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.