Citation Edit

Cozza v. Network Associates, Inc., 362 F.3d 12 (1st Cir. 2004) (full-text).

Factual Background Edit

In 1999 Paul Cozza licensed Network Associates (NAI) to use his patented scan enhancement technology. During the license period disputes arose between the parties; after negotiations, they reached a Settlement Agreement on August 29, 1999, under which “Network was to remove Cozza’s technology from its products upon expiration of the License Agreement (December 31, 2001).” The License Agreement included an arbitration clause; the Settlement Agreement did not.

Trial Court Proceedings Edit

In June 2002 Cozza sued NAI alleging breaches of the Settlement Agreement. NAI moved to compel arbitration under the Federal Arbitration Act (FAA), arguing that the License Agreement specified that the arbitration clause survived the expiration of the License Agreement, and “all disputes between the parties arising from the licensing relationship are arbitrable.” The trial court refused to compel arbitration under that clause, stating

That may be true, but the Complaint does not assert any breach of the License Agreement, only breaches of the terms of the Settlement Agreement, which contains no arbitration clause. Given Cozza’s binding representation that he has not, and will not assert any claim arising under the License Agreement, the arbitration clause does not apply and Cozza cannot be compelled to submit to arbitration. [citation omitted] Consequently, the motion to compel arbitration is DENIED. [Opinion of Stearns, J., Oct. 17, 2002 (D. Mass. Case No. 02-CV-11135-RGS.]

“NAI did not appeal this denial . . . despite the FAA’s explicit provision for interlocutory appeals of such denials.” Activity in the District Court continued, including a motion by NAI that Judge Stearns reconsider his opinion.

Appellate Court Proceedings Edit

Finally NAI appealed to the Circuit Court. After further motions, the Circuit Court heard the appeal and affirmed the district court’s denial of a motion to reconsider his October 2002 opinion.

The Court first considered NAI’s appeal based on newly discovered evidence. It held that while such a claim would ordinarily be considered, the case was still pending in the district court, and “the record fails to provide support for NAI’s assertion that new evidence supporting arbitration emerged in Cozza’s deposition.” NAI also argued:

  • All Cozza’s claims are arbitrable because they involve his technology which was the subject of the license.
  • The arbitration clause survived the end of the contract.
  • The settlement incorporated the License.
  • Settlement of an arbitrable dispute is also arbitrable.

The court held that these arguments were made earlier, when NAI could have appealed but did not.

NAI then alleged “newly discovered” evidence in Cozza’s deposition. The Circuit Court noted that the “evidence” was only part of Cozza’s speculation on damages, and "nothing in the record calls into question Cozza’s initial response that he is 'not making claims in the litigation based upon the license agreement.'"

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