United States Court of Appeals 

for the Federal Circuit 

__________________________ 

IN RE MSTG, INC., 

Petitioner. 

__________________________ 

Miscellaneous Docket No. 996 

__________________________ 

On Petition for Writ of Mandamus to the United States 

District Court for the Northern District of Illinois in case 

no. 08-CV-7411, Judge Edmond E. Chang. 

__________________________ 

ON PETITION FOR WRIT OF MANDAMUS 

__________________________ 

 CHRISTOPHER J. LEE, Niro, Haller & Niro, of Chicago, 

Illinois, filed a petition for writ of mandamus and motion 

to stay for petitioner-movant. 

 DAVID T. PRITIKIN, Sidley Austin LLP, of Chicago, 

Illinois, filed a response for respondent AT&T Mobility 

LLC. With him on the response were LISA A. SCHNEIDER 

and BENEDICT F. FREY. Of counsel was ROBERT N.

HOCHMAN. 

__________________________ 

Before RADER, Chief Judge, DYK and MOORE, Circuit 

Judges. 

DYK, Circuit Judge. 
IN RE MSTG INC 2

O R D E R 

This petition arises out of an order of the United 

States District Court for the Northern District of Illinois 

compelling MSTG, Inc. (“MSTG”) to produce documents 

related to license negotiation discussions between MSTG 

and six other companies, including previous defendants in 

this suit. We are asked to decide first, as a matter of first 

impression, whether such communications related to 

reasonable royalties and damages are protected from 

discovery based on a settlement negotiation privilege, and 

second, whether on the facts of this case the district court 

clearly abused its discretion by ordering their production. 

Because we conclude that the communications are not 

privileged, and that the district court did not clearly 

abuse its discretion, we deny the petition for writ of 

mandamus. 

BACKGROUND

In 2008, MSTG sued AT&T Mobility, LLC (“AT&T”) 

and other cell phone service providers and mobile device 

manufacturers claiming infringement of U.S. Patent Nos. 

5,920,551, 6,198,936, and 6,438,113 (collectively, the 

“patents-in-suit”) covering third-generation (“3G”) mobile 

telecommunications technologies. In 2009, MSTG initiated another lawsuit against other cell phone service 

providers and mobile device manufactures, also alleging 

infringement of the patents-in-suit. MSTG eventually 

settled with all defendants other than AT&T. As part of 

the settlement agreements, most defendants were granted 

licenses under the patents-in-suit as well as under other 

patents owned by MSTG. One defendant entered into an 

agreement giving it an option to license the patents at a 

predetermined rate. Additionally, during this time period, MSTG licensed the patents-in-suit to a technology 
3 IN RE MSTG INC

consortium, providing the consortium the right to grant a 

sublicense to its more than 50 members, a few of which 

were defendants in the pending litigation. 

One of the issues in the litigation was the amount of a 

reasonable royalty if AT&T were found to infringe the 

patents-in-suit. License agreements can be pertinent to 

the calculation of a reasonable royalty. During discovery 

and in response to AT&T’s document requests, MSTG 

produced six license agreements and the option agreement (collectively, the “settlement agreements”). AT&T 

then sought further discovery into the negotiations of the 

settlement agreements on the theory that those negotiations too could be pertinent to a reasonable royalty. 

MSTG objected on the ground that the negotiations were 

irrelevant to the reasonable royalty calculation. AT&T 

moved to compel the production of all “documents reflecting communications between MSTG or its attorneys, on 

the one hand, and either licensees or parties threatened 

with infringement by MSTG, on the other.” Resp’t’s App. 

270. In a January 20, 2011, order, a magistrate judge 

denied AT&T’s motion to compel, finding that “AT&T has 

not carried its burden of showing why the settlement 

negotiations are relevant and discoverable under the 

standards of Rule 26.” MSTG, Inc. v. AT&T Mobility LLC

(“Initial Order”), No. 08-C-7411, slip op. at 28 (N.D. Ill. 

Jan. 20, 2011). 

On January 10, 2011, after AT&T had submitted its 

motion to compel, MSTG served an expert report by 

Frank Bernatowicz on the issue of damages. This report 

was not submitted to the magistrate judge before he 

issued his January 20, 2011, order. In this report, Mr. 

