FKSA Client Wins Motion to Compel Arbitration of IP Claims in Switzerland

August 27, 2013

In an August 27, 2013 decision, Judge Paul A. Engelmayer granted a motion by FKSA's client, a European company, to compel arbitration in Switzerland of claims asserted in New York by a company claiming ownership of certain intellectual property rights. In 2006, FKSA's client entered into a Manufacturing Agreement with Versadial which required that the parties arbitrate any disputes in Switzerland before the International Chamber of Commerce. In 2009, FKSA's client terminated its agreement with Versadial for nonpayment. In 2013, VariBlend Dual Dispensing Systems commenced a lawsuit in federal court in New York alleging that it was the assignee of all of Versadial's assets, and that FKSA's client had misappropriated alleged "trade secrets" disclosed under the Manufacturing Agreement.

FKSA moved pursuant to the Federal Arbitration Act and New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards to compel arbitration in Switzerland as provided in the Manufacturing Agreement. VariBlend argued that it was not bound by Versadial's agreement to arbitrate disputes because it was not a signatory to that agreement, and, because it had taken assignment of Versadial's rights, but not its duties. Judge Engelmayer agreed with FKSA that Variblend's disclaimer of Versadial's duties "does not change the fact that VariBlend is seeking to enforce rights it assumed under Versadial's former contracts with [FKSA's client]." While Variblend argued that it had not asserted a claim for breach of the Agreement, the Court noted that "Variblend seeks to step into Versadial's shoes, vis-à-vis the Agreement, while simultaneously removing the arbitration provision that was a material element of that Agreement. That it cannot do." Judge Engelmayer also noted that an assignee never stands in a better position than his assignor, and "Versadial could not assign to Variblend rights it did not have."

FKSA's client was represented by partner Andrew W. Goldwater and associate Christopher McCall.