Oracle America, Inc. v. Myriad Group A.G. , 724 F.3d 1069 ( 2013 )

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ORACLE AMERICA , INC., No. 11-17186
Plaintiff-Appellee,
D.C. No.
v. 4:10-cv-05604-SBA
MYRIAD GROUP A.G.,
Defendant-Appellant. OPINION
Appeal from the United States District Court
for the Northern District of California
Saundra B. Armstrong, District Judge, Presiding
Argued and Submitted
May 6, 2013—San Francisco, California
Filed July 26, 2013
Before: William A. Fletcher, Ronald M. Gould,
and Morgan Christen, Circuit Judges.
Opinion by Judge Christen
2 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
SUMMARY*
Arbitration
The panel reversed the district court’s partial denial of a
motion to compel arbitration in a copyright and trademark
infringement action concerning licenses for access to the Java
computer programming language.
The panel held that, unlike the arbitrability of claims in
general, the question whether the court or the arbitrator
decides arbitrability is an issue for judicial determination
unless the parties clearly and unmistakably provide otherwise.
Agreeing with the Second and D.C. Circuits, the panel held
that incorporation of the United Nations Commission on
International Trade Law arbitration rules into an arbitration
provision in a commercial contract constitutes clear and
unmistakable evidence that the parties to the contract
intended to delegate questions of arbitrability to the arbitrator.
The panel remanded the case for proceedings consistent with
its opinion.
*
This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 3
COUNSEL
Jeffrey S. Bucholtz (argued), Kevin R. Sullivan, Shannon M.
Kasley, Daniel S. Epps, and Timothy J. Sullivan, King &
Spalding LLP, Washington, D.C.; Brian A. White, King &
Spalding LLP, Atlanta, Georgia; Geoffrey M. Ezgar, King &
Spalding LLP, San Francisco, California, for Defendant-
Appellant.
Jeffrey M. Shohet (argued), Christopher J. Beal, and Amanda
C. Fitzsimmons, DLA Piper LLP, San Diego, California;
Elizabeth Rogers Brannen, Oracle America, Inc., Redwood
City, California, for Plaintiff-Appellee.
OPINION
CHRISTEN, Circuit Judge:
Myriad Group A.G. appeals the district court’s partial
denial of its motion to compel arbitration. Myriad maintains
that incorporation of the United Nations Commission on
International Trade Law (UNCITRAL) arbitration rules into
an arbitration provision in a commercial contract constitutes
clear and unmistakable evidence that the parties to the
contract intended to delegate questions of arbitrability to the
arbitrator. We agree, consistent with the other circuits to
have considered the question. We therefore reverse the
district court’s partial denial of Myriad’s motion to compel
arbitration.
4 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
I. BACKGROUND
Myriad is a Swiss mobile software company. Oracle
America, Inc. is a Delaware corporation that developed Java,
a computer programming language, and the Java Runtime
Environment. The Java Runtime Environment facilitates
cross-platform computing compatibility.
Oracle has a community licensing program that allows
access to the Java programming language and use of Java
trademarks in exchange for royalties. Myriad entered into a
Community Source License in 2002. The Source License
encompasses several separate licenses, including the
Technology Compatibility Kits (TCK) License. The TCK
License allows a licensee to access Oracle’s testing protocols;
it is intended to ensure compatibility of the licensee’s
products. A licensee’s right to use Java trademarks is
contingent upon the licensee’s product meeting applicable
testing protocols.
Myriad maintains that a separate agreement, the Java
Specification Participation Agreement (JSPA), gave it rights
to the Java language and the testing protocols without
payment of royalties. Oracle maintains that, based on
Myriad’s faulty interpretation of the JSPA, Myriad stopped
paying royalties and breached the Source License. Oracle
also alleges that Myriad failed to renew a separate agreement,
the Master Support Agreement, which was a prerequisite to
a valid TCK License, and that Myriad’s continued use of the
Java trademarks and the Java programming language
infringed upon Oracle’s intellectual property rights.
