US court refuses to dismiss appeal following settlement

In what may appear to non-US lawyers to be a curious turn of events, the US Court of Appeals for the Federal Circuit has denied a joint request by TiVo Inc. and EchoStar Corp. to dismiss an appeal after the parties reached a US$ 500 million settlement of a patent infringement action brought by Tivo in 2004. According to Law.com's Texas Lawyer

"On May 10, the Federal Circuit issued an en banc order in TiVo Inc. v. EchoStar Corp. denying the companies' joint motion to dismiss the appeal, which had led to a divided en banc ruling on April 20. The court noted that the parties did not inform it of any settlement before it issued that decision. 

In that April ruling, the Federal Circuit vacated a $110 million award against EchoStar Corp. for continued infringement of TiVo Inc.'s patents after a permanent injunction, but affirmed a $90 million award against EchoStar as a sanction for its contempt finding. On April 29, the companies reached a settlement whereby EchoStar and the Dish Network Corp [an EchoStar subsidiary] agreed to make an initial payment of $300 million to Tivo and $200 million in six annual installments between 2012 and 2017. ... TiVo will also give Dish and EchoStar licenses for the DVR technology, and EchoStar will give TiVo a license for certain DVR-related patents. The companies also agreed to dismiss all pending litigation with prejudice and to dissolve all injunctions against Dish and EchoStar. 

The seven years of litigation between the two companies was initially about whether EchoStar infringed TiVo's digital video recorder technology patent. It later centered on whether EchoStar's redesign of its technology still infringed and whether EchoStar's actions amounted to contempt of the district court's permanent injunction order. 

In the May 10 order, Judge Alan Lourie wrote that the parties clearly "did not settle before our decision." He was joined by Chief Judge Randall Rader, Senior Judge Haldane Robert Mayer and nine judges: William Bryson, Timothy Dyk, Arthur Gajarsa, Richard Linn, Kimberly Moore, Pauline Newman, Kathleen O'Malley, Sharon Prost and Jimmie Reyna.

According to Lourie, the companies informed the Federal Circuit on May 2 that they had settled the case on April 29 and asked the court to dismiss the appeal. 

"The parties did not inform us that they had settled the matter before issuance of our decision nor do they inform us that they had agreed to a disposition of the matter dependent upon our decision," wrote Lourie. "It is clear that if the parties had entered into such an agreement before issuance of our decision, it was counsel's duty to inform this court of the agreement." 

If the court granted the parties' motion at this stage, days before issuance of a mandate, the result would be modification or vacatur of the en banc judgment "which is neither required nor a proper use of the judicial system," wrote Lourie. He also cited 7th, 9th and 11th Circuit rulings supporting that conclusion. 

"The parties are of course free upon our remand to the district court to request that the district court dismiss the complaint and vacate its previously imposed sanctions because they have settled the underlying matter," Lourie wrote. "However, consistent with our sister circuits, we conclude that we should not dismiss the appeal after it has been decided." ...

TiVo's lead trial counsel, Morgan Chu, a partner at Los Angeles-based Irell & Manella, said the Federal Circuit's action does not affect the settlement reached by the parties. "The court's mandate will now issue in a few weeks, on the usual schedule," Chu said. "As the court's order stated, the parties will then be able to return to [Eastern District of Texas Chief] Judge [David] Folsom to have the cases dismissed." ... 

In its April 20 ruling, the Federal Circuit affirmed Folsom's $90 million sanction award against EchoStar. Folsom had found EchoStar in contempt of the disablement provision of the permanent injunction, which required it to disable the infringing DVR technology in its products, including those that were with customers.

That ruling also vacated Folsom's finding that EchoStar was in contempt of the permanent injunction's infringement provision, which ordered it to stop making, using or selling infringing receivers. Another order in the ruling vacated Folsom's $110 million award against EchoStar Corp. for continuing to infringe TiVo Inc.'s patents after a permanent injunction".

How do other jurisdictions handle these issues?

Source: "Federal Circuit Refuses to Dismiss Appeal After Tivo/EchoStar Settlement", Texas Lawyer, 13 May 2011