Originally published in Blakes Bulletin in Intellectual Property - Special Patent Issue, September 2006
The Ontario Superior Court of Justice in Governing Council of the University of Toronto v. John N. Harbinson Limited supported the application of arbitration clauses in patent and other intellectual property license agreements, holding that a dispute relating to warranties regarding inventorship and ownership of the invention in a patent license agreement should be resolved pursuant to the arbitration clause in the agreement.
Increasingly, parties are including provisions in agreements to provide for the arbitration of disputes. Disputes in relation to technology, patent and other intellectual property licenses are particularly appropriate for arbitration because of the desire to maintain confidentiality about the licensed technology and rights, as well as the continuing relationship between the parties.
The University of Toronto and its Innovations Foundation (collectively, the University) entered into a license agreement with a predecessor of John N. Harbinson Limited (Harbinson) in which the University granted the worldwide exclusive right to exploit products relating to an invention (the Agreement). The University claimed that it owned the licensed invention because one of its professors, Hubbes, was an inventor of the invention. Harbinson and the University were also parties to a related research agreement which required Harbinson to fund research by Hubbes on the invention.In the Agreement, the University warranted that, to the best of its knowledge, Hubbes was the sole inventor of the invention, and that the University owned the invention and had the exclusive right to grant the licence. The arbitration clause provided that "any dispute, controversy or claim arising from this Agreement or its breach, termination or alleged invalidity shall be settled by arbitration in accordance with the Arbitrations Actof Ontario".In the course of the research, Hubbes discovered a new fungus. Harbinson alleged that Hubbes had misled Harbinson as to the status of the research and that the University had, in breach of the Agreement, obstructed Harbinson’s efforts to capitalize upon this development.
It is not evident from the court decision how the dispute arose but Harbinson claimed that the warranty that Hubbes was the sole inventor of the invention was untrue. Harbinson also alleged that, even if Hubbes had been the sole inventor, and the University, as his employer, was the original owner of the invention, the University had disposed of its right in the invention to a ministry of the federal government under a research collaboration contract.Harbinson sought damages for breach of the Agreement and punitive damages. Harbinson instituted an arbitration proceeding to pursue its claims. The University disputed the jurisdiction of the arbitration panel. It appears the University argued that, since the issues of inventorship and ownership were governed by the Patent Act, the matter should be dealt with by a court. The panel held that Harbinson’s warranty claims had nothing to do with the Patent Act and lay within the panel’s jurisdiction pursuant to the arbitration clause.
The University then commenced an action in the Ontario Superior Court of Justice for an order declaring that the panel lacked jurisdiction to arbitrate Harbinson’s claim. The court held that the panel was correct in its determination that it had jurisdiction to decide the claims made in the arbitration. The court said that the Patent Act does not provide a complete and exhaustive code regulating all claims of inventorship and ownership of inventions. Issues relating to inventorship and the ownership of inventions have been routinely adjudicated in alternative forums. Even where relief is sought under the Patent Act, contract claims which engage provincial contract law issues are to be resolved within the context of provincial adjudication mechanisms. The court noted that Harbinson did not claim to be the inventor or the owner of the invention, nor did it seek any relief under the Patent Act. Instead, Harbinson advanced claims that arise under contract law. Given the arbitration clause, the contract required that the dispute be adjudicated by the panel.
This case sends a clear message that Canadian courts encourage the use of arbitration to resolve disputes in intellectual property license agreements where the substance of the issue is within the scope of the arbitration clause, even where patent rights are in issue.
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