Bernatowicz offered an opinion regarding a reasonable 

royalty for AT&T’s alleged infringement of the patents-insuit by “analyz[ing] royalty rates from potentially compa-
IN RE MSTG INC 4

rable licenses, industry survey results, licensing policies 

of the 3GPP, and other published licensing rates for 

similar technology.” Resp’t’s App. 144–45. Although the 

expert had “reviewed the[] six agreements and taken 

them into consideration in [his] reasonable royalty analysis,” he did not find the royalty rates in those agreements 

to “be comparable to the hypothetical negotiation between 

MSTG and AT&T.” Resp’t’s App. 138. This was so because most of the royalty agreements were “litigation 

related compromises,” id., and because they covered 

additional patents beyond the patents-in-suit. There was 

no showing that the expert had access to the negotiation 

documents, though he relied on deposition testimony of an 

MSTG executive that the agreements reflected litigationrelated compromises. 

AT&T sought reconsideration of the January 20, 2011, 

order on the grounds that the expert’s discussion of the 

license agreements in his report constituted newly discovered evidence supporting discovery of the settlement 

negotiations. Granting the motion, the magistrate judge 

found that the negotiation documents “might contain 

information showing that the grounds Bernatowicz relied 

on to reach his conclusion are erroneous.” MSTG, Inc. v. 

AT&T Mobility LLC (“Reconsideration Order”), No. 08-C7411, slip op. at 4 (N.D. Ill. Mar. 8, 2011). The Reconsideration Order went on to explain that “[d]ocuments 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 MSTG.” Id. at 5. MSTG was ordered 

to “produce documents reflecting communications, including settlement negotiations, it had with the six companies 

referenced in AT&T’s motion.” Id. at 7. The effect was to 

require production of the negotiation documents leading 
5 IN RE MSTG INC

up to the license agreements, the option agreement, and 

the agreement with the technology consortium. 

The district court denied MSTG’s objections and 

adopted the order. MSTG, Inc. v. AT&T Mobility LLC

(“Final Discovery Order”), No. 08-C-7411, slip op. at 2 

(N.D. Ill. June 27, 2011). In doing so, the district court 

agreed with the analysis of the magistrate judge. Additionally, it found that because MSTG’s expert relied on 

the testimony of MSTG’s executive regarding MSTG’s 

“business reasons” for entering into the license agreements, it would be unfair for MSTG to “then shield those 

reasons from further examination.” Id. On July 7, 2011, 

MSTG moved the district court to stay its June 27, 2011, 

order pending MSTG’s petition for writ of mandamus. 

The district court denied MSTG’s motion.

MSTG petitioned this court for a writ of mandamus to 

vacate the June 27, 2011, order and simultaneously 

moved for a stay of the discovery order pending our review of the petition. On July 29, 2011, we temporarily 

stayed the district court’s discovery order pending our 

review. We have jurisdiction under 28 U.S.C. § 1295. See

In re Princo Corp., 478 F.3d 1345, 1351 (Fed. Cir. 2007). 

DISCUSSION

I 

“As to discovery matters, we have held that Federal 

Circuit law applies when deciding whether particular 

written or other materials are discoverable in a patent 

case, if those materials relate to an issue of substantive 

patent law.” Advanced Cardiovascular Sys., Inc. v. Medtronic, Inc., 265 F.3d 1294, 1307 (Fed. Cir. 2001). For 

example, in In re Seagate Technology, 497 F.3d 1360 (Fed. 
IN RE MSTG INC 6

Cir. 2007) (en banc), we held that “[b]ecause willful infringement and the scope of waiver [of attorney-client 

privilege and work-product immunity] accompanying the 

advice of counsel defense invoke substantive patent law, 

we apply the law of this circuit.” Id. at 1367–68. Similarly, in In re Spalding Sports Worldwide, Inc., 203 F.3d 

800 (Fed. Cir. 2000), we held that “a determination of the 

applicability of the attorney-client privilege to [an] invention record clearly implicates, at the very least, the substantive patent issue of inequitable conduct. We therefore 

apply Federal Circuit law in determining whether the 

attorney-client privilege applies.” Id. at 803–04. Just as 

we have applied our own law to issues of the scope of the 

attorney-client privilege and work product doctrine, we 

here apply our own law in determining whether a privilege or other discovery limitations protect disclosure of 

information related to reasonable royalties because that 

issue “implicates the jurisprudential responsibilities of 

this court within its exclusive jurisdiction,” Advanced 

Cardiovascular Sys., Inc., 265 F.3d at 1303, and has a 

significant bearing on the substantive issue of patent 

damages, see In re EchoStar Commc’ns Corp., 448 F.3d 

1294, 1298 (Fed. Cir. 2006). 

