NDCA refuses to compel production of license negotiations and license drafts

On June 5, 2012, in Implicit Networks, Inc. v. Juniper Networks, Inc., Case 3:10-cv04234-SI (N.D. Cal.), Judge Illston considered two motions to compel regarding patent licenses. In the first motion, Implicit argued that Juniper had failed to comply with a request to produce "all license ("in" and "out" and "cross") regarding computer networking technology." The second motion, brought by Juniper, sought production, among other things, of all of Implicit's licenses, draft licenses, and communications with actual and potential licensees for the purposes of damage calculations. The court denied both requests.

On the first motion, Implicit argued that Juniper's production of all the requested licenses was unclear. Juniper contended that it had completely complied with the request and had produced all the requested licenses. The court denied the motion as moot. The significant fact is that Juniper did not object to the request as overbroad and seeking irrelevant information, and instead produced all of its license agreements.

The second motion is more interesting. The case follows the Federal Circuit's April 9, 2012 MSTG decision (described in a separate entry in this blog), in which the Federal Circuit held that settlement negotiations related to reasonable royalties and damage calculations are not protected by a settlement negotiation privilege. 2012 U.S. App. LEXIS 7092 (Fed. Cir. 2012); see also Matsushita Elec. Indus. Co. v. Mediatek, Inc., 2007 U.S. Dist. LEXIS 27437 (N.D. Cal. Mar. 30, 2007) (rejecting existence of federal settlement privilege and ordering documents regarding the licensing of, and the negotiations regarding the licensing of, the patents-in-suit).

Here, after providing the licenses themselves, Implicit objected to production of the negotiation and drafting documents, claiming that the information was protected by FRE 408. Both Implicit and Juniper relied on MSTG Implicit for the fact that MSTG had rejected the negotiation privilege and upheld production of negotiation documents, and Juniper for the MSTG's holding that a party must satisfy a higher standard to gain production of negotiation information.

Leaning toward Juniper's position, the court first quoted the statement from MSTG "that courts have imposed heightened standards for discovery in order to protect confidential settlement discussions." Id., at *25-26. The court also observed that MSTG had upheld the lower court's decision to allow discovery of settlement negotiation information because the plaintiff had put that information into dispute in its own expert's damages report.

Applying these principles, the court found that the facts of its case were not in line with MSTG and denied the motion to compel production of the license negotiations and draft agreements. In the instant case, Implicit had not placed its licenses and settlement negotiations in direct dispute. Therefore, in light of the special concerns associated with the disclosure of settlement negotiation information, the court denied the motion to compel without prejudice.