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QAD Inc. v. St. Jude Medical, LLC

United States District Court, N.D. California, San Jose Division

July 8, 2019

QAD INC., Plaintiff,
v.
ST. JUDE MEDICAL, LLC, a Delaware limited liability company, Defendant.

          ORDER GRANTING MOTION TO COMPEL ARBITRATION; STAYING ACTION RE: DKT. NO. 16

          EDWARD J. DAVILA UNITED STATES DISTRICT JUDGE.

         I. INTRODUCTION

         This is an action for copyright infringement. Defendant St. Jude Medical, LLC (“St. Jude Medical”) moves to compel arbitration under the Federal Arbitration Act (“FAA”), or in the alternative, to dismiss the action. The court finds it appropriate to take the motion under submission for decision without oral argument pursuant to Civil Local Rule 7-1(b). For the reasons set forth below, the motion to compel arbitration will be granted.

         II. BACKGROUND [1]

         Plaintiff QAD Inc. (“QAD”) designs, develops, produces, and markets, through the granting of nonexclusive licenses, Enterprise Resource Planning [“ERP”] software and related products and support services. Compl. ¶ 3. In 1995, QAD and St. Jude Medical's corporate predecessor, St. Jude Medical, Inc. (“SJM”) entered into an agreement to license QAD's software. Compl. Ex. A (“License Agreement”), ¶ 12.1. The License Agreement provided that SJM would receive “a non-exclusive license, for perpetual use, ” of certain software products created by QAD. Id. ¶ 2.1. The License Agreement was to remain in effect for ten years, but provided that the license would survive the termination of the License Agreement. Id. ¶ 12.1.

         The License Agreement contained two other clauses that are relevant to St. Jude Medical's motion. First, the License Agreement contained an arbitration clause, which stated:

Any dispute arising between the parties shall be settled by arbitration under the rules of the American Arbitration Association in Minneapolis, Minnesota, USA before a single arbitrator selected under those rules. The arbitral language shall be English. The arbitral award may be enforced in any court having jurisdiction thereof.

Id. ¶ 13.1 (emphasis added). Second, the License Agreement contained clauses restricting SJM's ability to assign and transfer the license. In section 13.6, the License Agreement stated that SJM “may not assign or transfer interest in a license granted under this Agreement without the prior written consent of QAD, ” which written consent “shall not be unreasonably withheld.” Id. ¶ 13.6.

         In 2005, QAD and SJM agreed to renew the License Agreement for another ten years. Comp. ¶ 25. At the end of this term, SJM elected not to renew the License Agreement. Id. ¶ 27. Although there was no further renewal, SJM retained its existing license to continue using QAD's custom software after the License Agreement expired in December of 2015. Id. ¶ 29.

         In 2016, SJM entered into a merger that affected its ownership and corporate form. Id. ¶¶ 32-35. The merger was completed in two steps. Id. ¶ 34. SJM became a wholly-owned subsidiary of Abbott Laboratories and then changed its corporate form to become a limited liability company-St. Jude Medical. Id. ¶ 35. QAD alleges on information and belief that St. Jude Medical “survived the second merger as a wholly-owned subsidiary of Abbott” and that SJM “ceased to exist, with its assets, liabilities, and business operations having been transferred to” St. Jude Medical. Id. QAD alleges that neither SJM nor St. Jude Medical sought or obtained written consent of QAD for the transfer of any license granted under the License Agreement. Id. ¶¶ 36, 37.

         QAD alleges that after SJM was “merged out of existence, ” St. Jude Medical began and has continued to use QAD software that had been licensed to SJM without QAD's consent. Id. ¶ 39. QAD filed the instant lawsuit seeking damages for copyright infringement and injunctive relief.

         III. STANDARDS

         Under the Federal Arbitration Act (“FAA”), written arbitration agreements “shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the avoidance of any contract.” 9 U.S.C. § 2 (2012). “[A]rbitration agreements [are] on an equal footing with other contracts, ” and therefore courts are required to enforce arbitration agreements according to their terms. Rent-A-Center, West, Inc. v. Jackson, 561 U.S. 63, 67 (2010).

         The FAA “leaves no place for the exercise of discretion by a district court, but instead mandates that district courts shall direct the parties to proceed to arbitration on issues as to which an arbitration agreement has been signed.” Chiron Corp. v. Ortho Diagnostic Sys., Inc., 207 F.3d 1126, 1130 (9th Cir. 2000) (citing Dean Witter Reynolds, Inc. v. Byrd, 470 U.S. 213, 218 (1985)). A district court's role is limited to determining two “gateway” issues: (1) whether the parties agreed to arbitrate and, if so, (2) whether the claims at issue are within the scope of that agreement. See Brennan v. Opus Bank, 796 F.3d. 1125, 1130 (9th Cir. 2015). If the party seeking arbitration meets these two requirements, the court must compel arbitration. 9 U.S.C. § 4; Chiron, 207 F.3d at 1130. To be arbitrable, the claims at issue need only “touch matters” covered by the contract containing the arbitration clause. Simula, ...


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