Intellectual Property

A Patent Slate Not Wiped Clean

There are times when too much history has been generated in an IP dispute for the slate to get wiped completely clean post-settlement.

By Gaston Kroub on November 16, 2021 4:46 pm

Back in March, I wrote on these pages about an interesting competitor patent case in the roof imaging space. At the time, the patent owner EagleView had just gotten enhanced damages awarded to it on top of a $125 million jury verdict — to the tune of an additional $375 million — based on the trial judge’s findings that the defendant, Xactware, had committed various and sundry litigation missteps on top of its “egregious infringement behavior.” As would be expected following an award of that size, the case was appealed to the Federal Circuit, with oral argument held in the appeal in early October of this year.

When I listened to the oral argument, I was struck by the CAFC panel’s focus on the question of whether the asserted patents passed muster under Alice. If the panel concluded they didn’t, EagleView faced the unwelcome prospect of seeing its $500 million judgment turn into a big fat zero. In fact, the argument served as a potent reminder to us all that the Federal Circuit has no compunction about potentially taking down a big trial court verdict in a patent case, thereby confirming that appeals risk in patent cases is a serious matter for both sides of a dispute to consider. In light of the tone and tenor of the argument, it was not a surprise to see that the parties quickly announced a settlement of their dispute — before the Federal Circuit ruled. At minimum, the announcement provided further proof that there is nothing like introducing the possibility of a zero return to get a plaintiff with an up-to-then winning hand to try to get to a deal with all dispatch. Even in a case where the trial judge had colorfully discussed in an opinion the oozing animus between the parties.

As one would imagine, the settlement announcement was carefully calibrated to highlight the positives for both former adversaries going forward. To that end, the parties highlighted the “new long-term commercial agreement enabling joint innovation that will benefit customers and speed the claims adjudication process” as a positive consequence of the resolution. The announcement of cooperation going forward, coupled with supportive quotes from an executive from each party, is exactly what we would have expected to see from former adversaries turned newfound friends. Likewise, the confirmation that the deal resolved all legal disputes between the companies was standard fare. As was the statement that the defendant “affirms that the patents held by EagleView, which were included in the suit, are valid, subsisting and enforceable.” While some defendants may hesitate to make such statements in certain circumstances, it can be a lot more palatable to do so when the settlement contemplates ongoing cooperation between the parties — and the defendant may see some benefit from the patent owner wielding its patent mace against other competitors.

Even though the parties reached a settlement, there were still pending proceedings in the District Court that needed wrapping up. In fact, after the settlement was announced and the Federal Circuit appeal dismissed, the parties went back to the trial court with a motion to effectively wipe the trial court slate clean. In their motion, the parties asked the trial court to: “1. Vacate the Court’s Judgment [Docket No. 799] entered on September 26, 2019, and all Orders, decisions, and findings underlying such judgment or merged therein; 2. Vacate the Court’s Permanent Injunction [Docket No. 842] entered on October 19, 2019, and all Orders, decisions, and findings underlying such judgment or merged therein; 3. Dismiss, with prejudice, all claims, counterclaims, and defenses in this matter, including the allegations and averments contained therein; and 4. Terminate the contempt proceedings initiated by Eagle View.” The results were a mixed bag, albeit one that demonstrates the trial court’s and the case law’s respect for the effort put in by juries and trial courts in cases that actually get to verdict.

For its part, the trial court had no issue mooting the pending motions for contempt and attorney’s fees, based on the idea that the settlement between the parties had obviated the need for those motions getting decided. Likewise, the court unhesitatingly declared that all pled claims and defenses were “rendered moot” due to settlement, just as the need for a permanent injunction was also mooted on the same grounds. But when it came to wiping out the jury verdict, the court took serious issue. Noting that the “[t]he public interest is best served by the finality of judgments” and that “[a] jury trial is not a dress rehearsal for each party to perform its case” the court denied the motion to vacate the judgment itself. Thereby preserving the record, quite literally, of EagleView’s proving that Xactware had infringed — and that a jury award of $125 million of lost profits, later enhanced, was appropriate pending appeal.

Ultimately, this case reminds us that there are times when too much history has been generated in an IP dispute for the slate to get wiped completely clean post-settlement. Some may take that as a warning for parties to take settlement discussions more seriously earlier on in disputes, while others may point out that in this particular case, no real harm was done to either EagleView or Xactware by the Court’s unwillingness to set aside the judgment post-settlement. At the same time, however, there are definitely situations that can arise where a patentee is looking to vacate a negative decision against its patents on validity or enforceability grounds. In that scenario, a decision like the one taken by the trial court in EagleView could have serious negative consequences. At minimum, this most recent decision in EagleView reminds us that settlement is not only the most common way patent disputes are resolved — but that the timing of settlements can matter very much as well.

Please feel free to send comments or questions to me at [email protected] or via Twitter: @gkroub. Any topic suggestions or thoughts are most welcome.

Gaston Kroub lives in Brooklyn and is a founding partner of Kroub, Silbersher & Kolmykov PLLC, an intellectual property litigation boutique, and Markman Advisors LLC, a leading consultancy on patent issues for the investment community. Gaston’s practice focuses on intellectual property litigation and related counseling, with a strong focus on patent matters. You can reach him at [email protected] or follow him on Twitter: @gkroub.