District Court Declines to Vacate Claim Construction Order After Settlement Agreement

After Single Touch Interactive, Inc. ("Single Touch") and Zoove Corporation ("Zoove") reached a settlement in their patent infringement action, both parties filed a stipulated motion to vacate the district court's previous claim construction order. The parties' settlement agreement provided that they would jointly request that the district court vacate the claim construction order.

In analyzing the parties' joint request, the district court began by focusing on the United State Supreme Court's decision in U.S. Bancorp Mortgage Co. v. Bonner Mall P'ship, 513 U.S. 18 (1994) where "the Supreme Court held that appellate court vacatur of district court judgments in the context of settlement agreements should be granted only in 'exceptional circumstances,' which 'do not include the mere fact that the settlement agreement provides for vacatur.' The Supreme Court emphasized the public interests at stake in considering a request to vacate an order or judgment of the court, stating that '[j]udicial precedents are presumptively correct and valuable to the legal community as a whole... not merely the property of private litigants[,] and should stand unless a court concludes that the public interest would be served by a vacatur.' Id. at 26 (quoting Izumi Seimitsu Kogyo Kabushiki Kaisha v. U.S. Philips Corp., 510 U.S. 27, 40 (1993) (Stevens, J., dissenting)).

The district court then stated that due to the "fact-intensive nature of the inquiry required," district courts exercise "greater equitable discretion when reviewing [their] own judgments than do appellate courts operating at a distance." American Games, Inc. v. Trade Products, Inc.,142 F.3d 1164, 1170 (9th Cir.1998). Therefore, a district court in this circuit, even in the context of mootness by settlement, may vacate one of its own judgments absent exceptional circumstances. Id. at 1168-69. The proper standard is the "equitable balancing test," which balances the hardships of the parties and the public interests at stake. Id. at 1166; Zinus, Inc. v. Simmons Bedding Co., No. C 07-3012 PVT, 2008 WL 1847183, at *1 (N.D.Cal. Apr. 23, 2008). The standard for vacatur of a non-final, interlocutory order is even less rigid. See Persistence Software, Inc. v. Object People, Inc., 200 F.R.D. 626, 627 (N.D.Cal.2001) (comparing Federal Rule of Civil Procedure 54(b), governing vacatur of nonfinal orders, to Rule 60(b), governing vacatur of final judgments). Nevertheless, courts consider a number of factors in deciding whether vacatur is appropriate, including collateral estoppel effect, the parties' settlement incentives, public ownership of judicial decisions, and expenditure of courts' resources. Cf. RE2CON, LLC v. Telfer Oil Co., 2:10-CV-00786-KJM, 2013 WL 1325183 (E.D. Cal. Mar. 29, 2013); Cisco Systems v. Telcordia Tech., Inc., 590 F.Supp.2d 828 (E.D. Tex. 2008); Zinus, 2008 WL 1847183 at *1-2.

As part of the stipulation, the parties asserted that, by entering into the settlement agreement, they had resolved all claims and counter-claims without the necessity of further proceedings. IN addition, "[b]oth sides have also forgone their opportunity for additional review and reconsideration. They further argue that public policy favors encourages settlement of private disputes. Here, they contend, vacatur of the claim construction order does not affect the public's interest because claim construction orders are not final. While the parties indicate in their motion that vacating the Claim Construction Order is a "significant factor" in their resolution of the litigation, they do not state that the agreement is expressly conditioned upon the Court granting the motion."

The district court concluded that these reasons were insufficient to justify vacating the claim construction order. "The Court finds that the equities do not favor vacating the Claim Construction Order here. The Supreme Court, refusing to vacate a judgment in Bonner Mall, held that judicial decisions are not the property of private litigants, but are "valuable to the legal community as a whole." Bonner Mall, 513 U.S. at 26 (quoting Izumi Seimitsu, 510 U.S. at 40 (Stevens, J., dissenting)). Even if the Claim Construction Order here is not final, other courts may consider it for its persuasive value, particularly when construing the terms of the patents at issue here. Moreover, the Court expended substantial resources in reaching its decisions in the Claim Construction Order. The value of these efforts would be diminished if the order were vacated, increasing the possibility that other courts would be called upon to expend their resources to construe these same terms in the future."

The district court also noted that even though "the parties' individual settlement expectations may be frustrated by denying the motion, this factor does not weigh heavily in determining whether the request ought to be granted. From the perspective of settlement incentives generally, denial of the motion may be viewed as discouraging settlement. On the other hand, however, permitting parties to vacate interlocutory decisions may discourage earlier settlement and instead incentivize parties to take cases through the entire Markman process, or other non-dispositive rulings, in order to test their positions, knowing they could effectively "erase" that decision through settlement later."

Accordingly, the district court found that the public's interest in the decision and the conservation of judicial resources weighed in favor of denying the motion to vacate.

Single Touch Interactive, Inc. v. Zoove Corporation, Case No. 4:12-cv-00831-YGR (N.D. Cal. Nov. 26, 2013)