General Mills, Inc. v. Hunt-Wesson, Inc., 3-95-98.

• Decision Date: 06 July 1995
• Docket Number: No. 3-95-98.,3-95-98.
• Citation: 889 F. Supp. 1119
• Parties: GENERAL MILLS, INC., Plaintiff, v. HUNT-WESSON, INC., Defendant.
• Court: U.S. District Court — District of Minnesota

889 F. Supp. 1119

GENERAL MILLS, INC., Plaintiff, v. HUNT-WESSON, INC., Defendant.

No. 3-95-98.

United States District Court, D. Minnesota, Third Division.

July 6, 1995.

Allison A. Johnson, Robins, Kaplan, Miller & Ciresi, Minneapolis, MN, and Steve Pokotilow, Stroock & Stroock & Lavan, New York City, for plaintiff.

David R. Fairbairn, Thomas J. Stueber, Kinney and Lange, Minneapolis, MN and Craig Summer, Pretty, Schroeder, Brueggemann & Clark, Los Angeles, CA, for defendant.

ORDER

DAVIS, District Judge.

This matter is before the Court upon Defendant's objections to United States Magistrate Judge Mason's Report and Recommendation dated May 30, 1995.

Pursuant to statute, the Court has conducted a de novo review of the record. 28 U.S.C. § 636(b)(1); Local Rule 72.1(c). Based on that review and all the arguments of the parties, the Court ADOPTS the Report and Recommendation.

Accordingly, IT IS HEREBY ORDERED that:

1. Defendant's motion for a Stay of these proceedings is DENIED;

2. Plaintiff's motion for Preliminary Injunction is GRANTED. Plaintiff General Mills, Inc. and Defendant Hunt-Wesson, Inc., and their officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with them who receive actual notice of this Order by personal service or otherwise, are hereby restrained and enjoined from participating, or engaging in any way in the arbitration proceeding commenced by Hunt-Wesson against General Mills on April 21, 1995 before the American Arbitration Association, until further Order of this Court.

REPORT AND RECOMMENDATION

MASON, United States Magistrate Judge.

This action for patent infringement was commenced on February 1, 1995. On February 27, 1995, Defendant filed its Answer, and a Counterclaim seeking a declaratory judgment that the patent is invalid, unenforceable, and not infringed. On March 3, 1995, Defendant filed a Motion for Summary Judgment of non-infringement. On April 21, 1995, Defendant filed a Demand for Arbitration with the American Arbitration Association.

This matter is before the Court on cross-motions concerning Defendant's Demand for Arbitration. Defendant moves to Stay proceedings in this action pending conclusion of proceedings on its Demand for Arbitration, pursuant to the provisions of the Federal Arbitration Act, 9 U.S.C. § 3 Docket No. 13; Plaintiff moves for a preliminary injunction enjoining Defendant from proceeding with the arbitration. Docket No. 23.¹

The Court, being duly advised in the premises, upon all of the Affidavits, Exhibits, files, records and proceedings herein, now makes and enters the following Findings of Fact and Report and Recommendation.

FINDINGS OF FACT/REPORT

Plaintiff and Defendant are competitors in the sale of Microwave popcorn. Plaintiff sells microwave popcorn under the trademark POP SECRET®. Defendant sells microwave popcorn under the trademark ORVILLE REDENBACHER'S®, among others. The Complaint alleges that Defendant's microwave popcorn products infringe Plaintiff's U.S. Patent No. 4,267,420 (hereinafter the "patent in suit" or the "'420 patent").

Earlier litigation to which Defendant was a party ("The 1988 Litigation") involved allegations that Defendant's microwave popcorn products infringed what have been called the "Watkins patents," namely U.S. Patent Nos. 4,735,513 and 4,878,765.² These patents are owned by Golden Valley Microwave Foods, Inc. (Golden Valley). General Mills was a licensee under those patents, among others (Agreement, June 19, 1985 — Summers Affidavit, Exhibit 5), and had agreed with Golden Valley that the latter would bring suit under those patents, and split the proceeds with General Mills. (Agreement, September 26, 1988 — Summers Affidavit Exhibit 4). General Mills was not a party to the 1988 Litigation, and its '420 patent was not (and could not have been) in issue in the 1988 litigation.

The 1988 Litigation was ultimately resolved by three agreements entered into in 1991 ("The 1991 Agreements").³ Defendant claims that the 1991 Agreements provided it with an implied license under the patent in suit, and that the issue of whether it is entitled to that license must be decided by arbitration. Arbitration is provided for in the License Agreement and in the Settlement Agreement.

