Friday, April 6, 2012

Discovery of Prior Settlement Agreements and Negotiations Permitted "as the Exception and Not the Rule"

The court granted defendant’s motion to compel the production of draft license agreements and communications regarding license negotiations between plaintiff and third parties entered into to resolve past claims under the asserted patents. "Plaintiff’s business is to litigate and license. [Plaintiff] does not openly compete with Defendants in the marketplace. Accordingly, the settlement communications will be a valid consideration in determining whether the settlement agreements themselves accurately reflect the patents’ value. . . . The Court therefore will require production of the draft license agreements and underlying settlement negotiations in this case. However, the Court cautions future litigants that such production will be viewed as the exception and not the rule. Settlement negotiations are always suspect to some degree and are often littered with unreal assertions and unfounded expectations. The Court is aware that assertions made during settlement negotiations are generally made to ‘close the deal’ and are not always grounded in facts or reason. Accordingly, while the Court allows discovery of the negotiations and settlement discussions at issue, the Court intends . . . to thereafter direct its attention and scrutiny to the weight and degree that should properly be afforded to such negotiation materials."

Charles E. Hill & Associates, Inc. v. ABT Electronics, Inc., et. al., 2-09-cv-00313 (TXED April 4, 2012, Order) (Gilstrap, J.)

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