Federal Circuit Rules Settlement Agreements Not Privileged

June 1, 2012 | Intellectual Property News

In many cases, litigation plaintiffs seek to enter into settlements with other parties, often assuming that those agreements can be maintained in confidence and not disclosed to subsequent defendants during the course of a litigation. The Federal Circuit has recently held that this is not the case. In an appeal involving MSTG, Inc. in a case against AT&T, MSTG had sued a group of defendants. MSTG settled with all of them other than AT&T, and during the lawsuit AT&T asked for copies of the settlement agreements. In part, AT&T took the position that the agreements and underlying negotiations could establish that they are relevant to the amount of a “reasonable royalty” that might be applied as a measure of damages in the ongoing dispute between AT&T and MSTG. When MSTG refused to produce those agreements and communications, AT&T asked the court to order MSTG to produce them, and the court granted that order.

MSTG appealed to the Federal Circuit, seeking an order of mandamus directing that the settlement documents need not be produced to AT&T. The Federal Circuit first considered whether there should be a “settlement negotiation privilege,” which would be a new privilege not previously recognized other than in the Sixth Circuit. Second, it considered whether it would be sufficient to produce only the settlement agreements themselves, without the underlying communications leading to the final agreements. Ultimately, the court concluded that there is no settlement privilege, and that both the agreements and the related negotiation documents are discoverable.