No. 17-___ WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002 IN THE Supreme Court of the United States ———— DOW AGROSCIENCES, LLC, MYCOGEN PLANT SCIENCE, INC., AGRIGENETICS, INC., DBA MYCOGEN SEEDS, LLC AND PHYTOGEN SEED COMPANY, LLC, Petitioners, v. BAYER CROPSCIENCE AG AND BAYER CROPSCIENCE NV, Respondents. ———— On Petition for a Writ Of Certiorari to the United States Court Of Appeals for the Federal Circuit ———— PETITION FOR A WRIT OF CERTIORARI ———— KATHLEEN M. SULLIVAN Counsel of Record RAYMOND N. NIMROD WILLIAM B. ADAMS CLELAND B. WELTON II OWEN F. ROBERTS QUINN EMANUEL URQUHART & SULLIVAN, LLP 51 Madison Avenue 22nd Floor New York, NY 10010 (212) 849-7000 kathleensullivan@ quinnemanuel.com Counsel for Petitioners September 11, 2017
Transcript
No. 17-___
WILSON-EPES PRINTING CO., INC. – (202) 789-0096 – WASHINGTON, D. C. 20002
On Petition for a Writ Of Certiorari to the United States Court Of Appeals
for the Federal Circuit ————
PETITION FOR A WRIT OF CERTIORARI ————
KATHLEEN M. SULLIVAN Counsel of Record
RAYMOND N. NIMROD WILLIAM B. ADAMS CLELAND B. WELTON II OWEN F. ROBERTS QUINN EMANUEL URQUHART
& SULLIVAN, LLP 51 Madison Avenue 22nd Floor New York, NY 10010 (212) 849-7000 kathleensullivan@
quinnemanuel.com
Counsel for Petitioners
September 11, 2017
(i)
QUESTION PRESENTED
The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention”), as incorporated into Chapter 2 of the Federal Arbitration Act (“FAA”), 9 U.S.C. 201 et seq., authorizes a U.S. court to decline recognition and enforcement of an arbitral award that “would be contrary to the public policy” of the United States. Here, recognition and enforcement of a $455 million arbitral award based on duplicative and expired patents is contrary to the U.S. public policy that patents are granted only for “limited Times.” But the Federal Circuit held that award enforceable, ruling that a court may not entertain a public-policy challenge in the absence of a prior judicial decision on nearly identical facts.
The question presented is:
Whether a federal court must independently determine whether recognition and enforcement of an arbitral award under the New York Convention would be contrary to the public policy of the United States.
ii
RULE 29.6 STATEMENT
The following entities are parent corporations of Dow AgroSciences, LLC and/or own 10% or more of its stock: Centen Ag Inc.; The Dow Chemical Company; DowDupont Inc.; Mycogen Corporation; and Rofan Services, Inc.
The following entities are parent corporations of Mycogen Plant Science, Inc. and/or own 10% or more of its stock: Centen Ag Inc.; The Dow Chemical Company; DowDupont Inc.; Mycogen Corporation; and Rofan Services, Inc.
The following entities are parent corporations of Agrigenetics, Inc. dba Mycogen Seeds, LLC and/or own 10% or more of its stock: Centen Ag Inc.; The Dow Chemical Company; DowDupont Inc.; Mycogen Corporation; Mycogen Plant Science, Inc.; and Rofan Services, Inc.
The following entities are parent corporations of Phytogen Seed Company, LLC and/or own 10% or more of its stock: Centen Ag Inc.; The Dow Chemical Company; DowDupont Inc.; J.G. Boswell Co.; Mycogen Corporation; and Rofan Services, Inc.
(iii)
TABLE OF CONTENTS
Page
QUESTION PRESENTED .................................. i
RULE 29.6 STATEMENT ................................... ii
TABLE OF AUTHORITIES ................................ v
CONSTITUTIONAL, STATUTORY AND TREATY PROVISIONS INVOLVED .............. 3
STATEMENT OF THE CASE ............................ 4
A. Statutory Background ................................ 4
B. The Arbitration Proceedings ...................... 5
C. The District Court Proceedings .................. 9
D. The Federal Circuit Decision ..................... 10
REASONS FOR GRANTING THE WRIT .......... 12
I. REVIEW IS WARRANTED TO RESOLVE A SPLIT AMONG THE COURTS OF APPEALS .................................................. 13
A. The Fifth, Ninth, And D.C. Circuits Require Searching, Independent Judicial Review Of Public-Policy Challenges To Enforcement Of New York Convention Arbitral Awards ...... 13
B. The Second, Seventh, And Federal Circuits Preclude Searching, Independ-ent Judicial Review Of Public-Policy Challenges To Enforcement Of New York Convention Arbitral Awards ...... 15
iv
TABLE OF CONTENTS—Continued
Page
II. REVIEW IS WARRANTED BECAUSE THE DECISION BELOW CONFLICTS WITH THE NEW YORK CONVEN-TION .......................................................... 19
A. The New York Convention’s Text And Structure Require Independent Judicial Review Of Public-Policy Challenges ........................................... 20
B. New York Convention History And Practice Confirm That Public-Policy Challenges Require Independent Judicial Review .................................... 21
III. THE QUESTION PRESENTED IS EXCEPTIONALLY IMPORTANT ........... 27
IV. THIS CASE PRESENTS AN EXCEL-LENT VEHICLE TO RESOLVE THE QUESTION PRESENTED ....................... 30
Gulf Coast Indus. Workers Union v. Exxon Co., U.S.A., 991 F.2d 244 (5th Cir. 1993) ..................... 25
Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576 (2008) ................................... 4, 19
Int’l Bhd. of Elec. Workers, Local 97 v. Niagara Mohawk Power Corp., 143 F.3d 704 (2d Cir. 1998) ...................... 25
Iowa Elec. Light & Power Co. v. Local Union 204 of Int’l Bhd. of Elec. Workers, 834 F.2d 1424 (8th Cir. 1987) ................... 25
Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274 (5th Cir. 2004) ..................... 14
vii
TABLE OF AUTHORITIES—Continued
Page(s)
Kimble v. Marvel Entertainment, LLC, 135 S. Ct. 2401 (2015) ................... 29, 30, 31, 33
Local 453, Int’l Union of Elec., Radio & Mach. Workers, AFL-CIO v. Otis Elevator Co., 314 F.2d 25 (2d Cir. 1963) ........................ 25
Long John Silver’s Rests., Inc. v. Cole, 514 F.3d 345 (4th Cir. 2008) ..................... 18
In re Longi, 759 F.2d 887 (Fed. Cir. 1985) ................... 31
MidMichigan Reg’l Med. Ctr.-Clare v. Prof’l Employees Div. of Local 79, SEIU, AFL-CIO, 183 F.3d 497 (6th Cir. 1999) ..................... 25
Miles v. Melrose, 882 F.2d 976 (5th Cir. 1989) ..................... 14
Ministry of Defense & Support for Armed Forces of Islamic Republic of Iran v. Cubic Defense Systems, Inc., 665 F.3d 1091 (9th Cir. 2011) ................... 14
Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985) ......... 1, 5, 16, 19, 24, 27, 28
Odiorne v. Amesbury Nail Factory, 18 F. Cas. 578 (C.C. D. Mass. 1819) ......... 32
S. Cal. Gas Co. v. Utility Workers Union of Am., Local 132, 265 F.3d 787 (9th Cir. 2001) ..................... 25
viii
TABLE OF AUTHORITIES—Continued
Page(s)
Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225 (1964) ................................... 31
Margaret L. Moses, Arbitration Law: Who’s in Charge?,
40 Seton Hall L. Rev. 147 (2010) .............. 27
Message from the President of the United States Transmitting the Convention on the Recognition and Enforcement of Foreign Arbitral Awards,
90th Cong., 2d Sess. (April 24, 1968) ....... 23
Philip J. McConnaughay, The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration, 93 Nw. U. L. Rev. 453 (1999) .................... 27
Pierre Mayer, Mandatory Rules of Law in International Arbitration,
RESTATEMENT (3D) U.S. LAW OF INT’L COMM. ARBITRATION (Tentative Draft 2010) ........ 26
UN Econ. & Social Council, Comm. on the Enforcement of Int’l Arbitral Awards, Summary Record of the Seventh Meeting, Mar. 29, 1955 ............................. 22
UN Econ. & Social Council, UN Conf. on Int’l Comm. Arbitration, Comments on Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Mar. 6, 1958 .............................................. 22
UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (2016 ed.) ......................................... 5, 21, 25, 26
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 ..... 3, 4, 16, 20, 21, 22, 23, 25, 26
INTRODUCTION
International arbitration of federal statutory claims poses a threat to U.S. public policy that can be mitigated only by independent judicial review. As this Court held in Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614 (1985), the New York Convention itself requires such a backstop. Federal statutory claims are submitted to inter-national arbitral tribunals under the New York Convention on the express understanding that U.S. courts will have “the opportunity at the award-enforcement stage” to take a second look at the arbitrators’ decision, in order to ensure compliance with U.S. public policy. Id. at 638.
In the decision below, however, the Federal Circuit precluded any such second-look review. The decision upheld the recognition and enforcement of an arbitral award under the New York Convention ordering petitioners to pay respondents $455 million based on duplicative and expired patent rights whose enforcement violates settled U.S. public policy that patent monopolies may extend only for “limited Times.” The Federal Circuit reached that result only by holding that a court may not deny enforcement based on a public-policy challenge unless a prior judicial decision found a violation of the relevant policy in a case involving nearly identical facts.
This Court should grant review to decide whether federal courts may so freely avoid fundamental ques-tions of U.S. public policy in enforcing international arbitral awards. Certiorari is warranted for three reasons. First, the decision deepens a clear and existing circuit split. The Fifth, Ninth, and D.C. Circuits require independent judicial review of a party’s challenge to enforcement of an arbitral award
2 on public-policy grounds. The Second and Seventh Circuits, now joined by the Federal Circuit, instead preclude such independent review. Only this Court’s intervention can dispel this conflict. Second, the decision below conflicts with the plain text, structure and drafting and ratification history of the New York Convention, all of which require independent judicial review to ensure that a private arbitrator does not upend the basic public policy of the nation in which the award is to be enforced. Third, the reviewability of public-policy objections to arbitral awards is an issue of great national importance. Without the backstop of effective judicial review, fundamental public policies will go unenforced and parties will be discouraged from entering arbitration agreements in the first place.
This case presents an excellent vehicle to resolve the question presented. On independent, de novo review, the tribunal’s award of $455 million based on dupli-cative and expired patent rights violates U.S. public policy. The Federal Circuit’s choice of a circumscribed standard of review thus determined the outcome.
This Court should grant the petition.
OPINIONS BELOW
The opinion of the U.S. Court of Appeals for the Federal Circuit is reported at 680 F. App’x 985, and is reproduced at App. 1a-30a. The Federal Circuit’s order denying rehearing is reproduced at App. 51a-52a. The district court’s opinion is available at 2016 WL 205378 and is reproduced at App. 31a-50a.
JURISDICTION
The court of appeals denied rehearing on May 12, 2017. On July 31, 2017, the Chief Justice extended the time for filing a petition for a writ of certiorari to
3 September 11, 2017. This Court has jurisdiction under 28 U.S.C. 1254(1).
CONSTITUTIONAL, STATUTORY AND TREATY PROVISIONS INVOLVED
Section 207 of the FAA, 9 U.S.C. 207, provides:
Within three years after an arbitral award falling under the [United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards] is made, any party to the arbitration may apply to any court having jurisdiction under this chapter for an order confirming the award as against any other party to the arbitration. The court shall confirm the award unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.
Article V(2) of the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, June 10, 1958, 21 U.S.T. 2517 (reproduced in full at App. 53a-61a), provides in relevant part:
Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
* * *
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
U.S. Constitution art. I, § 8, cl. 8 provides:
The Congress shall have Power … To promote the Progress of Science and useful Arts, by
4 securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.
Section 101 of the Patent Act, 35 U.S.C. 101, provides:
Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.
STATEMENT OF THE CASE
A. Statutory Background
While U.S. policy favors agreements to arbitrate and enforcement of the awards that result, see, e.g., Hall St. Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 581-84 (2008), that policy does not override other funda-mental U.S. public policies. Accordingly, the New York Convention, as incorporated into U.S. law by the FAA, provides that a court need not enforce an arbitral award “falling under” the Convention, 9 U.S.C. 202, if the court “finds that … [t]he recognition or enforcement of the award would be contrary to the public policy of that country.” N.Y. Convention, art. V(2)(b) (reprinted at App. 56a); see 9 U.S.C. 207 (providing exception to enforcement where a court “finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the [New York] Convention”).
Neither the New York Convention nor the FAA specifies which public policies may serve as a basis for declining to confirm an award. The Convention instead envisions that a court will invoke the
5 public-policy exception wherever necessary to “protect the integrity of the legal order to which it belongs.” UNCITRAL Secretariat Guide on the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 239 (2016 ed.) (UNCITRAL Guide), available at http://www.uncitral.org/pdf/english/texts/arbitrati on/NY-conv/2016_Guide_on_the_Convention.pdf. In accord with this principle, “public policy is generally interpreted to mean those fundamental rules of the State where recognition and enforcement of an award is sought from which no derogation can be allowed.” Id. at 244.
In Mitsubishi, this Court similarly recognized the importance of balancing the policy favoring enforce-ment of arbitration agreements against other U.S. public policies. The Court allowed antitrust claims to be subject to arbitration under the New York Convention, but only with the caveat that federal courts would, in enforcement proceedings, take a second look to ensure conformity with U.S. public policy: “Having permitted the arbitration to go forward, the national courts of the United States will have the opportunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed.” 473 U.S. at 638.
B. The Arbitration Proceedings
1. In 2012, respondents (“Bayer”) commenced an arbitration against petitioners (“Dow”) in the Inter-national Court of Arbitration,1 asserting that certain Dow crop products infringed four U.S. patents belonging to Bayer’s “Leemans” family of patents.
1 Bayer initially filed suit against Dow in the U.S. District
Court for the Eastern District of Virginia, but the court ordered the parties to arbitration.
6 Bayer asserted, and the arbitral tribunal later found, that the Leemans patents are directed to a gene (the pat gene) that provides herbicide resistance to crops. The Leemans patents have been controlled by Bayer CropScience NV (or a predecessor) since at least 1992; a Bayer CropScience NV predecessor acquired owner-ship of them in or around July 1999. The last-expiring Leemans patent (reissue patent No. RE44,962) is effective until 2023.2
In 1992, 20 years before the arbitration commenced, Bayer’s predecessor had agreed to license the Leemans patents to Dow’s predecessor on a royalty-free basis. Bayer’s infringement claims depended on its conten-tion that Dow had breached the license agreement by sublicensing the pat gene to third party MS Tech. Having terminated the license for breach, Bayer asserted that it was free to bring claims for patent infringement.
Bayer also asserted in the arbitration that, in addition to exposing Dow to patent-infringement claims, the purported MS Tech sublicense gave rise to a damages claim for breach of contract under French law. Bayer’s claim for contract damages rested on a “lost opportunity” theory: If Dow had not breached the 1992 license agreement, it instead would have pursued a non-breaching “Option B” product under an agreement with MS Tech. Bayer alleged that Dow’s pursuit of this Option B would have resulted in MS Tech making payments to Bayer under a separate agreement between those two companies, running from the projected 2016 launch of the Option B product until the expiry of the MS Tech agreement in
2 The other three Leemans patents (U.S. Patent Nos.
5,561,236; 5,646,024; and 5,648,477) expired by 2014.
7 2030. According to Bayer’s contract theory, Dow’s breach made Dow liable for Bayer’s loss of this hypothetical revenue.
2. During the arbitration, Dow filed with the U.S. Patent and Trademark office (“PTO”) a request for ex parte reexamination of the Leemans patents. Dow argued, and PTO examiners ultimately found, see C.A.J.A. 9857, 9615, 9819, 9834, 9845; C.A. Dkt. 98, 99, that the Leemans patents are invalid based on “nonstatutory” or “obviousness-type” double-patenting—a longstanding doctrine arising from fundamental public policy, under which a patentee may not obtain a second patent for a putative “invention” that is not patentably distinct from a previously issued patent. See, e.g., Abbvie Inc. v. Mathilda & Terence Kennedy Inst. of Rheumatology Trust, 764 F.3d 1366, 1372 (Fed. Cir. 2014). As Dow explained to the PTO, Bayer CropScience AG owns a second family of patents (the “Strauch” patents, U.S. Patent Nos. 5,273,894 and 5,276,268)—which, like the Leemans patents, claim the pat gene used in Dow’s accused products. The Strauch patents, which for patent-law purposes claim the same invention as the Leemans patents, had expired by January 2011.3
The PTO ultimately agreed with Dow. In a series of office actions that relied on the “public policy … to prevent the unjustified or improper timewise extension of the ‘right to exclude’ granted by a patent,” C.A.J.A. 9829, the PTO rejected the asserted claims of the Leemans patents. Although the PTO noted that the Strauch and Leemans patents are formally owned
3 The Strauch patents were also covered by the royalty-free
1992 license agreement. Bayer did not assert the Strauch patents in the arbitration.
8 by separate Bayer subsidiaries, it determined that the Leemans patents are invalid because “Bayer’s common ownership of the patents has resulted in an unjustified time-wise extension of Bayer’s right to exclude others from practicing the invention.” C.A.J.A. 9854; see C.A.J.A. 9615, 9819, 9834, 9845; C.A. Dkt. 98, 99.
