Federal Circuit permits discovery of negotiations related to patent licenses—after expert opens the door

After initiating lawsuits against several large cell phone providers for infringing patents related to its 3G technology, the plaintiff settled with all the defendants except AT&T. When AT&T tried to get copies of those settlement licenses, including any information surrounding their negotiation, the trial court initially ruled that only the agreements themselves were relevant and discoverable. But when the plaintiff’s expert issued his damages report, it included reliance on a statement by one of the plaintiff’s executives (made during deposition) regarding the negotiated licenses. AT&T renewed its motion to compel, and this time the court ruled that the expert’s reliance had effectively “opened the door” to discovery of the negotiations, since Rule 26 FRCP requires disclosure of all the bases of an expert’s opinion. Moreover:

Documents related to negotiations could shed light on why the parties reached their royalty agreements and could provide guidance on whether some or all of the licenses could be considered a basis for calculating a reasonable royalty between AT&T and [the plaintiff].
The plaintiff sought an interim review, and last week the U.S. Court of Appeals for the Federal Circuit ruled that settlement negotiations related to reasonable royalty and damage calculations were not subject to a specific evidentiary privilege. In particular, “as a matter of fairness, [the plaintiff] cannot at one and the same time have its expert rely on information about the settlement negotiations and deny discovery as to those same negotiations.” Read the complete digest of In re MSTG, Inc., 2012 U.S. App. LEXIS 7092 (April 9, 2012) in the May 2012 Business Valuation Update; the Federal Circuit’s opinion will be posted soon at BVLaw.