Oracle filed suit in the Northern District of California
asserting claims for breach of contract, violation of the
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 5
Lanham Act (15 U.S.C. § 1125(a)), copyright infringement
(17 U.S.C. § 101 et seq.), and unfair competition under
California law (Cal. Bus. & Prof. Code § 17200 et seq.).
Myriad sued Oracle separately in the District of Delaware
asserting that Oracle breached the JSPA.
Myriad moved in the Northern District of California to
compel arbitration based on an arbitration clause in the
Source License. The arbitration clause provides:
Any dispute arising out of or relating to this
License shall be finally settled by arbitration
as set out herein, except that either party may
bring any action, in a court of competent
jurisdiction (which jurisdiction shall be
exclusive), with respect to any dispute relating
to such party’s Intellectual Property Rights or
with respect to Your compliance with the
TCK license. Arbitration shall be
administered: (i) by the American Arbitration
Association (AAA), (ii) in accordance with
the rules of the United Nations Commission
on International Trade Law (UNCITRAL)
(the “Rules”) in effect at the time of
arbitration as modified herein; and (iii) the
arbitrator will apply the substantive laws of
California and United States. Judgment upon
the award rendered by the arbitrator may be
entered in any court having jurisdiction to
enforce such award.
Myriad submitted a demand for arbitration with the
arbitrator on August 15, 2011. Approximately two weeks
later, the district court granted Myriad’s motion to compel
6 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
arbitration with respect to Oracle’s breach of contract claim
but denied Myriad’s motion with respect to all other claims.
The district court concluded that incorporation of the
UNCITRAL arbitration rules did not constitute clear and
unmistakable evidence that the parties intended to delegate
questions of arbitrability to the arbitrator. The district court
reasoned that the relevant provision of the 2010 UNCITRAL
rules states only that the arbitrator has authority, but not
exclusive authority, to decide its own jurisdiction.
In January 2012, the district court enjoined Myriad from
proceeding with arbitration of its non-contract claims. In
deciding Oracle’s motion for preliminary injunction, the
district court clarified that it had not ruled that it had
concurrent jurisdiction with the arbitrator over questions of
arbitrability. Rather, because the arbitration clause states that
the court’s jurisdiction is “exclusive” with respect to a party’s
intellectual property claims or claims arising out of the TCK
License, the court determined that the parties intended for the
court to decide questions of arbitrability.
Myriad appeals the district court’s order partially denying
its motion to compel arbitration. The parties stipulated to a
stay of the district court proceedings pending the outcome of
this appeal.
II. STANDARD OF REVIEW
We review an order denying a motion to compel
arbitration de novo. Smallwood v. Allied Van Lines, Inc.,
660 F.3d 1115, 1120 (9th Cir. 2011).
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 7
III. DISCUSSION
The only issue in this case is whether the parties agreed
to arbitrate arbitrability. There is generally a “liberal federal
policy favoring arbitration agreements.” Moses H. Cone
Mem’l Hosp. v. Mercury Constr. Corp., 460 U.S. 1, 24
(1983). In accordance with that policy, “doubts concerning
the scope of arbitrable issues should be resolved in favor of
arbitration.” Id. at 24–25. But the dispute in this case centers
on who decides whether a claim is arbitrable.
“Just as the arbitrability of the merits of a dispute depends
upon whether the parties agreed to arbitrate that dispute, so
the question ‘who has the primary power to decide
arbitrability’ turns upon what the parties agreed about that
matter.” First Options of Chi., Inc. v. Kaplan, 514 U.S. 938,
943 (1995) (internal citations omitted). But, unlike the
arbitrability of claims in general, whether the court or the
arbitrator decides arbitrability is “‘an issue for judicial
determination unless the parties clearly and unmistakably
provide otherwise.’” Howsam v. Dean Witter Reynolds, Inc.,
537 U.S. 79, 83 (2002) (emphasis added) (alteration omitted)
(quoting AT & T Techs., Inc. v. Commc’ns Workers, 475 U.S.
