Oracle America, Inc. v. Myriad Group A.G., 724 F.3d 1069 (9th Cir. 2013) [click for opinion]
Oracle America, Inc., the developer of the computer programming language Java, entered into a Community Source License agreement with Myriad. The agreement included a number of licenses, including the Technology Compatibility Kits License, which allows a licensee to access Oracle’s testing protocols to ensure compatibility. Only a licensee whose products meets applicable testing protocols has the right to use Java’s trademarks.
Myriad argued that a separate agreement, the Java Specification Participation Agreement, gave it the right to use Java language and testing protocols without paying royalties. Myriad stopped paying royalties, and, according to Oracle, failed to renew another agreement, the Master Support Agreement, which was a prerequisite to a Technology Compatibility Kits License. Oracle alleged that Myriad’s continued use of Java trademarks and programming language infringed its intellectual property and so filed suit in the Northern District of California.
Myriad moved to compel arbitration based on the arbitration clause in the Community Source License. The court granted the motion with respect to the breach-of-contract claims but denied it as to the other claims. The district court held that the incorporation of the United Nations Commission on International Trade Law (“UNCITRAL”) arbitration rules into the contract did not grant the arbitrator exclusive authority to decide its own jurisdiction. Furthermore, the district court held that because the arbitration clause states that the court’s jurisdiction is “exclusive” with respect to a party’s intellectual property claims or claims arising out of the TCK License the parties intended for the court to decide questions of arbitrability. Myriad appealed.
The Ninth Circuit first addressed the parties’ dispute as to which version of the UNCITRAL rules, the 1976 or the 2010 version, applied. The court decided that it made no difference; under either version the arbitrator has authority to rule on issues of arbitrability.
The main issue was one of first impression for the Ninth Circuit. The court looked to the Second and D.C. Circuits, both of which have held that incorporation of the UNCITRAL rules provides clear and unmistakable evidence that the parties intended for the arbitrator to decide issues of arbitrability. The Ninth Court also noted that virtually every Circuit to have addressed the issue in the context of the incorporation of the American Arbitration Association Rules has determined that such incorporation is clear and unmistakable evidence that the parties agreed to arbitrate arbitrability. The Ninth Circuit therefore held that, so long as the arbitration agreement was between sophisticated parties to a commercial contract, the parties are expected to understand that the incorporation of the UNCITRAL rules delegates questions of arbitrability to the arbitrator.
The Ninth Circuit rejected Oracle’s argument that the parties’ intent was ambiguous and held that Article 23(3) of the UNCITRAL rules does not create an ambiguity. The carve-out in the rules for certain causes of action addresses only the scope of the arbitration agreement, not the question of who decides arbitrability.