Opinion ID: 209986
Heading Depth: 3
Heading Rank: 1

Heading: Sham litigation and settlement

Text: First, the evidence relating to Judkins's conduct during the '120 patent's prosecution does not point so unequivocally to bad faith that we are compelled to accept HT's argument that the district court must have ignored this evidence and therefore based its ruling on clearly erroneous factual findings. HT says that two prior bad acts by Judkins were but-for causes of the '120 patent's issuance: sham litigation aimed at overturning the Board's decision awarding priority against Judkins, and Judkins's supposed failure to disclose the abandonment finding in the Springs litigation to either the patent office or the Western District of Pennsylvania in the suit he brought to overturn the Board's interference decision. These acts, HT asserts, constitute a breach of the duty of candor owed by patent applicants under 37 C.F.R. § 1.56. See also Manual of Patent Examining Procedure §§ 2001.04 & 2001.06(c) (8th ed., Rev.6, 2007); McKesson Info. Solutions, Inc. v. Bridge Med., Inc., 487 F.3d 897, 917-18 (Fed.Cir.2007). The 2001 suit was not obviously a sham. Judkins was entitled to seek review of the Board's decision awarding priority to the Ford patent, as well as all issues raised by that decision, in a district court pursuant to 35 U.S.C. § 146. See Gen. Instrument Corp., Inc. v. Scientific-Atlanta, Inc., 995 F.2d 209, 211 (Fed.Cir. 1993). Nothing in the record suggests Judkins believed that he stood no chance of prevailing outright in that action. Indeed, he pursued just that result for nearly two years before reaching a settlement with Newell  hardly a span of time one would expect sham litigants to wait to reach a collusive bargain. Moreover, Newell moved the district court to dismiss the case in January 2002. Had Newell prevailed on this motion, which the record shows was capably briefed by its attorneys, Judkins would have been stuck with the Board's ruling. Newell's motion is not what one expects of a strawman or supposed opponent sued as part of a scheme to subvert[] the adversarial process, as HT asserts. For these reasons, the evidence relating to the 2001 suit does not suggest that the district court clearly erred in evaluating the facts HT asserts establish its likelihood of success on the merits. HT's assertion of a conspiratorial settlement of the lawsuit similarly fails to persuade us that the district court overlooked a breach of the duty of candor or other glaringly obvious misconduct. The fact that both Judkins and Newell took from the settlement something of value points to a constructive, mutually beneficial resolution to a legitimate dispute. HT's argument that the settlement was a breakdown of the adversarial system is difficult to square with the principle that the law favors settlement of litigation. See Bergh v. Dep't of Transp., 794 F.2d 1575, 1577-78 (Fed.Cir.1986) (citing United States v. Contra Costa County Water Dist., 678 F.2d 90, 92 (9th Cir.1982)). When genuine adversaries reach a mutually agreeable compromise and present their agreement in detail to the court, and no fraud or other problems militate against the agreement's enforcement, public as well as private interests are best served by giving effect to the settlement. Cf. Bradley v. Chiron Corp., 136 F.3d 1317, 1322 (Fed.Cir.1998) (Although the courts well recognize the public as well as private interest in the finality of settlements, ... a settlement will not be enforced if it is tainted by fraud or another condition that warrants its rescission.). Was the settlement agreement resolving the section 146 action obviously tainted by fraud? HT argues it was, because Judkins did not disclose the abandonment finding in the Springs litigation to the court in connection with the settlement agreement. Yet HT also acknowledges that Newell had disclosed the abandonment finding to the Pennsylvania district court when it moved to dismiss the 2001 suit. Thus, HT's argument assumes that the court confined itself to the stipulations the parties put before it in Judkins's agreed motion for summary judgment and ignored the rest of the record, including an earlier dispositive motion. We decline to make this assumption about that court's diligence. The district court in this case did not clearly err when it failed to find that the settlement was collusive and therefore treat it as irrefutable evidence of Judkins's bad faith in later asserting the '120 patent. HT also asserts that Judkins did not disclose the finding in the Springs litigation to the patent examiners during the prosecution of the '120 patent and thus again breached the duty of candor. HT does not, however, elaborate on this assertion in its brief. Judkins countered at oral argument that Newell submitted the Illinois decision to the Board during the interference proceedings and that record in turn went to the examiners who eventually approved the '120 patent. [1] HT's assertion does not rebut the inference that the patent examiners who approved the '120 patent had access to the record from the interference, including the findings in the Springs litigation supplied by Newell.