643, 649 (1986)). In other words, there is a presumption that
courts will decide which issues are arbitrable; the federal
policy in favor of arbitration does not extend to deciding
questions of arbitrability.
A. Whether Incorporation of the UNCITRAL
Arbitration Rules Clearly and Unmistakably
Delegates Arbitrability to the Arbitrator
As a preliminary matter, the parties disagree about which
version of the UNCITRAL arbitration rules controls. Their
8 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
agreement refers to the UNCITRAL rules “in effect at the
time of arbitration as modified herein.” The 2010
UNCITRAL rules were in effect at the time Myriad submitted
its demand for arbitration, and some of Oracle’s arguments
hinge on application of the 2010 rules. But Myriad represents
that the parties at one point agreed that the 1976 UNCITRAL
rules govern. We conclude that it is ultimately unnecessary
to decide which version of the UNCITRAL rules applies.
The 1976 UNCITRAL arbitration rules provide that “[t]he
arbitral tribunal shall have the power to rule on objections
that it has no jurisdiction, including any objections with
respect to the existence or validity of the arbitration clause or
of the separate arbitration agreement.” UNCITRAL
Arbitration Rules art. 21, para. 1, G.A. Res. 31/98, U.N. Doc.
A/RES/31/98 (Dec. 15, 1976). The 2010 UNCITRAL rules
state that “[t]he arbitral tribunal shall have the power to rule
on its own jurisdiction, including any objections with respect
to the existence or validity of the arbitration agreement.”
UNCITRAL Arbitration Rules art. 23, para. 1, G.A. Res.
65/22, U.N. Doc. A/RES/65/22 (Jan. 10, 2011).
By giving the arbitral tribunal the authority to decide its
own jurisdiction, both the 1976 and 2010 UNCITRAL rules
vest the arbitrator with the apparent authority to decide
questions of arbitrability. The only difference is that, under
the 1976 rules, the authority of the arbitral tribunal is
described as ruling on objections to its jurisdiction and under
the 2010 rules the tribunal has the authority to decide its
jurisdiction. The 1976 rules are more narrowly phrased than
the 2010 rules, but there is not a significant distinction
between how these sets of rules treat questions of
arbitrability. We conclude it is immaterial which version of
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 9
the UNCITRAL rules is applied to the question presented by
this appeal.
The parties’ central dispute is whether incorporation of
the UNCITRAL rules into the parties’ arbitration provision
constitutes clear and unmistakable evidence that the parties
intended to arbitrate arbitrability. This is an issue of first
impression in the Ninth Circuit, but the Second Circuit and
the D.C. Circuit have concluded that incorporation of the
1976 UNCITRAL arbitration rules constitutes clear and
unmistakable evidence that the parties to an agreement
intended to arbitrate questions of arbitrability.
1. Second Circuit
In Republic of Ecuador v. Chevron Corp., 638 F.3d 384(2d Cir. 2011), the Second Circuit held that whether Chevron
had waived its right to arbitration under an investment treaty
or was estopped from invoking arbitration under that treaty
were issues for the arbitral panel. The treaty—to which
Ecuador was a signatory—incorporated the 1976 UNCITRAL
arbitration rules.
The court noted initially that waiver was presumptively an
issue for the arbitrator. Id. at 394. But the court then ruled
that, even if waiver and estoppel could be characterized as
questions of arbitrability (and therefore, presumptively as
issues for judicial determination), incorporation of the
UNCITRAL rules was “clear and unmistakable” evidence
that the parties delegated questions of arbitrability to the
arbitrator. Id. Because Ecuador’s waiver and estoppel claims
challenged the validity of the arbitration agreement, and
because the UNCITRAL rules gave the arbitrator authority to
decide objections to the validity of the arbitration agreement,
10 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
the Second Circuit concluded that the waiver and estoppel
claims were for the arbitrator to decide. Id. at 394–95.