3. The arbitral tribunal issued its final decision in October 2015, finding for Bayer on both its patent claim and its contract claim. The tribunal awarded Bayer damages totaling more than $442 million, plus nearly $13 million in net attorneys’ fees and costs.
Over a dissent, C.A.J.A. 565-70, the tribunal majority ruled that the Leemans patents were not invalid on double-patenting grounds. The majority acknowledged that “double patenting is a matter that engages public policy,” C.A.J.A. 410, and stated that, on the merits of the double-patenting issue, it “would have declared the reissue patent to be invalid,” C.A.J.A. 411. But the panel ruled that the defense was not available because the Strauch and Leemans patents were owned by nominally different Bayer entities (respectively, Bayer CropScience AG and Bayer CropScience NV). In the panel’s view, the patents therefore “lack[ed] the common ownership that is necessary in order for double patenting to apply.” C.A.J.A. 411; see C.A.J.A. 415-18. The panel also found, in the alternative, that common ownership was lacking because another entity (Biogen) “can be considered a co-owner of the [Leemans] patent, but not of the Strauch patent[s].” C.A.J.A. 418; see C.A.J.A. 418-19.
Having found the asserted patents valid, the tribunal majority ruled that Dow had breached the 1992 license agreement by sublicensing the pat gene
9 to MS Tech. See C.A.J.A. 289, 299-304. To remedy this breach, the tribunal awarded some $375 million in damages under Bayer’s “lost opportunity” theory—reflecting payments that MS Tech would have made to Bayer between 2016 and 2030 in a hypothetical world where Dow continued to use the pat gene in a manner that did not breach the agreement. See C.A.J.A. 512-23, 562. Of the $375 million, some $138 million relates to payments that, according to the tribunal majority, would have occurred from the fourth quarter of 2023 through the end of 2030—a span of more than seven years after the expiration of the last of the Leemans patents in 2023. See id.
The tribunal also found that Dow infringed the patents through its sublicense to MS Tech. The tribunal awarded damages to compensate for this infringement under U.S. law, assessing a lump-sum reasonable royalty of nearly $68 million. C.A.J.A. 523-31, 562.
C. The District Court Proceedings
After the tribunal issued its award, the parties filed cross-petitions to confirm and to vacate the award in the district court. Dow asserted that enforcing the award would violate U.S. public policy against time-wise overextension of the patent monopoly. Specifi-cally, Dow argued that the award is unenforceable in its entirety because it depends on the validity of the Leemans patents—which, as the PTO office actions have found, are invalid on double-patenting grounds. Further, Dow argued that a substantial portion of the contract-damages award ($138 million) is premised on Bayer retaining exclusivity rights for seven years after expiration of the last relevant patent.
In January 2016, the district court issued an order granting Bayer’s petition to confirm the award and
10 denying Dow’s cross-petition to vacate it. App. 31a-50a. The district court did not independently consider whether enforcement of the award comports with U.S. public policy, stating as its sole reason for overruling Dow’s challenge that “the issue of double patenting was placed squarely before the panel and it was rejected.” App. 43a. According to the district court, “[w]here a party requests, is granted, and actively participates in a multi-year arbitration, the party forfeits its right to relitigate the issues that were before the arbitration panel in the district court.” App. 45a. The court stated that, under the New York Convention, it “cannot and will not” “reopen the record and analyze the case on the merits” in order to decide a question of public policy, App. 43a, and thus declined to consider the double-patenting issue. The court did not specifically address Dow’s argument against post-expiration patent recoveries.
D. The Federal Circuit Decision
The court of appeals affirmed. App. 1a-30a. Reciting the limited circumstances in which arbitral awards may be vacated under the FAA for reason of the arbitrators exceeding their powers or manifestly disregarding applicable law, the court stated that “[a] challenger must meet related, and similarly high, standards to support a refusal to confirm an award as contrary to public policy” under the New York Convention. App. 13a. Applying the same “strict stand-ards” to Dow’s public-policy and manifest-disregard challenges, the court declined to hold that “the tribu-nal’s conclusion is contrary to public policy.” App. 16a.
The court of appeals construed Dow’s public-policy challenge as resting not on broad policy against timewise overextension of the patent monopoly but rather on particular “policies governing double patent-
11 ing and post-patent-expiration royalties.” App. 15a. As to double patenting, the court noted that no judicial decision has addressed the specific question whether the doctrine applies to patents owned by separate but related companies like Bayer’s wholly-owned subsid-iaries. App. 16a-17a. The court continued:
No precedent … considers and resolves in Dow’s favor the doctrinal questions presented by this situation, including those addressed to the policies that underlie the doctrine—the unjustified extension of exclusivity rights against the public and the potential for separate assignee suits enforcing the same rights. With the doctrinal question as unset-tled as it is for the present circumstances, the tribunal’s rejection of Dow’s double-patenting challenge cannot be declared a manifest disregard of law or contrary to public policy.
App. 17a (citations omitted). Thus, according to the court, “[i]t suffices to say that the tribunal’s conclusion did not contravene any well-defined, established law applicable to the situation presented here.” App. 16a. Absent such “well-defined, established law” resolving the precise issue in question, the court held, an arbitral tribunal’s determination of an issue implicat-ing public policy is conclusive. App. 16a-17a.4
The court of appeals “reach[ed] the same conclusion” with respect to the policy against post-expiration recovery, holding that, “[u]nder the standards for public-policy and manifest-disregard challenges, …
4 In a footnote, the court acknowledged but declined to address
the tribunal’s alternative ruling that Biogen’s co-ownership of the Leemans patents precluded application of the double-patenting doctrine. App. 16a n.1.
12 Dow has not established that the contract award … must be vacated.” App. 17a-18a. In particular, the court held that “[n]o established law declares … prohibited” the result reached by the tribunal in awarding post-expiration damages, and concluded that Dow “has not shown why the contract-damages award is prohibited by sufficiently established legal authority … to make the award contrary to public policy or manifestly in disregard of the law.” App. 19a.
The court of appeals denied Dow’s petition for rehearing. App. 51a-52a.
REASONS FOR GRANTING THE WRIT
The Federal Circuit’s decision deepens an existing circuit split that requires this Court’s resolution. The Fifth, Ninth, and D.C. Circuits direct district courts to conduct independent review of public-policy chal-lenges to the enforcement of an arbitral award under the New York Convention. The Second, Seventh, and Federal Circuits, in contrast, treat an arbitral tribunal’s resolution of issues implicating U.S. public policy as effectively the final word, as on any other issue submitted to arbitration. This split is ripe for this Court’s resolution, and is dispositive here: Had the Federal Circuit reviewed the arbitral tribunal’s $455 million award independently, it could only have found that enforcing the award would violate funda-mental U.S. public policy requiring limits on the term of patent exclusivity.
The Federal Circuit’s decision also warrants review because it conflicts with the text and history of the New York Convention. The Convention’s plain language authorizes U.S. courts to control resolution of public-policy matters by empowering “the compe-tent authority” to examine an arbitral award, and to
13 decline to enforce an award that it “finds” violates public policy. The Convention’s history and practice support the conclusion that such independent review is required.
Finally, review should be granted because the question presented is exceptionally important. Absent any judicial public-policy backstop, arbitral awards involving U.S. statutory claims will undermine basic U.S. public policies in areas like patent and antitrust law. In addition, parties will be discouraged from arbitrating federal statutory claims altogether.
The Court should accordingly grant review to resolve the circuit split presented by the petition and to correct the Federal Circuit’s misconstruction of the New York Convention.
I. REVIEW IS WARRANTED TO RESOLVE A SPLIT AMONG THE COURTS OF APPEALS
The decision below deepens an existing circuit split regarding the proper standard of judicial review where U.S. public policy is raised as a basis for a district court to decline recognition and enforcement of an arbitral award that is subject to the New York Convention. This Court’s intervention is needed to dispel the conflict.
A. The Fifth, Ninth, And D.C. Circuits Require Searching, Independent Judi-cial Review Of Public-Policy Challenges To Enforcement Of New York Conven-tion Arbitral Awards
Three courts of appeals—the Fifth, Ninth, and D.C. Circuits—hold that a court must independently review an arbitral award under the New York Convention
14 where challenged at the enforcement stage as vio-lating basic U.S. public policy. In these circuits, a court must decide the public-policy challenge itself—without deference to the arbitrators’ determination.
For instance, in Ministry of Defense & Support for Armed Forces of Islamic Republic of Iran v. Cubic Defense Systems, Inc., 665 F.3d 1091 (9th Cir. 2011), an arbitral tribunal issued an award in favor of the Iranian Ministry of Defense; the losing party in the arbitration (Cubic) argued that confirmation would be contrary to the U.S. policy against trade and financial transactions with Iran’s government. See id. at 1095, 1097. Although the court ultimately upheld the district court’s order confirming the award, it did so only after close, independent analysis of the award in light of the policy at issue. See id. at 1098-1100.
Similarly, in Asignacion v. Rickmers Genoa Schiffahrtsgesellschaft mbH & Cie KG, 783 F.3d 1010 (5th Cir. 2015), the Fifth Circuit recognized that the party challenging the arbitral award had identified a “well defined and dominant” public policy of “provid[ing] ‘special solicitude to seamen,’” which could in principle support a public-policy vacatur under the New York Convention. Id. at 1017 (quoting United Paperworkers Int’l Union, AFL-CIO v. Misco, Inc., 484 U.S. 29, 43 (1987), and Miles v. Melrose, 882 F.2d 976, 987 (5th Cir. 1989)). The court of appeals reversed the district court’s order vacating the award, but did so only after conducting an extensive inde-pendent analysis of the award and concluding that enforcing the award would not offend that policy. Id. at 1017-20; see also Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 305-07 (5th Cir. 2004) (undertaking independent review of public-policy challenge).
15 The D.C. Circuit took the same approach in Enron
Nigeria Power Holding, Ltd. v. Federal Republic of Nigeria, 844 F.3d 281 (D.C. Cir. 2016), explaining that (as in the Fifth and Ninth Circuits) “‘the question of public policy is ultimately one for resolution by the courts.’” Id. at 288 (quoting W.R. Grace & Co. v. Local 759, Int’l Union of United Rubber Workers, 461 U.S. 757, 766 (1983)). The court agreed that the challenger had identified a fundamental public policy against allowing a party to profit from its own fraud, and over-ruled the public-policy challenge only after concluding on independent review that enforcing the award would not have such an impermissible effect. See id. at 289-91; Belize Bank Ltd. v. Gov’t of Belize, 852 F.3d 1107, 1111 (D.C. Cir. 2017) (recognizing same principle).
Three circuits thus clearly require a court presented with a public-policy challenge to enforcement of an arbitral award under the New York Convention to conduct a searching, independent review to ensure that recognizing and enforcing the award comports with fundamental U.S. public policy. See also Escobar v. Celebration Cruise Operator, Inc., 805 F.3d 1279, 1287 (11th Cir. 2015) (noting that Article V(2)(b) public-policy review is “directed at courts”).
B. The Second, Seventh, And Federal Circuits Preclude Searching, Independ-ent Judicial Review Of Public-Policy Challenges To Enforcement Of New York Convention Arbitral Awards
In contrast, three courts of appeals—the Second, Seventh, and Federal Circuits—now hold that a court presented with a public-policy challenge under the New York Convention should not decide inde-pendently whether recognition and enforcement of the award would violate U.S. public policy. In these
16 circuits, the arbitrator’s assessment of issues implicat-ing public policy is for practical purposes the last word.
For instance, in Baxter International, Inc. v. Abbott Laboratories, 315 F.3d 829 (7th Cir. 2003), a divided panel of the Seventh Circuit held that an arbitrator’s determination of a public-policy question was “conclu-sive.” Id. at 832. In that case, the arbitral tribunal interpreted a contract to prohibit Baxter from using a new process to compete against Abbott. See id. at 830-31. The tribunal rejected Baxter’s contention that this interpretation would force the parties to violate antitrust public policy as embodied in the Sherman Act. See id. at 831. The Seventh Circuit majority affirmed the district court’s order confirming the tribunal’s decision. The majority declined to inde-pendently consider Baxter’s argument that enforcing the award would violate U.S. antitrust policy, reason-ing that it was enough that “[t]he arbitral tribunal in this case ‘took cognizance of the antitrust claims and actually decided them.’ Ensuring this is as far as [a court’s] review legitimately goes.” Id. at 832 (emphasis added) (quoting Mitsubishi, 473 U.S. at 638).
The Baxter dissent protested the panel majority’s abdication of independent judicial public-policy review, noting that, while “a commitment to deference cannot be questioned” where only private contractual rights are implicated, “other considerations enter the mix when the issue becomes a matter of the arbitrators’, in interpreting a statute, commanding the parties to … violate clearly established norms of public policy.” Id. at 834 (Cudahy, J., dissenting). Citing the New York Convention’s provision of “grounds for refusing to confirm an award under ‘public policy’ principles,” id. at 836 n.4 (quoting N.Y. Convention, art. V(2)(b)), the dissent rejected the majority’s approach of “simply
17 not[ing] the arbitration panel’s resolution of the antitrust issue and consider[ing] our work done,” id. at 836. In the dissent’s view, the court was obligated to “fulfill [its] judicial responsibilities and examine the effect of the outcome commanded by the arbitral award,” including by “determin[ing] whether, going forward, the horizontal restraint on Baxter’s compet-ing with Abbott … violates the Sherman Act.” Id. at 836-37. The dissent concluded: “Defense of public interests is sometimes better fulfilled by courts than by arbitration panels.” Id. at 838.
The Second Circuit has adopted an approach similar to that of the Seventh Circuit majority. In Banco de Seguros del Estado v. Mutual Marine Office, Inc., 344 F.3d 255 (2d Cir. 2003), the arbitrators repeatedly ordered Banco de Seguros (a reinsurance company owned by the government of Uruguay) to post prehear-ing security pending the arbitrators’ final decisions. See id. at 258. Banco de Seguros argued that such orders violated an express U.S. public policy (reflected in the Foreign Sovereign Immunities Act) limiting the circumstances under which a foreign state may be subject to judicial process.5 On appeal, the Second Circuit acknowledged that the tribunals’ attachment orders implicated that “‘explicit public policy,’” but held that the orders could not be vacated under the New York Convention because they “did not ‘explicitly conflict’ with law and legal precedent.” 344 F.3d at 264 (quoting 230 F. Supp. 2d at 430). The court thus treated the public-policy challenge as merely a
5 See Banco de Seguros Del Estado v. Mut. Marine Offices, Inc.,
230 F. Supp. 2d 427, 430 & n.1 (S.D.N.Y. 2002) (citing Verlinden B.V. v. Cent. Bank of Nigeria, 461 U.S. 480, 493 (1983), and Stephens v. Nat’l Distillers & Chem. Corp., 69 F.3d 1226, 1232-33 (2d Cir. 1995)).
18 “recycled” version of Banco de Seguros’ “contention that the Panels acted in manifest disregard of the law,” and applied the deferential manifest-disregard standard rather than analyze independently whether the attachments violated U.S. public policy. Id.
The Federal Circuit has now joined the Seventh and Second Circuits in precluding independent judicial review of public-policy challenges in New York Con-vention cases. The decision below declined to consider whether enforcement of the tribunal’s award in this case would violate U.S. public policy prohibiting time-wise overextension of the patent monopoly, reasoning that “[i]t suffices to say that the tribunal’s conclusion did not contravene any well-defined, established law applicable to the situation presented here.” App. 16a. It thus found review precluded because no court had previously decided the precise question whether U.S. patent policy tolerates evasion of double-patenting rules by assigning duplicative patents to separate corporate entities under the same corporate umbrella, or the precise question whether an award of contract damages such as the one ordered here violates U.S. patent policy against post-expiration recovery.
Like the Seventh and Second Circuits, the Federal Circuit treated the New York Convention’s express provision for public-policy review as functionally coex-tensive with the “manifest disregard of the law” test that some courts have read into the FAA, under which vacatur is permitted only where an arbitral tribunal’s award is directly contrary to on-point precedent. See, e.g., Wachovia Sec., LLC v. Brand, 671 F.3d 472, 483 (4th Cir. 2012) (stating that arbitral award may be vacated for “manifest disregard” if arbitrator “‘refused to heed’” a “‘clearly defined’” legal rule that is “‘not subject to reasonable debate’”) (quoting Long John
19 Silver’s Rests., Inc. v. Cole, 514 F.3d 345, 349-50 (4th Cir. 2008)).6 Indeed, the Federal Circuit expressly analyzed the two grounds together. See App. 17a, 19a.
The courts of appeals are thus divided between courts that require independent judicial review of a public-policy challenge to enforcement of an interna-tional arbitral award and courts that narrowly restrict review of that question. Certiorari is warranted to resolve this split.
II. REVIEW IS WARRANTED BECAUSE THE DECISION BELOW CONFLICTS WITH THE NEW YORK CONVENTION
This Court’s review is also warranted because the Federal Circuit’s circumscribed standard of review of public-policy challenges under the New York Convention is wrong. Correctly construed, the New York Convention, and the provisions incorporating it into the FAA, prescribe independent judicial review of public-policy challenges—protection that this Court in Mitsubishi deemed an essential precondition for allowing private arbitral tribunals to decide claims of public right. Certiorari should accordingly be granted to correct the Federal Circuit’s misconstruction of the New York Convention.
