to arbitrate was inconsistent with 35 U.S.C. § 294 and the Supreme Court's repeated statements in favor of strong enforcement of arbitration agreements.

GENERAL BACKGROUND FACTS2

In 2007, ROHM Japan and MaxPower entered a technology license agreement ("TLA"). The TLA included an agreement to arbitrate "[a]ny dispute, controversy, or claim arising out of or in relation to this Agreement or at law, or the breach, termination, or validity thereof...."

Between 2019 and 2020, a dispute arose between ROHM Japan and MaxPower concerning whether the TLA covered certain ROHM products. The dispute escalated and, in a few months, MaxPower notified ROHM Japan of its intent to initiate arbitration in thirty days. Shortly thereafter, ROHM Semiconductor USA, LLC ("ROHM"), a wholly owned subsidiary of ROHM Japan, countered by filing a complaint for declaratory judgment of noninfringement of four MaxPower patents in the Northern District of California and four IPR petitions concerning those same four patents.

MaxPower argued to the district court and the Board that both matters should be terminated based on the parties' arbitration agreement and that 35 U.S.C. § 294 compels arbitration. Section 294 states that arbitration provisions relating to patent validity "shall be valid, irrevocable, and enforceable, except for any grounds that exist at law or in equity for revocation of a contract."

In the federal lawsuit, the district court quickly dismissed the case and compelled ROHM to arbitrate the dispute. The Patent Office, however, took a different approach. The Board rejected MaxPower's argument and instituted ROHM's four IPR petitions. According to the Board, an "arbitration clause is not a reason to decline institution." The Board held that Section 294 does not compel arbitration because Chapter 31 of the U.S.C. (which provides for IPR proceedings) is "an entirely different Chapter" than the one under which Section 294 falls. The Board further held that any issues related to the TLA are beyond the Board's mandate as they are issues of contractual interpretation. The Board ultimately concluded that there is no "statute, rule, or policy that would preclude the Office from acting on the Petition."

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MaxPower filed four interlocutory appeals of the Board's institution decisions at the Federal Circuit. It also...