Copyright and Arbitration

 28 U.S.C.A. § 1338(a) reads:

The district courts shall have original jurisdiction of any civil action arising under any Act of Congress relating to patents, plant variety protection, copyrights and trademarks.  Such jurisdiction shall be exclusive of the courts of the states in patent, plant variety protection and copyright cases.

The section says nothing about arbitration. Common-law judges expressed a negative view toward arbitration, apparently based on a belief that such alternative dispute resolution ousted the court's jurisdiction. In the United States, the legal landscape fundamentally changed with the passage in 1925 of the Federal Arbitration Act. The purpose of the FAA was to reverse the longstanding judicial hostility and to place arbitration agreements upon the same footing as other contracts, in order to further a national policy favoring arbitration as a dispute-resolution mechanism.

There is no longer any doubt that claims arising under the Copyright Act may be arbitrated (voluntarily, or involuntarily pursuant to 9 U.S.C.A. section 4). Motions to compel arbitration for a wide variety of claims arising under the Copyright Act are now routinely granted, so long as the dispute is encompassed by the agreement to arbitrate. Similarly, motions to confirm arbitration awards have been confirmed, absent manifest disregard for the law, partiality, or vagueness. Except maybe in the Fourth Circuit.

On March 3d, in Design Gaps, Inc. v. Shelter, LLC, 2025 WL 665080the Fourth Circuit faced a “bevy of challenges” to an arbitration award. The court of appeals deftly and quickly disposed of those challenges: not on the merits but on new jurisdictional grounds. The dispute was a typical one in the construction industry: a project is not completed on time so the commissioning party gives the architectural plans to someone else who completes the job using the plans. There was an arbitration clause in the original contract, which led to a three day arbitration. The arbitrator ruled in favor of defendant finding no substantial similarity and fair use. 

The copyright owners went to district court to vacate the award, asserting the arbitrator had “manifestly disregarded the law.” The district court declined, affirming the arbitration award. The copyright owner appealed to the Fourth Circuit. The court of appeals dismissed on jurisdictional grounds, based on its decision last year in Friedler v. Stifel, Nicolaus & Co., 108 F.4th 241. That opinion was in turn based on the Supreme Court’s 2022 opinion in Badgerow v. Walters, 596 U.S. 1, which abrogated the so-called “look through” approach where courts could look through the arbitration application to the underlying substantive law for jurisdictional purposes. The Court held federal courts may no longer do so. Given that ruling, the Fourth Circuit held on March 3 that the fact that the arbitration involved federal copyright law did not give the federal courts jurisdiction, so it dismissed for lack of subject matter jurisdiction


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