Court Declines To Enforce Settlement, Dismisses Infringement Action

Posted on | July 16, 2008 | No Comments

2008-1458 Icon Health v. Keys Fitness
D/UT 06-cv-00087
Judge Tena Campbell

Icon appeals from the order of Judge Tena Campbell dismissing the case for lack of subject matter jurisdiction.  The order followed Icon’s motion to enforce a settlement the parties apparently reached during the case, although the infringement claims were never dismissed or concluded. 

Icon sued Keys for patent infringement.  During the case the parties engaged in settlement discussions which resulted in a May 2007 Letter Agreement executed by officers of the parties.  This Letter Agreement spelled out, according to Icon’s motion, all of the essential terms of the settlement, including:

• Keys is to pay ICON a confidential amount for a non-exclusive, perpetual,
paid up license to make, have made, use, or sell any products or devices
falling within the scope of ICON’s United States Patent Nos. 4,842,266,
5,104,120, and 4,998,725;

• This confidential amount would be paid by Keys to ICON in installments,
interest free, with the first installment being due sixty (60) days from the
date of execution of the Letter Agreement;

• In the event that Keys is more than 10 days late in making any quarterly
installment payment, the entire unpaid balance shall be immediately due
and payable together with interest at the rate of 8% per year on the unpaid
balance;

• All claims pending in both in this Action and the Texas lawsuit are to be
dismissed with prejudice, and the parties shall mutually release each other
from all claims, known or unknown, relating to the subject matter of the
patent claims asserted in this Action and all claims alleged in the Texas
lawsuit, except those arising from breach of the Letter Agreement;

• ICON and Keys would enter into a formal settlement agreement
memorializing the terms contained in the Letter Agreement.

Following the letter agreement, dates from the case schedule were extended–however, no formal settlement agreement was ever executed.  Further, none of the parties filed any stipulation, consent judgment, notice, or other document of dismissal, and the action remained pending on the court’s active docket.  Keys ultimately refused to make any payments or take any other action consistent with the letter agreement.  (There is some suggestion that Key also may have filed for bankruptcy at some point after the letter agreement was signed).

In May 2008 Icon moved for an order to enforce the settlement agreement.  The court asked Icon to show that the court had jurisdiction to enforce the letter agreement–prompting Icon to file a brief on jurisdiction.  Despite this, the court found that it could not enforce the letter agreement and dismissed the entire action for lack of subject matter jurisdiction:

Because the court has not specifically retained subject matter jurisdiction within the settlement agreement itself and the settlement agreement is entirely a contractual issue under Utah State law, Plaintiff’s motion to enforce settlement agreement (dkt. # 39) is DENIED and the case is DISMISSED for lack of subject matter jurisdiction.

Note: The court seems to have concluded that the settlement agreement, if final and therefore capable of being "enforced," ended the patent case and thus also the court’s jurisdiction.  The court never could have "specifically retained subject matter jurisdiction within the settlement agreement itself"–settlement agreements are between private parties, not the court.  And the parties could not agree to have the court retain subject matter jurisdiction.  That language is in the court’s order of dismissal which, of course, was never entered or requested. 

I wonder if the year long delay between the agreement and the motion to enforce factored into the court’s decision–would a motion to enforce a month after the agreement have been met with the same dismissal?

More reading:

Order

Icon Brief on Jurisdiction

Motion to Enforce

Counsel:
Icon: Workman Nydegger, Salt Lake City (Larry Laycock, Sterling Brennan, Robyn Phillips).
Keys: Ray, Quinney & Nebeker, Salt Lake City (Mark Bettilyon).

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