DataTreasury v. Wells Fargo (and 50+ other banks) (Fed. Cir. 2008)
In 2006, DataTreasury obtained its electronic check clearing patents from WMR e-Pin — a company that had previously licensed its patents to Wells Fargo. The license agreement included a provision requiring arbitration of disputes.
Soon after DataTreasury obtained the patents, it sued Wells Fargo and more than fifty other major banking institutions for patent infringement. On interlocutory appeal here, is the district court’s refusal to stay litigation pending arbitration. DataTreasury argues that it is not bound by the arbitration agreement.
On appeal, the CAFC confirmed that the subsequent purchaser, DataTreasury, is not bound by the arbitration clause. Applying Fifth Circuit interpretation of the FAA and Minnesota law, the appellate panel found that the arbitration policy does not operate as a servitude upon the property. Rather, the arbitration agreement it is a personal contract binding only the original parties. “[R]equiring a non-signatory to arbitrate solely on the basis of an arbitration clause in a license agreement between signatory parties would be inconsistent with basic principles of contract law and the Federal Arbitration Act.”
The case is remanded to Judge Folsom (E.D.Tex.) to resolve the dispute.