Discovery of Prior Settlement Agreements and Common Interest Privilege

by Dennis Crouch

In re Modern Font Applications LLC (Fed. Cir. 2021)

The Federal Circuit denied MFA’s petition for mandamus on a discovery dispute, and Chief Judge Prost but wrote an interesting short opinion explaining the panel’s reasoning.  In the case, MFA has asserted its U.S. Patent No. 9,886,421 that covers  a method of displaying “non-standard fonts” on your handheld device when accessing a network-document.

Alaska Airlines is the defendant in this case and submitted a discovery request of MFA’s prior settlement agreements. In civil litigation discovery  requests are generally guided by three pillars: privilege, relevance, and proportionality.

FRCP 26(b)(1) Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s claim or defense and proportional to the needs of the case.

Prior settlement agreements tend to be quite relevant to for any damages calculations, but MFA refused to comply with the request based upon privilege.  Although the prior agreements had been shared between litigating parties, with the settlement agreement the parties became unified (at least with regard to the agreement) and the result is “common interest privilege.”

The magistrate judge ordered disclosure, confirmed by the district court, and now the Federal Circuit has refused to act on the mandamus petition (other than denying it).  Most appeals are taken after final judgment in a case. Mandamus is a shortcut to get an immediate decision from an appellate court on an interlocutory issue (such as discovery disclosure), but is only rarely granted.  The court notes that it will only grant mandamus in cases involving a “clear and indisputable right to relief [where there are] no other adequate means to attain the relief.” Slip op., quoting Cheney v. U.S. Dist. Ct. for D.C., 542 U.S. 367 (2004).  Even where those elements are met, the district court also has discretion to decide whether granting the writ is “appropriate under the circumstances.” Id.

In its opinion, the court did not fully decide the issue of common interest privilege in the settlement context, but noted that the Federal Circuit has previously declined to recognize the form of privilege. See In re MSTG, Inc., 675 F.3d 1337 (Fed. Cir. 2012) (holding that pre-settlement communications were not privileged). The court went on to note that even if common interest privilege were adopted in this context, the parties must still show that the withheld documents are “communications by a client to an attorney made in order to obtain legal assistance from the attorney in his capacity as a legal advisor.”

The outcome here makes sense and also begs the question — why is MFA trying to hide its prior settlement agreements?

18 thoughts on “Discovery of Prior Settlement Agreements and Common Interest Privilege

  1. 6

    I expect a law professor to use “begs the question” properly.

    1. 6.1

      I do too, especially because in the cases where it’s misused, there was a perfectly good alternative—”raises the question”—whereas I’m not aware of another convenient way to express the same meaning as “begs the question” when properly used.

      Unfortunately, it seems like that ship has left port quite some time ago.

      1. 6.1.1

        “From Wikipedia, the free encyclopedia
        In classical rhetoric and logic, begging the question or assuming the conclusion is an informal fallacy that occurs when an argument’s premises assume the truth of the conclusion, instead of supporting it.
        For example, the statement “Green is the best color because it is the greenest of all colors” claims that the color green is the best because it is the greenest—which it presupposes is the best.
        It is a type of circular reasoning: an argument that requires that the desired conclusion be true. This often occurs in an indirect way such that the fallacy’s presence is hidden, or at least not easily apparent.[1]

        In modern vernacular usage, however, begging the question is often used to mean “raising the question” or “suggesting the question”.[2][3] Sometimes it is confused with “dodging the question”, an attempt to avoid it.[4]

        The phrase begging the question originated in the 16th century as a mistranslation of the Latin petitio principii, which in turn was a mistranslation of the Greek for “assuming the conclusion”.[4]”

        1. 6.1.1.1

          Also a big pet peeve. While definition of words do change all the time, when the “new” definition causes confusion with the “old” definition, that’s when we have a problem.

          “Asking the question” versus “assuming the conclusion”

          The outcome here makes sense and also asks the question.
          The outcome here makes sense and also assumes the conclusion as true.

          What meaning does the Prof. really mean?

  2. 5

    “MFA has asserted its U.S. Patent No. 9,886,421 that covers a method of displaying “non-standard fonts” on your handheld device when accessing a network-document.”

    Hilariously, the method for displaying the non-standard font is… downloading and installing the non-standard font. You can’t make this stuff up.

  3. 4

    To answer your question, Paul, it is rare for patentees to resist production of prior licenses and settlement agreements, for precisely the reasons you mentioned. This was rare even before the MSTG decision in 2012 established that these types of agreements are not privileged. Sometimes litigants may resist discovery of negotiations and correspondence between the parties around the agreement, but not the signed agreement itself. This seems to have been a fairly ill-conceived mandamus petition, and the unpublished order denying it was unremarkable and not worthy of a mention in this blog.

  4. 3

    Off topic, but Prof. Crouch has been discussing the idea of COVID19 trade-secrets on this Twitter feed, and his discussion has sparked a few thoughts. I am setting them down here in the hope that someone smarter can help me think through this. Imagine that the Biden administration were to decide to share confidential info related to COVID19 vaccines with developing nations, in an effort to help along the global vaccine push. I do not consider this an especially likely happening, but imagine that it were to happen. There are two ways that this could play out:

    (1) The Biden admin issues some sort of executive order directing Pfizer, Moderna, and J&J to make confidential vaccine manufacturing know-how available on some sort of shared server for vaccine-poor nations to access and copy. A variation on this theme would involve Biden convincing Congress to pass a law to this same effect, although that is a much less plausible scenario than unilateral executive action.

