Settlement Can Be Reached Before Claim Construction
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Claim Construction
So when, exactly, can an indemnitee in a
patent case buy that peace? The United
States District Court for the Northern District
of California, in Phoenix Solutions,
Inc. v. Sony Electronics, Inc., was recently
confronted with the issue of “how far a
patent infringement case must proceed in
order to establish a rightful infringement
claim . . . .” 8 In that case Sony Electronics,
Inc., was sued by a patentee claiming
to hold a patent covering Sony’s use of an
interactive voice recognition system on
Sony’s customer service phone lines. Sony
had contracted with another company, Edify
Corporation (later bought out by Intervoice),
to provide the software necessary
provide the software necessary
to enable interactive voice recognition on
the system. Sony litigated the case for 11
months but settled prior to claim construction.
Sony asserted by way of defense both
that the patentee’s claims were invalid and
that Sony did not infringe.
Prior to settling with the patentee, Sony
filed a third-party complaint against Edify/
Intervoice for indemnification under California’s
version of UCC section 2-312(2),
California Commercial Code section
2312(2). Edify/Intervoice moved for summary
judgment, claiming, inter alia, that
the patentee’s claims were not rightful in
light of Sony’s invalidity and noninfringement
positions, which Sony effectively
abandoned by settling prior to claim
construction. Edify/Intervoice asserted that
claim construction was required at a bare
minimum in light of the impact the court’s
construction of disputed terms would have
on Sony’s defense positions.
The court rejected the argument that
claim construction was per se necessary
to determine whether a patent claim was
rightful. Although the mere filing of litigation
did not itself demonstrate a non-frivolous,
rightful claim, claim construction
was not necessary to engage in an evaluative
inquiry into the merits of the claim
itself. Because the terms of the settlement
indicated that Sony undertook such an
evaluative exercise, enough evidence was
presented for Sony’s claim to survive summary
judgment. Thus, the court rejected
adoption of any specific milestone in
patent litigation before a determination
of rightfulness could be made, suggesting
that an indemnitee/patent defendant need
not await any specific milestone before
exploring settlement with the patentee.
to enable interactive voice recognition on
the system. Sony litigated the case for 11
months but settled prior to claim construction.
Sony asserted by way of defense both
that the patentee’s claims were invalid and
that Sony did not infringe.
Prior to settling with the patentee, Sony
filed a third-party complaint against Edify/
Intervoice for indemnification under California’s
version of UCC section 2-312(2),
California Commercial Code section
2312(2). Edify/Intervoice moved for summary
judgment, claiming, inter alia, that
the patentee’s claims were not rightful in
light of Sony’s invalidity and noninfringement
positions, which Sony effectively
abandoned by settling prior to claim
construction. Edify/Intervoice asserted that
claim construction was required at a bare
minimum in light of the impact the court’s
construction of disputed terms would have
on Sony’s defense positions.
The court rejected the argument that
claim construction was per se necessary
to determine whether a patent claim was
rightful. Although the mere filing of litigation
did not itself demonstrate a non-frivolous,
rightful claim, claim construction
was not necessary to engage in an evaluative
inquiry into the merits of the claim
itself. Because the terms of the settlement
indicated that Sony undertook such an
evaluative exercise, enough evidence was
presented for Sony’s claim to survive summary
judgment. Thus, the court rejected
adoption of any specific milestone in
patent litigation before a determination
of rightfulness could be made, suggesting
that an indemnitee/patent defendant need
not await any specific milestone before
exploring settlement with the patentee.
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