Settlement Communications Leading to Litigation-Induced Licenses may be Discoverable to Establish Admissibility of License Agreements

The court granted defendants' motion to compel the production of settlement communications leading to litigation-induced license agreements because the communications would help determine the admissibility of the license agreements. "Although other courts in this District are split on whether litigation induced settlement agreements are admissible at trial, this Court takes a case-by-case approach to the issue. Whether the settlement agreements are admissible will likely depend on whether they are an accurate reflection of the inventions’ value. In this case, the settlement communications are likely to be key in determining whether the settlement agreements accurately reflect the inventions’ value or were strongly influenced by a desire to avoid or end full litigation. Defendants have demonstrated that, even within the same type of industry, different companies have settled for vastly different amounts. Companies with higher internet sales revenues have settled for less than companies with much lower internet sales revenues. Thus, the settlement amounts do not seem to be correlated to the companies’ potential damages exposure. Additionally, some companies have had secondary agreements that have required them to pay less than the original settlement amount. The settlement communications will likely explain these inconsistencies."

Clear With Computers, LLC v. Hyundai Motor America, Inc., 6-09-cv-00479 (TXED November 29, 2010, Order) (Davis, J.)