Delaware Business Litigation Report

Court of Chancery Grants Motion for Summary Judgment in Favor of Arbitration of Dispute

Delta & Pine Land Co. v. Monsanto Co., C.A. No. 1970-N, 2006 WL 1510417 (Del. Ch. May 24, 2006). Plaintiff moved for summary judgment on its claim for arbitration of a dispute with Defendant. Defendant granted Plaintiff an exclusive license for use of patents involving the production of genetically-modified cotton. Plaintiff was entitled to use these patents in Brazil. As a result of the availability of "bootleg" seed in Brazil, Defendant developed an indemnity collection system. This system allowed Defendant to collect penalties from growers who could not show they had a license for the patents. Plaintiff objected to the indemnity collection system because it feared growers would pay a penalty, rather than acquire a license from Plaintiff. Defendant sought a declaratory judgment in Missouri state court that it could implement the disputed system and that the system did not violate the parties' license agreement. Plaintiff sought an order compelling arbitration in the Court of Chancery and filed a demand for arbitration with the American Arbitration Association. Although the license agreement required arbitration of disputes, it required that arbitration be in accordance with the option agreement. Defendant claimed that the option agreement did not mandate arbitration of the dispute because: (1) the option agreement limited arbitrable disputes to controversies not involving patent rights and this dispute involved patent rights; (2) the option agreement provided that nothing precluded a party from seeking any other remedy at law; (3) the option agreement allowed the first to file for relief to choose arbitration or judicial relief; and (4) Plaintiff had waived its right to arbitration. The Court rejected all of these arguments. First, the Court held that Plaintiff was not seeking to contest the validity of Defendant's patents and was instead seeking to protect its commercial rights so its claim fell within the scope of arbitration. Second, Court held that the option agreement allowed the parties to seek a remedy at law not available in arbitration, but did not eviscerate the arbitration provisions of the license agreement as Defendant argued. Third, the option agreement allowed any party to seek arbitration and did not give the first to file the right choose. Fourth, Plaintiff did not waive its right to arbitration by participating in litigation to enforce that right. Share