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Reopening a Case: Loss of License Not EnoughJuly 27, 2006

In a recent Federal Circuit case, the court addressed if a patent licensor can alter the judgment in a settled case when the settlement agreement is rendered meaningless by the licensees’ subsequent bankruptcy. Specifically, a mattress manufacturer, Louisville Bedding had sued competitor, Pillowtex, for infringing a patent on a mattress pad having a stretchable skirt material. Another company, Xymid, had an exclusive license to supply the allegedly infringing skirt material to Pillowtex. After construing the claim language of the patent, the District Court found that Pillowtex’s mattress pad did not infringe. Nonetheless, the parties decided to settle the case. Pillowtex agreed to license the patent so long as all other claims in the lawsuit were dismissed. As part of the settlement, the court entered judgment that Pillowtex’s product did not infringe Louisville Bedding’s patent.Unfortunately for Louisville, Pillowtex went bankrupt. Because of this, Xymid was released from its exclusive supply agreement with Pillowtex, and began supplying other competitors with the skirt material. Louisville wanted to sue these new competitors, but could not because the judgment of noninfringement prevented Louisville from relitigating. Therefore, Louisville requested the District Court reopen the case and vacate its judgment of non-infringement. The District Court rejected this request, and the Federal Circuit affirmed the District Court’s decision.The Federal Circuit stated that in order to reopen a final judgment, there must be ‘exceptional or extraordinary circumstances,’ and that Louisville did not make such a showing. Furthermore, Louisville had agreed to dismiss all claims against Pillowtex pursuant to the settlement agreement, except for the one that became the subject of the license. Louisville, faced with the prospect of an unfavorable verdict, salvaged considerable benefit with respect to the Pillowtex mattress pad license agreement and therefore could not nullify a bargained-for provision in that agreement because later developments made the agreement less favorable. Lastly, the court mentioned the strong public policy interest in having a clear end to litigation, that ‘those who have contested an issue shall be bound by the result of the contest, and that matters once tried shall be considered forever settled as between the parties.’Considering that courts will not reopen cases except in extraordinary circumstances, this case emphasizes the responsibility on parties to carefully think through their options and any potential future consequences when making settlement agreements pursuant to reaching a final decision in a lawsuit.To read the complete decision, log on to

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