Diapulse Corporation of America v. Cabra, Ltd.

Diapulse Corporation of America (Diapulse) (plaintiff) manufactured medical devices used to expedite bone and tissue healing. Diapulse’s devices were not approved for distribution in the United States, so Diapulse marketed them abroad through foreign distributorship agreements. Cabra, Ltd. (defendant), a Swiss corporation, entered into contracts to be the exclusive distributor of Diapulse’s devices in Switzerland and in Germany. The contracts contained noncompete provisions that prohibited Cabra from distributing similar devices during the term of the contracts and for two years after the contracts expired. The contracts also contained arbitration clauses that required any disputes to be resolved via arbitration. Diapulse demanded arbitration after learning that Cabra marketed a competing machine in Switzerland, France, and Algeria. Cabra argued that the other machine was not similar to Diapulse’s device, that the contracts prevented competition only in Switzerland and Germany, and that the other machine was not actually sold in Switzerland. The arbitrator ruled in favor of Diapulse and issued a broad injunction barring Cabra from marketing any machines that were similar to Diapulse’s devices. Diapulse motioned to confirm the arbitration award. Cabra cross-moved to modify the arbitration award on the ground that the two-year restriction had expired. The district court modified the arbitration award by narrowing the scope of the injunction, barring Cabra from marketing any similar devices for two years in Switzerland and Germany only. Diapulse appealed.