II 

Pursuant to the All Writs Act, 28 U.S.C. § 1651(a), 

this court has the authority to issue a writ of mandamus 

as “necessary or appropriate in aid of” our jurisdiction. 

Miss. Chem. Corp. v. Swift Agric. Chems. Corp., 717 F.2d 

1374, 1379 (Fed. Cir. 1983). The remedy of mandamus is 

available only in extraordinary situations to correct a clear 

abuse of discretion or usurpation of judicial power. In re 

Calmar, Inc., 854 F.2d 461, 464 (Fed. Cir. 1988). A party 

seeking a writ bears the burden of proving “that its right to 

issuance of the writ is clear and indisputable, . . . and that it 
7 IN RE MSTG INC

lacks adequate alternative means to obtain the relief 

sought.” In re Spalding Sports Worldwide, 203 F.3d at 

804 (alteration in original) (quoting In re Regents of Univ. 

of Cal., 101 F.3d 1386, 1387 (Fed. Cir. 1996)). 

It is generally inappropriate to review discovery orders 

by mandamus. However, mandamus may be appropriate 

where a discovery order “raises a novel and important 

question of power to compel discovery, or . . . reflects 

substantial uncertainty and confusion in the district 

courts.” 16 Charles Alan Wright, Arthur R. Miller & 

Edward H. Cooper, Federal Practice and Procedure: 

Jurisdiction and Related Matters § 3935.3 (2d ed. 1996) 

(citing Schlagenhauf v. Holder, 379 U.S. 104, 111 (1964) 

(“[T]he petition was properly before the court on . . . an 

issue of first impression that called for the construction and 

application of [a discovery rule] in a new context.”)). 

Thus, “mandamus may properly be used as a means of 

immediate appellate review of orders compelling the 

production of documents claimed to be protected by privilege or other interests in confidentiality.” Bogosian v. 

Gulf Oil Corp., 738 F.2d 587, 591 (3d Cir. 1984). In such 

cases, “[w]ithout mandamus review, litigants might be 

compelled to disclose documents that are protected from 

disclosure by strong public policy.” Id. at 592. Mandamus 

review is appropriate here as to the privilege issue. The 

issue of whether settlement negotiations are privileged is a 

matter of first impression before this court and one on 

which district courts are split.1 The confidentiality of the 

settlement negotiations would be lost if review were denied 

until final judgment, and immediate resolution of this issue 

would avoid discovery that would undermine the claimed 

important public interests in protecting settlement discus-

 1 See infra note 2. 
IN RE MSTG INC 8

sions from discovery. See In re Seagate, 497 F.3d at 1367; 

In re Spalding Sports Worldwide, 203 F.3d at 804; see 

also In re United States, 669 F.3d 1333, 1336-37 (Fed. Cir. 

2012). 

III 

There are two primary issues. First, MSTG argues 

that the license negotiations between it and its other 

licensees are protected by a settlement negotiation privilege. Second, MSTG argues that here, where the fullyintegrated settlement agreements are already part of the 

record, the district court clearly abused its discretion by 

ordering the production of the underlying settlement 

negotiations. 

A. 

MSTG urges us to invoke Rule 501 of the Federal 

Rules of Evidence to fashion a new privilege in patent 

cases that would prevent discovery of litigation settlement negotiations related to reasonable royalties and 

damages. In this respect, MSTG urges us to adopt the 

reasoning of the United States Court of Appeals for the 

Sixth Circuit in Goodyear Tire & Rubber Co. v. Chiles 

Power Supply, Inc., 332 F.3d 976, 979-83 (6th Cir. 2003), 

which appears to be the only one of our sister circuits to 

adopt such a privilege. The Seventh Circuit declined to 

adopt a settlement privilege in In re General Motors Corp. 

Engine Interchange Litigation, 594 F.2d 1106, 1124 n.20 

(7th Cir. 1979).2 Although parties to settlement may 

 2 District courts are divided on whether a settlement negotiation privilege exists. Compare Matsushita 

Electric Indus. Co. v. Mediatek, Inc., No. C-05-3148, 2007 

WL 963975 (N.D. Cal. Mar. 30, 2007), and In re Subpoena 

Issued to Commodity Futures Trading Comm'n, 370 F. 
9 IN RE MSTG INC

agree to keep settlement agreements confidential, MSTG 

does not contend that settlement agreements themselves 

would be covered by the proposed privilege. 