6 Following this Court’s holding that Section 10 of the FAA,
9 U.S.C. 10, “provide[s] the FAA’s exclusive grounds for … vacatur,” Hall Street, 552 U.S. at 584, several courts have observed that “[t]he manifest-disregard doctrine [as applied to domestic FAA arbitrations] has been thrown into doubt,” e.g., Bangor Gas Co. v. H.Q. Energy Servs. (U.S.) Inc., 695 F.3d 181, 187 (1st Cir. 2012).
20 A. The New York Convention’s Text And
Structure Require Independent Judicial Review Of Public-Policy Challenges
Article V(2)(b) of the New York Convention provides that an arbitral award need not be enforced “if the competent authority in the country where recognition and enforcement is sought finds that … [t]he recog-nition or enforcement of the award would be contrary to the public policy of that country.” App. 56a (emphases added). This provision contains two clear textual clues that the drafters intended independent judicial review of public-policy questions.
First, Article V(2) states that review of public policy is to be conducted by “the competent authority in the country where recognition and enforcement is sought”—i.e., the court. App. 56a. The Convention thus specifies that it is the court’s responsibility, and not the arbitrators’, to identify relevant national public policies and to determine whether enforcement of a given award would violate them.
Second, as the United Nations Commission on International Trade Law (“UNCITRAL”) itself has explained, the word “finds” in Article V(2) is similarly significant: As a number of courts across jurisdictions have held, the drafters’ choice of the term “finds” is meant to instruct a court considering a petition to enforce a New York Convention award to decide for itself whether enforcement of the award comports with a nation’s public policy. Whereas enforcement may be declined under Article V(1) only “at the request of the party against whom [the award] is invoked,” App. 55a,7 a judge has authority under Article V(2)(b) to
7 Article V(1) provides additional grounds for declining to enforce an arbitral award that are not relevant to this petition.
21 “review an award for breach of public policy ex officio” (UNCITRAL Guide 258 (collecting authorities))8—that is, “by virtue of the authority implied by office,” BLACK’S LAW DICTIONARY (10th ed. 2014). As explained in a U.K. decision cited with approval in the UNCITRAL Guide, “it must always be open to the court to take a point of public policy of its own motion.” UNCITRAL Guide 259 (quoting Gater Assets Ltd. v. Nak Naftogaz Ukrainiy [2007] EWCA (Civ) 988, [2007] 2 CLC 567).
While Congress or the drafters of the New York Convention could have chosen to narrowly circum-scribe review of public-policy challenges to arbitral awards, they did not do so. The Convention’s text does not provide, for instance, that a reviewing court should reject confirmation only where required by on-point judicial precedent. Such a test would have been equivalent to the “manifest disregard of the law” standard that some courts have read into the FAA as applied to domestic arbitrations. But any such stand-ard is conspicuously omitted from the Convention’s “exhaustive” list of grounds for refusal of enforcement. UNCITRAL Guide 127-28. Instead, the treaty lan-guage directs that the court should ensure that the award does not violate public policy, and that the court should refuse enforcement when it finds a violation.
B. New York Convention History And Practice Confirm That Public-Policy Challenges Require Independent Judicial Review
Independent judicial review of an arbitral award’s alleged public-policy violations likewise fits with the
8 Accord UNCITRAL Guide 129 (“Article V(2) provides that the
grounds under the second paragraph may be observed by a court ex officio.”); id. at 256 (similar).
22 scheme contemplated by the New York Convention’s drafters and ratifiers.
1. For instance, at one early meeting during the drafting of the Convention, the Indian representative stated that “it was generally conceded that the competent authority had to go behind the award itself to discover whether anything contrary to public policy was involved.” UN Econ. & Social Council, Comm. on the Enforcement of Int’l Arbitral Awards, Summary Record of the Seventh Meeting, Mar. 29, 1955 (UN Doc. E/AC.42/SR.7), at 4 (emphasis added). Similarly, one of the first comments submitted on the initial 1958 draft of the Convention stated that it was “generally agreed that … courts should remain free to refuse the enforcement of a foreign arbitral award if such action should be necessary to safeguard the basic rights of the losing party or if the award would impose obligations clearly incompatible with the public policy of the country of enforcement.” UN Econ. & Social Council, UN Conf. on Int’l Comm. Arbitration, Comments on Draft Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Mar. 6, 1958 (UN Doc. E/Conf.26/2), at 5.
These “generally agreed” sentiments were central to UNCITRAL’s plan, under which the general policy to favor and enforce arbitration agreements would be counterbalanced by an assurance to each signatory nation, embodied in Article V(2), that its courts would retain authority to police and protect the nation’s own fundamental interests. Nothing in the UNCITRAL materials suggests that the Convention’s drafters con-templated that courts would conduct anything other than an independent review of public-policy challenges.
2. The ratification debate in the United States similarly contemplated robust judicial review of
23 public-policy challenges. When the President trans-mitted the treaty to the Senate for consideration, for instance, the Executive Branch’s report explained:
Article V also would permit a court in the United States to refuse recognition or enforcement of an arbitral award as contrary to the public policy of the United States. These and other provisions provide substan-tial safeguards to American citizens against any misuse of the arbitration process.
Message from the President of the United States Transmitting the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 90th Cong., 2d Sess., at 4 (April 24, 1968). A State Department memorandum provided to the Senate as part of the same report explained that Article V(2)(b)’s public-policy exception “would give the courts to which application is made considerable latitude in refusing enforcement.” Id. at 21. And in a report prepared shortly before the Senate consented to the United States’ accession to the Convention, the Committee on Foreign Relations expressed similar views—explaining the Committee’s understanding that “article V … provides that an American court may refuse recognition or enforcement of an award as contrary to the public policy of the United States.” Executive Report No. 10, 90th Cong., 2d Sess., at 1 (Sept. 27, 1968).
Thus, like the drafters of the Convention itself, the Executive Branch and the Senate both viewed Article V(2)(b) as reserving to the courts the power to review arbitral awards for compliance with U.S. public policy. There is no indication in the ratification history that anyone expected the courts to restrict their review in
24 applying the public-policy exception to cases involving the precise violation of a prior judicial decision.
3. Precedent likewise supports independent judicial review of public-policy challenges under the New York Convention. In Mitsubishi, this Court approved the submission of federal antitrust claims to arbitration in express reliance on the premise that “the national courts of the United States [would] have the oppor-tunity at the award-enforcement stage to ensure that the legitimate interest in the enforcement of the antitrust laws has been addressed.” 473 U.S. at 638. Without such independent judicial review to ensure compliance with fundamental domestic public policy, the Court emphasized, arbitration of U.S. antitrust claims would not be appropriate. See id.; see also Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 540 (1995) (relying on similar reasoning in authorizing foreign arbitration of claims under Carriage of Goods by Sea Act).
Such independent, “second look” review in New York Convention cases also aligns with the uniform approach to public policy in the context of domestic arbitration (particularly labor arbitration). In that setting, this Court has explained that “the question of public policy is ultimately one for resolution by the courts,” W.R. Grace, 461 U.S. at 766 (emphasis added), because “the public’s interests … will go unrepre-sented unless the judiciary takes account of those interests,” Misco, 484 U.S. at 42 (emphasis added). The courts of appeals are in uniform accord in this view, and the lower courts thus always undertake independent review when a domestic arbitral award is
25 challenged on public-policy grounds.9 And this prin-ciple is applicable a fortiori with respect to decisions of international arbitral tribunals, which “[are] not the guardian[s] of the public policy of any country at all”—let alone the public policy of the United States in particular. See Pierre Mayer, Mandatory Rules of Law in International Arbitration, 2 Arb. Int’l 274, 277 (1986).
4. Secondary authorities also agree that courts should conduct public-policy review in New York Convention cases independently. UNCITRAL’s Guide to the Convention, in addition to explaining the significance of the word “finds” in Article V(2) (see supra, at 20-21), explains:
Public policy allows the courts … where recognition and enforcement is sought to consider the merits of an award so as to satisfy themselves that there is nothing in the
9 See, e.g., Titan Tire Corp. of Freeport v. United Steel, Paper &
Forestry, Rubber, Mfg., Energy, Allied Indus. & Serv. Workers Int’l Union, 734 F.3d 708, 717 (7th Cir. 2013); S. Cal. Gas Co. v. Utility Workers Union of Am., Local 132, 265 F.3d 787, 794 (9th Cir. 2001); MidMichigan Reg’l Med. Ctr.-Clare v. Prof’l Employees Div. of Local 79, SEIU, AFL-CIO, 183 F.3d 497, 504 (6th Cir. 1999); Int’l Bhd. of Elec. Workers, Local 97 v. Niagara Mohawk Power Corp., 143 F.3d 704, 715 (2d Cir. 1998); Exxon Corp. v. Esso Workers’ Union, Inc., 118 F.3d 841, 845 (1st Cir. 1997), abrogated on other grounds, E. Associated Coal Corp. v. United Mine Workers of Am., Dist. 17, 531 U.S. 57 (2000); Gulf Coast Indus. Workers Union v. Exxon Co., U.S.A., 991 F.2d 244, 248 (5th Cir. 1993); Exxon Shipping Co. v. Exxon Seamen’s Union, 993 F.2d 357, 360 (3d Cir 1993); Delta Air Lines, Inc. v. Air Line Pilots Ass’n, Int’l, 861 F.2d 665, 670 (11th Cir. 1988); Iowa Elec. Light & Power Co. v. Local Union 204 of Int’l Bhd. of Elec. Workers, 834 F.2d 1424, 1427 (8th Cir. 1987); Local 453, Int’l Union of Elec., Radio & Mach. Workers, AFL-CIO v. Otis Elevator Co., 314 F.2d 25, 29 (2d Cir. 1963) (Marshall, J.).
26 award that would infringe the fundamental values of that State.
UNCITRAL Guide 247 (emphasis added). Later, the Guide describes “the essence of public policy,” as implemented in Article V(2)(b), as “a concept that allows the court to reject a violation of it[s] most fundamental norms of justice.” Id. at 258 (emphasis added). There is no suggestion in the Guide that arbitrators should be entrusted with matters of national public policy, or that courts should defer to their policy judgments.
Other authorities are in accord. The current iteration of the Restatement, for instance, provides that “[a] court may examine whether recognition or enforcement of a Convention award would be repug-nant to public policy … even if the parties themselves do not raise the issue.” RESTATEMENT (3D) U.S. LAW OF INT’L COMM. ARBITRATION § 5-14(b) (Tentative Draft 2010) (emphasis added). The Restatement goes on to explain that “[a] court generally determines whether recognition or enforcement of a Convention award violates public policy … in accordance with federal law,” id. § 5-14(c) (emphasis added), and that “[i]dentifying public policy, and determining the extent to which recognition or enforcement of an award would offend it, entails an exercise of judgment by courts,” id. § 5-14 Reporter’s Note c (emphasis added).
The Federal Circuit below, in holding that enforce-ment of the award here could not be held to violate U.S. patent policy absent an all-fours judicial precedent on nearly identical facts, thus contravened the text, structure and history of the New York Convention.
27 III. THE QUESTION PRESENTED IS
EXCEPTIONALLY IMPORTANT
For all the reasons set forth above, certiorari is warranted in this case so that this Court may adopt a uniform and correct standard for U.S. courts to apply in public-policy challenges to enforcement of arbitral awards under the New York Convention. But review is also warranted because the question presented has great importance to, and practical consequences for, the public policies of the United States. International arbitration is increasingly a venue where important U.S. statutory policy (for example, patent and competition policy) is shaped. Unless the lower courts enforce the Convention’s public-policy exception, those public policies will be subject to private arbitral whim.
As commentators have thus explained, this Court’s “expansion of arbitration to cover statutory claims creates a greater, not a lesser need, for meaningful judicial review,” because such claims will more frequently implicate the national public interest. Margaret L. Moses, Arbitration Law: Who’s in Charge?, 40 Seton Hall L. Rev. 147, 180 (2010). Indeed, as this Court held in Mitsubishi, “the availability of the public policy exception is what justifies allowing claims that involve public policy to be arbitrable in the first instance.” Catherine A. Rogers, The Arrival of the “Have-Nots” in International Arbitration, 8 Nev. L.J. 341, 366 n.150 (2007). But despite its importance to the regime envisioned by the New York Convention’s drafters and ratifiers, the promised “‘second look’ has not yet occurred.” Philip J. McConnaughay, The Risks and Virtues of Lawlessness: A “Second Look” at International Commercial Arbitration, 93 Nw. U. L. Rev. 453, 457 (1999); see Moses, supra, 40 Seton Hall
28 L. Rev. at 179 (similar). This case presents the Court with an excellent opportunity to correct this omission and vindicate the premise of Mitsubishi.
Tasking the courts with ultimate responsibility for policing U.S. public policy in New York Convention cases will, moreover, give rise to a virtuous cycle: If arbitrators know that courts will review public-policy issues independently, they will be more likely to take such issues seriously themselves. See Rogers, supra, 8 Nev. L.J. at 367 (“the potential for more exacting review can affect how arbitral tribunals apply … mandatory laws”). Independent judicial scrutiny will reduce the incidence of even arguable public-policy violations by arbitrators, increasing public confidence in arbitration.
Review of the question presented is also important in order to ensure that contracting parties continue to view our Nation as a hospitable jurisdiction in which to settle their disputes. Companies are willing to submit to arbitration before international arbitral panels in part because they can rely on the expectation that U.S. public policy provides a backstop against runaway awards. The Federal Circuit’s decision permitting arbitrators to disregard foundational U.S. patent policy, in order to award nearly half a billion dollars in damages, risks discouraging parties from entering into international arbitration agreements, in contravention of the long-settled federal policy favoring such agreements.
This effect will be particularly significant in patent matters. Congress has specifically sought to encour-age arbitration of patent disputes through its adoption of Section 294 of the Patent Act, 35 U.S.C. 294, which permits arbitration of patent disputes, and arbitration agreements are thus common in transnational patent
29 transactions. Allowing arbitral panels to freely disre-gard the fixed limits on patent terms countermands U.S. public policy by discouraging such agreements: Few companies will agree to arbitrate patent claims if by doing so they expose themselves to the risk of an unreviewable award of damages that extends the patent monopoly beyond the scope or duration of the patent term.
Placing such vital policies beyond the reach of the courts will, moreover, have adverse consequences—particularly for parties already locked into binding patent-arbitration agreements. The Federal Circuit’s approach to public-policy review benefits patent holders at the expense of potential defendants, skew-ing the vital “balance between fostering innovation and ensuring public access to discoveries.” Kimble v. Marvel Entertainment, LLC, 135 S. Ct. 2401, 2406-07 (2015). This balance must be “carefully guarded” for the patent system to work, id. at 2407, and only the courts may properly occupy the guardian’s role.
These concerns are not limited to business disputes, but also reach cases involving individual rights. For example, an employment agreement between a U.S. citizen and a foreign corporation might call for arbitra-tion of disputes; an award under that agreement would be subject to the New York Convention. See 9 U.S.C. 202. At an arbitration, the tribunal might find that the employee had been subjected to sex discrimination, and yet refuse relief because that precise form of discrimination had not yet been addressed by a court. Or, conversely, the arbitrator might find that the employee had engaged in some novel form of accounting fraud, and yet order that she be reinstated to her job. In either situation, the rule in the Federal Circuit (as in the Second and Seventh
30 Circuits) would require a reviewing court to accept the arbitrator’s decision and to enforce the award—unless some prior court had found a violation of law on precisely the same facts. That cannot be the rule.
IV. THIS CASE PRESENTS AN EXCELLENT VEHICLE TO RESOLVE THE QUESTION PRESENTED
The issue of what standard of review governs public-policy challenges to enforcement of international arbitral awards under the New York Convention is squarely presented here because it is outcome-determinative in this case. The arbitral award at issue is enforceable under the approach taken by the Second, Seventh, and Federal Circuits—but not under the approach of the Fifth, Ninth, and D.C. Circuits. Under the independent review mandated by the law of the latter three circuits (and by the New York Convention itself), the award here would be declared unenforce-able as contrary to the fundamental U.S. public policy against timewise overextension of the patent monopoly. This case thus presents an excellent vehicle to decide the question presented.
The U.S. public policy at issue derives from the Constitution’s Patent Clause, which empowers Congress to promote “the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” U.S. Const. art. I, § 8, cl. 8 (emphasis added). As this Court explained in Kimble, the Constitution and the Patent Act strike a “balance between fostering innovation and ensuring public access to discoveries. While a patent lasts, the patentee possesses exclusive rights to the patented article…. But … when the patent expires, the patent-ee’s prerogatives expire too, and the right to make or
31 use the article, free from all restriction, passes to the public.” 135 S. Ct. at 2406-07 (citing Sears, Roebuck & Co. v. Stiffel Co., 376 U.S. 225, 230 (1964)). This long-settled policy against overextension of the term of patent exclusivity manifests in a number of specific sub-rules, two of which would be violated by enforcing the award here.
