Licensor’s successor is not bound by arbitration clause in license agreement

Last week’s Federal Circuit decision in DataTreasury Corp. v Wells Fargo & Company highlights the interplay between federal and state laws in IP license agreements.  In the case, a patent license agreement contained an arbitration clause in which the parties agreed that all disputes would be subject to arbitration.  The patent holder/licensor then assigned the patent to DataTreasury.  When DataTreasury brought suit against Wells Fargo (parent of the licensee) Wells Fargo argued that DataTreasury was subject to the license agreement’s arbitration clause.

The court disagreed.  Noting that the agreement was governed by Minnesota law, and that Minnesota law does not (in most situations) impose an arbitration clause on a party who has not expressly agreed to it, the court held that DataTreasury was not subject to the agreement’s arbitration clause.

The lesson for licensees:  In many situations, patent, trademark and copyright owners are not willing to restrict their ability to assign the license agreement.  If so, a licensee should ensure that the agreement expressly requires the licensor to bind any successor-in-interest to all terms of the license agreement.  This may allow the licensee to bring a breach of contract claim if the successor-in-interest fails to accept all of the license terms.

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