United States District Court for the District of Columbia
March 29, 2004.
INSTITUT PASTEUR, Plaintiff,
CHIRON CORP., Defendant
The opinion of the court was delivered by: JOHN BATES, District Judge
Plaintiff Institut Pasteur ("Pasteur") brings this action under
35 U.S.C. § 146 to review certain decisions of the Board of Patent
Appeals and Interferences of the United States Patent Trademark Office.
Defendant Chiron Corporation ("Chiron") prevailed in a patent
interference against Pasteur's predecessors in interest regarding a
disputed test for HIV antibodies. Chiron has moved to stay these
proceedings and compel arbitration, citing an HIV Cross-License Agreement
of 1993 ("the Agreement"), signed by Pasteur and Chiron, that arguably
requires submission of this dispute to binding arbitration. Pasteur
insists that it joined the Agreement for limited purposes only and did
not bind itself to the provision of the Agreement compelling arbitration.
Also before the Court is Chiron's motion seeking relief from its
obligations under FED. R. Civ. P. 26(f) during the pendency of the motion
to compel arbitration.
Pasteur is a private non-profit medical research foundation established
under the laws of France. Chiron is a biotechnology company specializing
in vaccines, blood testing, and
biopharmaceuticals. It is incorporated in Delaware and has its
principal place of business in California.
The cross-license agreement states that it was "made by and among
Chiron . . . Ortho Diagnostics Systems, Inc., a New Jersey Corporation
(`Ortho'), Pasteur Sanofi Diagnostics, a corporation formed under the
laws of France (`PSD'), and Genetic Systems Corporation, a Delaware
Corporation (`GSC')." Agreement at Preamble. It further states that
Pasteur "joins in this Agreement for the purposes set forth herein."
Id. Chiron and Ortho were at the time of the Agreement engaged
in a long-term collaborative research venture involving the products
subject to the Agreement. PSD and GSC each owned or controlled patents to
HIV tests very similar to those developed by Chiron and Ortho. An
underlying purpose of the Agreement, therefore, was the desire of PSD and
GSC on the one hand and Ortho and Chiron on the other "to provide each
other with freedom of operation under their respective patent rights, and
thereby to avoid the possible mutual blocking of their patent rights and
the uncertainty and expense of potential patent disputes." Id.
at Background ¶ 4. Accordingly, Ortho and Chiron granted to PSD and
GSC nonexclusive licenses under certain Ortho and Chiron patents to
manufacture and market potentially disputable HIV products in specified
countries. Id. at §§ 2.1, 2.2. In return, PSD and GSC
granted to "the Ortho/Chiron parties" nonexclusive licenses under PSD and
GSC patents*fn1 to manufacture and market similar HIV products in other
countries. Id. at §§ 2.3, 2.4.
In Section 2.8 of the Agreement, "[t]o further ensure complete freedom
hereunder," Pasteur granted to the Ortho/Chiron parties an option
to obtain a license as to some patents held directly by Pasteur under
certain circumstances. See id. §§ 2.8.1, 2.8.2. "Except as
set forth herein," the Agreement states, "such license from Institut
Pasteur shall be subject to the same use limitations, terms and
conditions as the licenses granted hereunder to the Ortho/Chiron Parties
by PSD and GSC." Id. at § 2.8.1. The Ortho/Chiron parties
agreed to pay royalties directly to Pasteur for any licenses granted
under Section 2.8. Id. Finally, "[f]or the avoidance of doubt,
PSD, GSC, and Institut Pasteur further agree[d] not to assert (or assist
others in asserting) against the Ortho/Chiron Parties, solely with
respect to their activities that are licensed under Sections 2.3 and 2.4,
any patent rights specifically relating to HIV-1 and/or HIV-2, if any,
that are not otherwise provided for under this Agreement." Id.
at § 2.8.3.
A similar concern with warding off disputes is apparent in Sections 6.3
and 9.10 of the Agreement. In the former section, it was agreed that:
The parties shall cooperate reasonably to resolve
and withdraw from any patent interferences, and
withdraw from any patent oppositions, between them
with respect to Licensed Ortho/Chiron Patents
owned by Ortho, Chiron or their Affiliates or
Licensed PSD/GSC Patents owned by PSD, GSC or
their Affiliates, or Institut Pasteur, to the
extent the coverage of claims involved in such
interference or opposition is limited to the uses
licensed under this Agreement.
