In a Summary Order, the United States Court of Appeals for the Second Circuit refused to allow Nokia to enforce its right to arbitrate claims involving an alleged license agreement with InterDigital, basing its decision partly on the fact that by waiting three and a half years, Nokia waived its arbitration right. Nokia Corporation v. InterDigital Inc., InterDigital Communications, LLC and InterDigital Technology Corp., Case No. 08-1642 (2nd Cir., July 31, 2008) (non-precedential).

In the ongoing saga between Nokia and InterDigital, the Court of Appeals for the Second Circuit dealt Nokia a setback by reversing the district court’s grant of a motion for a preliminary injunction. The now defunct preliminary injunction had enjoined InterDigital from participating in the investigation of Nokia being conducted by the International Trade Commission (ITC) and required InterDigital to submit to arbitration despite the long litigation history between the parties.

Nokia filed suit against InterDigital on January 2005 seeking a declaration that it did not infringe any valid claim InterDigital’s 3G patents. Nokia also sought a determination as to which InterDigital patents were 3G patents according to an agreement between them. Nokia amended its complaint in January 2007 and again asserted that it had a license to the 3G patents.

About a month before Nokia amended its complaint, InterDigital filed an ITC action. The ITC complaint included the patents that were at issue in the district court action.

Roughly 34 months after the filing of the district court action, Nokia moved for a mandatory stay in that preceding, citing an overlap of issues in the district court action and the ITC. Still later, Nokia filed a motion to terminate or, in the alternative, to stay the ITC proceeding, pending arbitration under the parties prior agreement. This was the first time that Nokia claimed that InterDigital’s claims should be submitted to arbitration. The district court granted the motion to stay pending the outcome of the ITC investigation. After the district court granted Nokia’s motion for a preliminary injunction enjoining InterDigital from proceeding at the ITC, InterDigital appealed.

The Second Circuit reversed, determining that Nokia waived its right to arbitration. In reaching that conclusion, the Court considered the time elapsed from when litigation was commenced until the request for arbitration; the amount of litigation to date, including motion practice and discovery; and proof of prejudice.

The court found that the three and half years of proceedings provided evidence of Nokia’s desire and successful efforts to litigate, rather than arbitrate, claims involving the 3G patents.

Further, the Court had little trouble determining that InterDigital was prejudiced by Nokia’s conduct, in part because Nokia was the first to bring suit and the parties thereafter engaged in considerable discovery. The Court stated that allowing Nokia to prevail in its arbitration strategy and force InterDigital into yet another forum (i.e., arbitration) after it initiated the district court proceeding would cause InterDigital to suffer prejudice in the form of an ever-increasing delay in the resolution of the multiple disputes between the parties in the district court and at the ITC. In the end, the Court concluded that Nokia has waived its right to arbitrate through its repeated, intentional invocation of judicial process to resolve questions about the scope of the patents at issue and the applicability of the license established by the agreement to these patents.