Judicial Review of Arbitration Award is “Very Limited”: Federal Circuit | Practical Law

Judicial Review of Arbitration Award is “Very Limited”: Federal Circuit | Practical Law

In Bayer CropScience AG v. Dow Agrosciences LLC, the US Court of Appeals for the Federal Circuit issued a non-precedential opinion holding that ordinary, or even serious, legal or factual error is not a ground for disturbing an arbitral award on patent infringement and contract claims.

Judicial Review of Arbitration Award is “Very Limited”: Federal Circuit

Practical Law Legal Update w-006-7362 (Approx. 3 pages)

Judicial Review of Arbitration Award is “Very Limited”: Federal Circuit

by Practical Law Intellectual Property & Technology
Published on 03 Mar 2017 • USA (National/Federal)
In Bayer CropScience AG v. Dow Agrosciences LLC, the US Court of Appeals for the Federal Circuit issued a non-precedential opinion holding that ordinary, or even serious, legal or factual error is not a ground for disturbing an arbitral award on patent infringement and contract claims.
On March 1, 2017, in Bayer CropScience AG v. Dow Agrosciences LLC, the US Court of Appeals for the Federal Circuit issued a non-precedential opinion largely affirming the US District Court for the Eastern District of Virginia's decision to confirm an arbitration award, and held that ordinary, or even serious, legal or factual error is not a ground for disturbing an arbitral award on patent infringement and contract claims. However, the Federal Circuit concluded that the district court abused its discretion regarding post-judgment interest and modified the judgment to apply the federal statutory rate ( (Fed. Cir. Mar. 1, 2017)).
In a patent infringement and contract dispute between Bayer CropScience AG and Dow Agrosciences LLC, an international arbitral tribunal entered an award finding, among other things, that Dow infringed Bayer's patents and awarded Bayer approximately $455 million in damages. Dow was also ordered to pay an 8% post-award interest rate. In January 2016, the US District Court for the Eastern District of Virginia confirmed the judgment.
The Federal Circuit pointed to relevant federal statutes and precedents establishing that review is extremely limited. Ordinary legal or factual error is not a ground for disturbing an arbitral award like the one at issue in this case. Specifically, courts have held that an award may be vacated only if:
  • It implicates one of the grounds for refusal or deferral of recognition or enforcement of the award as specified in the New York Convention (9 U.S.C. § 207), including a finding that the award:
    • deals with a difference not contemplated by or not falling within the terms of the submission to arbitration (New York Convention art. V(1)(c)); or
    • is contrary to the public policy of the country where recognition or enforcement is sought (New York Convention art. V(2)(b)).
  • The arbitrator "manifestly disregarded" the applicable law.
  • The award "fails to draw its essence" from the relevant contractual provisions.
The Federal Circuit noted that even if an arbitrator committed serious error, it would not suffice to overturn the award, if the arbitrator arguably construed or applied the contract and acted within the scope of his authority.
The Federal Circuit also concluded that the court abused its discretion in denying Dow's motion to amend the judgment to use the federal statutory rate for post-judgment interest. Numerous courts have held that once a federal court confirms an arbitral award, the award merges into the judgment and the federal rate for post-judgment interest presumptive applies unless the parties or arbitrators unambiguously express their intent to replace the federal rate for the post-judgment period.
Counsel seeking to overturn an arbitration award at the Federal Circuit will face the same nearly insurmountable standards applied in the regional circuits.