First, enforcing the award would violate public policy as manifested in the prohibition of double-patenting—an issue that even the arbitral tribunal acknowledged as one that “engages public policy.” C.A.J.A. 410. This double-patenting rule is an integral component of the policy against timewise over-extension of the patent monopoly, which has existed “[s]ince the inception of our patent laws,” Abbvie, 764 F.3d at 1372. It reflects the policy that “‘[t]he public should … be able to act on the assumption that upon the expiration of the patent it will be free to use not only the invention claimed in the patent but also modifications or variants which would have been obvious to those of ordinary skill in the art at the time the invention was made.’” In re Longi, 759 F.2d 887, 892-93 (Fed. Cir. 1985) (quoting In re Zickendraht, 319 F.2d 225, 232 (C.C.P.A. 1963) (Rich, J., concurring)). As Justice Story explained two centuries ago:
It cannot be, that a patentee can have in use at the same time two valid patents for the same invention; and if he can successively take out at different times new patents for the same invention, he may perpetuate his exclusive right during a century, whereas the patent act confines this right to fourteen years from the date of the first patent. If this proceeding could obtain countenance, it would completely destroy the whole consid-
32 eration derived by the public for the grant of the patent, viz. the right to use the invention at the expiration of the term specified in the original grant.
Odiorne v. Amesbury Nail Factory, 18 F. Cas. 578, 579 (C.C. D. Mass. 1819) (emphasis added).
Enforcing the arbitral award in this case would violate this policy, because the entirety of the damages award (both the infringement damages and the compo-nent denominated as contract damages) depends on the premise that the Leemans patents were valid. But enforcing any such award would be contrary to the policy against improper timewise overextension of patent rights, because (as PTO examiners and the arbitral tribunal itself have found) the Leemans patents generically claim the same pat gene that is more specifically claimed by the Strauch patents. See supra, at 7-8.
The Federal Circuit rejected this argument only because no court had previously addressed a double-patenting challenge based on corporate ownership facts identical to those presented here. App. 16a-17a. Had the court conducted its own independent review, however, it necessarily would have found that enforcing the Leeman patent rights in this situation would violate U.S. public policy. The PTO examiners so found, ruling that the Leemans patents constitute “an unjustified time-wise extension that restrict[s] the public’s freedom to use the invention claimed in the Strauch patent even after expiration.” C.A. Dkt. 98, at 22; see id. at 23 (similar); C.A. Dkt. 99, at 21, 23 (similar). As the PTO concluded, there is no policy or doctrinal justification to allow corporations to use the corporate form to avoid the ban on double-patenting merely by assigning patents to formally
33 separate subsidiaries. To the contrary, any such rule would provide a simple roadmap for bypassing a fundamental policy of the patent laws.10
Second, enforcing the award also violates the public policy against timewise overextension of the patent monopoly by conferring on Bayer $138 million in contract damages covering seven years after the last of the Leemans patents has expired. As this Court recently reiterated, a patent-holder may not enforce an agreement that would effectively “continue ‘the patent monopoly beyond the [patent] period,’ even though only as to the licensee affected,” because—“‘whatever the legal device employed’”—enforcement of such an agreement would necessarily “conflict with patent law’s policy of establishing a ‘post-expiration … public domain’ in which every person can make free use of a formerly patented product.” Kimble, 135 S. Ct. at 2407-08 (emphasis added) (quoting Brulotte v. Thys Co., 379 U.S. 29, 31 (1964)).11 Enforcing the award as to the post-2023 contract damages would violate the fundamental public policy requiring adher-
10 The award also could not be upheld under independent
public-policy review based on Biogen’s co-ownership of the patents. See supra, at 8. The courts below did not reach this issue (see App. 16a n.1), but it makes no difference to the policy analysis: Whatever rights Biogen may have in the Leemans patents, it would violate public policy to enforce an award that extends rights in those patents to Bayer beyond the expiration of the Strauch patents.
11 In Kimble, this Court reaffirmed Brulotte, noting that its “statutory and doctrinal underpinnings have not eroded over time,” 135 S. Ct. at 2410, and that “Congress has spurned multiple opportunities to reverse” it, id. at 2409. “[T]his Court has continued to draw from that legislative choice [not to overrule Brulotte] a broad policy favoring unrestricted use of an invention after its patent’s expiration.” Id. at 2411.
34 ence to the temporal limits on the patent monopoly set by the Constitution and Congress.
Again, had the Federal Circuit independently ana-lyzed whether enforcing the award would comport with the public policy limiting enforcement of patent rights following their expiration, it would have barred enforcement, because the award confers patent protec-tion on Bayer for seven years after the expiration of its patents. Parties may not contract around this funda-mental public policy by means of a royalty agreement, and there is no basis in law or policy to permit them to achieve the same result through an arbitration agreement.
The result in this case thus turns on whether or not this Court adopts independent public-policy review under the New York Convention. The petition presents a clean vehicle for resolving a circuit split and deciding the exceptionally important question presented.
35 CONCLUSION
The petition should be granted.
Respectfully submitted,
KATHLEEN M. SULLIVAN Counsel of Record
RAYMOND N. NIMROD WILLIAM B. ADAMS CLELAND B. WELTON II OWEN F. ROBERTS QUINN EMANUEL URQUHART
& SULLIVAN, LLP 51 Madison Avenue 22nd Floor New York, NY 10010 (212) 849-7000 kathleensullivan@
quinnemanuel.com
Counsel for Petitioners
September 11, 2017
APPENDIX
1a APPENDIX A
NOTE: This disposition is nonprecedential.
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
Appeals from the United States District Court for the Eastern District of Virginia in No. 2:12-cv-00047-
RAJ-RJK, Judge Raymond Alvin Jackson.
————
Decided: March 1, 2017
————
CHRISTOPHER JAMES GASPAR, Milbank, Tweed, Hadley & McCloy LLP, New York, NY, argued for plaintiffs-appellees. Also represented by RYAN HAGGLUND; ROBERT J. KOCH, MICHAEL D. NOLAN, STEPHANIE R. AMOROSO, EDWARD JOHN MAYLE, Washington, DC.
DAVID JASON LENDER, Weil, Gotshal & Manges LLP, New York, NY, argued for defendants-appellants. Also represented by ELIZABETH WEISWASSER, DAVID
2a FITZMAURICE, ADAM BANKS; ALEX V. CHACHKES, PETER A. BICKS, ROBERT L. SILLS, JAMES STENGEL, Orrick, Herrington & Sutcliffe LLP, New York, NY; MARK S. DAVIES, KATHERINE M. KOPP, JEFFREY M. PROKOP, MELANIE L. BOSTWICK, Washington, DC; ELIZABETH MOULTON, Menlo Park, CA.
LLOYD LEE DAVIS, III, Andrews Kurth Kenyon LLP, Houston, TX, for amicus curiae Jeff C. Dodd.
————
Before MOORE, TARANTO, and CHEN, Circuit Judges. TARANTO, Circuit Judge.
This case involves an international arbitration tri-bunal’s decision on a contract claim, under French law, and patent-infringement claims, under U.S. law, in a dispute between Bayer CropScience NV and Bayer CropScience AG (sometimes collectively, Bayer), on one side, and Dow Agrosciences LLC, Mycogen Plant Science, Inc., Agrigenetics, Inc., and Phytogen Seed Co. (collectively, Dow), on the other. Bayer initially sued Dow for patent infringement, but the district court stayed the action pending arbitration. The arbitral tribunal awarded Bayer approximately $455 million, including damages for breach of contract and patent infringement, and set a rate for post-award interest. The district court, in the patent-infringement case, confirmed the arbitral award. The court rejected Dow’s arguments against the award and also denied Dow’s motion to clarify that interest from the date of the district court’s judgment would accrue at the statutory rate for post-judgment interest rather than the tribunal’s higher post-award rate. Dow appeals.
We conclude that the district court correctly con-firmed the award, but abused its discretion regarding post-judgment interest. We modify the judgment to
3a state that interest from the date of the district court’s judgment accrues at the federal statutory rate. We affirm the judgment as modified.
I
A
Bayer CropScience NV, a successor of Plant Genetic Systems NV, owns or co-owns the Leemans patent family, which includes U.S. Patent Nos. 5,561,236, 5,646,024, 5,648,477, 7,112,665, and RE44,962. The patents describe and claim various technologies related to the pat gene, which confers resistance to the herbi-cide glufosinate. The Leemans patents issued from con-tinuations of U.S. Patent Application No. 07/131,140 and have similar specifications.
Bayer CropScience AG, a successor of Hoechst AG, owns the Strauch patent family, including U.S. Patent Nos. 5,273,894 and 5,276,268 (Strauch ’268). Although not asserted by Bayer CropScience AG, the Strauch patents are indirectly at issue, as the basis for Dow’s double-patenting challenge to the Leemans patents. Bayer CropScience AG and Bayer CropScience NV are wholly owned subsidiaries of non-party Bayer AG.
Dow AgroSciences LLC produces the Enlist E3, Enlist E3+IR, Enlist Soybean, Enlist Cotton, Widestrike, and Widestrike 3 products through its subsidiaries, Mycogen Plant Science, Inc., Agrigenetics, Inc., and Phytogen Seed Co. Each of those products contains the pat gene. The Enlist E3 products also contain a molec-ular stack of the aad-12 and dmmg genes. Like the pat gene, the aad-12 and dmmg genes confer resis-tances to herbicides.
In June 1992, Hoechst AG and Lubrizol Genetics, Inc., Dow’s predecessor, agreed to cross-license certain
4a technologies to which they had rights. That agreement (the 1992 Agreement) granted Lubrizol licenses to cer-tain patents, including the Strauch and the Leemans patents. At the time of the agreement, Hoechst owned the Strauch patents and exclusively licensed the Leemans patents from Plant Genetic Systems NV.
Article 4 of the 1992 Agreement restricts the parties’ use of the licensed technology:
No right or license is hereby granted, to either party, either expressly or by implication, to use any other proprietary technology owned by or available to the other in connection with the licenses granted hereunder.
Both parties are entitled to grant sublicences or distribution rights for their Transfor-mants. Hoechst is furthermore entitled to grant sublicences for gene promoter con-structs containing a Promoter in conjunction with any gene of which Hoechst can dispose.
J.A. 886, 4147. Article 12 states that the agreement is to be governed by and construed in accordance with French law and that all controversies or disputes are to be “decided by arbitration in accordance with the Rules of Conciliation and Arbitration of the Interna-tional Chamber of Commerce.” J.A. 889, 4150.
Between 2007 and 2008, Dow and non-party MS Technologies, LLC entered into a series of agreements regarding the pat and dmmg genes. In September 2007, MS Tech granted Dow access to the dmmg gene, to which MS Tech had a license under a 2004 agree-ment with Bayer CropScience AG. In April 2008, Dow transferred soybean seed transformants containing the aad-12, pat, and dmmg genes to MS-Tech. Dow
5a and MS Tech’s collaboration resulted in the creation of the Enlist E3 products.
In November 2007, Bayer CropScience AG and MS Tech entered into a new agreement, which involved the dmmg gene and which transferred ownership of Event FG72 to MS Tech. The agreement required MS Tech to pay Bayer CropScience AG a percentage—in this case, determined to be 50%—of the net trait revenues associated with Event FG72 until 2030.
B
In January 2012, Bayer CropScience AG terminated the 1992 Agreement after accusing Dow of materially breaching Article 4. The same month, Bayer Crop-Science AG and Bayer CropScience NV sued Dow in the Eastern District of Virginia for infringement of the ’236, ’024, ’477, and ’665 patents. Dow moved to dis-miss or stay the action based on the agreement’s arbi-tration clause. The district court stayed the action. See 9 U.S.C. § 3.
In September 2013, Bayer CropScience NV filed a reissue application for the ’665 patent. See 35 U.S.C. § 251. In its application, Bayer CropScience NV stated that reissuance was appropriate in view of the Supreme Court’s decision in Association for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107 (2013). The ’665 patent reissued as the RE’962 patent, which expires in 2023. The other patents at issue expired no later than July 2014.
Between November 2014 and August 2015, Dow filed six requests for inter partes reexamination of the ’236, ’024, ’447, and RE’962 patents. See Ex Parte Leemans, Control Nos. 90/013,394, 90/013,449, 90/013,452, 90/013,453, 90/013,515, 90/013,563. Dow alleged that claims 8, 9, 12, 15, 18, and 19 of the ’236 patent; 1, 15,
6a and 16 of the ’024 patent; 1, 2, 15–17, and 19 of the ’477 patent; and 1 and 2 of the RE’962 patent were invalid for obviousness-type double patenting over Strauch ’268 and ’894 and U.S. Patent No. 5,633,434. See Control Nos. - 394, -449, -452, -453, -515. Dow also alleged that claim 2 of the RE’962 patent would have been obvious over certain prior-art references. Control No. -563. At the examiner level, the Office has issued final rejections in four proceedings, Control Nos. -394, -449, -515, -563, and non-final rejections in the others, Control Nos. -452, -453. Those proceedings remain pending in the Office and do not alter our resolution of this appeal. See 35 U.S.C. § 294; Fresenius USA, Inc. v. Baxter Int’l, Inc., 721 F.3d 1330 (Fed. Cir. 2013).
In October 2015, an arbitral tribunal entered an award, finding, in relevant part, that (1) Dow breached the 1992 Agreement by effectively sublicensing the pat gene to MS Tech; (2) Dow infringed various claims of the Leemans patents by its creation and other activ-ities involving the identified Enlist and Widestrike product—specifically, claims 8, 9, 12, and 15 of the ’236 patent; claims 15 and 16 of the ’024 patent; claims 15, 16, and 19 of the ’447 patent; and claim 1 of the RE’962 patent; (3) the asserted claims of the ’024, ’236, ’447, ’665, and RE’962 patents were not invalid for inadequate written description or lack of enablement; and (4) the ’236, ’024, ’447, and RE’962 patents were not invalid for obviousness-type double patenting over Strauch ’268. The tribunal awarded Bayer $455,459,187 in damages, including $374,731,000 in lost-opportunity damages under French law for breach of contract and $67,837,000 in reasonable-royalty damages under U.S. law for patent infringement. The tribunal also awarded Bayer pre-award interest using a rate of 8% and declared that the same rate would apply to “post-award interest.” J.A. 560, 563.
7a Arbitrator George Berman dissented in part, dis-agreeing with the tribunal’s conclusion of no double patenting.
Bayer moved the district court to confirm the arbi-tral award. See 9 U.S.C. § 207. Dow cross-moved to vacate the award. The court confirmed the award. The court also denied Dow’s motion to amend the judgment to clarify that any interest for a period after the dis-trict court’s judgment would accrue at the rate speci-fied by 28 U.S.C. § 1961(a), not at the tribunal’s 8% rate for “post-award interest.” Dow appeals. We con-clude that we have jurisdiction, and we affirm the judgment as modified.
II
We have jurisdiction under 28 U.S.C. § 1295(a)(1), which gives us jurisdiction over any “appeal from a final decision of a district court . . . in any civil action arising under, or in any civil action in which a party has asserted a compulsory counterclaim arising under, any Act of Congress relating to patents.” An action arises under the patent laws if the complaint includes a claim asserting a cause of action created by federal patent law. Christianson v. Colt Indus. Operating Corp., 486 U.S. 800, 808–09 (1988). It also arises under the patent laws in certain circumstances where there is no federal cause of action. In Christianson, the Court stated that a state-law cause of action arises under federal patent law if “the plaintiff’s right to relief necessarily depends on resolution of a substan-tial question of federal patent law, in that patent law is a necessary element of one of the well-pleaded claims.” Id. More recently, in Gunn v. Minton, 133 S. Ct. 1059 (2013), which concerned patent-law issues involved in a state-law malpractice claim, the Court explained that “federal jurisdiction over a state law
8a claim will lie if a federal issue is: (1) necessarily raised, (2) actually disputed, (3) substantial, and (4) capable of resolution in federal court without disrupting the federal-state balance approved by Congress.” Id. at 1065; see also Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 314 (2005). In 2011, before the present suit was filed, Congress amended § 1295(a)(1) to extend our jurisdiction to actions that involve compulsory counterclaims arising under the patent laws. 28 U.S.C. § 1295(a)(1); Leahy-Smith America Invents Act, Pub. L. No. 112–29, § 19(b), 125 Stat. 284, 331–32 (2011). That amendment became effective with respect to any civil action filed before September 16, 2011. Leahy-Smith America Invents Act § 19(e), 125 Stat. at 333; Wawrzynski v. H.J. Heinz Co., 728 F.3d 1374, 1378 (Fed. Cir. 2013).
In this case, Bayer’s complaint arises under the patent laws. The complaint expressly alleges multiple counts of patent infringement. The district court stayed adjudication of those claims pending arbitration, but did not dismiss the case or the patent claims. After the tribunal entered its award, the court resolved the parties’ post-award motions in the same action. Bayer cites, and we are aware of, no authority establishing that the tribunal’s adjudication of the patent-infringement claims altered the court’s basis for jurisdiction.
The conclusion would not change even if one looked beyond the original complaint to the post-arbitral-award proceedings in the district court. When Dow turned to the court to challenge the arbitral award by way of a motion to vacate, it asserted patent law as a necessary basis for certain challenges to parts of the tribunal’s award. See Gunn, 133 S. Ct. at 1065. In particular, Dow argued that the Convention on
9a the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), June 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38, required the court to decide, among other issues, whether enforcement of the award would violate a host of patent-law require-ments and policies. See New York Convention art. V(2)(b). Those questions were not only “necessarily raised,” but also “substantial” and “disputed.” Gunn, 133 S. Ct. at 1065. Moreover, because French law governed the contract claim, there was no basis for concern that the federal court’s determination of the patent-law issues, within the strict limits of arbitral-award review, would “disrupt[] the federal-state balance.” Id. Thus, whether viewed as a new claim or as a compulsory counterclaim to Bayer’s claim for confirmation of the arbitral award, Dow’s challenge comes within the Gunn standard.