Id. at § 6.3.*fn2
Substantiating the Agreement's
concern for cooperation, Section 9.10 outlines a dispute resolution
procedure at some length. Section 9.10.1 provides:
The parties recognize that bona fide disputes as
to certain matters may arise from time to time. In
the event of the occurrence of such a dispute,
either party may, by written notice
to the other party, have such dispute referred
to the respective officers designated below or
their successors, for attempted resolution by good
faith negotiations within 30 days after such
notice is received. The designated officers for
Chiron and Ortho are their respective Presidents
or Chairmen; the designated officers for GSC and
PSD are their respective Presidents or Chairmen.
In the event the designated officers are not able
to resolve the referred dispute within the 3 0-day
period, either party may invoke the provisions of
Section 9.10.2 within 15 days following the 30-day
Id. Section 9.10.2 provides, in turn, that "[a]ny
dispute, controversy or claim arising out of or relating to the validity,
enforceability or performance of this Agreement shall be settled by
binding Alternative Dispute Resolution (`ADR') in the manner described"
in the succeeding nine subsections. Id. However, the Agreement
acknowledges that some disputes related to its subject matter will not be
subject to ADR. Section 9.10.6 states that "[n]othing in this Section
9.10 shall be deemed to preclude a party from bringing suit against the
other party in a court of competent jurisdiction to enforce, or enjoin
infringement of, such parties intellectual property rights."
Finally, Section 9.15 states: "Institut Pasteur, by executing this
Agreement, hereby signifies its consent to the terms hereof, agrees to
the provisions of Section 2.8, and agrees to take no action which would
have the effect of frustrating this Agreement." Id. The words
"For Approval and as to Section 2.8" appear above the signature block for
A. Applicable Legal Standards
The parties do not dispute the applicability of the Federal Arbitration
Act, 9 U.S.C. § 1 et seq. ("FAA"), to Chiron's motion. In relevant
part, the FAA provides: " [a] party aggrieved by the alleged failure,
neglect, or refusal of another to arbitrate under a written agreement for
arbitration may petition any United States district court which, save for
such agreement, would have jurisdiction . . . of the subject matter of
a suit arising out of the controversy between the parties,
for an order directing that such arbitration proceed in the manner
provided for in such agreement." Id. at § 4. Further,
"upon being satisfied that the making of the agreement for arbitration
or the failure to comply therewith is not in issue, the court shall make
an order directing the parties to proceed to arbitration in accordance
with the terms of the agreement. . . . If the making of the arbitration
agreement . . . be in issue, the court shall proceed summarily to the
trial thereof." Id.
The Supreme Court has determined that "arbitration is a matter of
contract and a party cannot be required to submit to arbitration any
dispute which he has not agreed so to submit." Steelworkers v.
Warrior & Gulf Nav. Co., 363 U.S. 574, 582 (1960); see also
Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83 (2002). While
the courts have adhered to a "liberal federal policy favoring arbitration
agreements," Moses H. Cone Memorial Hospital v. Mercury Construction
Corp., 460 U.S. 1, 24-25 (1983), the question whether the parties
have submitted a particular dispute to arbitration is "an issue for
judicial determination unless the parties clearly and unmistakably
provide otherwise." AT & T Technologies. Inc. v. Communications
Workers, 475 U.S.643, 649 (1986); see also National R.R.
Passenger Corp. v. Boston & Maine Corp., 850 F.2d 756, 761 (D.C.
"[T]he proper approach to employ in reviewing the defendant's motion to
dismiss and compel arbitration is to apply the same standard of review
that governs [Federal Rules of Civil Procedure] Rule 56 motions."
Brown v. Dorsey & Whitney, LLP, 267 F. Supp.2d 61, 67
(D.D.C. 2003). Thus, it is appropriate to grant a party's motion to
compel arbitration when the pleadings and the evidence demonstrate that
"there is no genuine issue as to any material fact and that the moving
party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c).
The party seeking to compel arbitration bears the initial responsibility
of demonstrating the absence of a genuine
dispute of material fact. See Celotex Corp. v. Catrett,
477 U.S. 317, 323 (1986). In determining whether there exists a genuine
issue of material fact sufficient to preclude summary judgment, the court
must regard the non-movant's statements as true and accept all evidence
and make all inferences in the non-movant's favor. See Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). Anon-moving party,
however, must establish more than the "mere existence of a scintilla of
evidence" in support of its position. Id. at 252. By pointing
to the absence of evidence proffered by the non-moving party, a moving
party may succeed on summary judgment. Celotex, 477 U.S. at
322. "The district court, when considering a motion to compel arbitration
which is opposed on the ground that no agreement to arbitrate has been
made between the parties, should give to the opposing party the benefit
of all reasonable doubts and inferences that may arise. . . . [I]nasmuch
as the district court's order to arbitrate is in effect a summary
disposition of the issue of whether or not there had been a meeting of
the minds on the agreement to arbitrate,' consideration of the motion
according to the `standard used by district courts in resolving summary
judgment motions pursuant to Fed.R.Civ.P. 56(c) . . . is
appropriate.'" Brown, 267 F. Supp.2d at 66-67 (quoting
Par-Knitt Mills v. Stockbridge Fabrics Co., 636 F.2d 51, 54 (3d
Cir. 1980)): see also Smith Wilson Co. v. Trading & Dev.