Oracle argues that Republic of Ecuador only addressed
whether the arbitrator should decide waiver and estoppel
issues in the first instance. But the Second Circuit has more
recently confirmed that “Republic of Ecuador . . . held that a
bilateral investment treaty’s incorporation of the . . .
UNCITRAL rules was clear and unmistakable evidence that
the parties intended questions of arbitrability to be decided by
the arbitral panel in the first instance.” Schneider v. Kingdom
of Thailand, 688 F.3d 68, 73 (2d Cir. 2012) (internal
quotation marks omitted).
2. D.C. Circuit
In Republic of Argentina v. BG Group PLC, 665 F.3d
1363, 1371 (D.C. Cir. 2012), the D.C. Circuit also concluded
that incorporation of the 1976 UNCITRAL Rules provides
clear and unmistakable evidence that the parties agreed to
arbitrate arbitrability. Like Republic of Ecuador, the decision
in Republic of Argentina involved a bilateral investment
treaty. Id. at 1365. The treaty called for arbitration so long
as a party first filed suit in the host country’s courts and
eighteen months passed without resolution. Id. If those
preconditions were met and the parties did not separately
agree on an arbitration forum or procedure, the treaty dictated
that the UNCITRAL arbitration rules would govern. Id. at
1370–71.
The plaintiff in Republic of Argentina invoked the treaty’s
arbitration provision without first filing suit in an Argentine
court. Id. at 1365. The D.C. Circuit ultimately held that
because the preconditions to arbitration had not been met,
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 11
“the question of arbitrability [was] an independent question
of law for the court to decide.” Id. at 1371. But the court
also observed that if the plaintiff had first filed suit in an
Argentine court and waited eighteen months, the result would
have been different: “the Treaty’s incorporation of the
UNCITRAL Rules provides clear and unmistakable evidence
that the parties intended for the arbitrator to decide questions
of arbitrability.” Id. (internal quotation marks, alterations,
and citations omitted). The D.C. Circuit concluded succinctly
that “the UNCITRAL Rules grant the arbitrator the power to
determine issues of arbitrability.” Id.
3. Incorporation of the American Arbitration
Association Rules
Virtually every circuit to have considered the issue has
determined that incorporation of the American Arbitration
Association’s (AAA) arbitration rules constitutes clear and
unmistakable evidence that the parties agreed to arbitrate
arbitrability. See Petrofac, Inc. v. DynMcDermott Petroleum
Operations Co., 687 F.3d 671, 675 (5th Cir. 2012); Fallo v.
High-Tech Inst., 559 F.3d 874, 878 (8th Cir. 2009);
Qualcomm Inc. v. Nokia Corp., 466 F.3d 1366, 1373 (Fed.
Cir. 2006); Terminix Int’l Co. v. Palmer Ranch LP, 432 F.3d
1327, 1332 (11th Cir. 2005); Contec Corp. v. Remote Solution
Co., 398 F.3d 205, 208 (2d Cir. 2005). Only one circuit has
concluded otherwise. See Riley Mfg. Co. v. Anchor Glass
Container Corp., 157 F.3d 775, 777 & n.1, 780 (10th Cir.
1998). The AAA rules contain a jurisdictional provision
similar to Article 21(1) of the 1976 UNCITRAL rules and
almost identical to Article 23(1) of the 2010 UNCITRAL
12 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
rules.1 The Second and D.C. Circuits’ conclusions with
respect to incorporation of the UNCITRAL rules are
consistent with the majority view regarding the effect of
incorporating the AAA rules into an agreement.
We see no reason to deviate from the prevailing view that
incorporation of the UNCITRAL arbitration rules is clear and
unmistakable evidence that the parties agreed the arbitrator
would decide arbitrability. We hold that as long as an
arbitration agreement is between sophisticated parties to
commercial contracts, those parties shall be expected to
understand that incorporation of the UNCITRAL rules
delegates questions of arbitrability to the arbitrator.2
B. Whether the Parties Intended a Court Would Decide
Arbitrability or Whether the Parties’ Intent is
Ambiguous
Oracle advances several arguments in support of its
position that the parties to this case intended for a court to
decide arbitrability or that the parties’ intent is at least
ambiguous. We address each in turn.
