In a ruling of first impression, the Federal Circuit confirmed that settlement negotiations related to reasonable royalties and damage calculations are discoverable. The Court rejected plaintiff MSTG, Inc.’s argument that such negotiations are protected by a settlement negotiation privilege. In re MSTG, Inc., Misc. Docket No. 996 (Fed. Cir. April 9, 2012).

MSTG sued multiple defendants for infringing patents covering 3G mobile technology, settling with all defendants except for AT&T. One of the remaining issues in the litigation was the amount of a reasonable royalty should AT&T be found to infringe the patents-in suit. MSTG produced the license and settlement agreements it reached with the other defendants but refused to produce discovery related to the negotiations of the settlement agreements. The magistrate judge ordered production of the documents, and the District Court agreed with the finding that the negotiation documents could disclose reasons why the parties reached the royalty agreements, providing guidance on whether the licenses could be considered a basis for calculating reasonable royalty.

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