    The result of this order (whether executive action or law) would be that the various vaccine manufacturers sue for an injunction barring the order, and claiming that the order violates their I & V amendment rights. The court would almost certainly grant a preliminary injunction to stop the disclosures until the merits are adjudicated. In practice, the pandemic would have run its course before this litigation is resolved.

    (2) Precisely because it knows that course #(1) above would be futile, the administration does not try to make the order discussed above. Instead, the administration simply directs the FDA to make available all of the paperwork concerning the three vaccines that it has in its files. This scenario can play out in two varieties:

    (2a) The administration announces beforehand that it is going to take this step. The result is that the vaccine manufacturers sue, just as in (1) above, with the same outcome as in (1) above.

    (2b) I think that if the administration were going to direct the FDA to divulge, it would almost certainly announce so beforehand. I suppose, however, that because it would know how (2a) would play out, you could imagine a more wiley and amoral administration simply disclosing the confidential FDA documents without public deliberation or announcement beforehand. This is the only interesting* scenario, because it is the scenario in which confidential trade-secrets actually get spilled.

    Once the info is out there, it is out there. There is no putting that djini back in the bottle. I expect that the vaccine manufacturers could sue in the CFC for the value of their lost trade-secrets as a V amendment taking. I lay no odds as to the likelihood of success of that suit.

    I believe (although this will never actually happen, so we will never know if I am right about this) that the FDA’s disclosure will have no discernible impact on the course of the pandemic. That is to say, the know-how currently in the hands of the FDA will not actually overcome any rate-limiting steps in India & al.

    None of the approved COVID vaccines are like any other vaccine that has ever been approved before last year. The sort of vaccine factories that one uses to make MMR vaccines or DTAP vaccines or seasonal flu vaccines are not the same as the sort you need to make any of the US-approved COVID vaccines**. The lead time it takes to set up a workable manufacturing base for these sophisticated new vaccines is so long that U.S. manufactured and European manufactured vaccine will have already supplied the demand in the rest of the world before India & al. could get their own manufacturing efforts up and running.

    * When I say “interesting,” I do not mean “good,” or “admirable.” This would be a bad idea. It would, however, have provide the basis for litigation that would address legally novel questions, to which the answers would be enlightening.

    ** I know less about Russia’s SPUTNIK vaccine or SinoVac’s vaccine, so I do not know if the same applies to them. It scarcely matters, however, as the FDA cannot disclose info about these because they have not applied for US approval.

    1. 3.1

      To follow your reasoning, what are the law regarding confidentiality requirements by the FDA in regards to data submitted during an approval process? Would the FDA disclosing information to a third party based on Executive Order rather than judicial order violate any laws? You’re right in that it’s an “interesting” scenario to consider because the ramifications would be significant. Also, on the same line, who (or which countries) would be given access to that information? What kind of non-disclosure requirement would be necessary for any company tasked with using that information to produce one or more of the vaccines? The list of land mines along that path is extensive, and I’m sure there are dozens more that would be spotted by digging into it further.

    2. 3.2

      FWIW my family in south america mostly got the Russian vaccine (not sure if you are counting that as “European”).
      There is a decent chance the Russian vaccine plus a cuban developed vaccine will end up vaccinating much of the developing world. Not sure that’s a win for US intellectual property interests overall. (Its also interesting that the US is actively pressuring developing countries not to accept the Russian vaccine for fear of increasing their foreign influence, while not providing an alternative..)

    3. 3.3

      So, Greg wants to continue a topic that he himself refuses to fully embrace (I suspect he will continue until he hears a polite confirmation of his views from somebody)…

      Greg tries so very hard to NOT expand his thinking – and “politely” asks for others to chime in — with his overly constrained scenario…

      …. all the while NOT listening to me (while others such as xtian have vouched for the veracity of my comments.

      The irony is delicious.

      And by the way (not necessarily reinforcing my prior points – but close):

      link to barrons.com

  5. 2

    This kind of litigation discovery resistance to producing prior licenses and settlement agreements re the same patents [or even at least their key financial details], seems to occur all to often? [In spite of their obvious importance to reaching current case settlements and/or to the “Georgia-Pacific Factors” for determining what the litigated patent infringement damages could or should be.] As understood, this CAFC published refusal of a mandamus motion, by refusing to block the lower court’s order FOR discovery without a stronger legal basis, seems to be in effect a useful favorable CAFC mandamus pro-discovery decision?

    1. 2.1

      Such agreements could also be relevant to secondary considerations like commercial success.

      If I understand your last question correctly, then yes, I do think this decision can (and will) be cited as helpful authority in support of a motion to compel on this kind of discovery.

    2. 2.2

      BTW I saw that this “Modern Font Applications LLC” patent owner had filed 17 patent suits on the same patent, with 16 now inactive. It looks like all were suits against retail companies who must have purchased the subject software. Presumably to get 16 small prior suit settlements, rather that suing their software supplier [who would be more able and likely to defend rather than pay enough just to get out of patent litigation]? [A common PAE income tactic, assisted by software suppliers commonly refusing to step in to protect their customers from patent suits on their products.]

      1. 2.2.1

        AA isn’t exactly a small retailer, so I guess MFA got ambitious on this one. Relatedly, does anyone know how this case ended up in Utah? It seems like AA’s headquarters is at SeaTac. Would a ticket counter at SLC be enough?

    3. 2.3

      Paul I responded to your question but somehow it got pushed to the top. Sorry

  6. 1

    You say above that “Even where those elements are met, the district court also has discretion to decide whether granting the writ is ‘appropriate under the circumstances.'” Id. I think you meant to say “the ISSUING court also has discretion . . . “, as the court in this case is the CAFC.

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