Precedent reinforces the conclusion that we have jurisdiction over this appeal. In Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir. 2001), we exercised jurisdiction over a final district-court decision confirm-ing an arbitral award for patent infringement. Id. at 1364. Additionally, in Microchip Technology Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir. 2004), we held that we had jurisdiction under § 1292(a)(1) over interlocutory orders denying motions to compel arbi-tration. Id. at 1354–55. The Third and Eighth Circuits have reached the opposite conclusion regarding our jurisdiction over interlocutory appeals, but neither has questioned our jurisdiction over final appeals. Indus. Wire Prods., Inc. v. Costco Wholesale Corp., 576 F.3d 516, 518–20 (8th Cir. 2009); Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44, 51–53 (3d Cir. 2001). To the contrary, the Third Circuit has concluded that we have jurisdiction in situations such as this. Medtronic AVE, 247 F.3d at 53.
10a We are unaware of any instance in which the
regional circuits have decided an appeal involving the confirmation or vacatur of an arbitral award for patent infringement. In DeRosa v. J.P. Walsh & J.L. Marmo Enterprises, Inc., 541 F. App’x 250 (4th Cir. 2013), and Rocket Jewelry Box, Inc. v. Noble Gift Packaging, Inc., 157 F.3d 174 (2d Cir. 1998), the parties excluded the patent-related issues from arbitration. DeRosa also involved only a counterclaim for patent infringement, which did not suffice to create jurisdiction in cases, like DeRosa, filed before September 16, 2011. See Holmes Grp., Inc. v. Vornado Air Circulation Sys., Inc., 535 U.S. 826 (2002); DeRosa v. J.P. Walsh & J.R. Marmo Enters., Inc., 471 F. App’x 902 (Fed. Cir. 2012). Although Golden v. Lim, No. 2:15-cv-10795, 2016 WL 520302 (E.D. Mich. Feb. 10, 2016), which is discussed in Bayer’s filings, might not have been distinguishable on the same grounds, the Sixth Circuit has since dismissed the appeal in that case. See Golden v. Lim, No. 16-1313 (6th Cir. dismissed Apr. 14, 2016).
III
On the merits, we follow the Supreme Court’s and relevant regional circuit’s law on issues not unique to patent law. Flex-Foot, Inc., 238 F.3d at 1365–66. Nevertheless, we have been shown no reason to think that our conclusions would change under any other circuit’s law on matters not squarely controlled by Supreme Court precedent. We review the district court’s denial of the motion to vacate the arbitral award with-out deference and any underlying factual findings for clear error. Raymond James Fin. Servs., Inc. v. Bishop, 596 F.3d 183, 190 (4th Cir. 2010). We review the denial of the motion to amend the judgment for abuse of discretion. Wilkins v. Montgomery, 751 F.3d 214, 220
11a (4th Cir. 2014). A court necessarily abuses its discre-tion if it commits legal error. Highmark, Inc. v. Allcare Health Mgmt. Sys., Inc., 134 S. Ct. 1744, 1748 n.2 (2014). The award of post-judgment interest is a legal question, reviewed without deference. Hitachi Credit Am. Corp. v. Signet Bank, 166 F.3d 614, 632–33 (4th Cir. 1999). To the extent that the parties raise issues unique to patent law, we review those issues under our law. Flex-Foot, Inc., 238 F.3d at 1365–66.
A
Judicial review of the arbitral award at issue here is very limited even if, as we assume for present pur-poses, the standards governing both international and domestic arbitration apply. In numerous ways, the relevant federal statutes and precedents make clear that ordinary legal or factual error is not a ground for disturbing an arbitral award like the one at issue here.
The New York Convention and its enabling statute, 9 U.S.C. §§ 201–208, require that a district court con-firm an award “unless it finds one of the grounds for refusal or deferral of recognition or enforcement of the award specified in the said Convention.” 9 U.S.C. § 207. One ground invoked here requires a finding that “the award deals with a difference [i.e., issue] not con-templated by or not falling within the terms of the submission to arbitration, or contains decisions on matters beyond the scope of the submission to arbi-tration.” New York Convention art. V(1)(c). Another requires a finding that “recognition or enforcement of the award would be contrary to the public policy” of “the country where recognition or enforcement is sought.” New York Convention art. V(2)(b).
The Federal Arbitration Act likewise strictly limits the grounds for disturbing an arbitral award. See 9
12a U.S.C. §§ 10–11; Hall Street Assocs., L.L.C. v. Mattel, Inc., 552 U.S. 576, 584–89 (2008). For example, the Act permits vacatur “where the arbitrators exceeded their powers.” 9 U.S.C. § 10(a)(4). But as the Supreme Court has explained, the Act authorizes only “the limited review needed to maintain arbitration’s essential vir-tue of resolving disputes straightaway,” thus ensuring that arbitration not become “merely a prelude to a more cumbersome and time-consuming judicial review process.” Hall Street Assocs., 552 U.S. at 588 (quoting Kyocera Corp. v. Prudential-Bache Trade Servs., Inc., 341 F.3d 987, 998 (9th Cir. 2008)). The Court adhered to those principles in reviewing international arbitral awards under the Act. BG Grp., PLC v. Republic of Argentina, 134 S. Ct. 1198, 1206 (2014).
The Fourth Circuit has stated that an award may be vacated if the arbitrators “manifestly disregarded” the applicable law. Wachovia Sec., LLC v. Brand, 671 F.3d 472, 480 (4th Cir. 2012). The court has explained that the manifest-disregard ground exists either “as an independent ground for review or as a judicial gloss on the enumerated grounds for vacatur set forth at 9 U.S.C. § 10.” Id. at 483 (quoting Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 559 U.S. 662, 672 n.3 (2010)). In one formulation, the ground applies only if the tribunal was “aware of the law, understood it cor-rectly, found it applicable to the case before them, and yet chose to ignore it in propounding their decision.” Three S Del., Inc. v. DataQuick Info. Sys., Inc., 492 F.3d 520, 529 (4th Cir. 2007) (quoting Remmey v. PaineWebber, Inc., 32 F.3d 143, 149 (4th Cir. 1994)). In another, it applies only if “(1) the applicable legal principle is clearly defined and not subject to reason-able debate; and (2) the arbitrator[s] refused to heed that legal principle.” Long John Silver’s Rests., Inc. v. Cole, 514 F.3d 345, 349–50 (4th Cir. 2008) (quoting
13a Merrill Lynch, Pierce, Fenner & Smith, Inc. v. Jaros, 70 F.3d 418, 421 (6th Cir. 1995)); Wachovia, 671 F.3d at 483. That “carefully circumscribed standard,” the Fourth Circuit has said, “is not an invitation to review the merits of the underlying arbitration.” Id. Instead, the standard has “for decades guaranteed that review for manifest disregard not grow into the kind of prob-ing merits review that would undermine the efficiency of arbitration.” Id.
Additionally, although an award may be disturbed if it “fails to draw its essence” from the relevant con-tractual provisions, MCI Constructors, LLC v. City of Greensboro, 610 F.3d 849, 857 (4th Cir. 2010) (quoting Patton v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006)), it does not fail to draw its essence from those provisions merely because the arbitrators misread them, see Oxford Health Plans LLC v. Sutter, 133 S. Ct. 2064, 2068 (2013); Stolt-Nielsen, 559 U.S. at 671; United Paperworkers Int’l Union v. Misco, Inc., 484 U.S. 29, 38 (1987); Choice Hotels Int’l, Inc. v. SM Prop. Mgmt., LLC, 519 F.3d 200, 207 (4th Cir. 2008); Three S Del., 492 F.3d at 527–28. Rather, “as long as the arbitrator is even arguably construing or applying the contract and acting within the scope of his author-ity, that a court is convinced he committed serious error does not suffice to overturn his decision.” United Paperworkers Int’l Union, 484 U.S. at 38; Choice Hotels Int’l, 519 F.3d at 207 (quoting U.S. Postal Serv. v. Am. Postal Workers Union, AFL-CIO, 204 F.3d 523, 527 (4th Cir. 2000)).
A challenger must meet related, and similarly high, standards to support a refusal to confirm an award as contrary to public policy. In the domestic labor-arbitration context, the Supreme Court has said that, to justify non-enforcement, an asserted public policy
14a “must be well defined and dominant, and is to be ascertained ‘by reference to the laws and legal prece-dents and not from general considerations of supposed public interests.’” W.R. Grace & Co. v. Local Union 759, Int’l Union of United Rubber, Cork, Linoleum & Plastic Workers, 461 U.S. 757, 766 (1983) (quoting Muschany v. United States, 324 U.S. 49, 66 (1945)). Relatedly, the Court has recognized the strong policy considerations that favor allowing parties to enter into international arbitral agreements. See Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 537–39 (1995); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631–40 (1985); Scherk v. Alberto-Culver Co., 417 U.S. 506, 517–18 (1974). Guided by those considerations, the Court has enforced an agreement to arbitrate, over a “public policy” objection that the arbitrators would not permit assertion of a U.S. statutory right, where it was not clear that such a “prospective waiver of a party’s right to pursue statutory remedies” would occur. Vimar Seguros, 515 U.S. at 540; see also Mitsubishi, 473 U.S. at 637 & n.19.
Courts of appeals have construed the New York Con-vention’s public-policy exception narrowly. In Parsons & Whittemore Overseas Co. v. Société Generale De L’Industrie du Papier (RAKTA), 508 F.2d 969 (2d Cir. 1974), the Second Circuit stated that, in accordance with general international choice-of-law principles, the exception applies “only where enforcement would violate the forum state’s most basic notions of morality and justice.” Id. at 974 (citing 1 Restatement (Second) of the Conflict of Laws § 117 cmt. c, at 340 (Am. Law Inst. 1971)). Most circuits follow that approach. See Ministry of Def. & Support for the Armed Forces of the Islamic Republic of Iran v. Cubic Def. Sys., Inc., 665 F.3d 1091, 1097 (9th Cir. 2011); TermoRio S.A. E.S.P.
15a v. Electranta S.P., 487 F.3d 928, 938 (D.C. Cir. 2007); Karaha Bodas Co. v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 364 F.3d 274, 306 (5th Cir. 2004); Slaney v. Int’l. Amateur Athletic Fed’n, 244 F.3d 580, 593 (7th Cir. 2001); M & C Corp. v. Erwin Behr GmbH & Co., KG, 87 F.3d 844, 851 n.2 (6th Cir. 1996). The Eleventh Circuit has applied the Supreme Court’s labor-relations standard to the review of arbi-tral awards entered under the New York Convention, stressing the standard’s strictness. Indus. Risk Ins. v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1445 (11th Cir. 1998). For the purposes of this appeal, any differences between the various approaches are immaterial: under any approach, an asserted policy must be clearly established to justify non-enforcement of an arbitral award. See W.R. Grace & Co., 461 U.S. at 766; Indus. Risk Ins., 141 F.3d at 1445; Parsons & Whittemore Overseas Co., 508 F.2d at 974.
B
Dow’s first set of arguments attack parts of the arbi-tral award as counter to U.S. law or policies governing double patenting and post-patent-expiration royalties. We reject Dow’s arguments.
1
The tribunal’s rejection of Dow’s double-patenting defense to patent infringement does not justify non-enforcement of the award. Dow argued to the tribunal that the Leemans patents were invalid for obviousness- type double patenting in light of Strauch ’268, con-tending that the patents were commonly owned by Bayer AG, the parent company of Bayer CropScience AG (owner of the Strauch patents) and Bayer Crop-Science NV (owner or co-owner of the Leemans patents). The tribunal carefully scrutinized Dow’s
16a argument, accepted the premise that the Leemans and Strauch patents did not claim patentably distinct inventions, but nevertheless rejected the challenge. It concluded that the patents were not commonly owned because Bayer CropScience AG and Bayer Crop-Science NV were different entities and Dow had not provided sufficient evidence to pierce the corporate veil separating them. We cannot say that the tribu-nal’s conclusion is contrary to public policy or reflects a manifest disregard of the law under the strict standards governing such challenges.1
It suffices to say that the tribunal’s conclusion did not contravene any well-defined, established law applicable to the situation presented here. Dow does not challenge the tribunal’s conclusion that, with no common inventors, common ownership of the patents was required for the double-patenting bar to apply. To support its position on common ownership, Dow relies on Manual of Patent Examining Practice (MPEP) § 706.02, which states that patents owned by wholly owned subsidiaries of the same parent company are commonly owned for purposes of deciding what quali-fies as prior art under 35 U.S.C. § 103(c). See MPEP § 706.02(l)(2)(I), at 700-74. But the MPEP does not have the force of law. See Ethicon, Inc. v. Quigg, 849 F.2d 1422, 1425 (Fed. Cir. 1988). And in any event, the MPEP passage is not addressed to double-patenting doctrine.
As we have explained, obviousness-type (or “non-statutory”) double patenting is a judicially-created corollary to “statutory” double patenting, which is
1 The tribunal separately found no common ownership on the
ground that Biogen is a co-owner of the Leemans patents. We need not address that ground.
17a itself a judicial gloss on § 101. See Geneva Pharm., Inc. v. GlaxoSmithKline PLC, 349 F.3d 1373, 1377–78 (Fed. Cir. 2003). The authoritative source of law in this area is therefore judicial precedent. But while the courts may someday reach the present situation, they have not yet done so. 2 The Leemans and Strauch patents, having originated from separate inventors and unrelated companies (Hoechst AG and Plant Genetic Systems), are now held by sibling companies. The tribunal concluded that Dow had not established that the corporate veil separating the companies could be pierced. No precedent cited to the tribunal, or to us, considers and resolves in Dow’s favor the doctrinal questions presented by this situation, including those addressed to the policies that underlie the doctrine—the unjustified extension of exclusivity rights against the public and the potential for separate assignee suits enforcing the same rights. See id. at 1378; In re Hubbell, 709 F.3d 1140, 1145 (Fed. Cir. 2013). With the doctrinal question as unsettled as it is for the pre-sent circumstances, the tribunal’s rejection of Dow’s double-patenting challenge cannot be declared a mani-fest disregard of law or contrary to public policy.
2
We reach the same conclusion with respect to Dow’s argument that the tribunal’s contract-damages award is partially unenforceable because it violates U.S. patent-law limits on the recovery of post-expiration royalties for practicing a patent. In Brulotte v. Thys Co., 379 U.S. 29 (1964), the Supreme Court held unen-forceable a licensing agreement that required the
2 A district-court decision concerning terminal-disclaimer law supports Bayer, not Dow, on this issue. Email Link Corp. v. Treasure Island, LLC, No. 2:11-cv-1433-ECR-GWF, 2012 WL 4482576 (D. Nev. Sept. 25, 2012).
18a licensee to pay royalties after the expiration of the patent. Recently, the Court declined to overrule that precedent. See Kimble v. Marvel Entm’t., LLC, 135 S. Ct. 2401 (2015). Under the standards for public-policy and manifest-disregard challenges, we conclude, Dow has not established that the contract award—more precisely, the portion of the award reaching past the 2023 expiration of the RE’962 reissue patent— must be vacated based on Brulotte.
The tribunal awarded contract damages to compen-sate Bayer CropScience AG for certain revenues that it would have earned had Dow not breached the 1992 Agreement’s restriction on sublicensing certain rights it obtained from Bayer. At the time of the breach, Dow and MS Tech were considering two alternatives, which the parties refer to as “Option B” and “Option C.” Although Dow and MS Tech chose Option C, which resulted in the Enlist E3 products, the tribunal found that, in the absence of breach, Option C would have been unavailable, and Dow and MS Tech would have chosen Option B. That option would have required MS Tech to pay licensing revenues to Bayer CropScience AG under the 2007 Bayer-MS Tech agreement, which the tribunal determined to be 50% of net trait reve-nues associated with Event FG72. The tribunal calcu-lated contract damages based on the revenues that Bayer CropScience AG would have received under that agreement until it expired, in 2030. Although Dow argues that the tribunal misconstrued the amount that Bayer CropScience AG would have received under the 2007 Bayer-MS Tech agreement, see infra pp. 22–23, it does not dispute the tribunal’s conclusion that the agreement entitled Bayer CropScience AG to at least some revenues.
19a No established law declares that result prohibited
under the Brulotte rule. The 1992 Agreement estab-lished obligations entirely within the patent period: unless breached earlier, the agreement was to termi-nate upon expiration of the last covered patent—2023, as relevant here. The pertinent condition set by the Agreement on Dow’s use of the pat gene—namely, the restriction on sublicensing it to others—neither extends beyond the patent period nor violates any other identified law or policy. If Dow’s predecessor had simply refused to accept the no-sublicensing condition, instead of accepting and then breaching it, Bayer’s predecessor could have refused to grant the patent license. In that scenario, according to the tribunal’s findings, Dow and MS Tech would have turned to Option B. If they had done so Bayer then would have earned the licensing revenues under the 2007 Bayer-MS Tech agreement that the tribunal awarded here as contract damages under French law. Dow does not allege that the 2007 Bayer-MS Tech agreement, to which Dow is not a party, violates Brulotte.
