A “Side Bet” Option Does Not Create a Live Case or Controversy on Appeal

Abstract

In In re Hybir, Inc., No. 2025-1367, 2026 WL 1076702 (Fed. Cir. Apr. 21, 2026), the Federal Circuit dismissed a patent owner’s appeal where a settlement agreement tied the outcome of the appeal to a nominal, $100 optional license. The Federal Circuit decided that because the prospective $100 option was merely a “side bet” on the outcome of the appeal that did not create a live case or controversy.

Background

The dispute arose when Hybir, the owner of a patent for a computer-file backup system, sued Veeam, a software corporation, for patent infringement. The district court dismissed the case, finding Hybir’s patent claims ineligible. Following the dismissal, the parties entered into a broader settlement agreement, which did not include the patent at issue ruled ineligible in the district court. Under the agreement, Hybir reserved the right to appeal the district court’s judgment regarding that patent, and Veeam maintained the option to license its patent for $100 if Hybir’s appeal was successful. The agreement also provided that Veeam could not participate in the appeal, which included not filing briefs or participating at oral argument.

The Federal Circuit Appeal

On appeal, the Federal Circuit determined that due to the settlement terms, Hybir’s appeal no longer had real economic significance and, therefore, dismissed the appeal. It found that a nominal $100 payment contingent on the success of an appeal was insufficient to create a live case or controversy because the amount was unrelated to the value of the patent or the issues on appeal. Instead, the arbitrary $100 amount functioned merely as a bet on the appeal’s outcome, introduced for the purpose of manufacturing a controversy.

Hybir argued that a live dispute still existed because Veeam had only an option (not an obligation) to take the license after the appeal and, if the court reversed and found the claims patent eligible, Veeam would probably attempt to invalidate the patent another way, rather than exercise its option to license the patent for $100. But the court rejected this argument, stating that speculation about what Veeam might do in the future was not enough. To support jurisdiction, there must be a concrete, immediate dispute before the court. Speculation about future disputes or future litigation is not enough.

Strategy and Conclusion

The Federal Circuit’s decision in In re Hybir reflects the importance of real-world consequences and the need for a live controversy or dispute to sustain litigation. Merely preserving a right to appeal a judgment in a settlement agreement may not be enough. And parties cannot artificially create a live case or controversy with an arbitrary sum, whether it be $100 or $50,000. Instead, when a party preserves its right to appeal and offers an option to license contingent on the outcome of appeal, the amount of money at issue must materially relate to the value of the issues on appeal, such as an estimate of a prospective damages award that might follow the appeal.

Further Information

For further information, see the Court’s full decision here.