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A federal court in California affirmed the rights of parties to settle their copyright disputes through binding arbitration, rather than the federal court system.
In Packeteer, Inc. v. Valencia Systems, Inc., No. C-06-07342 RMW, 2007 WL 707501 (N.D. Cal Mar. 6, 2007), Valencia alleged that Packeteer federal violated copyright laws by "reverse engineering" a portion of software code to create a software "patch."
Valencia sought arbitration, pursuant to the terms of the parties' Software License and Development Agreement (SLADA). However, Packeteer claimed that the arbitration clause only encompassed contract claims, not copyright claims, which fall under the jurisdiction of federal courts.
The Court held that all of Valencia's claims were arbitrable under the parties' broad dispute resolution agreement. Several federal appellate courts have weighed in on the issue of whether copyright issues are subject to arbitration. Most notably, the Ninth Circuit assumed that copyright disputes are arbitrable. Lorber Industries of Cal. v. Los Angeles Printworkers Corp., 803 F.2d 523, 525 (9th Cir. 1986).
Similarly, cases from the Second and Seventh Circuits indicate that someone other than a federal court could settle a copyright dispute. See McMahan Securities Co. L.P. v. Forum Capital Markets L.P., 35 F.3d 82, 89 (2d Cir. 1994); Saturday Evening Post Co. v. Rumbleseat Press, Inc., 816 F.2d 1191, 1198-99, (7th Cir. 1987). In light of this federal copyright jurisprudence, the Court permitted arbitration of both the contract and copyright claims.
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