Bayer has not shown why the facts of the present case are materially different from the foregoing scenario. More generally, it has not shown why the contract-damages award is prohibited by sufficiently established legal authority, whether Brulotte or its successors, to make the award contrary to public policy or manifestly in disregard of the law. We therefore reject the Brulotte-based challenge without deciding whether the Brulotte rule involves the kind of public policy that would, where violated, undercut an arbitral award.3
3 Dow’s invocation of the Constitution’s patent clause, U.S.
Const. art. I, § 8, cl. 8, does not bolster its argument. If judicial precedent and statutory provisions do not forbid the contract-
20a C
Dow presents a number of additional arguments for vacating the arbitral award. It argues that the tribu-nal exceeded its powers or manifestly disregarded applicable law (or committed some error that would justify vacatur) by (1) rejecting Dow’s written descrip-tion and enablement defenses, (2) ruling on the RE’962 patent, (3) misconstruing the relevant contract provi-sions, and (4) imposing an 8% rate for pre-award interest. We reject these contentions.
1
Dow challenges the tribunal’s rejection of its written-description defense, J.A. 379–95, but its argu-ments amount to no more than allegations of ordinary legal error. For example, Dow accuses the tribunal of conducting its written-description analysis back-wards, by first adopting a claim construction that, according to Dow, improperly narrowed the relevant genus based on the specification’s disclosures and then asking whether the narrowed genus was sufficiently disclosed. Similarly, Dow argues invalidity on the ground that the specification directly disclosed only two of the four members of the relevant genus. Dow’s assertions do not meet the demanding standards for showing that arbitrators exceeded their powers or manifestly disregard the law. See Oxford Health Plans, 133 S. Ct. at 2068; Stolt-Nielsen, 559 U.S. at 671; Hall Street, 552 U.S. at 584–85; Wachovia, 671
breach damages here under the limited standards of review of arbitral awards, neither does the Constitution’s “limited Times” language, which is no more self-defining, or fundamental, than the language limiting patents to “Inventors” and their “Discoveries.”
21a F.3d at 481; Long John Silver’s Rests., 514 F.3d at 349– 50; Remmey, 32 F.3d at 149.
The same is true of Dow’s challenge to the tribunal’s rejection of its enablement defense. J.A. 395–96. In its Phase II submissions, Dow argued to the tribunal that the asserted claims of the ’024 and ’447 patents were invalid because the specification did not enable mono-cots. The tribunal rejected that argument because it concluded that the claims did not cover monocots. In doing so, the tribunal properly considered Plant Genetic Systems, N.V. v. DeKalb Genetics Corp., 315 F.3d 1335 (Fed. Cir. 2003), in which this court affirmed the district court’s conclusion that certain claims of the ’236 patent excluded monocots because they were limited to plants “susceptible to infection and transformation by Agrobacterium and capable of regeneration thereafter.” Id. at 1345. After consider-ing Plant Genetic Systems, the tribunal in the present matter concluded that the asserted claims were expressly or implicitly limited to Agrobacterium trans-formation. The tribunal’s analysis shows no manifest disregard of law or other error meeting the standards for rejection of arbitral determinations.
2
Dow’s argument that the tribunal exceeded the scope of its powers by including the RE’962 patent in the proceeding, see J.A. 325–31, is similarly without merit. The RE’962 patent is a reissue of the ’665 patent, which Bayer asserted earlier in the arbitra-tion.4 In its opening Phase II Memorial—filed after the
4 The ’665 and RE’962 patents recite only two claims: one specifying an amino-acid sequence; the other, a codon sequence. Where ’665 claim 1 states that amino acid X “is Met or Val,” RE’962 claim 1 limits X to Met and also requires the codon for X to be ATG. ’665 patent, col. 51, lines 44–45; RE’962 patent, col.
22a Office allowed the reissue application on April 25, 2014, but before the reissue patent issued on June 24, 2014—Bayer asserted claim 1 of the RE’962 patent. In its Phase II Reply, Dow argued that Article 23(4) of the Rules of Arbitration of the International Chamber of Commerce prohibited parties from raising new claims outside the Terms of Reference without the tribunal’s authorization. The tribunal determined that Bayer’s RE’962 patent-infringement claim was not a “new claim” within the meaning of Article 23(4). J.A. 325, 330. We see no reason to vacate the arbitral award based on that determination.
The tribunal concluded that whether Bayer’s RE’962 patent-infringement claim was a “new claim” under Article 23(4) depended on considerations of “procedural integrity and fairness.” J.A. 330. Dow pre-sents no meaningful argument against that aspect of the tribunal’s determination: although Dow suggests that the “new claim” standard must mirror U.S. patent law’s standard for whether a reissue claim supports intervening rights, it provides no persuasive reason that Article 23(4), a procedural provision governing international arbitration, must follow that standard. Given those considerations, the tribunal determined that Bayer’s RE’962 patent-infringement claim was not a new claim because: (1) claim 1 of the RE’962 patent was “fully included in the asserted claim of the ’665 patent”; (2) the RE’962 patent “was fully briefed”; and (3) if the RE’962 patent were excluded, it would need “to be dealt with in another proceeding.” J.A. 330.
51, lines 41–42. Where ’665 claim 2 allows ATG or GTG at a specified place in the codon sequence, RE’962 claim 2 limits that codon to ATG. ’665 patent, col. 52, line 45; RE’962 patent, col. 52, line 41.
23a Dow has not presented any persuasive argument
justifying judicial reversal of the tribunal’s conclusion. Significantly, although Dow broadly asserted to the tribunal that including the RE’962 patent in the arbi-tration would be fundamentally unfair, it did not pre-sent any evidence of concrete prejudice. As far as Dow has shown in this court, it did not identify to the tribunal any particular argument or evidence that it needed greater opportunity to develop and present or that it would have presented if it had known earlier that the RE’962 patent (rather than the ’665 patent) would be at issue. See J.A. 3049–52. At a minimum, Dow did not identify such an argument in its opening brief in this court. See SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1319 (Fed. Cir. 2006) (“Our law is well established that arguments not raised in the opening brief are waived.”).
Dow suggests that we review the tribunal’s determi-nation regarding inclusion of the RE’962 patent with-out deference. But Dow provides no convincing basis for our departing from the established approach to judicial review of whether domestic arbitrators have exceeded their powers in construing the scope of arbitration agreements. In those circumstances, the Supreme Court has applied the same deferential standard that it applies to their determination of other issues. See Oxford Health Plans, 133 S. Ct. at 2068; Stolt-Nielsen, 559 U.S. at 671. In any event, for the reasons given above, we have been shown no error in the tribunal’s construction or application of the “new claim” standard of Article 23(4) to support inclusion of RE’962 in this arbitration.
3
Dow also contends that the tribunal, in calculating lost-opportunity contract damages, misconstrued
24a relevant contract provisions. In particular, Dow challenges the tribunal’s reliance on the 50%-revenue provision of § 5.1.1(a)(i) of the 2007 Bayer-MS Tech Agreement instead of § 5.1.1(a)(x). See J.A. 448–68. But Dow forfeited this argument by not making it to the tribunal. In its Phase III submissions, Dow argued that Bayer’s evidence did not establish harm, causa-tion, or foreseeability. Dow also objected to Bayer’s lost-profits theory on due-process grounds. Dow did not present the contract argument it now makes about Bayer’s prospective revenues under Option B. We see no basis for excusing Dow’s failure to raise this argu-ment and now requiring the arbitral panel to redo its application of contract provisions clearly within its authority to interpret.5 We conclude, therefore, that Dow cannot raise the issue at this juncture. See Nat’l Wrecking Co. v. Int’l Bhd. of Teamsters, Local 731, 990 F.2d 957, 960 (7th Cir. 1993) (“Failure to present an issue before an arbitrator waives the issue in an
5 Dow’s new argument involves the interpretation of contract
provisions clearly within the arbitral tribunal’s authority to interpret. In this respect, Dow’s challenge is quite different from the challenge at issue in Stolt-Nielsen, in which the Supreme Court held that an arbitrator exceeded his powers, i.e., acted without a contractual basis, by concluding that the arbitration agreement authorized class arbitration when the parties had stipulated that the contract was silent on the issue. 559 U.S. at 665–65; see Oxford Health Plans, 133 S. Ct. at 2069. This case likewise differs from Bankers Life & Casualty Insurance Co. v. CBRE, Inc., 830 F.3d 729 (7th Cir. 2016), in which the Seventh Circuit disapproved the arbitration panel’s reliance on a dis-claimer that was outside the scope of the agreement submitted to arbitration. Id. at 730–33. See also Dewan v. Walia, 544 F. App’x 240, 245–48 (4th Cir. 2013) (arbitrator found release clause enforceable, but nevertheless refused to enforce it).
25a enforcement proceeding.”); United Food & Commer-cial Workers Local 100A, AFL-CIO v. John Hofmeister & Son, Inc., 950 F.2d 1340, 1343–45 (7th Cir. 1991).
4
For similar reasons, the tribunal did not manifestly disregard Indiana law governing pre-judgment inter-est. Based on the evidence submitted by the parties, the tribunal found it highly likely that Dow and MS Tech would have pursued Option B if they had not breached the 1992 Hoechst-Lubrizol Agreement. J.A. 464–68, 515–16. The tribunal calculated contract damages based on the amount that Bayer would have received under the 2007 Bayer-MS Tech agreement and awarded pre-award interest based on that amount. The parties agree that Indiana law governs the pre-judgment interest award.
Dow argues that Indiana law allows pre-judgment interest to be awarded only when “the amount of the claim rests upon a simple calculation and the terms of the contract make such a claim ascertainable.” Kummerer v. Marshall, 971 N.E.2d 198, 201 (Ind. Ct. App. 2012) (quoting Olcott Int’l & Co. v. Micro Data Base Sys., Inc., 793 N.E.2d 1063, 1078 (Ind. Ct. App. 2003)). Indiana practice may not be as uniform as Dow suggests. See James P. Nehf, Contract Damages as Substitute for Full Performance, 32 Ind. L. Rev. 765, 783, (1999) (“In practice, however, Indiana courts have awarded prejudgment interest even when the terms of the contract did not make the amount of the claim readily ascertainable by mere computation.”). But the tribunal carefully considered and applied Indiana law in evaluating the parties’ arguments regarding pre-award interest. Dow’s challenge amounts to no more than an assertion that the tribunal misapplied the law, which is not enough. See Long John Silver’s
26a Rests., 514 F.3d at 349–50; Remmey, 32 F.3d at 149. We therefore decline to vacate the tribunal’s award of pre-award interest.
D
Although we affirm the district court’s decision to confirm the arbitral award, we conclude that the court abused its discretion in denying Dow’s motion to amend the judgment to use the federal statutory rate for post-judgment interest for the period beginning with the entry of the district court’s judgment. 28 U.S.C. § 1961(a) provides that “interest shall be calcu-lated from the date of the entry of the judgment, at a rate equal to the weekly average 1-year constant maturity Treasury yield, as published by the Board of Governors of the Federal Reserve System, for the calendar week preceding the date of the judgment.” Dow argues that the court was obligated to replace the tribunal’s “post-award” interest rate with the stat-utory post-judgment rate for time after the district court’s judgment. We agree on the facts of this case.
Under the doctrine of merger, when “a valid and final judgment for the payment of money is rendered in favor of the plaintiff, the original claim of the plain-tiff is extinguished and a new cause of action on the judgment is substituted for it.” Restatement (Second) of Judgments § 47. Reflecting that notion, numerous circuits have concluded that once a federal court con-firms an arbitral award, the award merges into the judgment and the federal rate for post-judgment inter-est presumptively applies. See Tricon Energy Ltd. v. Vinmar Int’l, Ltd., 718 F.3d 448, 456–460 (5th Cir. 2013); Newmont U.S.A. Ltd. v. Ins. Co. of N. Am., 615 F.3d 1268, 1275–77 (10th Cir. 2010); Fid. Fed. Bank, FSB v. Durga Ma Corp., 387 F.3d 1021, 1023–24 (9th Cir. 2004); Carte Blanche (Sing.) Pte., Ltd. v. Carte
27a Blanche Int’l, Ltd., 888 F.2d 260, 268–70 (2d Cir. 1989); Parsons & Whittemore Ala. Mach. & Servs. Corp. v. Yeargin Constr. Co., 744 F.2d 1482, 1484 (11th Cir. 1984). To overcome this presumption, courts have required the parties or arbitrators to unambiguously express their intent to replace the federal rate for the post-judgment period. See Tricon Energy, 718 F.3d at 456–60; Newmont U.S.A., 615 F.3d at 1275–77; Fid. Fed. Bank, 387 F.3d at 1023–24; Westinghouse Credit Corp. v. D’Urso, 371 F.3d 96, 101–02 (2d Cir. 2004).
We think that the Fourth Circuit would follow the approach taken by its sister circuits and apply the federal post-judgment interest rate in the absence of unambiguous evidence of the parties’ or arbitrators’ contrary intent. In a non-precedential opinion, the Fourth Circuit has applied the same rule to determine whether a contractual interest rate replaced the fed-eral rate. See KanawhaGauley Coal & Coke Co. v. Pittston Minerals Grp., Inc., 501 F. App’x 247, 254–55 (4th Cir. 2012) (per curiam). Bayer does not identify any reason that the Fourth Circuit would not apply the same rule to arbitral awards. We are also unaware of any instance in which a federal court has allowed an interest rate specified in an award to replace the federal rate based on less than clear evidence.
In this case, there is insufficiently clear evidence to displace the federal statutory rate. Here, the tribunal granted “post-award interest” “at the rate of 8% from the date of this Award until full payment.” J.A. 560, 563. And it is undisputed that the tribunal’s attention was not called to the distinction between the time from award to confirmation judgment and the time after confirmation judgment. We see no basis on which to distinguish these circumstances from other grants
28a found to be insufficiently clear to displace the statu-tory post-judgment rate. See Tricon Energy, 718 F.3d at 456–60; Fid. Fed. Bank, 387 F.3d at 1023–24; Westinghouse Credit, 371 F.3d at 101– 02.
The Fifth Circuit’s decision in Tricon Energy is espe-cially instructive. There, arbitrators awarded Tricon contract damages and “post-award interest” “at the rate of 8.5% per annum . . . [from] the date of th[e] award, until paid.” 718 F.3d at 459 (alterations in orig-inal). The district court awarded post-judgment inter-est at the statutory rate. Id. at 452. The Fifth Circuit affirmed, explaining that, because the “panel did not use the words ‘postjudgment interest,’ it is far from clear that it meant to award postjudgment interest.” Id. at 459. The court also rejected Tricon’s contention that because the panel awarded interest “until paid,” the arbitrators meant to replace the federal rate. Id. We do not see how this case, in which the tribunal awarded 8% interest “until full payment,” is materi-ally different from the Tricon Energy arbitrators’ award of 8.5% interest “until paid.”
Mobil Cerro Negro, Ltd. v. Bolivarian Republic of Venezuela, No. 14 Civ. 8163 (PAE), 2015 WL 926011 (S.D.N.Y. Mar. 4, 2015), is not to the contrary. There, the district court held that the federal post-judgment interest rate did not apply to post-judgment interest awarded under the Convention on the Settlement of Investment Disputes Between States and Nationals of Other States (ICSID Convention), Mar. 18, 1965, 17 U.S.T. 1271, 575 U.N.T.S. 159. Id. at *1–3. In reaching that conclusion, however, the court relied on reasoning that applies to the ICSID Convention, but not the New York Convention. For example, the court noted that
29a the Federal Arbitration Act’s enforcement provisions do not apply to the ICSID Convention. See 22 U.S.C. § 1650a. By contrast, the New York Convention’s enabling statute contains no such prohibition. See 9 U.S.C. § 208. The court also made specific factual findings regarding the language of the award.
Under 28 U.S.C. § 2106, a federal appellate court “may affirm, modify, vacate, set aside or reverse any judgment, decree, or order of a court lawfully brought before it for review.” In exercising our discretion under that provision, we modify the district court’s judgment to include the relief requested by Dow’s motion to amend. See Bayer CropScience AG, No. 2:12-cv-47-RAJ-RJK (E.D. Va. Jan. 21, 2016), ECF Nos. 209–10. Specifically, we modify the district court’s judgment to provide that post-award interest, as set forth in the arbitral award, shall accrue through January 15, 2015, the date on which the court entered judgment, and post-judgment interest shall accrue thereafter at the rate established in § 1961. We affirm the judgment as modified. Like the Fourth Circuit, we believe that this approach is appropriate because the resolution of the parties’ dispute requires only the correction of the relevant interest rates. See Martin v. Harris, 560 F.3d 210, 219–22 (4th Cir. 2009); First Fed. Sav. & Loan Ass’n of S.C. v. Chrysler Credit Corp., 981 F.2d 127, 135–36 (4th Cir. 1992). Remand for further proceed-ings would cause the parties to suffer additional delay and expense with no change in outcome.
IV
For the foregoing reasons, we affirm the district court’s decision to confirm the arbitral award. We vacate the court’s decision denying Dow’s motion to amend the judgment. We modify the court’s judgment to provide that post-award interest accrued at the
30a tribunal-set rate through January 15, 2015, and there-after post-judgment interest shall accrue at the rate established in 28 U.S.C. § 1961. We affirm the judg-ment as modified.
Costs awarded to Bayer.
AFFIRMED AS MODIFIED
31a APPENDIX B
IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA
Before the Court are nine motions: Plaintiffs’ Motion to Confirm the Arbitration Award (“Plaintiffs’ Motion” or (“Motion to Confirm”), Defendants’ Motion to Vacate the Arbitration Award (“Motion to Vacate”), and Defendants’ Motion to Stay (“Motion to Stay”). ECF Nos. 113, 116, 132, and 134.1 The Court has reviewed the Motions, the accompanying memoranda
1 Also pending before the Court are several Motions to Seal: ECF Nos. 110, 129, 185, and 194. Each of those motions is GRANTED. The Court also notes a Motion for Leave to Supple-ment the Record was filed on December 16, 2015. ECF No. 200. The Motion to Supplement the Record is GRANTED, and the information therein (including the Plantiffs’ and Defendants’ filings) has been thoroughly considered.
