A Settlement Agreement Between Patent Litigants May Not Justify Vacating a Claim-Construction Order Previously Issued by the Court

Authored by D. Brain Kacedon, John C. Paul, and Robert D. Wells

Often times, a claim construction decision in a patent infringement case can have a significant impact on the settlement positions of the parties. In particular, a decision that is unfavorable to a patent owner may cause a patentee to consider settling to avoid a final judgment of noninfringement or invalidity based on that construction. In these situations, it is common that a patent owner may seek to have the claim construction decision vacated so as to mitigate or eliminate the effects of that decision in future disputes. A recent decision from the United States District Court for the Northern District of California, however, illustrates the potential dangers of waiting until after a court has construed the claims of an asserted patent to settle litigation, as the court may not be inclined to vacate its decisions based on a private settlement between the parties.

Background

A few months after the Northern District of California issued its claim-construction order in Single Touch Interactive, Inc. v. Zoove Corp.,¹ the parties settled their dispute and filed a joint motion to vacate the court's order. In support of the motion, the parties argued that the settlement agreement "resolved all claims and counterclaims without the necessity for further proceedings" or the possibility of requests for additional review and reconsideration. In other words, the parties asserted that the claim-construction order was no longer necessary because no controversy existed between them. In addition, they asserted that vacatur would not affect the public interest because public policy favors settlement and claim-construction orders are interlocutory (i.e., nonfinal). Further, the parties asserted that public policy favoring settlement would be served by vacating the claim-construction order because the proposed vacatur was a "significant factor" in the resolution of the litigation.

The Single Touch Decision

Citing Supreme Court precedent, the district court denied the motion, noting that "[j]udicial precedents are presumptively correct and . . . and should stand unless a court concludes that the public interest would be served by a vacatur." (Quoting U.S. Bancorp Mortgage Co. v. Bonner Mall Partnership, 513 U.S. 18, 29 (1994)). Although denying the motion might frustrate the parties' individual settlement expectations in this particular situation, the court stated, in general, "permitting parties to vacate interlocutory decisions may discourage earlier settlement and instead incentivize parties to take cases through the entire Markman process, or other non-dispositive rulings, in order to test their positions, knowing they could effectively 'erase' that decision through settlement later."

Relying on the reasoning in Bonner Mall, the court also concluded that "judicial decisions are not the property of the private litigants, but are 'valuable to the legal community as a whole.'" In particular, the court observed, even if the claim-construction order were not final, "other courts may consider it for its persuasive value, particularly when construing the terms of the patents at issue . . . ."

Finally, the court stated that the value of the "substantial [judicial] resources" required to reach the decisions in the claim-construction order would be diminished if the order were vacated, "increasing the possibility that other courts would be called upon to expend their resources to construe the[] same terms in the future."

In sum, the court held that the public's interest in decisions of the judiciary and in conservation of judicial resources outweighed the parties' individual interests and expectations in having the order vacated. Consequently, the court denied the parties' motion.

Strategy and Conclusion

This case demonstrates that parties and, in particular, patent owners should not expect to erase unfavorable claim-construction orders through later settlement and a joint motion for vacating the order. Although a court's refusal to vacate a claim-construction order may not affect settling defendants, patent owners should thoroughly evaluate settlement options before receiving a claim-construction order to avoid the possibility of a previous order being used as persuasive authority on the construction of a previously asserted patent.

Endnotes

¹ The Single Touch decision can be found at http://law.justia.com/cases/federal/district-courts/california/candce/4:2012cv00831/252406/79.

Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.