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Invista S.A.R.L. v. Rhodia

October 25, 2010

INVISTA S.À.R.L.; INVISTA TECHNOLOGIES, S.À.R.L.; INVISTA NORTH AMERICA S.À.R.L.
v.
RHODIA, SA, APPELLANT



Appeal from the United States District Court for the District of Delaware (Civ. No. 1-08-cv-00941) District Judge: Hon. Robert B. Kugler

The opinion of the court was delivered by: McKEE, Chief Judge.

PRECEDENTIAL

Argued: April 13, 2010

Before: McKEE, Chief Judge, HARDIMAN, Circuit Judge, and RUFE, District Judge*fn1

OPINION

Rhodia, SA, appeals the district court's denial of the motion it filed pursuant to Section 3 of the Federal Arbitration Act, 9 U.S.C. § 3, ("FAA"), in which Rhodia asked the district court to dismiss or stay an action filed against Rhodia by Invista S.à.r.l., Invista Technologies, S.à.r.l. and Invista North America S.à.r.l. ("INVISTA").*fn2 For the reasons set forth below, we will dismiss Rhodia's appeal because Rhodia's attempt to resolve the underlying dispute through arbitration under the § 3 of the FAA is now moot.

I. THE UNDERLYING DISPUTE

In the late 1960's, E. I. DuPont de Nemours ("DuPont") developed the "Gen I technology," for manufacturing adiponitrile ("ADN"). ADN is a critical intermediate chemical used in manufacturing nylon. The actual Gen I technology (hereinafter, sometimes referred to as "The Trade Secrets") is contained in various documents including flowsheets, process simulation models, and proprietary design and engineering manuals. According to INVISTA, these documents contain countless items of proprietary technical information concerning designing, constructing, and safely and efficiently operating an ADN plant. The information was developed from mathematical modeling and laboratory experiments, as well as the accumulated technical knowledge of many years of operational experience. According to INVISTA, today, over 40 years after its invention, the Gen I technologies and other butadiene-based ADN technologies offer the promise of hundreds of millions of dollars in annual revenue in the global merchant market for ADN and nylon 6, 6.

Ultimately, the parties decided to enter an arrangement whereby DuPont's French affiliate, E.I. DuPont de Nemours France S.A.S. ("DuPont France"), entered into a joint venture with Société des Usines Chimiques Rhône-Poulenc ("SUCRP"), which is a subsidiary of Rhône-Poulenc S.A. ("RhônePoulenc"). The joint venture was called, "Butachimie." The arrangement involved SUCRP designing, building and operating a plant to manufacture ADN using the Gen I technology.

The Butachimie joint venture is governed by the Joint Venture Agreement ("JVA") and a number of ancillary agreements. However, the JVA is the umbrella agreement that spells out the duties and obligations of the parties. Article 9 of the JVA, captioned: "NONDISCLOSURE OF TECHNOLOGY," provides that, absent certain specified exceptions:

Neither party will disclose to third parties or use, except as otherwise agreed upon, for fifteen (15) years from date of disclosure, confidential information with respect to the production of ADN or ADN hydrogenation disclosed to it by the other party or by SNC,*fn3 . . .

JA 199-200.

Article 23 of the JVA contained the arbitration clause that is at the center of this dispute. That clause provides:

The parties hereto agree that all disputes which may arise in connection with this Agreement should be resolved between them and, when this is not possible, such disputes shall be finally settled under the Rules of Conciliation and Arbitration of the International Chamber of Commerce by one or more arbitrators appointed in accordance with said Rules, arbitration to be held at Paris, France. The arbitrators will act as amiablecompositeurs. The decision of the arbitrators will be final. . .

JA 201. The ancillary agreements governing the joint venture contained similar arbitration clauses, and most of them also contained non-disclosure provisions.

According to INVISTA, the arbitration clause in the JVA applies only to the parties to the JVA, i.e., DuPont France and SUCRP, and not to either entity's parent company or affiliates.

