In Prism Technologies v. Sprint Spectrum L.P., [2016-1456, 2016-1457] (March 6, 2016) the Federal Circuit affirmed a $30 million judgment entered after a jury verdict against Sprint Spectrum L.P. lfor infringement of U.S. Patent Nos. 8,127,345 and 8,387,155.

Sprint raised several arguments why the district court should have granted JMOL, including error in admitting a prior settlement agreement with AT&T regarding the patents. Sprint claimed it was an abuse of discretion under FRE 403 to admit the Settlement Agreement, but the Federal Circuit disagreed.

The Federal Circuit said that a license agreement entered into in settling an earlier patent suit sometimes is admissible in a later
patent suit involving the value of the patented technology, and sometimes is not. A settlement involving the patented technology can be probative of the technology’s value if that value was at issue in the earlier case. The reason is simple: such a settlement can reflect the assessment by interested and adversarial parties of the range of plausible litigation outcomes on that very issue of valuation.  However the Federal Circuit recognized that for various reasons a
settlement may be pushed toward being either too low, as
in Hanson, or too high, as in LaserDynamics, relative to
the value of the patented technology at issue in a later
suit.  However the Federal Circuit also recognized that for various reasons a settlement may be pushed toward being either too low or too high relative to the value of the patented technology at issue in a later suit.  The Federal Circuit said that what is needed for assessing the probativeness and prejudice components of the Rule 403 balance, then, is consideration of various aspects of the particular litigation settlements offered for admission into evidence.

The Federal Circuit said that the mere fact that the license resulted from litigation does not automatically mean that the prejudice outweighs probativeness side, noting that Sprint itself relied upon settlement agreements (although with lower royalty rates).  The Federal Circuit found that the circumstances of the AT&T Settlement Agreement affected the Rule 403 assessment in ways that support
the district court’s admission of the Agreement.  The Federal Circuit noted that the AT&T Settlement was made after the entire case had been tried, so the entire record was developed, enhancing the reliability of the parties assessment of the value of the settlement.  The Federal Circuit found not abuse of discretion in admitting the AT&T settlement agreement.

The Federal Circuit also rejected per se rules suggested by Sprint for excluding settlement agreements.  The Federal Circuit noted the inconsistency of Sprint’s position, before Prism and AT&T settled, Sprint affirmatively urged the admission of various Prism licenses
resulting from patent-litigation settlements, and even moved to exclude the damages testimony of Prism’s expert on the ground that he failed to rely on such settlement agreements. Sprint contended that those agreements were “reliable marketplace evidence of the value of the patents-in-suit” and therefore “‘highly probative as to
what constitutes a reasonable royalty for those patent rights because such actual licenses most clearly reflect the economic value of the patented technology in the marketplace.’”  When Sprint first opposed admission of the AT&T settlement agreement, it did not invoke any categorical rule, which the Federal Circuit found was a strategic choice so that Sprint could urge for the admission of lower rate licenses while opposing higher rate licenses.