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PASTEUR v. CHIRON CORP.

March 29, 2004.

INSTITUT PASTEUR, Plaintiff,
v.
CHIRON CORP., Defendant



The opinion of the court was delivered by: JOHN BATES, District Judge

MEMORANDUM OPINION

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.

BACKGROUND

  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 Page 2 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 of operation Page 3 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 Page 4 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 period.

 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." Id.

  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 Pasteur.

  ANALYSIS

 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, Page 5 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 ...


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