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continued:
-- Joint defendants can discuss the merits of their defense. Thus, there is no problem in discussing, or reaching agreement about legal theories of, claim interpretation, infringement and validity, in identifying and analyzing prior art or in addressing any other issue properly relating to the defense of a potential or actual patent suit.
-- Joint defendants ordinarily are free to exchange information relevant to their common defense. They must be cautious, however, about discussing proposed settlement amounts.
Once they begin to discuss amounts, the patentee may argue that this information was supplied to influence other members in granting or withholding clearance, which would evidence a restraint on their right to settle independently. So, although exchange of proposed settlement amounts theoretically is permissible, it can create the appearance of an antitrust violation and thus expose the parties to unnecessary risk.
By contrast, disclosure of actual settlement amounts already agreed upon and paid is less likely to raise such risk because it relates to a past event. Thus, it would have no impact on the decision-making of the party that already entered into such an agreement. A patentee might argue however, that the settlement amount was being disclosed to direct other defendants to settle on similar terms. So, even here there may be some antitrust risk.
-- Joint defendants should never agree to any kind of prior approval or veto arrangement under which one of them can prevent another from settling on terms the latter thought appropriate. A limited exception to this rule relates to confidential information exchanged in the joint defense pact.
Typically, joint defense agreements require signatories to promise to keep information exchanged within the group confidential. Thus, if it appears that a defendant's proposed settlement agreement would breach this provision, the members of the group would have a legitimate interest-which would not implicate the antitrust laws-in insisting that confidential information not be disclosed to the patentee.
-- Joint defendants should never agree to a requirement that before conducting negotiations with a patentee, they first notify other members of their intent to do so. Such prior notice could have a "chilling effect" on independent negotiations and thus may be seen as facilitating restrictions on negotiating freedom. The requirement of prior notice can be distinguished from simply volunteering to give notice, without being required to do so, before negotiating. The risk, however, is that the volunteering of notice could be characterized by the patentee as evidence of an agreement that notice was required under an informal agreement.
-- Joint defendants should be careful about the language they use in their discussions and documentation developed in connection therewith. For example, statements such as "we must present a united front" enable the patentee to argue that there was an unwritten agreement pursuant to which the defendants imposed restrictions on one another with regard to settlement.
-- If a joint defense agreement is executed, it should include a provision stating that each party fully retains its right to settle independently with the patentee. First, this makes it clear to all defendants that restrictions on settlement will not be tolerated and cannot be imposed. Second, this could be persuasive in rebutting a patentee's claim that restrictions were imposed.
-- Although some common positions may be adopted by members of a defendant group, it typically is preferable that each defendant present them to the patentee individually through its own counsel-that is, to avoid joint offers of settlement.
FNa. Mr. Daniel is a partner in the intellectual property and technology law department at New York's Kramer, Levin, Naftalis & Frankel, where he specializes in intellectual property and antitrust law. He is on the board of directors of the New York Intellectual Property Law Association and is a former chairman of the association's Antitrust, Inequitable Conduct and Misuse Committee.
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