ALLENTOWN – A federal judge has affirmed a $397,000 arbitration award previously granted to a small Pennsylvania chemical company’s domestic and international competitors – a pair of companies that the plaintiff alleged had conspired to steal patented technology it created, whose primary use would be to generate solar energy.
PPT Research, Inc. of Allentown first filed suit in the U.S. District Court for the Eastern District of Pennsylvania on June 5, 2020 versus Solvay USA, Inc. of Princeton, N.J. and Rhodia Operations S.A.S., of France.
PPT said it spent years and millions of dollars to develop the LVS micro-gel particle slurry suspension system (MGP Technology), which consists of a water-based formula used in the process of cutting solar wafers, which, in turn, are used to manufacture the solar cells for solar panels.
“Under a technology licensing agreement, PPT licensed the MGP Technology to Solvay for use in China and South Korea, in exchange for a modest royalty fee of 7 percent. PPT accepted this small royalty fee to gain access to the lucrative China solar market, with which Solvay purported to have extensive ties. PPT (and Solvay) knew that PPT’s MGP Technology would be worth hundreds of millions of dollars once it was successfully commercialized in China,” per the lawsuit.
Solvay is said to have wanted the MGP Technology, but did not want to pay for it. Allegedly, it created a plan hinged on discrediting the technology and secretly filing a fraudulent patent application to disrupt and de-value PPT’s existing intellectual property and patents/active applications.
“Solvay intentionally deviated from PPT’s patented technology, training, S.O.P.s, recommendations and directions in tests with China based solar wafer manufacturers to ensure that the tests would fail,” the suit said.
“The culmination of the plan involved coercing PPT into agreeing to allow Solvay to patent the Solvay solution in Solvay’s own name. Rather than focusing its efforts on commercializing PPT’s technology, Solvay spent the next five months (from November 2015 to April 2016) lying to PPT in an effort to co-opt PPT’s valuable technology.”
The suit stated PPT later learned when it saw the Solvay-filed patent application, for the first time in April 2018, that its technology solution was anything but “independent.” Solvay’s solution was instead derived from PPT work product shared with Solvay, and was a derivative of PPT’s patented technology and confidential intellectual property, the suit said.
Although Solvay was successful in misappropriating PPT’s MGP technology, the lawsuit says it ultimately failed in its efforts to commercialize the technology in China. This was due to another new technology, diamond wire slicing (DWS), taking the lead in the Chinese market and superseding PPT’s technology, the suit said.
The suit said if not for “Solvay’s breaches of contract and scheme to steal PPT’s trade secrets, PPT’s technology would have been the prominent technology in the Asian market, not the competing technology that now exists.”
“Solvay’s conduct was and is a substantial factor in PPT losing out on a lucrative business opportunity with production revenue that easily would have exceeded $100 million annually,” the suit stated.
UPDATE
The case later moved to arbitration, where the defendants were granted a total arbitration award of $397,812.23, between
In a July 17 memorandum opinion, U.S. District Court for the Eastern District of Pennsylvania Judge Jeffrey L. Schmehl upheld the arbitration award and dismissed PPT’s case.
“As set forth in the Reciprocal Confidentiality Agreement, the arbitration tribunal applied Delaware law as the applicable substantive law to claims and defenses relating to the RCA and Pennsylvania law and federal law as the applicable substantive law to claims and defenses relating to the Technology License Agreement. Over the course of arbitration, two claims became uncontested. First, the parties agreed that the RCA is no longer in effect and the Parties have no continuing obligations arising out of the RCA. Second, the parties agreed that Solvay effectively terminated the TLA in its letter dated June 8, 2017. As for the contested claims, the Tribunal concluded that (1) PPT materially breached the TLA by failing to provide a technology package and training of the LVS technology that would enable its commercialization as required under Section 5(b), and (2) Defendants’ claims are not time-barred based on the plain reading of Section 14(d) of the TLA, and PPT is thus not relieved of its liability for damages for its material breach,” Schmehl said.
“In sum, under the TLA, Solvay incurred losses and damages in the amounts of $35,312.23 in payments to PPT, $216,000 for the license and technology transfer, and $100,000 as a royalty fee advance. Defendants were also entitled to arbitration costs in the amount of $46,500. Added together, the Tribunal found that PPT is liable to defendants for $351,312.23 in damages for its material breach of the TLA and $46,500 in arbitration costs.”
