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Microsoft Must Arbitrate Battery Fight With Sony

OAKLAND, Calif. (CN) - A federal judge on Tuesday granted Sony's request to arbitrate Microsoft's antitrust claims involving lithium ion batteries, but tossed its motion to dismiss the claims as moot.

In June 2015, Microsoft accused Sony, Panasonic and other electronics firms of conspiring to fix the price of lithium ion batteries for more than a decade. The suit is part of a wider multidistrict class action still pending in the Northern District of California.

Sony settled the antitrust claims it faced in the multidistrict litigation case for $19 million in September, the first defendant to do so.

In Microsoft's lawsuit, the Seattle-based tech giant says Nokia, whose mobile business it bought in 2013, paid more than it should have for the batteries during the time of the conspiracy, which it claims lasted from Jan. 1, 2000 to May 31, 2011.

Sony wants Microsoft to arbitrate its claims, citing its product purchase agreement with Nokia for the batteries. The agreement contains an arbitration clause requiring that disputes over its scope and the arbitrability of claims be resolved by an arbitrator, not a court.

Meanwhile, Microsoft said the court could determine arbitrability based on the "wholly groundless" standard, which aims to prevent a party from asserting any claim it wants just to force arbitration.

Specifically, Microsoft wanted a judge to determine the arbitrability of claims predating the product purchase agreement as well as injunctive relief claims, which were carved out of the agreement. It said the claims that predate the agreement shouldn't be arbitrated because the agreement isn't retroactive.

And at a hearing in August, Microsoft attorney Parker Miller told U.S. District Judge Yvonne Gonzalez Rogers that Sony backdated the arbitration agreement to July 2000, though it was executed in October 2001.

"This was a narrow contract about the purchase of certain lithium ion batteries, it doesn't cover purchases before [the contract]," Miller told the judge. "How can [claims] possibly arise from a contract that doesn't exist?"

Miller did not return a request for comment on the ruling.

In finding for Sony on Tuesday, Gonzalez Rogers noted that the arbitration clause is based on International Chamber of Commerce rules.

"The parties' incorporation of the ICC rules in the arbitration provision constitutes a clear and unmistakable delegation of the question of arbitrability here to an arbitrator, rather than the court," she said in her order.

Gonzalez Rogers then addressed Microsoft's "wholly groundless" argument. Even where arbitrability questions have been delegated to an arbitrator, she said courts have ordered parties to arbitrate claims predating an arbitration agreement and that retroactive application of the agreement isn't wholly groundless if the arbitration clause is "broad."

The judge made a similar finding regarding Microsoft's contention that its injunctive relief claims aren't arbitrable based on the wholly groundless test, noting that even where such claims have been carved out of an arbitration agreement, courts have nonetheless compelled arbitration.

And Microsoft is seeking damages, not injunctive relief, Gonzalez Rogers noted.

"Microsoft did not rush into court seeking emergency injunctive relief," Gonzalez Rogers said. "Nor is intellectual property at issue. Given the overlap between the damages sought and the potential for injunctive relief, the court cannot find that Microsoft's injunctive relief claims against Sony would fall within a 'wholly groundless' category depriving the question of arbitrability from the arbitrator."

Despite ordering arbitration in the case, Gonzalez Rogers denied Sony's request to dismiss Microsoft's complaint as moot, citing Ninth Circuit precedent allowing her to either stay proceedings as in this case or dismiss.

Sony is represented by Jon Cieslak of Cooley LLP in San Diego. He did not return a request for comment.

Miller is with Alston & Bird in Atlanta.

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