Federal Circuit Upholds Fee-Shifting Terms Of Settlement Agreement

In Buckhorn Inc. v. Orbis Corp., the Federal Circuit reversed the district court's refusal to enforce the fee-shifting terms of a licence and settlement agreement. The district court found that the terms did not apply because the new action was not brought to enforce the agreement, and also considered that the fee-shifting terms were unenforceable as unconscionable. The Federal Circuit disagreed on both points.

The Agreement At Issue

In 1992, predecessors-in-interest to the parties (Xytec and Ropak) settled patent infringement litigation with an agreement that included the following fee-shifting terms:

In any litigation based on a controversy or dispute arising out of or in connection with this Agreement or its interpretation, the prevailing party shall be entitled to recover all fees, costs, reasonable attorney's fees, and other expenses attributable to the litigation.

The New Dispute

In 2000, Ropak transferred its entire materials handling business (including its rights under agreement) to Linpac Materials Handling, Inc. ("LMH"), which was acquired by Orbis in 2006.

In 2006, the successor-in-interest to Xytec licensed several patents to Myers Industries, Inc., including U.S. Patent 5,199,592, which was encompassed by the agreement. Under the license, Myers could commence infringement actions and transfer its rights to a subsidiary without notice .

In 2008, Buckhorn Inc., a wholly-owned subsidiary of Myers, brought the infringement action at issue against Orbis and others.

Orbis raised the Ropak-Xytec agreement as an affirmative defense, asserting that it was the successor-in-interest of Ropak's rights under the agreement. After the district court granted Orbis' motion for partial summary judgment on its affirmative license defense, Orbis moved for an award of fees under the fee-shifting terms of the agreement.

As summarized by the Federal Circuit:

The district court denied ORBIS's motion, stating that this "case cannot be a litigation based on a controversy or dispute arising out of or in connection with the License when Plaintiffs clearly had no knowledge of the License at the time the litigation was initiated." .... The district court also found that enforcing the fee-shifting provision would be unconscionable.

The Federal Circuit Decision

The Federal Circuit opinion was authored by Judge O'Malley and joined by Chief Judge Rader and Judge Reyna.

Reviewing the agreement under California state law (in accordance with its choice of law...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT