On April 1, 2022, Justice Borrok of the New York County Commercial Division issued a decision in Network-1 Tech., Inc. v. Netgear, Inc., 2022 NY Slip Op. 31081(U), holding that an agreement that gave the parties the option of arbitrating their dispute did not require the parties to arbitrate, explaining:
Where a party has been aggrieved by another’s failure to arbitrate they may move for an order to compel the arbitration. Arbitration is a matter of contract law such that a party cannot be forced to submit to an arbitration he did not agree to. Contractual provisions providing for an alternative process of dispute resolution must be express and unequivocal to constitute a waiver of a party’s right to their day in court.
The issue of arbitrability as a threshold matter is itself a matter of contract. If there is clear and unmistakable evidence that the parties sought to delegate the arbitrability question to the arbitrator then a court may not decide the arbitrability question. An arbitration provision can be distinguished by whether it applies broadly to all disputes from a provision that only applies to specific issues.
Netgear’s renewed motion to compel arbitration must be denied. Simply put, the word “may” makes Section 4.9 of the License Agreement permissive, and that the parties submitted to mediation does not obligate the parties to arbitration. Section 4.9 merely provides Netgear a mechanism to obtain a declaration of right to cease royalty payments in the event of a Non-Infringement Finding, but it does not mandate arbitration as the sole method for dispute resolution. Network’s stipulation does not resolve the underlying dispute about whether the HP verdict warranted Netgear’s decision to cease making royalty payments.
With respect to the issue of arbitrability, the court retains jurisdiction where, as here, there is no clear and unmistakable evidence that the parties delegated that authority to an arbitrator Henry Schein, Inc., 139 S Ct at 530). Pursuant to Section 4.9 of the Licensing Agreement, the issue of whether a third party’s PoE infringes on the Patent could be submitted to an arbitrator if the parties chose to do so. Netgear’s reliance on Communications Workers of Am. v AT&T Inc., 6 F4th 1344, 1349 (DC Cir 2021), which stands for the proposition that questions of whether the issue of arbitrability was delegated to the arbitrator should be resolved by the arbitrator, does not lead to a different result. Netgear’s motion to compel arbitration must therefore be denied.
(Internal citations omitted).