Handshake - IPR Institution Despite Arbitration Agreement Is Not Appealable

Over a thorough dissent by Judge O’Malley, the Federal Circuit determined it lacked jurisdiction to review the Board’s decision to institute IPR despite an arbitration agreement between the parties. In re Maxpower Semiconductor, Inc., 2021-146, 2021-1950, 2021-1951, 2021-1952, 2021-1953, 2021 WL 4130639 (Fed. Cir. Sept. 8, 2021).

ROHM Japan and Maxpower are parties to a technology license agreement that includes an agreement to arbitrate disputes. In September, 2020, Maxpower notified ROHM Japan of its intent to initiate arbitration. Shortly after, ROHM USA filed a complaint for declaratory judgment of non-infringement and four IPRs challenging the patents at issue. Id. at *2. The district court dismissed the complaint and compelled the parties to arbitrate. But the Board instituted each of the IPRs, determining that the contractual interpretation is beyond the Board’s mandate. Id. at *3 (concurring/dissenting op.).

Maxpower filed a petition for mandamus and direct appeal to the Federal Circuit, asking it to review the Board’s institution. Relying on 35 U.S.C. § 314(d), which states that decisions not to institute are nonappealable, the court denied the mandamus petition and dismissed the appeals. The court rejected Maxpower’s attempt to appeal under the Federal Arbitration Act, 9 USC §16(a)(1), because the institution decision did not fall within the categories of orders set forth therein as subject to appeal. The court also determined that it lacked jurisdiction under the collateral order doctrine because Maxpower would still have the right to raise its challenge to the applicability of the arbitration agreements after the Board’s final written decision. Finally, the majority noted that Maxpower had not met the mandamus standard because alternate relief was available to it by asking the district court to enjoin ROHM from proceeding with its IPRS, citing Dodocase VR, Inc. v. MerchSource, LLC, 767 F. App’x 930 (Fed. Cir. 2019). Maxpower, 2021 WL 4130639 at *2, fn. 1.

Judge O’Malley dissented from the denial of mandamus. Her analysis begins with 35 U.S.C. § 294, which makes agreements to arbitrate patent validity “valid, irrevocable, and enforceable, except for any grounds that exist at law or in equity for revocation of a contract.” Maxpower, 2021 WL 4130639 at *2. By denying mandamus, she contends the court irreversibly harms Maxpower by denying it the benefit of the arbitration agreement and “casts a shadow” over arbitration agreements by making them valid only in district court and not before the Board. Id. Judge O’Malley cites the Supreme Court’s repeated pronouncements of the “liberal federal policy favoring arbitration agreements,” requiring that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Id. at *4. Further, she notes that the Supreme Court’s decision in Preston v. Ferrer, 552 U.S. 346 (2008) shows that arbitration agreements can preclude an administrative agency’s exercise of its otherwise lawful jurisdiction to adjudicate disputes, such as the Board’s jurisdiction over inter partes review proceedings. Id. at *5. The majority opinion fails, according to Judge O’Malley, to address this argument, noting only that the case was never cited by Maxpower. Judge O’Malley, a former district court judge, also disputed the majority’s position that the district court provides an alternate remedy, noting the district cannot bind the Board from acting. In denying mandamus, Judge O’Malley contends that the court has multiplied proceedings rather than streamlining them as intended by the arbitration agreement.

The court’s decision prioritizes the AIA’s prohibition against the appeal of the decision whether to institute over the Federal Arbitration Act’s liberal policy favoring arbitration, seemingly in contravention of Supreme Court precedent. The Federal Circuit leaves parties to an arbitration agreement few options to seek benefit of that agreement in the Patent Office before the Board issues a final written decision. Based on this decision, perhaps litigants seeking an order from the district court to compel arbitration should also seek an injunction prohibiting putative arbitration opponents from filing IPR petitions.