Industrial Wire Products, Inc. (IWP) v. Costco Wholesale Corp., 576 F.3d 516 (8th Cir. 2009).
On appeal, Costco asked the court to determine whether the mandatory arbitration clause of its supply agreement with IWP operates to compel arbitration of IWP’s patent infringement lawsuit. (The Federal Arbitration Act (FAA) creates a right to immediately appeal a district court’s refusal to compel arbitration.)
Before reaching the merits, however, the Eighth Circuit questioned its own appellate jurisdictional over the patent case.
Federal Circuit Appellate Jurisdiction: In creating the Court of Appeals for the Federal Circuit (Federal Circuit), Congress indicated its desire for national uniformity of the patent laws. The Federal Circuit holds exclusive jurisdiction over appeals of district court final judgments in cases that “arise under” the patent laws. 28 USC § 1295(a)(1). The Federal Circuit also holds exclusive jurisdiction over interlocutory appeals of those patent cases if the appeal relates to the grant or denial of an injunction or the creation or destruction of a receivership.
After examining the jurisdictional statutes, the Eighth Circuit determined that the Federal Circuit did not have exclusive jurisdiction because the lower court’s decision (1) was not a final judgment because the lower court had retained jurisdiction after denying the motion to compel arbitration and (2) did not relate to the grant or denial of injunctive relief (or to a receivership). Absent those conditions, the Eighth Circuit held that itself – as the “circuit embracing the district” – had jurisdiction over the appeal. 28 U.S.C. § 1294(1).
Circuit Split: This case highlights an already existing circuit split. In a 2004 decision, the Federal Circuit held that it has exclusive jurisdiction over an appeal of a denial or grant of a motion to compel arbitration. Microchip Tech. Inc. v. U.S. Philips Corp., 367 F.3d 1350 (Fed. Cir. 2004). In Microchip Tech, the Federal held that the act of compelling arbitration is “in effect a mandatory injunction.” Id., following Sinclair Refining Co. v. Atkinson, 370 U.S. 195 (1962) (discussing a “mandatory injunction to carry out an agreement to arbitrate”). The Third Circuit previously held that the Federal Circuit does not have exclusive jurisdiction in this situation. Medtronic AVE, Inc. v. Advanced Cardiovascular Sys., Inc., 247 F.3d 44 (3rd Cir. 2001).
The injunction question could be resolved depending upon whether the district court was (1) asked to simply stay the case or refuse jurisdiction or (2) asked to issue an “antisuit injunction” or order participation in the arbitration process. The FAA specifically discusses the right to “compel arbitration.” Arbitration expert Gary Born has written that an order compelling arbitration “amounts to an injunction requiring a party to arbitrate pursuant to its arbitration agreement.” Gary Born, International Commercial Arbitration 1015 (2009). A Second Circuit decision explains the difference between refusing to hear a case and compelling arbitration:
The first merely arrests further action by the court itself in the suit until something outside the suit has occurred; but the court does not order that it shall be done. The second, through the exercise of discretionary equity powers, affirmatively orders that someone do (or refrain from doing) some act outside the suit. Kulukundis Shipping Co. v. Amtorg Trading Corp., 126 F.2d 978 (2nd Cir 1942)
Compelling Arbitration: On the merits, the Eighth Circuit reversed – holding that the current patent infringement dispute fell within the mandatory arbitration agreement between the parties and therefore that the district court should have entered an order compelling arbitration.