Photopaint Technologies v. Smartlens Corp.

Photopaint Technologies, LLC (Photopaint) (plaintiff) entered into a licensing agreement with Smartlens Corporation and Steven Hylen (Smartlens) (defendant). The agreement contained an arbitration provision, and when a dispute arose, the parties submitted the controversy to an arbitrator from the American Arbitration Association (AAA). The arbitrator issued an award in favor of Photopaint in May 2000 with instructions stating that either party could formally rescind the license agreement within 30 days of receiving the award and that Smartlens’s payment amount to Photopaint would vary depending on which party rescinded. The AAA failed to distribute the award to the parties until October 2000, putting the end of the 30-day rescission period in early November 2000. However, the parties continued independent settlement negotiations and agreed to extend the rescission deadline to the end of November, with any other applicable deadlines being extended a similar amount of time. As negotiations continued, Smartlens requested further extensions and threatened to attempt vacating the arbitration award under the Federal Arbitration Act (FAA) if Photopaint did not agree. Photopaint and Smartlens then agreed to extend the time a party had to act “to rescind the license, or otherwise.” The series of tolling agreements continued from October 2000 until July 2001, when negotiations broke down and Photopaint acted to rescind the license agreement and demand payment from Smartlens. Smartlens refused to pay, and Photopaint petitioned for confirmation of the arbitration award in federal district court. Smartlens argued that under § 9 of the FAA, Photopaint was required to petition for confirmation within one year of the arbitration award’s making in May 2000. The district court agreed and dismissed Photopaint’s petition. Photopaint appealed to the Second Circuit.