Cengage Advantage Books: Fundamentals of Business Law 9th Edition by Roger LeRoy Miller

Exercise 2

Arbitration. PRM Energy Systems, Inc. (PRM), owned technology patents and licensed Primenergy to use and to sublicense the technology in the United States. The agreement stated that all disputes would be settled by arbitration. Kobe Steel of Japan was interested in using the technology at its U.S. subsidiary; PRM directed Kobe to talk to Primenergy about that. Kobe talked to PRM directly about using the technology in Japan, but no agreement was reached. Primenergy then agreed to let Kobe use the technology in Japan without telling PRM. The dispute between PRM and Primenergy about Kobe went to arbitration as required by the license agreement. PRM sued Primenergy for fraud and theft of trade secrets. PRM also sued Kobe for using the technology in Japan without its permission. The district court ruled that PRM had to take all complaints about Primenergy to arbitration. PRM also had to take its complaint about Kobe to arbitration because the complaint involved a sublicense Kobe was granted by Primenergy. PRM appealed, contending that the fraud and theft of trade secrets went beyond the license agreement with Primenergy and that Kobe had no right to demand arbitration because it never had a right to use the technology under a license from PRM. Is PRM correct or must all matters go to arbitration? Explain. [PRM Energy Systems v. Primenergy, 592 F3d 830 (8th Cir. 2010)]