The scope of discovery is governed by Rule 26(b)(1) of 

the Federal Rules of Civil Procedure, which provides in 

relevant part: 

Parties may obtain discovery regarding any nonprivileged matter that is relevant to any party’s 

claim or defense . . . . Relevant information need 

not be admissible at the trial if the discovery appears reasonably calculated to lead to the discovery of admissible evidence. 

Discovery of privileged material is not permissible. Rule 

501 of the Federal Rules of Evidence authorizes federal 

courts to define new privileges by interpreting “[t]he 

common law . . . in the light of reason and experience.” 

“The Rule thus did not freeze the law governing the 

privileges of witnesses in federal trials at a particular 

point in our history, but rather directed federal courts to 

‘continue the evolutionary development of testimonial 

privileges.’” Jaffee v. Redmond, 518 U.S. 1, 8–9 (1996) 

(quoting Trammel v. United States, 445 U.S. 40, 47 

(1980)). However, in adhering to the principle that “the 

public . . . has a right to every man’s evidence,” United 

States v. Bryan, 339 U.S. 323, 331 (1950), the Supreme 

Court has warned that evidentiary privileges “are not 

lightly created nor expansively construed, for they are in 

derogation of the search for truth,” United States v. 

 

Supp. 2d 201 (D.D.C. 2005), with California v. Kinder 

Morgan Energy Partners, L.P., No. 07-1883, 2010 WL 

3988448 (S.D. Cal. Oct. 12, 2010), and Software Tree, LLC 

v. Red Hat, Inc., No. 6:09-CV-097, 2010 WL 2788202 (E.D. 

Tex. June 24, 2010). 
IN RE MSTG INC 10

Nixon, 418 U.S. 683, 710 (1974). 

The Supreme Court has identified several factors to 

be considered in assessing the propriety of defining a new 

privilege under Rule 501. These factors do not support 

recognition of a settlement privilege here. 

First, “the policy decisions of the States bear on the 

question whether federal courts should recognize a new 

privilege or amend the coverage of an existing one.” 

Jaffee, 518 U.S. at 12–13. In Jaffee, the Court found that 

the existence of a consensus among the states as to the 

existence of a psychotherapist privilege indicated that 

“reason and experience” supported recognition of the 

privilege. Id. at 13. Because of the broad consensus 

among states, “[d]enial of the federal privilege therefore 

would frustrate the purposes of the state legislation that 

was enacted to foster these confidential communications.” 

Id. Here, however, there is no state consensus as to a 

settlement negotiation privilege. Although all states have 

apparently enacted a statutory mediation privilege, Jay 

M. Zitter, Annotation, Construction and Application of 

State Mediation Privilege, 32 A.L.R. 6th 285, § 2 (2008), 

the negotiations in this case did not result from mediation 

but from settlement negotiations between two sides 

without the assistance of a third-party mediator. We are 

not aware of any state that recognizes a settlement privilege outside the context of mediation. Thus, failure to 

recognize a federal settlement privilege will not “frustrate 

the purposes” of any state legislation as the failure to 

recognize a psychotherapist-patient privilege would have 

in Jaffee. 

Second, in determining whether a new privilege 

should be adopted, courts look to whether Congress had 

considered that or related questions. See Univ. of Pa. v. 
11 IN RE MSTG INC

EEOC, 493 U.S. 182, 189 (1990). In adopting Rule 408 of 

the Federal Rules of Evidence, Congress directly addressed the admissibility of settlements and settlement 

negotiations but in doing so did not adopt a settlement 

privilege. Although the Supreme Court transmitted to 

Congress its proposed Rules of Evidence in 1973 pursuant 

to the Rules Enabling Act, Congress exercised its powers 

to suspend their implementation until expressly approved 

by an act of Congress. Act of Mar. 30, 1973, Pub. L. No. 

93-12, 87 Stat. 9. After being revised by Congress, in 

1975, the Federal Rules of Evidence were adopted as 

statutory law. Act of Jan. 2, 1975, Pub. L. No. 93-595, 88 

Stat. 1926. As part of the new rules, Congress adopted 

Rule 408, which was devised for the basic purpose of 

advancing the goal of “promoting non-judicial settlement 

of disputes.” H.R. Rep. No. 93-650, at 7 (1974), reprinted 

in 1974 U.S.C.C.A.N. 7075, 7081. Rule 408, as currently 

amended,3 provides that “[e]vidence of . . . (1) furnishing, 

promising, or offering—or accepting, promising to accept, 

or offering to accept—a valuable consideration in compromising or attempting to compromise the claim; and (2) 

