Settlement without Signatures: Federal Circuit Orders that Parties Memorialize Oral Agreement

On July 24, 2014, the Federal Circuit ordered that Endo Pharmaceuticals Inc. and Mylan Pharmaceuticals Inc. were required to continue their attempts to memorialize a previously-agreed-to settlement in a patent-litigation suit relating to Endo’s Frova tablets, a frovatriptan succinate EQ medication that treats migraine headaches.  Specifically, the Federal Circuit denied Endo’s bid for an emergency stay pending appeal.

In 2011, Endo brought suit against Mylan in the District of Delaware after Mylan sought approval for its generic Frova tablet.  Endo originally claimed that Mylan infringed U.S. Patent Nos. 5,464,864, 5,637,611, and 5,837,871.  The matter proceeded to trial, whereupon Endo abandoned its infringement claims as to the latter two patents.  Upon conclusion of the eight-day bench trial, the only matter left for the Court to decide was the validity of the ʼ864 patent, as Mylan conceded that its proposed tablet would infringe under the Court’s claim construction.

While a final determination as to validity of the ʼ864 patent was under advisement, Endo and Mylan discussed the prospect of settlement.  Unbeknownst to the Court, the parties reached a settlement in principal, but before the agreement was memorialized and a stipulation of dismissal was filed, the Court issued a finding in favor of Endo.  Specifically, the Court held that the ʼ864 patent was not anticipated, obvious, or invalid for failure to comply with the written description requirement.

Less than an hour after the Court issued its Findings of Fact, Mylan filed a letter explaining that the parties had reached a settlement in principle prior to receiving the Court’s decision.  Endo disputed that a formal settlement had been reached and argued that material terms remained outstanding at the time that the final decision was rendered.  In response, Mylan filed both a motion to enforce the settlement agreement and a motion under Rule 60(b).

Thereafter, Judge Renee Marie Bumb, sitting by designation, granted both of Mylan’s motions.  Specifically, Judge Bumb explained that although the parties clearly intended that a written agreement would be drafted, the settlement was nevertheless enforceable because the oral agreement contained all the essential terms of the settlement agreement, including the parties’ launch date and an allocation of attorneys’ fees.

Despite Judge Bumb’s order to the contrary, Endo refused to engage in any further settlement discussions and filed a formal notice of appeal.  Moreover, Endo sought a stay of any further settlement discussions pending the Federal Circuit’s decision on the motion to enforce settlement and for relief under Rule 60(b).

The Federal Circuit denied Endo’s request to stay settlement and ordered that the parties memorialize the settlement that was reached shortly before the district court issued its validity determination.  The Federal Circuit further provided that any written settlement agreement should be conditioned on the Federal Circuit’s decision in the underlying appeal.

Although it remains to be seen whether the Federal Circuit will find that a formal settlement was reached, litigants negotiating settlements in the District of Delaware should nevertheless be cognizant that at least one Judge holds that a formal settlement is reached prior to the actual memorialization of the agreement and before the stipulation of dismissal is filed.