Cour Pharmaceuticals Development Company, Inc. v. Phosphorex, Inc.

Background

Cour Pharmaceuticals Development Company, Inc. alleged that Phosphorex, Inc. violated a 2016 settlement agreement and a 2017 Master Services Agreement by filing patent applications that Cour claimed covered intellectual property belonging to Cour. Cour asserted claims involving ownership of patent applications, breach of the 2017 agreement, breach of the implied promise to act fairly under the 2016 settlement agreement, and unfair competition and misappropriation. Cour withdrew its fourth cause of action.

The 2017 agreement contained a broad arbitration clause covering claims or disputes arising from or relating to the agreement, including contract, tort, and statutory claims. The agreement also contained exceptions allowing court actions involving certain patent or other intellectual-property disputes. Phosphorex moved to dismiss under Federal Rule of Civil Procedure 12(b)(6) or, alternatively, to compel arbitration and stay the case. Cour argued that its claims fell within the agreement’s exceptions and therefore belonged in federal court.

Arbitration Analysis

The court found that the parties had agreed to arbitrate under Section 15.2 of the 2017 agreement. It characterized that provision as a broad arbitration clause because it covered any claim, dispute, or controversy arising out of or relating to the agreement.

The court concluded that Cour’s claims were not collateral to the 2017 agreement. Cour’s ownership claims relied on the agreement’s provisions concerning preexisting intellectual property and work product. Its breach claim directly concerned the agreement. Although Cour’s claim concerning the 2016 settlement agreement arose from a separate agreement, the court found that resolving it would require reference to the 2017 agreement’s intellectual-property provisions. The court also found that the unfair competition and misappropriation claim was connected to the 2017 agreement because Cour alleged that its ownership arose from both inventorship and contract.

The court rejected Cour’s reliance on the arbitration exception for disputes involving the validity, construction, scope, enforceability, infringement, or other violations of patents or other proprietary or intellectual-property rights. It interpreted that exception as addressing disputes similar to patent, copyright, and trademark disputes, not disputes over ownership of patent applications. The court also rejected Cour’s attempt to characterize its claims as involving patent claim construction and scope, stating that the complaint presented a dispute over patent ownership and asserted no federal claims.

Disposition

The court concluded that all of Cour’s remaining claims were arbitrable. Because the claims were arbitrable and Phosphorex had requested a stay as an alternative to dismissal, the court held that the Federal Arbitration Act required a stay rather than outright dismissal.

The conclusion states that Phosphorex’s motion to dismiss was granted in part, to the extent that its alternative request to compel arbitration and stay the case was granted. The case was stayed pending arbitration, and the Clerk of Court was directed to close the motion and mark the case as stayed. The opinion does not state that the court decided the underlying ownership, contract, or misappropriation claims on their merits.