32a and attachments, the voluminous exhibits, the Tribu-nal’s Arbitration Award, and the law. Having held a hearing on the Motions this matter is now ripe for judicial determination. For the reasons stated below, Plaintiffs’ Motion to Confirm the Arbitration Award is GRANTED, Defendants’ Motion to Vacate the Arbi-tration Award is DENIED, and Defendants’ Motion to Stay is DENIED.
I. PROCEDURAL AND FACTUAL BACKGROUND
This is a dispute arising from a patent license agree-ment between the parties for certain plant technology that was entered into on or about June 15, 1992. Plaintiffs allege that Defendants violated the agree-ment, causing Plaintiffs to terminate the agreement and sue for patent infringement.2
On January 20, 2012, Plaintiffs alleged four counts of patent infringement and requested (1) a declara-tory judgment that certain patents were infringed; (2) a permanent injunction against any infringement by Defendants; (3) a judgment that Defendants’ conduct is willful; (4) a judgment that Defendants’ conduct is exceptional; (5) attorneys’ fees; (6) damages; (7) costs and expenses; and (8) such other relief as the Court may deem proper. ECF No. 1.
On March 9, 2012, Defendants filed a Motion to Dismiss or in the Alternative to Stay this Action Pending Arbitration. ECF No. 25. Plaintiffs filed a Memorandum in Opposition to Defendants’ Motion on April 13, 2012, ECF No. 35, and the Court held a hearing on the Motion on July 3, 2012.
2 A more detailed accounting of the factual history of this case
can be found in the Court’s Memorandum Opinion and Order of July 13, 2012.
33a On July 13, 2012, the Court filed a Memorandum
Opinion and Order denying in part and granting in part Defendants’ Motion to Dismiss or in the Alterna-tive to Stay this Action Pending Arbitration. ECF No. 52. The motion to dismiss was denied and the motion to stay this action pending arbitration was granted. Specifically, the Court Ordered that,
Defendants’ alternative Motion to Stay This Action Pending Arbitration is GRANTED. All issues, including the alleged breach and termi-nation of the License Agreement and Plaintiffs’ four patent infringement claims in its Com-plaint, shall be submitted to arbitration in accordance with this Order and the License Agreement between the parties. Further, the Court notes its authority to order dismissal of this action sua sponte should the Court deem it necessary to do so in the future.
ECF No. 52 at 21. The Court further ordered Plaintiff to initiate arbitration proceedings by August 13, 2012. ECF No. 58
Arbitration in this case began on August 13, 2012. ECF No. 59. Subsequently, the Court received joint reports on the status of arbitration from the parties every 120 days.
On August 2, 2013, Defendants filed a Motion to Maintain Stay Pending Arbitration or, in the Alterna-tive, to Dismiss the Complaint. ECF No. 71. Plaintiffs filed a Reply in Opposition on August 7, 2013 (ECF No. 74). A hearing was held on September 10, 2013, and the Court granted the motion to maintain the stay, denied the motion to dismiss, and denied Plaintiffs’ request to lift the stay on September 11, 2013. ECF No. 83. Because of the Court’s concern regarding the
34a pace of arbitration progress, the parties were ordered to file a joint status report every sixty days. Id.
On October 9, 2015, and over partial dissent, the arbitration Panel issued a 346 page Final Award, awarding Plaintiffs damages. ECF No. 118 (Sealed).
On October 16, 2015, Plaintiffs filed this instant Motion to Confirm Final Arbitration Award along with supporting memoranda and relevant exhibits. ECF Nos. 113, 114, 115, 116, 117, and 118.
On November 10, 2015, Defendants filed a Motion to Vacate the Arbitration Award and a Memorandum in Support of the Motion to Vacate the Arbitration Award and in Opposition to Plaintiffs’ Motion to Confirm. ECF Nos. 132 and 133. That same day, Defendants filed a Motion to Stay Proceedings Concerning Plain-tiffs’ Motion to Confirm. ECF Nos. 134 and 135. In support of their Motion, Defendants filed, both elec-tronically and physically with the Court, 137 appendices and several dozen binders of exhibits. ECF Nos. 136-176. Plaintiffs filed an Opposition to the Motion to Stay on November 27, 2015 and contemporaneously submitted a Declaration in Opposition. ECF Nos. 183, 184. Defendants filed Replies to both of their Motions on December 3, 2015. ECF Nos. 191, 192.
On December 16, 2015, Defendants filed a Motion for Leave to File Supplement to the Record, a Memo-randum in Support of the Motion, and a Declaration. ECF Nos. 200-202. Plaintiffs filed a Response on December 30, 2015. ECF No. 204.
On December 22, 2015, the Court held a hearing on the pending Motions and permitted each party time to argue its position. Upon the completion of the hearing the Court informed the parties that it would return to the briefs to deliberate and rule. Having fully consid-
35a ered the Motions, briefs, and voluminous exhibits and declarations, the Court is now satisfied that this matter is ripe for judicial adjudication.
II. LEGAL STANDARD
Arbitration agreements are favored in federal courts, as are those awards stemming from such agree-ments. Arrowhead Global Solutions, Inc. v. Datapath, Inc, 166 F. App’x 39, 43 (4th Cir. Feb. 3, 2006) (unpublished per curiam). The powers of a federal court sitting to review an arbitration award are “severely circumscribed.” Wachovia Sec., LLC v. Brand, 671 F.3d 472, 478 (4th Cir. 2012) (quoting Apex Plumbing Supply, Inc. v. US. Supply Co., Inc., 142 F.3d 188, 193 (4th Cir. 1998)). Further, “[t]he analysis begins with the presumption that the Court should confirm the arbitration award.” Wichard v. Suggs, No. 1:15 cv 003, 2015 U.S. Dist. LEXIS 36994, at *16 (E.D. Va. Mar. 24, 2015) (citing Apex Plumbing, 142 F.3d at 193). This sensible doctrine serves to further the purpose of arbitration, which is “the quick resolution of disputes and the avoidance of the expense and delay associated with litigation.” Apex Plumbing, 142 F.3d at 193. In reviewing an arbitration award, the court “sits to determine only whether the arbitrator did his job—not whether he did it well, correctly, or reasonably, but simply whether he did it.” Wachovia Sec., LLC v. Brand, 671 F.3d at 478. It is long settled that the function of a court reviewing an arbitration award “is intended to be summary: confirmation can only be denied if an award has been corrected, vacated, or modified in accordance with the Federal Arbitration Act.” Taylor v. Nelson, 788 F.2d 220, 225 (4th Cir. 1986). That is, this Court has absolutely no jurisdic-tion to vacate the arbitration award simply because the Court may have reached a different conclusion
36a on these facts. Long John Silver’s Restaurant v. Cole, 514 F.3d 345, 349 (4th Cir. 2008) (citing United Paperworkers Inter. Union AFL-CIO v. Misco, Inc., 484 U.S. 29, 38 (1987).
The Federal Arbitration Act (“FAA”), 9 U.S.C. § 1 et seq., applies to patent contracts including settlement and licensing agreements. Flex-Foot, Inc. v. CRP, Inc., 238 F.3d 1362 (Fed. Cir. 2001) (citing 35 U.S.C. § 294 (1994)). The FAA “is a congressional declaration of a liberal policy favoring arbitration.” Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1370 (Fed. Cir. 2006) (citing Moses H. Cone Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24 (1983)). Pursuant to the Federal Arbitration Act, a district court may vacate an arbitra-tion award if the court finds: (1) fraud in procuring the award; (2) partiality on the part of the arbitrators; (3) gross misconduct by the arbitrators; or (4) failure of the arbitrators to render a mutual, final, and definite decision. Id. (citing 9 U.S.C. § 10 (1994)). Statute defines “gross misconduct” as, inter alia, “any other misbehavior by which the rights of any party have been prejudiced.” 9 U.S.C. § 10(a)(3) (1994). Further, in Wilko v. Swan, 346 U.S. 427, 436 (1953), the Supreme Court observed that an arbitration award may be vacated if it is in “manifest disregard” of the law.
A party seeking to vacate an arbitration award “shoulders a heavy burden.” Patten v. Signator Ins. Agency, Inc., 441 F.3d 230, 234 (4th Cir. 2006) (quoting Remmey v. PaineWebber, Inc., 32 F.3d 143, 149 (4th Cir. 1994)).
A court’s power to grant a motion to stay comes not from the Federal Rules of Civil Procedure, but from the court’s inherent power “under [its] general equity powers and in the efficient management of their
37a dockets.” PMB Nutritionals, LLC v. Dornoch Ltd., 667 F. Supp. 2d 621, 631 (E.D. Va. 2009) (citing Williford v. Armstrong World Industries, Inc., 715 F. 2d 124, 127 (4th Cir. 1983)). See also Aventis Pharma Deutschland GMBH v. Lupin Ltd., 403 F. Supp. 2d 484, 489 (E. D. Va. 2005) (noting that although not expressly provided for by the Federal Rules, a district court has inherent discretion to entertain a motion to stay under its general equity powers). In determining whether to grant the stay, the court must “weigh competing interests and maintain an even balance.” Landis v. N. Am. Co. 299 U.S. 248, 255 (1936)
The party seeking a stay “must justify it by clear and convincing circumstances outweighing potential harm to the party against whom it is operative.” Williford, 715 F. 2d at 127. That is, there must be a “clear case of hardship or inequity in being required to go forward.” Landis, 299 U.S. at 255, 57. If the movant fails to demonstrate such a hardship or inequity, “a stay is not merited.” Aventis Pharma, 403 F. Supp. 2d at 489.
III. DISCUSSION
This case has returned to this Court once again upon filing of the arbitration tribunal’s Final Award. The question before the Court is relatively straight-forward: Should the Court confirm the Award, vacate the Award, or stay the case pending further proceed-ings regarding the subject patents. The Court finds it most appropriate to begin its analysis with the License Agreement that is the subject of the dispute in this case. The Agreement contains a mandatory arbitration clause, which provides for final, binding arbitration in accordance with the Rules of the International Chamber of Commerce. ECF No. 52 at 4. In pertinent part, Article 9 of the Agreement provides:
38a Any controversies or disputes in connection with this Agreement which cannot be amica-bly settled by the parties shall be decided by arbitration in accordance with the Rules of the Conciliation and Arbitration of the International Chamber of Commerce then prevailing. The arbitration shall be held at the place of business of the defendant. The decision of this Court of Arbitration shall be final and binding on the parties and their legal successors.
License Agmt. At Art. 12 (emphasis added). Further, pursuant to 35 U.S.C. § 294(c), “[a]n award by an arbitrator shall be final and binding between the parties . . .”
In 2012, when the Court was considering whether to submit this case to arbitration, the parties agreed that “the questions of whether Defendants violated the License Agreement and whether Plaintiffs validly terminated the agreement should be submitted to arbitration.” ECF No. 52 at 14. Further, Defendants, who now move to vacate the Award on myriad grounds, including that the Award is against public policy and that the tribunal exceeded its authority, asserted that “an arbitrator, not this Court, should decide the threshold issue of which claims are arbitrable, and that all claims, including the patent infringement claims should be decided by an arbitrator.” Id. After deciding that it would determine the threshold ques-tion of arbitrability, the Court held that “[a]ll issues, including the alleged breach and termination of the License Agreement and Plaintiffs’ four patent infringe-ment claims in its Complaint, shall be submitted to arbitration in accordance with this Order and the License Agreement between the parties.” Id. at 21.
39a This case entered arbitration on August 12, 2012. The Court will address each of the three pending Motions below.
A. Motion to Confirm
Plaintiffs move to confirm the arbitration Award pursuant to 9 U.S.C. § 207, the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly known as the New York Conven-tion, and 35 U.S.C. § 294. ECF Nos. 113, 114, 116, and 117. There are four principal reasons Plaintiffs argue in favor of confirming the October 9, 2015 arbitration Award. First, Plaintiffs aver that the Award is final and binding under both federal statute and the License Agreement. Second, Plaintiffs argue that the Court has jurisdiction to confirm the Award because the instant Motion is timely under the New York Convention and 9 U.S.C. § 207 and because this Court retained its jurisdiction over the case post arbitration. Third, Plaintiff submit that absent extraordinary circumstances, an arbitration award must be con-firmed pursuant to 9 U.S.C. § 207. Fourth and Finally, Plaintiffs note that the International Chamber of Com-merce (“ICC”) scrutinized and approved the Award.
Upon review of the record the Court finds that Plaintiffs have filed a timely Motion to confirm the Award. The Motion is timely under statute and this Court expressly retained jurisdiction in its Order sending this case into arbitration. The Court further finds that this is a final and binding award pursuant to the License Agreement and that it has already been scrutinized and approved by the ICC. Unless the Court can find that there exists some extraordinary circumstance under which this Award should be vacated, the Award must be confirmed.
40a B. Motion to Vacate
Defendants move to vacate the arbitration Award because, they argue, (1) the Award is contrary to United States public policy; (2) it manifestly disregards applicable law and disregards unambiguous contract provisions; (3) it fails to draw its essence from the applicable agreements; (4) the tribunal exceeded its authority; (5) the Award violates constitutional patent policy against double patenting; and (6) that the subject patents are invalid and that a pending Patent and Trademark Office (“PTO”) reexamination will confirm as much.
The Court is mindful of its duty at this stage in the proceeding to determine whether it is prudent that the Award be confirmed. The Court also understands that its powers to review an arbitration award are severely circumscribed. A motion to vacate an arbitration award is not an appropriate avenue to relitigate the entire case. The purpose of binding arbitration is to avoid litigation and advance judicial economy. This is not to say that the Court could in no circumstance vacate an arbitration award. However, it is important to caution that arbitration in this case was initiated largely as a result of Defendants urging and the parties’ License Agreement. In essence, by submitting this case to arbitration, the parties agreed to have the underlying factual and legal issues heard and decided by the arbitration panel instead of by this Court.
There is no dispute between the parties that this arbitration falls under the auspices of the New York Convention. Both parties discuss the Convention and its requirements at length in their briefs. The Convention enumerates seven strictly limited grounds for vacating an arbitration award:
41a (a) The parties to the agreement . . . were,
under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made;
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was other-wise unable to present his case;
(c) The award deals with a difference not contemplated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitra-tion, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which contains decisions on matters submitted to arbi-tration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of
42a the country in which, or under the laws of which, that award was made; or
(f) The subject matter of the conflict is not capable of settlement by arbitration in the country in which enforcement is sought; or
(g) Recognition and enforcement of the award would violate the public policy of that country.
New York Convention, Art. V(1)(a)-(e) and V(2)(a)-(b). See also Industrial Risk Insurers v. M.A.N. Gutehoffnungshutte GmbH, 141 F.3d 1434, 1441-42 (11th Cir. 1998) (“In short, the [New York] Conven-tion’s enumeration of defenses is exclusive.”); M & C Corp. v. Erwin Behr GmbH & Co., 87 F.3d 844, 848 (6th Cir. 1996) (noting that the seven grounds specified in the Convention are exclusive).
After reviewing the voluminous submissions of the parties and the extensive record in this case (including the transcript of oral argument on the instant Motions), the Court finds absolutely zero basis to vacate the Award on defenses (a) through (f) cited above. The record in no way supports that Defendants suffered from incapacity, lack of notice, a partial tribunal (indeed one of the arbiters was proposed by Defend-ants), face a non-binding award, that the subject matter is not subject to arbitration or that the panel’s Award falls outside the scope of what was contem-plated in the arbitration. There simply is not evidence to sustain the Defendants’ very heavy burden to vacate the award on any of those grounds.
Thus, the real issue for the Court is whether the Award violates public policy. The Court first notes the “emphatic federal policy in favor of arbitral dispute
43a resolution . . . that applies with special force in the field of international commerce.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 631 (1985). Specifically, Defendants argue that the Award “violates constitutional patent policy against double patenting,” the public policy against manifest disregard of the law, and disregards unambiguous contract provisions.
Citing Article I § 8 of the United States Constitu-tion, Defendants argue that the Tribunal should have invalidated the asserted patents on double patenting grounds. ECF No. 133 at 14. It is true that “[t]he prohibition against double patenting is a longstanding doctrine . . . based on the core principle that, in exchange for a patent, an inventor must fully disclose his invention and promise to permit free use of it at the end of his patent term.” Gilead Scis., Inc. v. Natco Pharma Ltd., 753 F.3d 1208, 1212 (Fed. Cir. 2014), cert. denied, 135 S. Ct. 1530 (2015). However, the issue of double patenting was placed squarely before the panel and it was rejected. See Award, ECF No. 118-3 at ¶ 600 (“the Tribunal is of the opinion that the Strauch patent and the reissue patent should not be considered as commonly owned on the basis that each of the two patents is held by a wholly owned subsidiary of Bayer AG. This lack of common ownership precludes a finding of double patenting.”). In reviewing the Tribunal’s Award, the Court finds that this conclusion is the result of analysis of at least 50 cases and exhibits, and the 29 paragraphs pertaining to double patenting include a thorough discussion of the dissent-ing Tribunal member’s reasoning. For the Court to now delve into whether the majority was wrong to reject the double patenting argument would be to reopen the record and analyze the case on the merits. The Court cannot and will not do so. The Court finds
44a no manifest disregard of the law nor does it see gross misconduct. The Award will not be vacated on Defendants’ double-patenting argument.