A separate License Agreement served as a technology transfer agreement. It is between DuPont, the technology owner, and DuPont France/SUCRP, i.e., Butachimie -- the joint venture. INVISTA contends that DuPont, as the technology owner, licensed the highly confidential Gen I technology (along with other technical information) pursuant to the License Agreement between DuPont and Butachimie.

The License Agreement contains a non-disclosure clause, which provides:

Except as hereinbefore specifically provided, neither LICENSEE [i.e., Butachimie] nor any Sublicensee shall disclose to any party, furnish to any party any equipment embodying such information or use said information in any manufacturing operations outside of France. The obligations of this paragraph shall continue for fifteen (15) years from the date of receipt by LICENSEE of the particular Confidential DU PONT Technical Information in question.

JA 205. The License Agreement also contains an arbitration clause at Article XVII, which is very similar to the arbitration clause contained in Article 23 of the JVA. The decision of the arbitrators is also to be final under Article XVII of the License Agreement. JA 208.

According to INVISTA, neither Rhodia, S.A. nor any of its affiliates is a party to the License Agreement because DuPont only intended a license for the Butachimie joint venture. Thus, all transfers of technology from DuPont were intended only for the sole benefit of Butachimie and not for any Rhodia entity.

In 1975, SUCRP merged with another entity to become Rhône-Poulenc Industrialization ("RPI"). In 1997, the parent company, Rhône-Poulenc S.A., transferred its chemical and specialties business (including RPI) to the Rhodia Group, which is directed by Rhodia S.A. RPI's interest in the Butachimie joint venture was ultimately transferred to a single Rhodia S.A. subsidiary, Rhodianyl.

In 2002, DuPont decided to sell its Textiles and Interiors Business ("DTI") to affiliates of the company now known as INVISTA. In 2004 those affiliates purchased DTI, including the Gen I technology and other "know-how" related to the manufacture of ADN, for approximately $4 billion. INVISTA contends that in two agreements governing the transaction, the Purchase and Sale Agreement ("PSA") and the Patent and Technical Information Agreement ("PTIA"), DuPont promised INVISTA, inter alia, that it would not compete with INVISTA in the manufacture of ADN until April 30, 2011, and that it would maintain the confidentiality of the Trade Secrets being transferred to INVISTA. As part of the transaction, KoSa France Holding S.à.r.l, an INVISTA affiliate, acquired DuPont France's interest in Butachimie. INVISTA claims that, as a result of its purchase of DTI, it now owns the Gen I technology.

On September 19, 2006, INVISTA announced that it had "begun engineering activities to construct a world-scale nylon 6,6 facility in Asia to support the region's growing demand for [ADN] . . . and nylon 6,6 polymer." JA 127. INVISTA also announced that the new facility would deploy its "proprietary, next generation of butadiene-based ADN technology to expand its low-cost, competitively advantaged position in Asia." Id.

INVISTA notes that less than one week after its announcement, Rhodia, S.A. announced that it too was "studying the feasibility of building an [ADN] plant in Asia." JA 127. However, according to INVISTA, Rhodia, S.A. has not acquired a license for any butadiene-based ADN manufacturing technology comparable to INVISTA's proprietary and confidential Gen I technology, and Rhodia, S.A. could not develop a comparable technology on its own without a substantial expenditure of resources, time, and money. Accordingly, INVISTA claims that Rhodia, S.A. could proceed with its announced plans only by misappropriating the Gen I technology Trade Secrets it learned through the Butachimie joint venture and/or if DuPont (the originator of the technology and assignor of it to INVISTA) had unlawfully disclosed the Trade Secrets to Rhodia, S.A.

II. THE INTERNATIONAL ARBITRATION

On October 3, 2007, Rhodianyl, then the Butachimie joint venture partner and party to the JVA, and Rhodia Operations S.A.S., an entity which purportedly provides services to Butachimie, initiated arbitration, pursuant to Article 23 of the JVA against INVISTA-affiliated entities, INVISTA S.à.r.l. INVISTA North America S.à.r.l.and KoSa France Holding S.à.r.l, ...


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