Arbitrating the Patent Case Part XXI: Confirming the Award

We have now arrived at a point in our discussion of patent arbitration where a party has won an award and wants to enforce it. Now what?

It depends. You may not need to do anything but speak to the other side. In many cases, once there is a final award of money, the other side pays it.  Given the limited nature of review or arbitral awards, unless the parties have agreed to an appeal procedure, there is often very little reason to spend time and money on further disputes. Presumably, the parties chose arbitration to save time and money. They may simply agree it’s time to settle up and move on.

But what if your opponent doesn’t see it that way or if the award involves some sort of injunction you may need to enforce one day? How do you collect and enforce? The arbitrator can’t issue a judgment that can be enforced by a sheriff or marshal. For that you need a court.

Finding the right statute

You will first want to consider what statute governs. There are two possibilities: the Federal Arbitration Act (“FAA”) or a state arbitration act, which most states have. The FAA generally pre-empts state law in cases involving interstate commerce, which your patent case almost certainly will. Easier yet, Congress said the FAA governs patent arbitrations. Recall from an earlier article in this series that 35 U.S.C. § 294 specifically allows arbitration of any dispute relating to patent validity or infringement and that the arbitration is governed by the FAA. (You can find that article at https://www.daveadr.com/2015/05/21/arbitrating-the-patent-case-part-ix-statutory-provisions/.) So you will almost certainly look to the FAA.

Finding the right court

Next, you will want to consider which court to go to. Federalism can be confusing, so spend some time figuring out the particulars of your case. I’ll skip ahead and say the answer is almost always the federal court in which you held the arbitration or in which the losing party resides, but getting to the answer takes some doing.

While the FAA pre-empts state law, it doesn’t automatically confer jurisdiction in a federal court. For that you need to find an independent source of federal jurisdiction. Often that will be diversity jurisdiction, requiring citizens of different states and over $75,000 at issue.   28 U.S.C. § 1332.

Another obvious source of jurisdiction is 28 U.S.C. 1338 that confers original jurisdiction in federal district court “of any civil action arising under and Act of Congress relating to patents . . .” But be careful. Fairly recently, the Federal Circuit, albeit in a non-precedential opinion, refused to hear an appeal from a district court’s confirmation of an arbitration award, noting that “[c]auses of action based on contractual rights in a patent assignment or license agreement as a general rule do not arise under the patent laws.” DeRosa v. J.P. Walsh & J.L. Marmo Enterprise, No. 2012-1401 (Fed. Cir. 2013)( citing Luckett v. Delpark, Inc., 270 U.S. 496, 502-03 (1926)). The case was in federal court, so there was federal jurisdiction, but diversity was pled as the basis – not federal patent jurisdiction.

On the other hand, if a party can “establish[h] either that federal patent law creates the cause of action or that the plaintiff’s right to relief necessarily depends on resolution of a substantial question of federal patent law,” then federal jurisdiction will lie. DeRosa (quotingHolmes Group, Inc. v. Vornado Air Circulation Systems, Inc., 535 U.S. 826, 830 (2002)). Presumably, a counterclaim for invalidity and other patent-related issues would establish patent jurisdiction in federal court.

There are no reported cases I can find that authoritatively address all this, so do yourself a favor. You didn’t get into arbitration to get into the vagaries of federal jurisdiction under the patent laws. In many cases, there will be diversity, so rely primarily on that. If not, and the case involves issues of infringement or validity – which it usually will – rely on 28 U.S.C. § 1338 and 35 U .S.C. § 294. If not, consider state court.

Don’t forget the Director

Recall that Section 294(d) requires that notice of an arbitration award be given to the Director of the Patent Office for each patent involved. Until the Director receives the notice, the Award is unenforceable. The same goes for Section 135 if you have agreed to arbitrate a derivation proceeding. Of course, if the real issue is payment, and the respondent just pays up, this filing may be unnecessary. It could be that failure of a patentee to file an award might have some inequitable conduct implications if the decision involves validity issues, so I commend consideration of that to you if you are thinking of skipping this step.

Applying to the court

Once you have figured out the right court, you will need to file an application – often styled a “petition” – to confirm the award. As noted, despite the complexity of federal jurisdiction over patent matters mentioned above, that court will usually be the federal district court in the jurisdiction where the arbitration hearing was held or where the loser resides. The FAA provides the basic procedure for confirming the award at 9 U.S.C. § 9. Basically, you have to apply to the court within a year to confirm the award. The court must confirm it, unless the award is vacated, modified, or corrected, pursuant to sections 10 or 11 of the FAA.

Because the statute is fairly general, naming and crafting the pleading you file isn’t a standard thing. Generally, you will want to file an application or petition to confirm that states the basis for the Court’s jurisdiction, summarizes the Award, and seeks that the award be confirmed and judgment be entered. The name probably doesn’t matter, but the statute says you “apply” for confirmation, so I’d call it the pleading an “Application for Confirmation of an Arbitration Award.”

Normally, you will attach the arbitration demand, any answer and counterclaim, and the Award itself. But check local practice and local rules for the particulars. And, of course, you will need to obtain a summons and serve it and the application on your opponent. If your arbitration agreement requires the proceedings to be kept confidential, you will need to determine what exactly is confidential and how to file confidential information, which may include the award itself, under seal.

You will next need to bring a motion to confirm the award. Again, check local rules and procedures on how to do that. If the motion is not contested, you will have your award confirmed and a judgment entered that can be enforced like any other judgment.

But it is not uncommon for your opponent to seek to vacate the award and avoid its confirmation. We’ll take that up in the next article.