conduct or a statement made during compromise negotiations about the claim” is “not admissible—on behalf of any 

party—either to prove or disprove the validity or amount 

of a disputed claim or to impeach by a prior inconsistent 

statement or a contradiction.” Fed. R. Evid. 408(a) (emphasis added). The rule specifically permits such evidence, however, for any other purpose, including, but not 

limited to, “proving a witness’s bias or prejudice, negating 

 3 The Federal Rules of Evidence were amended, effective December 1, 2011. These amendments, however, 

were “intended to be stylistic only. There [was] no intent 

to change any result in any ruling on evidence admissibility.” Fed. R. Evid. 408 advisory committee’s note to 2011 

amendments. Thus, we cite here to the amended version 

of the rules. 
IN RE MSTG INC 12

a contention of undue delay, or proving an effort to obstruct a criminal investigation or prosecution.” Fed. R. 

Evid. 408(b). 

The rule is clear by its text and history that it covers 

not only settlements and negotiations between the parties 

to the lawsuit, but also settlements and negotiations 

involving a third party. The advisory committee proposing the rule specifically stated: 

While the rule is ordinarily phrased in terms of offers of compromise, it is apparent that a similar 

attitude must be taken with respect to completed 

compromises when offered against a party 

thereto. This latter situation will not, of course, 

ordinarily occur except when a party to the present litigation has compromised with a third person. 

Fed. R. Evid. 408 advisory committee’s note (1972 Proposed Rules). This understanding has been echoed by 

both courts, see, e.g., McInnis v. A.M.F., Inc., 765 F.2d 

240, 247–48 (1st Cir. 1985), and commentators, see, e.g., 

23 Charles Alan Wright & Kenneth W. Graham, Jr., 

Federal Practice and Procedure: Evidence § 5304 (1st ed. 

1992) (collecting and commenting on cases). Third party 

settlement negotiations are admissible, but only for 

purposes other than proving liability or the amount of a 

claim. 

In enacting Rule 408, Congress did not take the additional step of protecting settlement negotiations from 

discovery. Adopting a settlement privilege would require 

us to go further than Congress thought necessary to 

promote the public good of settlement, or in other words, 

to strike the balance differently from the one Congress 
13 IN RE MSTG INC

has already adopted. This also suggests that it is not 

appropriate to create a new privilege for settlement 

discussions. 

This situation is similar to that in University of Pennsylvania, 493 U.S. 182, involving a Title VII suit against a 

university claiming bias in a tenure decision. The university asserted that a new privilege should be recognized 

under Rule 501 covering confidential peer review materials, that is, confidential documents in a professor’s tenure-review file such as evaluations made by other 

professors and documents reflecting the internal deliberations of the tenure committee. The Supreme Court rejected that privilege, placing significant emphasis on the 

fact that in extending Title VII to educational institutions 

and providing for broad EEOC subpoena powers, Congress did not see fit to create a privilege for peer review 

documents. In doing so, the Court weighed significantly 

the fact that “Congress has considered the relevant competing concerns but has not provided the privilege itself.” 

Id. at 189. Indeed, “Congress undoubtedly was aware . . . 

of the potential burden that access to [peer review] material might create,” id. at 191, but provided for confidentiality not through a privilege but by other means, such as 

criminal penalties for disclosure of confidential documents 

outside of an EEOC proceeding, id. at 192-93. Here too 

Congress’s failure to adopt a settlement privilege supports 

our conclusion that no privilege for settlement negotiations should be recognized. 

Third, in determining whether new privileges should 

be recognized, the Supreme Court has been influenced by 

the list of evidentiary privileges recommended by the 

Advisory Committee of the Judicial Conference in its 

proposed Federal Rules of Evidence. See Jaffee, 518 U.S. 

at 13-14; United States v. Gillock, 445 U.S. 360, 367-68 
IN RE MSTG INC 14

(1980). In Jaffee, the Court’s decision was “reinforced by 

the fact that a psychotherapist privilege was among the 

nine specific privileges recommended by the Advisory 

Committee in its proposed privilege rules.” 518 U.S. at 

14. In Gillock, on the other hand, the Court’s holding that 

Rule 501 did not include a state legislative privilege 

(speech and debate privilege) relied, in part, on the fact 

that no such privilege was included in the Advisory Committee’s draft. 445 U.S. at 367-68. Here, a settlement 

negotiation privilege was not included among the nine 

specific privileges recommended by the Advisory Committee, thus cutting against MSTG’s argument. 