Establishment, 744 F. Supp. 14, 16 (D.D.C. 1990).
Chiron also seeks the entry of an order staying discovery. The decision
whether to stay discovery lies in the sound discretion of the district
court. White v. Fraternal Order of Police, 909 F.2d 512, 517
(D.C. Cir. 1990). Accordingly, "[i]t is well settled that discovery is
generally considered inappropriate while a motion that would be
thoroughly dispositive of the claims in the Complaint is pending."
Anderson v. United States Attorney's Office, 1992 WL 159186, at
(D.D.C. Jun. 19, 1992).
B. Agreement to Arbitrate
Begetting the central difficulty in this case, the Agreement does not
define the terms "party" or "parties" so as to resolve the question
whether Pasteur is a party fully bound to the relevant provisions of the
Agreement, including the arbitration clause at Section 9.10.2. The
difficulty is compounded in the dispute resolution provisions of the
Agreement, discussed supra, in which it is unclear at times
whether the parties to the Agreement or the parties to a
dispute are contemplated. A definition of "parties" that would
encompass all signatories to the Agreement seems appropriate, however, in
light of Section 9.6 "No Third Party Beneficiaries." That section
This Agreement is entered into solely for the
benefit of the parties hereto, and the provisions
of this Agreement shall be for the sole and
exclusive benefit of such parties. Nothing herein
contained will be deemed to create any third party
beneficiaries or confer any benefit or rights on
or to any person not a party hereto, and no person
not a party hereto shall be entitled to enforce
any provisions hereof or exercise any rights
Id. Pasteur does not dispute that the Agreement inures to
its benefit or that it has exerciseable rights thereunder. Nor, indeed,
does it argue before this Court that the substantive claims of its action
under 35 U.S.C. § 146 are beyond the scope of the Agreement. Hence,
Pasteur must be a party to the Agreement as contemplated by Section 9.6.
Nonetheless, Pasteur contends forcefully that it was not a party
specifically to the dispute resolution provisions of the Agreement and
that it therefore made no agreement to submit the present dispute to
The Agreement does, in fact, treat Pasteur somewhat differently from
the other signatories. Thus, Pasteur points to several provisions of the
Agreement that appear to contemplate only Ortho, Chiron, PSD, and GSC as
parties. For example, Section 9.10.1 identifies no officer at
Pasteur to whom potential grievances under the voluntary dispute
resolution scheme should be addressed. Section 6.3 discusses Pasteur's
and Chiron's unexecuted agreement to withdraw patent disputes separately
from the agreement of the other signatories to "cooperate reasonably to
resolve and withdraw from any patent interferences, and withdraw from any
patent oppositions." Id. And most of all, Pasteur distinguishes
its stated intent to agree to Section 2.8 of the agreement from
its mere consent to the remainder of the Agreement. See
id. at § 9.15 & signature block. Pasteur points out that it
joined the Agreement only "for the purposes set forth [there]in."
Id. at Preamble. Such a caveat would be rendered meaningless,
says Pasteur, if the Court were to find that Pasteur joined the Agreement
in all respects.
Chiron replies that Pasteur's explicit agreement to Section 2.8 cannot
be read to exclude an agreement to the dispute resolution provisions.