1
Commercial Arbitration Rule 7(a) provides that “[t]he arbitrator shall
have the power to rule on his or her own jurisdiction, including any
objections with respect to the existence, scope or validity of the arbitration
agreement.” AAA Commercial Arbitration Rule 7(a).
2
W e express no view as to the effect of incorporating arbitration rules
into consumer contracts.
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 13
1. Article 23(3) of the 2010 UNCITRAL rules does
not create an ambiguity.
Oracle argues that Article 23(3) of the 2010 UNCITRAL
rules renders the effect of the 2010 rules ambiguous. Article
23(3) states, “[t]he arbitral tribunal may continue the arbitral
proceedings and make an award, notwithstanding any
pending challenge to its jurisdiction before a court.”
UNCITRAL Arbitration Rules art. 23, para. 3, G.A. Res.
65/22, U.N. Doc. A/RES/65/22 (Jan. 10, 2011). From this,
Oracle argues that courts and arbitrators have concurrent
authority to decide the arbitrator’s jurisdiction. But even if
the 2010 UNCITRAL rules apply, they do not, of themselves,
create a path to challenging the arbitrator’s jurisdiction in
federal court. Article 23(3) assumes such a path. See U.N.
Comm’n on Int’l Trade Law, Report of the Working Group
on Arbitration and Conciliation on the Work of its Forty-Fifth
Session ¶¶ 99–101 (Vienna, Sept. 11–15, 2006) (“It was
noted that a number of national laws provided parties with an
irrevocable right to seek recourse from the courts.”). By
contrast, “the central . . . purpose of the [Federal Arbitration
Act] is to ensure that private agreements to arbitrate are
enforced according to their terms.” Stolt-Nielsen S.A. v.
AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1773 (2010)
(internal quotation marks omitted). The UNCITRAL rules
clearly and unmistakably delegate questions of arbitrability
to an arbitrator—it is immaterial to the outcome of this
dispute that the 2010 UNCITRAL rules also contemplate that
in some countries the arbitrator’s jurisdiction may be
simultaneously challenged in court.
14 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
2. The carve-out clause in the parties’ agreement
does not negate incorporation of the UNCITRAL
rules.
Oracle also argues that a carve-out provision in the
parties’ arbitration clause expresses their intent that a court
would decide arbitrability. The arbitration clause states that
any claim arising out of the Source License shall be settled by
arbitration. But the carve-out clause states “that either party
may bring any action, in a court of competent jurisdiction
(which jurisdiction shall be exclusive), with respect to any
dispute relating to such party’s Intellectual Property Rights or
with respect to [Myriad’s] compliance with the TCK license.”
Oracle maintains that whether a court or an arbitrator will
determine the arbitrability of intellectual property claims or
claims arising out of the TCK License are “disputes relating
to” those claims, and therefore concludes that the district
court had exclusive jurisdiction to decide the arbitrability of
those claims.
Enforcement of Myriad’s intellectual property rights is
restricted by the Source License. And the TCK License is
part of the Source License. Thus, by definition, the claims
excepted from arbitration by the carve-out clause are claims
“arising out of or relating to” the Source License. Oracle’s
argument conflates the scope of the arbitration clause, i.e.,
which claims fall within the carve-out provision, with the
question of who decides arbitrability. The decision that a
claim relates to intellectual property rights or compliance
with the TCK License constitutes an arbitrability
determination, which the parties have clearly and
unmistakably delegated to the arbitrator by incorporating the
UNCITRAL rules.
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 15
Oracle cites a Sixth Circuit case in support of its position.