Defendants next argue that the Tribunal manifestly disregarded the law in finding that claim 1 of the reissue patent “encompasses the pat protein and, by extension . . . encompasses the pat gene.” ECF No. 118-3 at ¶ 375. This finding, Defendants argue, neces-sarily renders claim 1 of the reissue patent invalid on multiple grounds.
To prevail on an argument that the Tribunal manifestly disregarded the law, a party must prove (1) the existence of an applicable legal principle that is clearly defined and not subject to reasonable debate; and (2) the arbitrators refused to heed that legal principle. Long John Silver’s, 514 F.3d at 349. See also Remmey, 32 F.3d 149-50 (the burden is on the party seeking vacatur to “show that the arbitrators were aware of the law, understood it correctly, found it applicable to the case before them, and yet chose to ignore it in propounding their decision.”). The question is not whether this Court would apply the facts to the law differently, as even committing serious error does not suffice to overturn the decision. Long John Silver’s 514 F.3d at 349.
The arguments Defendants raise regarding a mani-fest disregard of the law are unavailing. Once more, Defendants raise issues that were expressly presented to the Tribunal, and thoroughly analyzed in the Award. The Court has scrutinized Defendants’ filings and has not found a case or legal principle that is clearly defined and not subject to reasonable debate that the arbitrators acknowledged and refused to heed. Absent such a finding, this Court is without jurisdiction to disturb the award on these grounds.
45a Substantive defenses and arguments that were raised before and thoroughly analyzed by the Tribunal cannot simply be couched as public policy issues for the purpose of sidestepping the valid, final, binding award. The Court concludes that the Tribunal did not manifestly disregard the law.
The Court similarly finds the remainder of Defend-ants’ arguments cannot prevail. The Court finds no meritorious reason to vacate the Award of contract damages that were clearly contemplated when this case was submitted to arbitration. Similarly, the Court does not find that the Tribunal disregarded unambiguous contract provisions or failed to draw the essence from the applicable agreements. Instead, the Court finds that the Tribunal thoroughly analyzed the record before it and reached a conclusion based on its interpretation of the relevant License Agreement and did not rewrite or alter the contract provisions. The Court does not find that the Tribunal misapplied any contract provisions. However, even a misapplication of facts or law is not sufficient to support vacatur. The Court today does not conduct a de novo review of the merits.
Ultimately, the most pressing public policy concern at this point in this matter is the public policy in favor of the arbitration process. The policy supporting fair, competent, and judicially respected arbitration proceed-ings is about as strong and compelling a public policy that our federal courts embrace. Where a party requests, is granted, and actively participates in a multi-year arbitration, the party forfeits its right to relitigate the issues that were before the arbitration panel in the district court. Indeed, if the parties were concerned that an arbitration panel might not decide the complex and important issues that comprise this case in a
46a manner palatable and satisfactory to them, the parties should not have agreed to a binding arbitration. Nothing in the panel’s Award and nothing in the record before the Court provides provides a legally sufficient basis to conclude that this Award violates any constitutionally, statutorily, or judicially recog-nized public policy.
Further, the Court finds no defect in the arbitration process such that it has jurisdiction to reopen the record and reexamine the substantive issues raised before the panel. The Court finds that the arbitration was valid, and that the panel’s Award is final and binding. To vacate the award on this record would be fundamentally inapposite to our nation’s public policy. There may very well be a case where an arbitration panel commits gross misconduct or demonstrates manifest disregard of the law in a manner that seri-ously violates or undermines our public policy. This is not that case. Mindful of its role at this stage in the proceedings, the Court will not permit Defendants to use this Motion to Vacate as an opportunity for a second bite at the apple. The Motion to Confirm is GRANTED, the Award is therefore CONFIRMED, and the Motion to Vacate is DENIED.
C. Motion to Stay
Defendants move in the alternative for a stay of proceedings on Plaintiffs’ Motion to Confirm the Arbi-tration Award until the United States Patent and Trademark Office (“PTO”) issues final office actions in a pending reexamination proceeding of all of the patents at issue in this proceeding. Defendants argue that a stay is warranted to permit the PTO to finish its examination of the patents and issue a final determination. This Award, they argue, is based entirely upon patents that the PTO may very well
47a deem invalid. Finally, Defendants suggest that Plain-tiffs would suffer no harm if the Court issues a stay.
Plaintiffs respond that the Award is already final and binding regardless of the current PTO proceeding, that the issue of staying resolution of this dispute was litigated and decided in arbitration, and that the entire Award is not based on the subject patents.
It is “well-settled law that a district court may exercise its discretion when ruling on a motion to stay proceedings pending reexamination of the patents-in-suit by the PTO.” NTP, Inc., v. Research in Motion, Ltd., 397 F. Supp. 2d 785, 787 (E.D. Va. 2005). In determining whether a stay is appropriate, the Court must “weigh competing interests and maintain an even balance.” Hawley v. Johnson & Johnson, 2011 WL 7946243 at *1 (E.D. Va. Apr. 29, 2011) (citing Landis v. North American Co., 299 U.S. 248, 255 (1936)). When considering a motion to stay pending PTO reexamination, a court examines “(1) whether discovery is complete and a trial date is scheduled; (2) whether a stay would simplify the matters at issue; and (3) whether a stay would unduly prejudice or clearly disadvantage the non-moving party.” ePlus, Inc. v. Lawson Software, 2012 WL 1279092, at *2 (E.D. Va. Mar. 31, 2010).
The Court heard lengthy argument on this issue at the hearing on this Motion, and will deny the Motion for a Stay for many of the stated public policy reasons it denied the Motion to Vacate. The Court “is not required to stay judicial resolution in view of [PTO] reexaminations.” Viskase Corp. v. American Nat. Can Co., 261 F.3d 1316, 1328 (Fed. Cir. 2001). See also Patlex Corp. v. Mossinghoff, 758 F.2d 594 (Fed Cir. 1985) (holding that a stay for purposes of reexamina-tion is within the district court’s discretion). After all,
48a giving courts such judicial discretion “is in harmony with the Congressional purpose.” Patlex Corp., 758 F.2d at 603. The Court also notes that this very issue was placed before and decided by the Arbitration Panel. In an eight-page procedural order denying the Motion for a Stay, the Panel ruled, “[t]he parties have clearly agreed to submit to arbitration all infringe-ment, validity and enforceability issues arising from their dispute over the patents-at-issue.” Panel Proce-dural Order, ECF No. 184-1, Exh. A. at 2. As with the substantive issues decided by the Panel, the Court finds no meritorious reason to disturb this procedural order.
Further, the very situation before this Court is one contemplated by 35 U.S.C. § 294. During the process of a final and binding arbitration, one party sought reexamination of the subject patents. Now, after issu-ance of a final and binding arbitration Award, that same party seeks to stay proceedings in light of a pending PTO reexamination. However, Section (c) of § 294 expressly contemplates this very scenario. The parties to an arbitration “may agree that in the event a patent which is the subject matter of an award is subsequently determined to be invalid or unenforce-able in a judgment rendered by a court of competent jurisdiction from which no appeal can or has been taken, such award may be modified . . .” 35 U.S.C. § 294. No such agreement exists in this case. Further, that the statute says the parties “may” agree indicates that Congress contemplated this exact scenario and determined that subsequent reexamination and deter-mination by the PTO is not necessarily fatal to a final and binding arbitration.
Having considered the required factors the Court has determined that a stay is not warranted. Plaintiffs
49a would suffer serious potential harm in that prolonging this litigation may make satisfying the judgment more difficult. Further, this issue is before the Court at the very end of a protracted binding arbitration process wherein Defendants had ample time to raise this issue (long before it was raised in 2014). Cf. Juxtacomm-Texas Software, LLC v. Lanier Parking Systems of Virginia, Inc., 2011 WL 3322554 (E.D. Va. Aug. 2, 2011) (granting a stay because the of “advanced stage of reexamination juxtaposed with the early stage of litigation”). Considering and balancing those factors in support and against a stay, the Court finds that while a stay would certainly provide a strategic advantage to Defendants, it is not warranted on this record. Therefore, Defendants’ Motion for a Stay is DENIED.
IV. CONCLUSION
After a three-year binding arbitration, a competent arbitration panel issued a final Award. Nothing about the arbitration process or the result compels this Court to disturb that panel’s work. For the reasons stated above, Plaintiffs’ Motion to Confirm the Award (ECF Nos. 113 and 116) is GRANTED, Defendants’ Motion to Vacate the Award (ECF No. 132) is DENIED, and Defendants’ Motion to Stay (ECF No. 134) is DENIED. A separate Order confirming the Award shall issue today. Each Motion to Seal (ECF Nos. 110, 129, 185, and 194) is GRANTED. The Motion for Leave to File Supplement to the Record (ECF No. 200) is GRANTED.
The Clerk is DIRECTED to send a copy of this Memorandum Opinion and Order to the parties.
50a IT IS SO ORDERED.
Norfolk, Virginia January 15, 2016
/s/ Raymond A. Jackson Raymond A. Jackson United States District Judge
51a APPENDIX C
NOTE: This order is nonprecedential.
UNITED STATES COURT OF APPEALS FOR THE FEDERAL CIRCUIT
Appellants Agrigenetics, Inc., Dow AgroSciences LLC, Mycogen Plant Science, Inc., and Phytogen Seed Company, LLC filed a combined petition for panel rehearing and rehearing en banc. A response to the petition was invited by the court and filed by Appellees Bayer CropScience AG and Bayer CropScience NV. The petition was referred to the panel that heard the appeal, and thereafter the petition for rehearing en banc was referred to the circuit judges who are in regular active service.
Upon consideration thereof,
IT IS ORDERED THAT:
The petition for panel rehearing is denied.
The petition for rehearing en banc is denied.
The mandate of the court will issue on May 19, 2017.
FOR THE COURT
May 12, 2017 /s/ Peter R. Marksteiner Date Peter R. Marksteiner
Clerk of Court
53a APPENDIX D
UNITED NATIONS CONFERENCE ON INTERNATIONAL COMMERCIAL
ARBITRATION
CONVENTION ON THE RECOGNITION AND ENFORCEMENT
OF FOREIGN ARBITRAL AWARDS
UNITED NATIONS 1958
CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN
ARBITRAL AWARDS
Article I
1. This Convention shall apply to the recognition and enforcement of arbitral awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal. It shall also apply to arbitral awards not considered as domestic awards in the State where their recognition and enforcement are sought.
2. The term “arbitral awards” shall include not only awards made by arbitrators appointed for each case but also those made by permanent arbitral bodies to which the parties have submitted.
3. When signing, ratifying or acceding to this Con-vention, or notifying extension under article X hereof, any State may on the basis of reciprocity declare that it will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. It may also declare that it will apply the Convention only to differences arising out of legal relationships, whether contractual or not,
54a which are considered as commercial under the national law of the State making such declaration.
Article II
1. Each Contracting State shall recognize an agree-ment in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agree-ment, signed by the parties or contained in an exchange of letters or telegrams.
3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.
Article III
Each Contracting State shall recognize arbitral awards as binding and enforce them in accordance with the rules of procedure of the territory where the award is relied upon, under the conditions laid down in the following articles. There shall not be imposed substantially more onerous conditions or higher fees or charges on the recognition or enforcement of arbi-tral awards to which this Convention applies than are imposed on the recognition or enforcement of domestic arbitral awards.
55a Article IV
1. To obtain the recognition and enforcement mentioned in the preceding article, the party applying for recognition and enforcement shall, at the time of the application, supply:
(a) The duly authenticated original award or a duly certified copy thereof;
(b) The original agreement referred to in article II or a duly certified copy thereof.
2. If the said award or agreement is not made in an official language of the country in which the award is relied upon, the party applying for recognition and enforcement of the award shall produce a translation of these documents into such language. The transla-tion shall be certified by an official or sworn translator or by a diplomatic or consular agent.
Article V
1. Recognition and enforcement of the award may be refused, at the request of the party against whom it is invoked, only if that party furnishes to the competent authority where the recognition and enforce-ment is sought, proof that:
(a) The parties to the agreement referred to in article II were, under the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the parties have subjected it or, failing any indication thereon, under the law of the country where the award was made; or
(b) The party against whom the award is invoked was not given proper notice of the appointment of the arbitrator or of the arbitration proceedings or was otherwise unable to present his case; or
56a (c) The award deals with a difference not contem-
plated by or not falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not so submitted, that part of the award which con-tains decisions on matters submitted to arbitration may be recognized and enforced; or
(d) The composition of the arbitral authority or the arbitral procedure was not in accordance with the agreement of the parties, or, failing such agreement, was not in accordance with the law of the country where the arbitration took place; or
(e) The award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.
2. Recognition and enforcement of an arbitral award may also be refused if the competent authority in the country where recognition and enforcement is sought finds that:
(a) The subject matter of the difference is not capable of settlement by arbitration under the law of that country; or
(b) The recognition or enforcement of the award would be contrary to the public policy of that country.
Article VI
If an application for the setting aside or suspension of the award has been made to a competent authority referred to in article V (1) (e), the authority before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the
57a enforcement of the award and may also, on the application of the party claiming enforcement of the award, order the other party to give suitable security.
Article VII
1. The provisions of the present Convention shall not affect the validity of multilateral or bilateral agreements concerning the recognition and enforce-ment of arbitral awards entered into by the Contracting States nor deprive any interested party of any right he may have to avail himself of an arbitral award in the manner and to the extent allowed by the law or the treaties of the country where such award is sought to be relied upon.
2. The Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927 shall cease to have effect between Contracting States on their becoming bound and to the extent that they become bound, by this Convention.
Article VIII
1. This Convention shall be open until 31 December 1958 for signature on behalf of any Member of the United Nations and also on behalf of any other State which is or hereafter becomes a member of any specialized agency of the United Nations, or which is or hereafter becomes a party to the Statute of the International Court of Justice, or any other State to which an invitation has been addressed by the General Assembly of the United Nations.
2. This Convention shall be ratified and the instrument of ratification shall be deposited with the Secretary-General of the United Nations.
58a Article IX
1. This Convention shall be open for accession to all States referred to in article VIII.
2. Accession shall be effected by the deposit of an instrument of accession with the Secretary-General of the United Nations.
Article X
1. Any State may, at the time of signature, ratifica-tion or accession, declare that this Convention shall extend to all or any of the territories for the inter-national relations of which it is responsible. Such a declaration shall take effect when the Convention enters into force for the State concerned.
2. At any time thereafter any such extension shall be made by notification addressed to the Secretary-General of the United Nations and shall take effect as from the ninetieth day after the day of receipt by the Secretary-General of the United Nations of this notification, or as from the date of entry into force of the Convention for the State concerned, whichever is the later.
3. With respect to those territories to which this Convention is not extended at the time of signature, ratification or accession, each State concerned shall consider the possibility of taking the necessary steps in order to extend the application of this Convention to such territories, subject, where necessary for consti-tutional reasons, to the consent of the Governments of such territories.
Article XI
In the case of a federal or non-unitary State, the following provisions shall apply:
59a (a) With respect to those articles of this Convention
that come within the legislative jurisdiction of the federal authority, the obligations of the federal Govern-ment shall to this extent be the same as those of Contracting States which are not federal States;
(b) With respect to those articles of this Convention that come within the legislative jurisdiction of constit-uent states or provinces which are not, under the constitutional system of the federation, bound to take legislative action, the federal Government shall bring such articles with a favourable recommendation to the notice of the appropriate authorities of constituent states or provinces at the earliest possible moment;
(c) A federal State Party to this Convention shall, at the request of any other Contracting State trans-mitted through the Secretary-General of the United Nations, supply a statement of the law and practice of the federation and its constituent units in regard to any particular provision of this Convention, showing the extent to which effect has been given to that provision by legislative or other action.
Article XII
1. This Convention shall come into force on the ninetieth day following the date of deposit of the third instrument of ratification or accession.
2. For each State ratifying or acceeding to this Convention after the deposit of the third instrument of ratification or accession, this Convention shall enter into force on the ninetieth day after deposit by such State of its instrument of ratification or accession.
Article XIII
1. Any Contracting State may denounce this Convention by a written notification to the Secretary-
60a General of the United Nations. Denunciation shall take effect one year after the date of receipt of the notification by the Secretary-General.
2. Any State which has made a declaration or notification under article X may, at any time there-after, by notification to the Secretary-General of the United Nations, declare that this Convention shall cease to extend to the territory concerned one year after the date of the receipt of the notification by the Secretary-General.
3. This Convention shall continue to be applicable to arbitral awards in respect of which recognition or enforcement proceedings have been instituted before the denunciation takes effect.
Article XIV
A Contracting State shall not be entitled to avail itself of the present Convention against other Con-tracting States except to the extent that it is itself bound to apply the Convention.
Article XV
The Secretary-General of the United Nations shall notify the States contemplated in article VIII of the following:
(a) Signatures and ratifications in accordance with article VIII;
(b) Accessions in accordance with article IX;
(c) Declarations and notifications under articles I, X and XI;
(d) The date upon which this Convention enters into force in accordance with article XII;
61a (e) Denunciations and notifications in accordance
with article XIII.
Article XVI
1. This Convention, of which the Chinese, English, French, Russian and Spanish texts shall be equally authentic, shall be deposited in the archives of the United Nations.
2. The Secretary-General of the United Nations shall transmit a certified copy of this Convention to the States contemplated in article VIII.