Responding specifically to the differences in treatment identified by
Pasteur, Chiron notes that, while no Pasteur officer is designated to
receive notices in Section 9.10.1, that provision deals with a voluntary
and informal dispute resolution mechanism apart from Section 9.10.2,
which contains no language limiting the obligation to engage in ADR to a
subset of the Agreement's signatories. As to Section 6.3, Chiron notes
that the patent at issue in this case is a "licensed patent" as provided
in the section's first sentence; Chiron's and Pasteur's failure to reach
a separate agreement does not, says Chiron, speak to the underlying
substantive controversy. Further, Chiron argues that various other
miscellaneous provisions in the Agreement dealing with the manner in
which parties may enforce their rights certainly apply to Pasteur, and
thus the arbitration provision at Section 9.10.2 should as well. For
instance, "[a]ny notice, report, demand, or other communication required
or permitted by [the]
Agreement" is to be sent to Pasteur at its address provided in
Section 9.2.*fn3 Chiron also emphasizes that the manner in which Pasteur
receives royalties pursuant to Section 2.8 is dictated by Section 4,
"Payment." Def.'s Rep. at 5. By analogy, says Chiron, the rights and
obligations undertaken by Pasteur in Section 2.8 cannot be severed from
the Section 9.10.2 obligation to use ADR. Finally, Chiron argues that,
under Pasteur's reading of the Agreement, "disputes among the signatories
arising out of the Agreement, even Section 2.8, would have to be resolved
before different tribunals (potentially applying different law) depending
on which parties were involved." Def's Rep. at 6.
The course of conduct between the parties sheds little light on the
issue. Pasteur notes that Chiron appealed a European Patent Office ruling
as to one of Pasteur's licensed patents under the Agreement in 1995.
Pl.'s Opp. at 7. Pasteur concedes that Chiron ultimately withdrew that
appeal, but argues that "by continuing the opposition in the EPO until
that time, Chiron itself acknowledged that the first sentence of Section
6.3 does not relate to disputes between Institut Pasteur and Chiron."
Id. Conversely, Chiron points to two memoranda it received from
Pasteur in which the Agreement is identified as the "HIV Cross License
Agreement between [or among] Chiron Corporation/Ortho Diagnostics
Systems, Inc./Pasteur Sanofi Diagnostics/Genetic Systems Corporation
Institut Pasteur." This listing, however, seems to be a very thin reed
to support Chiron's argument that Pasteur was, in fact, a party to the
In the end, neither party has advanced an interpretation of the
Agreement that would render it internally consistent as a whole. As to
the precise question presented whether Pasteur
agreed to arbitrate any disagreements arising under the Agreement
the Court is simply not "satisfied that the making of the
agreement for arbitration . . . is not in issue" in this case.
9 U.S.C. § 4. Clearly Pasteur intended to be bound by some, but not
all, of the Agreement's provisions. In light of Pasteur's insistence that
it did not mean to be bound by the arbitration provisions, supported by
its plausible reading of Section 9.15, Chiron's attempt to imply
Pasteur's agreement to Section 9.10.2 does not succeed in taking the
existence of an arbitration agreement out of contention. Chiron has not
yet, for instance, supplied some sensible theory of the Agreement which
would limit Pasteur's obligations to some subset of those undertaken by
the other signatories, including the obligation to arbitrate. Chiron's
best argument, that the Agreement expressly provides that it shall have
no third party beneficiaries, does not dispel the Court's sense that the
plain language of the Agreement reflects an intent to cabin Pasteur's
obligations in some fashion, even if it is a "party" to the Agreement.
Thus, because it is not clear beyond genuine dispute that there was a
meeting of the minds between Chiron and Pasteur on an agreement to
arbitrate, Chiron's motion cannot succeed at this point. See
Brown, 267 F. Supp.2d at 66-67. Instead, having concluded that "the
making of the agreement for arbitration" between Pasteur and Chiron is
"in issue," the Court must conduct further proceedings to determine the
issue. See 9 U.S.C. § 4.
In light of the foregoing, Chiron's motion to compel arbitration shall
be denied and its motion for relief from its discovery obligations shall
be denied as moot. Consistent with the FAA, given the Court's conclusion
that the existence of an arbitration agreement is at issue, the Court
must "proceed summarily to the trial" of the existence of an agreement to
arbitrate. 9 U.S.C. § 4.
Accordingly, the parties shall confer and submit a proposal and
schedule for further proceedings to resolve that issue by not later than
fifteen (15) days from the date of this memorandum opinion. A separate
order shall be issued herewith.
Upon consideration of defendant's motion to compel arbitration and
defendant's motion for relief from its obligations under FED. R. Civ. P.
26(f), and for the reasons stated in the memorandum opinion issued on
this date, it is hereby
ORDERED that defendant's motion to compel arbitration is denied without
prejudice; and it is further
ORDERED that defendant's motion for relief from its FED. R. Civ. P
26(f) obligations is denied as moot; and it is further
ORDERED that the parties shall confer and submit a proposal and
schedule for further proceedings to resolve the issue whether there was
an agreement to arbitrate between plaintiff and defendant by not later
than April 13, 2004.