Arbitration

• Author: International Law Group

Deprenyl Animal Health, Inc. (hereinafter DAHI) is a Louisiana corporation with its principal place of business in Kansas, and is the U.S. subsidiary of a Canadian corporation based in Ontario. The University of Toronto Innovations Foundation (UTIF) is a Canadian technical licensing corporation which assists the University of Toronto in using its academic inventions for commercial purposes.

In 1992, the parties entered into a licensing agreement in Kansas that eventually resulted in a patent. The agreement contained an arbitration clause, providing for arbitration of disputes in Canada under the Ontario Arbitrations Act. The choice-of-law clause provided that Ontario law would apply to contract disputes.

This falling out began in 1998 when DAHI's parent company announced that the FDA had approved the drug Anipryl when used to treat canine cognitive dysfunction. UTIF claimed that Anipryl was subject to the licensing agreement between the parties. In May 2000, DAHI sued UTIF in Kansas federal court seeking a declaratory judgment that the licensing agreement did not apply to sales of the drug, and that it was not infringing the patent. Two months later, DAHI filed an action in an Ontario Superior Court. It sought a declaration (1) that the dispute cannot be arbitrated in Canada because the license agreement does not apply, and (2) that neither the agreement nor the patent covered DAHI's product. In March 2002, the Ontario Superior Court of Justice ordered the Canadian court and arbitration proceedings stayed pending the outcome of this appeal.

UTIF sought dismissal based on lack of personal jurisdiction over it or, in the alternative, to dismiss pending binding arbitration. The district court dismissed the complaint for lack of personal jurisdiction over UTIF but did not reach the arbitration issue.

DAHI appealed. The U.S. Court of Appeals for the Federal Circuit reverses, staying the district court proceedings pending arbitration in Canada.

On the issue of jurisdiction, the Court makes the following comments. "UTIF purposefully directed activities at DAHI, in Kansas. Although DAHI initially contacted UTIF about the prospect of licensing certain of UTIF's technology, UTIF responded with telephone calls and letters to negotiate, and amend, the resulting ongoing license agreement pertaining to the technology that developed into the ... patent. As the license agreement required, UTIF sent DAHI, in Kansas, copies of correspondence with the patent...