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IP Alert: Settlement Agreement Held to Moot Pending Case-Dispositive Motions

February 19, 2020

On February 13, in Serta Simmons Bedding, LLC, Dreamwell, Ltd. v. Casper Sleep Inc., the Federal Circuit held that a settlement agreement rendered the case moot, including case-dispositive summary judgment motions, even where the settlement agreement required future performance by the parties.

In September 2017, Serta Simmons filed suit against Casper alleging infringement of three patents directed toward customizing mattress support. Casper filed three motions for summary judgment of non-infringement. On June 18, 2018, while Casper’s motions were pending, the parties entered into a settlement agreement. Per that agreement, Casper had the following obligations:

  • Pay $300,000 by June 28, 2018
  • Cease manufacturing the accused products by July 15, 2018
  • Cease selling inventory
  • Substantially discontinue marketing and advertising of the accused products by August 15, 2018

The settlement agreement further required that the parties file the appropriate papers to dismiss all claims and counterclaims within five days of Casper’s payment. In addition, the parties filed a joint motion of settlement and motion to stay.

Notwithstanding the settlement agreement, the court issued an order granting Casper’s summary judgment motions of non-infringement. Casper then told Serta it would not abide by the settlement agreement.

Serta filed a motion to enforce the settlement agreement and vacate the summary judgment order, which the district court denied. The court reasoned that the case was not moot when it issued the summary judgment order because the parties had outstanding obligations under the settlement agreement. Further, the district court held that it lacked jurisdiction to enforce the settlement agreement.

On appeal, the Federal Circuit recalled a previous case where the parties had signed an “Agreement in Principle Term Sheet.” This “term sheet” had included a dismissal agreement and an agreement to execute a license agreement. In that case, the district court had granted the defendant’s summary judgment motion, but the Federal Circuit decided the district court should have determined whether the parties entered into an enforceable agreement because, if so, the entry of final judgment would have been rendered moot. Based on the same reasoning, the court here found that there was an enforceable agreement and that therefore the case was moot. The fact that the agreement terms required future performance was of no consequence. Thus, the court concluded that “a binding settlement agreement generally moots the action even if the agreement requires future performance.”  

The court observed that there might be situations where a district court has discretion to refuse to enforce a settlement agreement or where refusal to enforce is mandated, such as where settlement agreements are contrary to law or public policy, but such was not the case here. 

Additionally, the Federal Circuit held that a district court has jurisdiction to enforce a settlement agreement if a motion to enforce is filed before the case is dismissed and the proceedings are ongoing. The court reasoned that the law“did not hold that a federal court cannot grant a motion to enforce filed before a dismissal of the case.”    

This decision highlights the importance of understanding procedural implications of a settlement agreement and that such an agreement will generally render an action moot. Additionally, parties seeking to settle an action should file a motion to enforce as soon as possible after settlement is reached if the client wishes to moot any pending case-dispositive motions. 

For more information on this case, please contact Fitch Even attorney Vincent R. Meyer, author of this alert.

 

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