In Turi v. Main St. Adoption Servs., LLP, 633 F.3d 496, 511
(6th Cir. 2011), the Sixth Circuit held that even though an
arbitration clause incorporated the AAA rules, the arbitration
clause was so narrow that questions of arbitrability did not
need to be decided by the arbitrator. The arbitration clause in
Turi only contemplated arbitration of “claim[s] regarding
fees” in excess of $5,000, id. at 506, but the plaintiffs in Turi
also asserted claims for fraud, conspiracy, misrepresentation,
intentional and negligent infliction of emotional distress, and
RICO violations, id. at 500. The court stated that “even
where the parties expressly delegate to the arbitrator the
authority to decide the arbitrability of the claims related to the
parties’ arbitration agreement, this delegation applies only to
claims that are at least arguably covered by the agreement.”
Id. at 511.
Turi did not involve a carve-out clause. It involved an
extremely narrow arbitration provision interpreted in the
context of a host of unrelated claims. Here, the excepted
claims are by definition related to arbitrable claims because
they all relate to the Source License. For this reason alone,
Turi is distinguishable. Nor are we persuaded by the
reasoning of Turi because as discussed above, when a tribunal
decides that a claim falls within the scope of a carve-out
provision, it necessarily decides arbitrability. Turi’s
reasoning collapses two separate questions into one.
Oracle also relies on a case from the Delaware Supreme
Court, James & Jackson, LLC v. Willie Gary, LLC, 906 A.2d
76 (Del. 2006). There, the parties’ arbitration agreement
stated, “[a]ny controversy or claim arising out of or relating
to this Agreement . . . shall be settled by arbitration,” but the
agreement also allowed LLC members to pursue injunctive
16 ORACLE AMERICA , INC. V . MYRIAD GROUP A.G.
relief and specific performance in court. Id. at 79–80. The
Delaware Supreme Court held that “[s]ince th[e] arbitration
clause [did] not generally refer all controversies to arbitration,
the federal majority rule does not apply, and something other
than the incorporation of the AAA rules would be needed to
establish that the parties intended to submit arbitrability
questions to an arbitrator.” Id. at 81. In fact, the parties’
agreement in James & Jackson did generally refer all
controversies to arbitration, only excepting claims for
injunctive relief and specific performance. Id. at 79–80. It is
clear that the James & Jackson court relied on the arbitration
agreement’s carve-out provision to decide that questions of
arbitrability would be decided by the court.
James & Jackson nominally supports Oracle’s position,
but the decision’s suggestion that the federal majority rule
only applies when an arbitration agreement lacks a carve-out
provision does not follow from the cases the court cited, see
id. at 80 n.9,3 and we know of no other authority supporting
this proposition.
3. The Source License does not modify the
UNCITRAL rules’ jurisdictional provisions.
Finally, Oracle argues that the parties’ arbitration clause
modified the UNCITRAL rules such that arbitrability must be
determined by the court. The arbitration clause in the Source
License states that arbitration is to be administered “in
accordance with the [UNCITRAL] rules . . . in effect at the
time of arbitration as modified herein.” The paragraph after
the arbitration clause sets out specific rules regarding
3
The court cited, among others, Terminix Int’l, 432 F.3d at 1329, and
Contec Corp., 398 F.3d at 208.
ORACLE AMERICA , INC. V . MYRIAD GROUP A.G. 17
arbitration proceedings that differ from the UNCITRAL rules,
but none of the modifications concern questions of
arbitrability.
Similarly, Oracle maintains that vesting courts with
“exclusive” authority to adjudicate claims relating to the
parties’ intellectual property rights and claims relating to
Myriad’s compliance with the TCK License constitutes
modification of the UNCITRAL rules. Oracle argues that this
modification requires that a court determine arbitrability. We
disagree. This argument merely recasts Oracle’s contention
that the carve-out provision evidences the parties’ intention
for a court to decide the arbitrability of claims that fall within
it. It is foreclosed by the discussion above.
IV. CONCLUSION
Incorporation of the UNCITRAL arbitration rules into the
parties’ commercial contract constitutes clear and
unmistakable evidence that the parties agreed to arbitrate
arbitrability. Accordingly, we REVERSE the district court’s
partial denial of Myriad’s motion to compel arbitration and
REMAND for proceedings consistent with this opinion.