PPT motioned for the Court to vacate the arbitration award, on the grounds that the arbitrator “exceeded her powers by deciding an issue in manifest disregard of the law” – while the defendants counter-motioned to have the award confirmed.
“PPT’s argument is that the arbitrator exceeded her powers and manifestly disregarded Pennsylvania law and the explicit language of the TLA in deciding that Solvay’s claims against PPT were not time-barred. However, here, rather than ignore the applicable law, the arbitrator knew the law (she already knew or was made aware of it by PPT’s brief), applied the law, and reached a different conclusion than PPT. Mere disagreement is not a valid ground to vacate an arbitration award,” Schmehl stated.
“However, PPT argues that the typical four-year statute of limitations was intentionally shortened by the parties to six-months by the last sentence of Section 14(d) of the TLA. Section 14(d) states as follows: ‘(d) All rights and obligations created hereunder shall expire upon termination of this Agreement, except that the Definitions, Sections 5(b-c), all confidentiality requirements of Section 6, and Sections 9(c), & 11 shall survive expiration or earlier termination of this Agreement. In no event shall termination of this Agreement release Licensee from the obligation to pay any amounts that became due on or before the date of such termination. For Sections 5(b-c), enforcement of said Sections shall continue for 6 months following termination of this Agreement as described in Section – 14.”
Schmehl added that ultimately, “the crux of the argument is over interpretation of the last sentence of Section 14(d) as a survival or limiting clause.”
“If it is a survival clause, then Solvay’s claims against PPT were time-barred six months after Solvay terminated the TLA by letter on June 8, 2017. If it is a limiting clause, however, then Solvay’s claims are not time-barred since they filed their ICC request for arbitration in July 2020, within four years of termination for material breach,” Schmehl said.
“PPT argues that the arbitrator’s interpretation of Section 14(d) was in manifest disregard of the law because the arbitrator read into the TLA a provision that was not there, despite the TLA providing that ‘the arbitral tribunal shall not have the power to alter, modify, amend, add to or subtract from any term or provision of this Agreement.’ However, as aforementioned, to vacate an arbitration award requires a demanding standard where even errors in the arbitrator’s interpretation of the law do not require vacatur – only a total lack of support in the record would do so. Further, the Supreme Court has articulated, when upholding the Third Circuit, that ‘an arbitral decision ‘even arguably construing or applying the contract’ must stand, regardless of a court’s views of its (de)merits.”
Schmehl explained that the arbitrator’s interpretation of Section 14(d) “was correct…as lacking a clear intent to shorten the four-year statute of limitations because Section 14(d) is a survival clause, as indicated by its use of the specific language of ‘shall survive’ and ‘shall continue.”
“While it is possible to write in a statute of limitations shortening provision, the law strongly disfavors doing so through a survival clause. In fact, in Pennsylvania, such a provision, while allowed, must demonstrate ‘a clear expression of such an intent [to shorten a statute of limitations] to be enforceable.’ There is no such unequivocal intent here,” Schmehl stated.
“Thus, after extensive review of the record in this matter, I find that there is insufficient evidence to support PPT’s argument as to this issue. PPT clearly did not meet its burden of demonstrating that the arbitrator knew of the applicable law yet ignored it in a manifest disregard of the law. This Court cannot vacate a valid award of an arbitrator based upon a mere disagreement by a party who is not happy with the outcome. In summary, as District Court review of arbitration decisions is quite narrow, this Court will not rely on conjecture to vacate or remand an otherwise valid decision of an arbitrator. Accordingly, PPT’s motion to vacate on this ground is denied and defendants’ motion to confirm the award is granted.”
The plaintiff was represented by Justin E. Proper and Natalie Molz of White & Williams in Philadelphia, plus Rebecca J. Price of Norris McLaughlin and Sanford J. Piltch of the Law Offices of Sanford J. Piltch, in Allentown.
The defendants were represented by Rebekah B. Kcehowski and Randall E. Kay of Jones Day, in Pittsburgh and San Diego, Calif.
U.S. District Court for the Eastern District of Pennsylvania case 5:20-cv-02645
From the Pennsylvania Record: Reach Courts Reporter Nicholas Malfitano at nick.malfitano@therecordinc.com