The U.S. Court of Appeals for the Federal Circuit recently issued a decision in ROHM Semiconductor USA, LLC v. MaxPower Semiconductor, Inc., No. 2021-0709 (Nov. 12, 2021). The case was on appeal from the Northern District of California, which had compelled arbitration and dismissed ROHM USA’s declaratory judgment action filed against MaxPower. The Federal Circuit affirmed.
The parties’ dispute focused on semiconductor technologies that MaxPower had licensed to ROHM USA’s parent company, ROHM Japan, under a technology license agreement (“TLA”). In September 2020, MaxPower gave notice of its intent to initiate arbitration under the TLA, which included an agreement to arbitrate any related dispute. In response, ROHM USA filed the declaratory judgment action for patent non-infringement and inter partes review petitions against MaxPower’s patents.
The central issue on appeal was whether the TLA delegated the question of arbitrability to the arbitrator. The law precludes courts from assuming parties “agreed to arbitrate arbitrability” absent clear and unmistakable evidence. First Options of Chi., Inc. v. Kaplan, 514 U.S. 938, 944 (1995). ROHM USA presented three reasons why there was no such agreement in the TLA.
First, ROHM USA argued the TLA’s incorporation by reference to the California Code of Civil Procedure (“CCCP”) was not a clear agreement to arbitrate arbitrability because the CCCP was ambiguous. One provision said the arbitrator “may rule on its own jurisdiction,” CCCP § 1297.161, while the other said a court shall do so, CCCP § 1281.2. The Federal Circuit, however, observed no ambiguity because the former provision expressly superseded the latter “with respect to international commercial arbitration and conciliation.” CCCP § 1297.17.
Second, ROHM USA argued that CCCP § 1297.17 and § 1297.161 did not apply because the dispute was not international. The Court disagreed based on the TLA involving ROHM Japan, a Japanese entity, and MaxPower, a California entity, as parties to a global license. ROHM USA had also attacked MaxPower’s patents in the U.S., Korea, and China. Thus, the Court found “this case is merely one aspect of a sprawling international dispute.”
Finally, ROHM USA argued that the CCCP’s permissive language – providing that the arbitrator “may rule on its own jurisdiction” – was not a clear and unmistakable delegation of authority to determine arbitrability. CCCP § 1297.161 (emphasis added). The Court interpreted the word “may” as empowering the arbitrator to determine arbitrability if disputed, which was consistent with how other circuits have interpreted similar language in the analogous United Nations Arbitration Rules.