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Profitstreams, LLC v. Ameranth

September 27, 2011

PROFITSTREAMS, LLC,
PETITIONER,
v.
AMERANTH, INC.,
RESPONDENT.



The opinion of the court was delivered by: Hon. Michael M. Anello United States District Judge

[Doc. No. 1]

ORDER GRANTING IN PART AND DENYING IN PART PROFITSTREAMS LLC'S PETITION TO COMPEL ARBITRATION

On April 13, 2011, Profitstreams, LLC filed a petition to compel arbitration against Ameranth, Inc. [Doc. No. 1.] Ameranth submitted its response on September 2, and Profitstreams filed a reply on September 19. [Doc. Nos. 24, 25.] On September 21, 2011, the Court in its discretion under Civil Local Rule 7.1(d)(1), took the motion under submission on the papers and without oral argument. For the reasons stated herein, the Court GRANTS IN PART and DENIES IN PART Profitstreams' petition to compel arbitration.

BACKGROUND

On August 27, 2008, Profitstreams and Ameranth entered a Second Amended and Restated License Agreement ("Agreement"), under which Profitstreams obtained a license for certain technology owned by Ameranth. [Doc. No. 1, Exh. A; Doc. No. 9 (under seal).] A dispute has arisen between the parties regarding the scope of the Agreement. [Doc. No. 1, p.3.] Profitstreams alleges it "believes that the license in the Agreement covers all of the claims" of the patents at issue, whereas Ameranth "contends that the license granted in the Agreement is limited to the subset of claims practiced by the Software." [Id. at p.1] Correspondence between counsel indicates the parties discussed the issue informally, but were unable to resolve their dispute. [Doc. No. 24-3, Exhs. 4-18.] Profitstreams therefore seeks to initiate arbitration proceedings as contemplated by the Agreement. [Id. at Exhs. 1-15.]

The Agreement contains the following dispute resolution provisions:

14.2 Governing Law and Dispute Resolution:

14.2.1 . . .

14.2.2 Any dispute arising out of or in connection with this Agreement, including any question regarding its existence, validity or termination, shall first be referred to each Party's appointed management, and the Parties shall use reasonable efforts to resolve such dispute.

14.2.3 Any dispute that is not resolved as provided in the preceding Section 14.2.2, whether before or after termination of this Agreement, will be referred to binding arbitration under the Commercial Arbitration Rules of the American Arbitration Association in the city and state where the defendant party has its headquarters. Except with respect to a breach of Section 2.5 or any other unauthorized transfer of Ameranth's intellectual property or proprietary rights, the arbitrator shall not be authorized to award, and no party shall be obligated to pay to the other Party hereunder, punitive, exemplary, consequential, indirect, special or incidental damages or lost profits (collectively "Special Damages") with respect to any such claim or controversy, nor shall any party seek Special Damages relating to any matter under, arising out of or relating to this Agreement in any other forum. Judgment upon the award of the arbitrators may be entered in any court having jurisdiction thereof or such court may be asked to judicially confirm the award and order its enforcement, as the case may be.

14.2.4 . . . 14.2.5 Notwithstanding anything to the contrary in this Section 14, either Party shall be entitled to seek injunctive relief in any court of competent jurisdiction for a breach or threatened breach of Section 13 or any infringement of such Party's intellectual property or proprietary rights.

[Doc. No. 1, Exh. A, p.16 (bold and italics in original) (underline added).]

Ultimately, the parties reached an impasse regarding which claims could be sent to arbitration, and Profitstreams filed the pending petition to compel Ameranth to arbitrate their dispute regarding the scope of the license. [Doc. No. 1.] LEGAL STANDARD

The Federal Arbitration Act ("FAA"), 9 U.S.C. § 1 et seq., governs the enforcement, interpretation and validity of arbitration clauses in commercial contracts. Cape Flattery Ltd. v. Titan Mar., LLC, 647 F.3d 914 *7 (9th Cir. 2011) (citing Moses H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24-25 (1983)). The FAA provides that arbitration agreements "shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or equity for the revocation of any contract." 9 U.S.C. ยง 2. This language creates a presumption in favor of ...


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