Unwinding a Case: Issues That May Arise Regarding Settlement Agreements in Patent Infringement Litigation

Jayme Partridge, Slusser Wilson & Partridge LLP
Jayne Piana, Slusser Wilson & Partridge LLP

Abstract

In a patent infringement case, district court orders such as an unfavorable claim construction or a partial summary judgment of invalidity may have a devastating effect not only on present litigation but on any subsequent litigation involving the same patents. Are these orders preclusive in subsequent litigation? For example, is the patentee precluded from asserting a patent where there has been a partial summary judgment finding of invalidity in prior litigation? What can the patentee do to mitigate the effect of an unfavorable ruling on subsequent litigation? This article reviews these issues in detail, including the different standards applied by the circuit courts of appeals, and suggests strategies a litigant, especially a patentee, should consider, such as the timing of settlement and seeking vacatur of the order.

In addition, during settlement, a litigant may have other opportunities to more favorably position itself in any subsequent litigation. For example, the patentee may secure an agreement from the defendant to waive future challenges to the patent’s validity where the patentee plans to charge the defendant’s new products with infringement in a subsequent case. Such waivers are generally enforceable, but require language sufficient to manifest the defendant’s intent to waive, under the Federal Circuit’s decision in Flex-Foot v. CRP.

Moreover, the Federal Circuit’s recent ResQNet.com v. Lansa decision allowing litigation-related licenses to be used in a damages analysis may have turned its precedent, which traditionally excluded litigation-related licenses, on its head. The Eastern District of Texas is so far the only district court to apply ResQNet, and the Courts have reached different conclusions regarding whether ResQNet “changed the legal landscape regarding admissibility of litigation-related licenses.” Patent litigants should be aware that settlement licenses and negotiations surrounding the licenses may be admissible in subsequent litigation to show damages, especially in the Eastern District of Texas. Accordingly, patent litigants should draft such licenses and surrounding communications with care.

Finally, it may come as a surprise to many patent litigants that absent another basis for federal jurisdiction, the district court does not have jurisdiction to enforce disputes regarding settlement agreements, even an agreement settling a case once pending in that court. The Supreme Court’s decision in Kokkonen v. Guardian Life Ins. Co of America provided a solution, explaining that the district court would have jurisdiction if the parties’ obligations to comply with the terms of the settlement agreement are made a part of the order of dismissal. The circuit courts of appeals have reached different conclusions regarding what is sufficient to meet the Kokkonen standard, so it is important for litigants to pay close attention to the specific requirements of the applicable regional circuit, which are reviewed in the article.