IP News

In an opinion issued on April 9, 2012, the Federal Circuit held that settlement negotiations were not privileged and therefore a party could be compelled to produce negotiation documents. The case underlying In re MSTG, Inc., Misc. Docket No. 996, involved MSTG, Inc. suing AT&T Mobility LLC and a number of other cellular phone providers, alleging infringement of certain 3G telephony-related patents. MSTG settled with every defendant except AT&T, and most of the settlement agreements involved licenses for MSTG's patents.

Because one of the questions in the litigation with AT&T was the amount of a reasonable royalty for the patents-in-suit, AT&T requested not only the settlement and license agreements MSTG had entered into with the former co-defendants, but also documents relating to the negotiation of those agreements. When MSTG refused to produce those documents, AT&T filed a motion to compel. The motion was initially rejected by the magistrate judge, who found that AT&T had not shown the documents to be relevant or discoverable. However, after an MSTG expert report described those licenses as reflecting certain compromises, AT&T moved the magistrate judge to reconsider the order. On reconsideration, the magistrate judge found that MSTG could not rely on the business reasons underlying the agreements for its own arguments, while at the same time shielding those reasons from examination. It ordered MSTG to produce the documents, and the district court adopted the order. As a result, MSTG petitioned the Federal Circuit for a writ of mandamus to vacate the order. MSTG argued that settlement negotiations were protected by privilege.