Arbitration clauses are standard provisions in many contracts, and counsel advising companies about such contracts are generally not surprised by their inclusion. But a recent federal decision indicates that such clauses may have broader application – including covering intellectual property disputes that do not directly relate to the subject of the contract.
Arbitration clauses are common in many contracts, including service contracts with large companies. They are usually understood to cover disputes over whether the services were properly provided or payments timely made. But what if a party that signed such an agreement later has a claim that the service is being abused by someone else to infringe its intellectual property rights?
A recent decision of a federal court in Connecticut, Edible International, LLC v. Google, LLC (D.Conn. 2018) held that the same arbitration clause would require arbitration of a later trademark infringement claim involving the services.
Counsel advising businesses signing service agreements, particularly with large providers like Google, need to be aware that service agreements they sign today may affect intellectual property enforcement efforts tomorrow. They may still conclude that it is worthwhile to do so – the service may be important or valuable to the company. But at a minimum businesses should understand what they are agreeing to.
Google operates an advertising service, the Google Adwords program. For a fee, businesses can purchase “keywords” that trigger advertisements when Google users search for the keyword terms. Edible International operates a series of franchises under the name Edible Pursuits, which sell cut fruits, particularly cut fruits in floral arrangements. In 2014, Edible International opened an advertising account with Google to use the Adwords program.
Google required customers for such services to agree to its Terms and Conditions. Among those was an arbitration clause, which required arbitration of all disputes and claim between Google and the customer that “arise out of or relate in any way to the Programs.” The term “Programs” was broadly defined to include Google’s advertising services.
At some point later, Edible International decided that Google’s Adwords program had been used against it – its trademarks had been sold by Google to competitors as “keywords.” It brought suit for trademark infringement. (Such claims have often been asserted against Google and other search engines, with mixed success.)
The law is clear – if the dispute is within the arbitration agreement, then the Federal Arbitration Act requires arbitration. The court analyzed the language and concluded that the broad language – all “disputes” that “arise out of or relate in any way” to Google’s programs encompassed Edible’s trademark claims. So the case was stayed pending arbitration.
The result in Edible International, while probably correct given the broad language of Google’s arbitration clause, would still likely be unexpected for most businesses. It is one thing to sign a service contract with an arbitration clause and then be required to arbitrate a trademark dispute over the services. Had Edible sued Google for giving it poor service, then the result would unexceptional. But here, Edible was forced to arbitrate a trademark infringement case that stemmed not from its own use of Google’s services, but from alleged abuse of Google’s services by an Edible competitor.
Businesses entering service agreements should understand that arbitration provisions may have broader application than they expect – they may extend to infringement claims related to the same services.