Fourth, “[t]he Supreme Court requires that a party 

seeking judicial recognition of a new evidentiary privilege 

under Rule 501 demonstrate . . . that the proposed privilege will effectively advance a public good.” In re Sealed 

Case, 148 F.3d 1073, 1076 (D.C. Cir. 1998) (citing Gillock, 

445 U.S. at 375). MSTG contends that settlement negotiations are analogous to the spousal, attorney-client, and 

psychotherapist privileges because they are all rooted in 

an “imperative need for confidence and trust,” Jaffee, 518 

U.S. at 10, and are designed to open up communication in 

which full and frank discussion serves a public good. 

MSTG concludes that this court must similarly recognize 

a privilege for settlement discussions. This need for 

confidence and trust alone, however, is an insufficient 

reason to create a new privilege. In other circumstances, 

the Supreme Court has rejected new privileges under 

Rule 501 even though recognition of a privilege would 

foster a relationship based on trust and confidence. See, 

e.g., Univ. of Pa., 493 U.S. at 194-95 (rejecting privilege 

against disclosure of academic peer review materials). 

Also, while there is clearly an important public interest in 

favoring the compromise and settlement of disputes, 

disputes are routinely settled without the benefit of a 
15 IN RE MSTG INC

settlement privilege. It is thus clear that an across-theboard recognition of a broad settlement negotiation privilege is not necessary to achieve settlement. 

Fifth, any settlement privilege would necessarily have 

numerous exceptions. Rule 408 itself contemplates a host 

of scenarios under which documents related to settlement 

negotiations would be admissible for purposes other than 

“prov[ing] or disprov[ing] the validity or amount of a 

disputed claim or [] impeach[ing] by a prior inconsistent 

statement or a contradiction.” For example, settlement 

negotiation evidence would be admissible where the 

settlement itself or its interpretation is at issue or where 

evidence of the ingredients of the settlement might be 

relevant to an issue of double recovery. See, e.g., Portugues-Santana v. Rekomdiv Int’l, 657 F.3d 56, 63–64 (1st 

Cir. 2011) (concluding the district court erred in not 

considering a settlement agreement in connection with a 

motion to offset damages); Catullo v. Metzner, 834 F.2d 

1075, 1079 (1st Cir. 1987) (holding that testimony of 

settlement negotiations was admissible to “prove the 

terms of the agreement itself”); see also 2 Jack B. 

Weinstein & Margaret A. Berger, Weinstein’s Federal 

Evidence § 408.08[5] (Joseph M. McLaughlin, ed., Matthew Bender 2d ed. 1997) (“If the settlement negotiations 

and terms explain and are a part of another dispute, they 

must often be admitted if the trier is to understand the 

case.”). Documents related to settlement negotiations 

would typically be relevant and discoverable to the extent 

that such evidence would be admissible under Rule 408. 

Thus, a privilege for settlement negotiations would necessarily be subject to numerous exceptions. The existence of 

such exceptions would distract from the effectiveness, 

clarity, and certainty of the privilege. “An uncertain 

privilege . . . is little better than no privilege at all.” 

Jaffee, 518 U.S. at 18 (quoting Upjohn Co. v. United 
IN RE MSTG INC 16

States, 449 U.S. 383, 393 (1981)). 

Finally, to the extent we need to protect the sanctity 

of settlement discussions and promote the compromise 

and settlement of dispute, there are other effective methods to limit the scope of discovery to achieve those ends—

primarily Rule 26 of the Federal Rules of Civil Procedure. 

In general, the Federal Rules of Civil Procedure promote 

a “broad and liberal” policy of discovery “for the parties to 

obtain the fullest possible knowledge of the issues and 

facts before trial.” Hickman v. Taylor, 329 U.S. 495, 501, 

507 (1947). Discovery is not unlimited, though, under 

Rule 26. Courts are required to “limit the frequency or 

extent of discovery otherwise allowed . . . if it determines 

that . . . the burden or expense of the proposed discovery 

outweighs its likely benefit, considering the needs of the 

case, the amount in controversy, the parties’ resources, 

the importance of the issues at stake in the action, and 

the importance of the discovery in resolving the issues.” 

Fed. R. Civ. P. 26(b)(2)(C). 

The Supreme Court has instructed us that the federal 

courts “should not hesitate to exercise appropriate control 

over the discovery process” to “prevent abuse.” Herbert v. 

Lando, 441 U.S. 153, 177 (1979). Under Rule 26, trial 

courts can grant motions for protective orders to restrict 

the use of information solely for purposes of the litigation. 

