United States District Court, N.D. Illinois, Eastern Division
For Wal-Mart Stores, Inc., a Delaware corporation, Plaintiff: Bradley C. Graveline, LEAD ATTORNEY, Sheppard Mullin Richter & Hampton LLP, Chicago, IL; Laura Lindsay Chapman, PRO HAC VICE, Sheppard, Mullin, Richter & Hampton, Llp, San Francisco, CA.
For Helferich Patent Licensing, LLC, an Illinois limited liability company, Defendant: Bruce S. Sperling, LEAD ATTORNEY, Eamon Padraic Kelly, Eugene J. Frett, Sperling & Slater, Chicago, IL.
MEMORANDUM OPINION AND ORDER
Rubé n Castillo, Chief United States District Judge.
Wal-Mart Stores, Inc. (" Plaintiff" ) brings this action against Helferich Patent Licensing, LLC (" HPL" ) and Does 1-10 seeking recession of a patent license agreement based on substantial nonperformance or breach, mutual mistake of law, and lack of consideration. Presently before the Court is HPL's motion to dismiss this action and compel arbitration pursuant to Federal Rule of Civil Procedure 12(b)(1) and Section 4 of the Federal Arbitration Act (the " FAA" ). For the reasons set forth below, the Court grants HPL's motion to compel arbitration.
Plaintiff is a Delaware corporation with its principal place of business in Bentonville, Arkansas. (R. 10, Sealed Compl. ¶ 1.) HPL is an Illinois limited liability company with its principal place of business in Chicago, Illinois. ( Id. ¶ 2.) Plaintiff alleges that Does 1-10, employees and/or agents of HPL whose names and capacities are unknown to Plaintiff, are
responsible in some manner for the occurrences at issue. ( Id. ¶ ¶ 3-4.)
HPL owns numerous patents covering " commercially significant developments" in the fields of wireless content provisioning and messaging, wireless/cellular handsets, and wireless services/infrastructure. ( Id. ¶ 8.) In 2011, Plaintiff and HPL negotiated and executed a Content Patent License Agreement (the " Agreement" ) in which HPL licensed its patents to Plaintiff, released claims relating to the patents, and covenanted not to sue Plaintiff for Plaintiff's use of the licensed technology. ( Id. ¶ 10; R. 23, Ex. A, Agreement.) Plaintiff paid $500,000 as consideration for the Agreement (the " License Payment" ). ( Id.)
Section 2(b) of the Agreement contains a warranty provision that states that HPL represents and warrants that " [n]o licenses or other rights have been granted or will be granted under the Licensed Patents and Applications that would prevent the licenses, covenants, releases and rights granted to [Plaintiff] hereunder." (R. 23, Ex. A, Agreement at 3.) Plaintiff alleges that it relied on this warranty provision when entering into the Agreement and that the warranty provision was a material reason it entered into the Agreement. (R. 10, Sealed Compl. ¶ 12.)
In Section 3(e) of the Agreement, HPL " expressly reserves the right to assert claims, file suit, or maintain causes of actions . . . against Third Parties for the Third Party's Infringement of any Reserved Claim of any of the Licensed Patents and Applications based upon a product, service, system or method within the scope of the Licensed Field . . . ." (R. 23, Ex. A, Agreement at 5.) HPL filed several patent infringement actions in Illinois that were consolidated in district court. (R. 10, Sealed Compl. ¶ 14.) The defendants in those actions moved for summary judgment on the issue of patent exhaustion; on August 14, 2013, the district court granted the defendants' motion, finding that HPL's patent infringement claims were exhausted as a result of prior licenses taken previously by " the entire cellular handset manufacturing industry." ( Id. ¶ 15.) Plaintiff alleges that because the patents are exhausted by HPL's prior licenses to handset manufacturers, the warranty provision in the Agreement is untrue. ( Id. ¶ 16.) Plaintiff alleges that it is thus entitled to rescission of the Agreement and return of the License Payment. ( Id.)
Section 9(c) of the Agreement contains an arbitration provision that states: " All disputes, controversies, or differences that may arise between the parties out of, or in relation to, or in connection with this Agreement, or for the breach thereof, shall be finally settled in Chicago, Illinois by arbitration under the Rules ...