In 1982, Congress enacted provisions which allow parties to make the enforcement provisions of the Federal Arbitration Act applicable to contracts involving patents. 35 U.S.C. § 294. The Federal Arbitration Act provides that contracts by which parties agree to have their disputes resolved by arbitration are enforceable by the federal courts (9 U.S.C. § 2), and it establishes a procedure by which a party may obtain a stay of the litigation if the issue therein is referable to arbitration. 9 U.S.C. § 3. Parties may be compelled to arbitrate if there is an agreement to arbitrate, and if the issue in dispute is an issue which the parties agreed to arbitrate. 9 U.S.C. § 4. Disputes concerning arbitration are to be decided by the court "in the manner provided by law for the making and hearing of motions." 9 U.S.C. § 6. Moses H. Cone Memorial Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 22, n. 26, 103 S.Ct. 927, 940, n. 26, 74 L.Ed.2d 765 (1983).

The limited duty of the district court is to determine whether there is an agreement to arbitrate, and whether the issue is one which the parties agreed to arbitrate. Houlihan v. Offerman & Co., Inc., 31 F.3d 692, 694 (8th Cir.1994); Daisy Mfg. Co. v. NCR Corp., 29 F.3d 389, 392 (8th Cir.1994). See also I.S. Joseph Co., Inc. v. Michigan Sugar Co., 803 F.2d 396, 399 (8th Cir.1986).

It is the Court, and not the arbitrator, which decides the issue of arbitrability. AT & T Technologies, Inc. v. Communications Workers of America, 475 U.S. 643, 648-649, 106 S.Ct. 1415, 1418-1419, 89 L.Ed.2d 648 (1986); International Union, United Auto, Aerospace and Agr. Implement Workers of America (UAW) v. General Elec. Co., 714 F.2d 830 (8th Cir.1983). "The court is to make this determination by applying the `federal substantive law of arbitrability, applicable to any arbitration agreement within the coverage of the Act.' Moses H. Cone Memorial Hospital, 460 U.S. at 24, 103 S.Ct. at 941." Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 625, 105 S.Ct. 3346, 3353, 87 L.Ed.2d 444 (1985).⁴ In making the decision, the Court is not to decide the merits of the dispute. E.g., AT & T Technologies, 475 U.S. 643, 649, 106 S.Ct. 1415, 1418-1419, 89 L.Ed.2d 648 (1986); United Steelworkers of America v. American Mfg. Co., 363 U.S. 564, 568, 80 S.Ct. 1343, 1346-1347, 4 L.Ed.2d 1403 (1960).

The federal policy favoring arbitration is one factor which the court must consider in deciding the issue of arbitrability, but the ultimate issue is whether the parties in fact agreed that the particular dispute was to be resolved by the process of arbitration rather than the judicial process. The Court of Appeals made this clear in Recold, S.A. de C.V. v. Monfort of Colorado, Inc., 893 F.2d 195, 197 (8th Cir.1990):

"While the Supreme Court has announced a policy in favor of arbitration to resolve national and international disputes, see Shearson/American Express, Inc. v. McMahon, 482 U.S. 220, 107 S.Ct. 2332, 96 L.Ed.2d 185 (1987); Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 638-39, 105 S.Ct. 3346, 3359-60, 87 L.Ed.2d 444 (1985), arbitration remains a dispute resolution mechanism which is not imposed absent both parties' consent. See Volt Information Sciences, Inc. v. Bd. of Trustees 489 U.S. 468, 477-78, 109 S.Ct. 1248, 1255, 103 L.Ed.2d 488 (1989); United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347 1352-53 4 L.Ed.2d 1409 (1960); United States v. Panhandle Eastern Corp., 672 F.Supp. 149, 153 (D.Del.1987)."

The threshold for determining whether a matter is one upon which arbitration should be ordered has been said to be very low.⁵ However, this policy applies more to those cases in which the grant of arbitral authority is broad, and in situations where it may be said with some assurance that the arbitrators will be able to bring particular abilities to the process by reason of experience and intimate knowledge of the contract issues involved. Labor matters are one common example. In those circumstances, the parties may be said to have preferred that an arbitrator with a background in such contracts decide the matter, rather than a judge or a jury.⁶ The policy favoring arbitration is not to be blindly applied when the reasons which underlie it are not present, such as the case presently before the Court.

With this background in mind, we turn to the specifics of the contracts before the Court.

Existence of Arbitration Agreements

Plaintiff contends that the License Agreement has expired pursuant to the provisions of Section 9 of the License Agreement, which provides that Hunt-Wesson's "obligation to pay royalties hereunder for Licensed Products ... shall continue until expiration of the last-to-expire of any U.S. Licensed Patents containing a claim which covers a Licensed Product." In 1992, the Watkins patents were declared invalid, and Defendant thereupon discontinued making payments under the License Agreement. Plaintiff argues that this demonstrates that the License Agreement terminated in 1992.

Although Section 9 is captioned "TERM AND TERMINATION," the Section does not set forth a termination date. It only specifies the date upon which Hunt-Wesson may discontinue making royalty payments. In the event of any dispute between the parties as to the matters upon which they agreed, (such as, for example, whether Hunt-Wesson paid all royalties it agreed to pay,) that dispute would be governed by the License Agreement. If Defendant was licensed under the '420 patent, it's right to continue making those sales, and its responsibility for payment of royalties on sales of the products covered by that patent, cannot...