See Mohawk Indus., Inc. v. Carpenter, 130 S. Ct. 599, 608 

(2009) (“Moreover, protective orders are available to limit 

the spillover effects of disclosing sensitive information.”). 

Indeed, in the present case the district court issued a 

protective order to help preserve confidentiality. 

Similarly, the Advisory Committee’s note to Rule 26 

recognizes that the discovery rules “confer[] broad powers 

on the courts to regulate or prevent discovery even though 
17 IN RE MSTG INC

the materials sought are within the scope of 26(b).” Fed. 

R. Civ. P. 26 advisory committee’s note (1970 Amendment 

Subdivision (b)). While typically settlement negotiations 

that are admissible under Federal Rule of Evidence 4084

or disclosed to a party’s expert5 would be discoverable, the 

district court has discretion to limit discovery of material 

that is not itself admissible and that was not utilized by 

the opposing party to protect settlement confidentiality. 

Even as to such admissible or disclosed material, some 

protections may be appropriate. Significantly, citing the 

example of a tax return, the Advisory Committee proposing Rule 26 acknowledged that discovery could be limited 

where competing confidentiality interests are at stake. 

Id. The Advisory Committee recognized that although a 

party’s tax return is generally held not privileged, an 

individual’s “interests in privacy may call for a measure of 

extra protection.” Id. (citing Wiesenberger v. W. E. Hutton 

& Co., 35 F.R.D. 556, 557 (S.D.N.Y. 1964) (holding in a 

Securities Act case that even though the plaintiff’s tax 

return was relevant to show that certain tax savings by 

the plaintiff for investments that turned out to be fraudulent could be offset against any liability of the defendant, 

a party’s income tax return should only be discoverable 

 4 We note here that we have not yet decided the extent to which evidence of settlement negotiations would 

be admissible under Rule 408. See generally

ResQNet.com, Inc. v. Lansa, Inc., 594 F.3d 860, 869-73 

(Fed. Cir. 2010); Vanderlande Indus. Nederland BV v. 

Int’l Trade Comm’n, 366 F.3d 1311, 1322 (Fed. Cir. 2004); 

Snellman v. Ricoh Co., 862 F.2d 283, 289-90 (Fed. Cir. 

1988); Medtronic Inc. v. Intermedics, Inc., 799 F.2d 734, 

741 (Fed. Cir. 1986); Hanson v. Alpine Valley Ski Area, 

Inc., 718 F.2d 1075, 1078-82 (Fed. Cir. 1983); Deere & Co. 

v. Int’l Harvester Co., 710 F.2d 1551, 1556-57 (Fed. Cir. 

1983). 

5 See In re Pioneer Hi-Bred Int’l, Inc., 238 F.3d 

1370, 1375 (Fed. Cir. 2001). 
IN RE MSTG INC 18

“where a litigant himself tenders an issue as to the 

amount of his income”)). Under this authority, discovery 

in other areas has been limited because allowing broad 

discovery would undermine other important interests in 

confidentiality. See, e.g., In re Anonymous Online Speakers, 661 F.3d 1168, 1176 (9th Cir. 2011) (identity of 

anonymous speaker); Bruno & Stillman, Inc. v. Globe 

Newspaper Co., 633 F.2d 583, 598 (1st Cir. 1980) (identity 

of confidential sources); Keyes v. Lenoir Rhyne Coll., 552 

F.2d 579, 581 (4th Cir. 1977), cert. denied 434 U.S. 904 

(1977) (peer review materials at universities); Hartley Pen 

Co. v. U.S. Dist. Court, 287 F.2d 324, 328 (9th Cir. 1961) 

(trade secrets). 

We note that other courts have imposed heightened 

standards for discovery in order to protect confidential 

settlement discussions. In the context of confidential 

mediation communications, the Second Circuit has held 

that because “confidentiality in [mediation] proceedings 

promotes the free flow of information that may result in 

the settlement of a dispute,” a party seeking discovery of 

confidential communications must make a heightened 

showing “demonstrat[ing] (1) a special need for the confidential material, (2) resulting unfairness from a lack of 

discovery, and (3) that the need for the evidence outweighs the interest in maintaining confidentiality.” In re 

Teligent, Inc., 640 F.3d 53, 57-58 (2d Cir. 2011) (internal 

quotation mark omitted). Many district courts also require heightened showings for discovery of settlement 

negotiations. See, e.g., Eisai Inc. v. Sanofi-Aventis U.S., 

LLC, No. 08-4168, 2011 WL 5416334, at *8 (D.N.J. Nov. 7, 

2011) (finding that party seeking discovery “failed to 

make a heightened, more particularized showing of relevance” (internal quotation mark omitted)); Atchison 

Casting Corp. v. Marsh, Inc., 216 F.R.D. 225, 226–27 (D. 

