June 5, 2017

Promise to Arbitrate Claims “Arising Under” is Narrower than Promise to Arbitrate Claims “Relating to” Agreement

By Bryan K. Wheelock, Principal

In Evans v. Building Materials Corporation of America, [2016-2427](June 5, 2017), the Federal Circuit affirmed the denial of a motion to dismiss a complaint for patent infringement and trade dress infringement.

Evans’ U.S. Design Patent No. D575,509 on a three-dimensional roofing model is designed to be used by a seller of roofing products during a sales pitch.  He entered into an agreement with GAF under which GAF agreed to promote the product to GAF’s network of certified contractors.  Evans agreed to sell the product at discounted prices to the GAF contractors and to pay GAF a percentage of sales.  The Agreement contained an arbitration clause for “any dispute or disagreement [that] arises under this Agreement.”

Evans sued alleging that after termination of the agreement, GAF made and sold infringing roofing models.  GAF moved to dismiss or stay pending arbitration, invoking the arbitration clause.  The district court found that 2009 agreement has expired, and thus did not apply, and alternatively, that the present dispute did not “arise under” the terminated 2009 agreement.

The Federal Circuit found GAF’s contention “wholly groundless.”  The Federal Circuit said that the arbitration clause only reaches claims arising under the 2009 agreement.  GAF conceded that under controlling Fourth Circuit precedent the focus is “whether the claims at issue have a direct nexus to the contractual obligations, and more specifically, whether the claims are ‘related to the interpretation and performance of the contract itself.’”  The Federal Circuit noted that the “arising under” language was narrower than “relating to” — under which a claim may be arbitrable if it has a “significant relationship” to the contract, regardless of whether it arises under the contract itself.