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LG Electronics, Inc. v. Interdigital Communications, Inc.

Court of Chancery of Delaware, New Castle

August 20, 2014

LG ELECTRONICS, INC., Plaintiff,
v.
INTERDIGITAL COMMUNICATIONS, INC., INTERDIGITAL TECHNOLOGY CORPORATION, and IPR LICENSING, INC., Defendants

Submitted July 16, 2014

Jeremy D. Anderson, Joseph B. Warden, FISH & RICHARDSON P.C., Wilmington, Delaware; Michael J. McKeon, Christian A. Chu, Scott A. Elengold, FISH & RICHARDSON P.C., Washington, District of Columbia; Attorneys for Plaintiffs.

Neal C. Belgam, Kelly A. Green, SMITH, KATZENSTEIN & JENKINS LLP, Wilmington, Delaware; David S. Steuer, Matthew R. Reed, WILSON SONSINI GOODRICH & ROSATI, Palo Alto, California; Attorneys for Defendants.

OPINION

Page 136

LASTER, Vice Chancellor.

LG Electronics, Inc. (" LG" ) and the defendants are parties to an arbitration before the International Centre for Dispute Resolution. After LG filed the arbitration, the parties entered into a non-disclosure agreement, titled " Agreement Governing Confidential Settlement Communications" (the " NDA" ). LG alleges in this action that the defendants, whom this decision refers to collectively as " InterDigital," breached the NDA by submitting certain documents to the arbitrators. As a remedy, LG seeks a permanent injunction compelling InterDigital to withdraw the offending documents and to refrain from further breaches of the NDA. InterDigital has moved to dismiss on the grounds that LG's claims are properly before the arbitral tribunal and this court should defer to the tribunal under McWane Cast Iron Pipe Corp. v. McDowell-Wellman Engineering Co., 263 A.2d 281 (Del. 1970). The motion to dismiss is granted.

I. FACTUAL BACKGROUND

The facts are drawn from LG's verified complaint and the documents it incorporates by reference. At this procedural stage, the complaint's allegations are assumed to be true, and the plaintiff receives the benefit of all reasonable inferences.

A. The 2006 Patent License Agreement

In 2006, LG and InterDigital entered into a Wireless Patent License Agreement (the " License Agreement" or " PLA" ). Section 5.2 provides that if the parties cannot resolve a dispute through negotiation, then either party can submit the dispute to arbitration. PLA § 5.2. The parties disagree about whether the License Agreement remains in force.

B. The ITC Proceedings

On July 26, 2011, InterDigital filed a complaint with the United States International Trade Commission (the " ITC" ) against a range of defendants. In substance, InterDigital alleged that the defendants had imported wireless devices that infringed InterDigital's patents. In December, InterDigital added LG and two of its subsidiaries as defendants. On January 20, 2012, LG moved to terminate the

Page 137

ITC proceeding on the grounds that the License Agreement covered its products and the terms of the License Agreement entitled it to arbitrate InterDigital's claims. An administrative law judge issued an initial determination that LG's request for arbitration was not " wholly groundless" and terminated the proceeding as to LG. After multiple rounds of appellate review, the United States Supreme Court ordered the ITC to dismiss the case.

C. The Arbitration Proceedings

On March 19, 2012, while still a party to the ITC proceeding, LG filed a demand for arbitration with the International Centre for Dispute Resolution. The demand sought a determination that the License Agreement gives LG the right to use the patents that InterDigital asserted in the ITC proceeding. Shortly after LG initiated the arbitration, InterDigital and LG entered into the NDA. The NDA defines certain types of documents and communications as " Settlement Communications" and restricts the abilities of the parties to use those Settlement Communications. Significantly, the NDA does not contain an arbitration provision.

An arbitral tribunal (the " Tribunal" ) was constituted on January 17, 2013. On April 19, LG submitted its opening brief to the Tribunal. LG made a point of stating that it had not included any information in its brief about the negotiation of the License Agreement or certain post-signing communications with InterDigital because LG believed that those matters fell within the NDA's definition of Settlement Communications and could not be used in the arbitration.

In response, InterDigital asked the Tribunal to rule on whether the NDA applied to pre-NDA communications. InterDigital argued the parties only intended for the NDA to cover prospective settlement communications and not to prevent the submission of pre-NDA evidence to the Tribunal. LG responded by advancing its own interpretation of the NDA, which stressed that the NDA extended to anything that fell within the definition of Settlement Communications " at any time." Pl.'s Compl. Ex. C at 3-5.

On May 8, 2013, the Tribunal ruled that InterDigital's request was " premature." Pl.'s Compl. Ex. D. The Tribunal took " the view that the [NDA] issue is one of the admissibility of evidence rather than of the [meaning] of the NDA" and stated that it would address that question if it became necessary to do so. Id. at 2.

InterDigital submitted its response brief to the Tribunal on May 31, 2013. LG contends that InterDigital's brief improperly disclosed Settlement Communications to the Tribunal. Shortly thereafter, the parties agreed to a temporary stay of the arbitration.

D. This Litigation

On June 2, 2014, InterDigital asked the Tribunal to lift the stay. Two days later, LG submitted a concurring letter. With the stay lifted, LG asked InterDigital to withdraw its brief and re-file it without the alleged Settlement Communications. InterDigital refused. On June 9, LG filed this suit, seeking injunctive relief compelling InterDigital to withdraw its brief and barring it from breaching the NDA in the future.

II. LEGAL ANALYSIS

InterDigital has moved to dismiss LG's complaint in favor of the arbitration. InterDigital does not assert that the court lacks subject matter jurisdiction over the dispute. Rather, it asks the court ...


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