(CN) - The 9th Circuit overturned an arbitrator's injunction in a trademark infringement dispute between comedy clubs, saying an arbitration award must be vacated if the arbitrator shows "manifest disregard for the law."
Comedy Club Inc. (CCI) and Improv West Associates became embroiled in a lengthy legal dispute over a license agreement for CCI to use Improv West's trademarks nationwide.
CCI failed to open eight Improv comedy clubs in 2002 and 2003, so Improv West dissolved the agreement and announced its intention to open its own Improv clubs.
The district court referred the case to an arbitrator, who ruled that CCI had violated the agreement.
The arbitrator enjoined CCI and its affiliates from opening or operating any comedy clubs in the United States until 2019. The injunction defined "affiliates" to include family members, former spouses and ex-spouses' relatives.
In September 2007, a three-judge panel found that it lacked jurisdiction to review the district court's order compelling arbitration. The Supreme Court vacated that opinion and remanded for reconsideration in light of Hall Street Associates v. Matel.
But Judge Gould held that the high court's decision did not undermine its precedent of vacating arbitrator's decisions that disregard the law.
"It is not reasonable to preclude from gainful competition in the comedy club sphere relatives of ex-spouses of the CCI principles who were not in an agency relationship with those principals," Gould wrote.
The court upheld its previous ruling.
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