On October 30, Judge Payne of the Eastern District of Texas issued a pre-trial order in Personalized Media Communications, LLC v. Zynga, Inc., Case No. 2:12-CV-00068-JRG-RSP (Doc. No. 213), addressing motions in limine. PMC had filed numerous MILs, including one seeking to exclude evidence of settlement demands made in other negotiations over the same patents. The ruling is brief, and we quote it in full:
Denied. PMC provides no reason that its demands from other negotiations on
these same patents are not relevant. Contrary to Zynga’s argument, the mere fact
that such a category is not specifically identified as a factor in Georgia Pacific
does not mean that it is wholly irrelevant or otherwise inadmissible.
This is a promising ruling for defendants facing plaintiffs who have previously licensed the patents-in-suit (or have reached prior litigation settlements). Settlement demands from other litigations (or even parties who have previously settled out of the current litigation) may reflect numbers much smaller than the damages sought at trial against the current defendant. Of course, the defendant will have to introduce evidence showing the comparability of the circumstances surrounding the prior settlements and the current damages case, e.g., same products at issue, similar sales volume, effective royalty rates, and other ways to demonstrate comparability. But if this marks a trend, defendants may have a forceful weapon to inform the jury that the plaintiff’s damages figure is inflated.
On July 23, 2012, in Implicit Networks, Inc. v. Juniper Networks, Inc., No. C 10-04234 SI (NDCA), the court considered a renewed motion by defendant to compel production of license negotiation documents and information. On June 5, 2012, the court rejected a motion to compel on this same issue. We covered that decision in a July 6, 2012 post.
On May 2, 2012, in Charles E. Hill v. 1-800 Flowers.Com, Inc., Case No. 2:11–CV–174 (EDTX), Judge Gilstrap granted the defendant’s motion to compel the plaintiff to produce both the draft license agreements and any communications between the plaintiff and third parties that related to negotiations of license agreements to resolve past claims under the patent-in-suit.
On April 9, 2012, the Federal Circuit in In re MSTG, Inc., Misc. Docket No. 996, held as a matter of first impression that license negotiation communications, even with other parties in the same case (including those who had dropped out of the case), are not privileged and and thus may be discoverable.
Patentee MSTG argued two issues: 1) that license negotiations between it and its other licensees are protected by a settlement negotiation privilege, and 2) that the district court had abused its discretion in ordering production of underlying license negotiations where the settlement agreements were fully integrated. The Federal Circuit rejected both arguments.
Since the Federal Circuit rendered its decision in ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 868-69 (Fed. Cir. 2010), numerous district court decisions have been faced with the issues of admissibility of litigation settlement agreements and discoverability of the underlying negotiation documents and communications. These issues have become increasingly important due to a statement from ResQNet, in which Judge Rader wrote that “the most reliable license in this record arose out of litigation.”
Some plaintiffs have seized on this statement and begun to press the importance of prior settlement agreements in determining reasonably royalty damages. On the flip side, some defendants who suspect that the plaintiff settled prior suits for low numbers want to see those agreements and potentially show them to the jury to drive the damages down.