Mass. 2003); Young v. State Farm Mut. Auto. Ins. Co., 169 
19 IN RE MSTG INC

F.R.D. 72, 76 (S.D. W. Va. 1996); Servants of Paraclete, 

Inc. v. Great Am. Ins. Co., 866 F. Supp. 1560, 1576 

(D.N.M. 1994). But see Vardon Golf Co. v. BBMG Golf 

Ltd., 156 F.R.D. 641, 650-51 (N.D. Ill. 1994) (rejecting the 

approach of placing a burden upon the proponent of 

discovery to make some “particularized showing” of a 

likelihood that admissible evidence will be generated by 

discovery of the information). Because the issue is not 

before us, we reserve for another day the issue of what 

limits can appropriately be placed on discovery of settlement negotiations. But the existence of such authority, 

whatever its scope, strongly argues against the need for 

recognition of a privilege. In other words, the public 

policy goals argued to support a privilege can more appropriately be achieved by limiting the scope of discovery. 

Therefore, in light of reason and experience, we hold 

that settlement negotiations related to reasonable royalties and damage calculations are not protected by a 

settlement negotiation privilege. See In re Gen. Motors, 

594 F.2d at 1124 n.20. 

B. 

Our cases appropriately recognize that settlement 

agreements can be pertinent to the issue of reasonable 

royalties. See generally ResQNet.com, Inc. v. Lansa, Inc., 

594 F.3d 860, 869-73 (Fed. Cir. 2010). Here, the settlement agreements were in fact produced and MSTG does 

not argue that this production was inappropriate. However, MSTG challenges the discovery order on the grounds 

that the district court abused its discretion by ordering 

the production of negotiation documents underlying the 

settlement agreements. 

The magistrate judge first denied discovery of the set-
IN RE MSTG INC 20

tlement negotiations because the settlement agreements 

had already been produced and AT&T had not shown a 

need for discovery as to the underlying settlement negotiations. After MSTG’s expert offered his opinion regarding a reasonable royalty for AT&T’s alleged infringement, 

the magistrate judge reconsidered and ordered production 

of the negotiation documents “because they might contain 

information showing that the grounds [MSTG’s expert] 

relied on to reach his conclusion are erroneous.” Reconsideration Order, slip op. at 4. The district court agreed, 

and ordered production to permit AT&T “the ability to 

test the accuracy of [the expert’s] opinions and assumption.” Final Discovery Order, slip op. at 2. 

While MSTG argues that its expert relied only on information within the four corners of the settlement 

agreements, see Reconsideration Order, slip op. at 3, 

AT&T points to specific opinions offered by the expert 

that go beyond the four corners of the agreements, see id.

at 4. For example, the expert concluded that the rates in 

the settlement agreements were “discounted by at least 

75%” because they were entered before any substantive 

litigation rulings such as claim construction or summary 

judgment. Resp’t’s App. 139. On this issue the agreements themselves did not support the opinion. Rather, 

the expert cited an MSTG executive as to MSTG’s supposed reasons for entering into the agreements as well as 

other data. As a matter of fairness MSTG 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. See In re Pioneer Hi-Bred 

Int’l, Inc., 238 F.3d 1370, 1374-76 (Fed. Cir. 2001). Nor 

has MSTG attempted to show that the district court 

awarded overly broad discovery into the settlement negotiations, or that denial of discovery of the settlement 

negotiation documents was necessary here to encourage 
21 IN RE MSTG INC

settlement. Thus, the district court did not clearly abuse 

its discretion in ordering production of the settlement 

negotiation documents. See In re Roche Molecular Sys., 

Inc., 516 F.3d 1003, 1004 (Fed. Cir. 2008) (“The remedy of 

mandamus is available only in extraordinary situations to 

correct a clear abuse of discretion . . . .”). MSTG’s petition 

for writ of mandamus is thus denied. 

Accordingly, 

IT IS ORDERED THAT: 

(1) The petition for a writ of mandamus is denied. 

(2) All pending motions are moot. 

FOR THE COURT

April 9, 2012

Date 

/s/ Jan Horbaly

Jan Horbaly 

Clerk