Agere Systems v. Samsung Electronics Co. Ltd.
| Decision Date | 18 February 2009 |
| Docket Number | No. 07-40984.,07-40984. |
| Citation | 560 F.3d 337 |
| Parties | AGERE SYSTEMS, INC., a Delaware Corporation, Plaintiff-Appellee, v. SAMSUNG ELECTRONICS COMPANY LTD., a Corporation of the Republic of Korea, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Eric Miller Albritton, Albritton Law Firm, Longview, TX, Edward J. DeFranco, Kathleen Marie Sullivan (argued), Quinn, Emanuel, Urquhart, Oliver & Hedges, New York City, Kevin P.B. Johnson, Quinn, Emanuel, Urquhart, Oliver & Hedges, Redwood Shores, CA, for Defendant-Appellant.
Appeal from the United States District Court for the Eastern District of Texas.
Before JONES, Chief Judge, and OWEN and SOUTHWICK, Circuit Judges.
Agere Systems, Inc. sued Samsung Electronics Company LTD, alleging a breach of a patent licensing agreement. Samsung moved to compel arbitration and stay the proceedings based on an arbitration clause contained in a subsequent payment scheduling agreement. The district court denied the request, and Samsung appealed. Because we conclude that an arbitrator should determine the arbitrability of this action, we REVERSE and REMAND.
At the center of this controversy are five agreements, each involving royalty payments. In 1990, Samsung entered into a detailed patent cross-license agreement with AT&T, in which both entities held nonexclusive rights to each others' patents. Samsung and AT&T also entered into a contemporaneous letter agreement that provided the payment structure for royalties until December 31, 1994.1 The letter agreement explained that, after December 31, 1994, Samsung and AT&T would negotiate in "good faith" for a new payment structure arrangement.
As contemplated, Samsung and AT&T executed a new agreement on December 11, 1995. This agreement set forth the payment structure through December 31, 1999. Similar to the 1990 letter agreement, the 1999 agreement obligated Samsung and AT&T to negotiate a new payment schedule in "good faith" upon expiration of the stated period. It also stated that the negotiations were to "be based on the same methodology" as before.
Lucent Technologies GRL Corporation became AT&T's successor-in-interest. On July 28, 2000, as contemplated in the 1995 agreement, Samsung and Lucent entered into a new payment structure agreement. This agreement provided the payment structure for royalties until December 31, 2004. It also contained four other pertinent provisions: (1) that in the event of a dispute arising out of the agreement, either party could request mediation; (2) that if mediation was unsuccessful, the dispute would be submitted to arbitration; (3) that an arbitrator was to determine questions of arbitrability; and (4) like the 1995 agreement, that Samsung and Lucent would use "the same methodology" as in the previous negotiations to reach a post-December 31, 2004 agreement.
In late 2004, Agere became Lucent's successor-in-interest and began negotiating with Samsung for a new payment schedule. However, ten months after the stated December 31, 2004 date, the parties still had not reached a new agreement. Samsung sent Agere a letter stating that no future royalties were due. Agere responded by threatening litigation.
Eventually, on January 9, 2006, the parties resolved some of their differences.2 By its terms, the 2006 agreement set forth a payment schedule for the period of January 1, 2005, through June 30, 2005. Both parties would use their "best efforts" to reach a new payment schedule agreement before April 30, 2006; neither party would "assert an IP action of any kind any where against the other relating to the PLA before April 30, 2006." The 2006 agreement did not reference an alternative dispute procedure or any of the prior agreements, except for the initial 1990 patent cross-licensing agreement.
The parties failed to reach an agreement by April 30, 2006. Agere filed suit in May 2006. Samsung responded by invoking the mediation clause contained in the 2000 agreement. Agere complied with Samsung's request for mediation, but the process was unsuccessful. Samsung then answered Agere's complaint and later filed a motion to compel arbitration. The district court denied the motion, holding that the 2006 agreement superceded the 2000 agreement. Samsung now appeals.
This court has jurisdiction under the Federal Arbitration Act, which provides that "[a]n appeal may be taken from ... an order ... denying a petition ... to order arbitration to proceed ...." 9 U.S.C. § 16(a)(1)(B). We review the district court's decision de novo. Pursuant to choice of law provisions contained in the various agreements, the parties agree that New York law governs their dispute. Morrison v. Amway Corp., 517 F.3d 248, 253 (5th Cir.2008).
The district court denied Samsung's motion to compel arbitration by finding that the agreement to arbitrate had expired:
To determine whether to compel arbitration, the court answers two questions: (1) whether the arbitration agreement is valid and (2) whether the dispute falls within the scope of the agreement. In this case, there is no longer a valid agreement to arbitrate. The court agrees with Agere that the terms of the 2006 Letter Agreement supersede the terms of the 2000 PLA.
Samsung argues that the district court's analysis went too far. We agree.
The Supreme Court has identified the appropriate starting point for resolving this type of dispute. While the "general rule" is that "question[s] of whether the parties agreed to arbitrate [are] to be decided by the court, not the arbitrator," an exception applies in cases where the parties unmistakably provide for the arbitrator to decide. AT&T Tech., Inc. v. Commc'n Workers of Am., 475 U.S. 643, 649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986). In other words, even the issue of arbitrability "may be submitted to binding arbitration ... if there has been a clear demonstration that the parties contemplated it." Piggly Wiggly Operators' Warehouse, Inc. v. Piggly Wiggly Operators' Warehouse Indep. Truck Drivers Union, Local No. 1, 611 F.2d 580, 584 (5th Cir. 1980).
The pertinent portions of the 2000 agreement provide this:
(a) If a dispute arises out of or relates to this Agreement, or the breach, termination or validity thereof, the parties agree to submit the dispute to a sole mediator selected...
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