Ordered To Agree: Binding Settlement Agreement Provision Found Despite Absence of Singular, Executed Agreement

PLASMACAM, INC. v. CNCELECTRONICS, LLC

Before Dyk, Reyna, and Newman, Appeal from the United States District Court for the Eastern District of Texas.

Summary: Agreement to the definition of a term within settlement negotiations may create a binding, enforceable agreement as to that term, despite the absence of a finalized settlement agreement as to all terms

PlasmaCam sued CNCElectronics, LLC (“CNC”) for patent infringement. On December 20, 2019, the parties exchanged a series of emails before eventually agreeing to settle the case. The parties then exchanged specific drafts of the settlement agreement, primarily disputing the products to be covered by a covenant not to sue and the terms of the mutual release.  The parties eventually agreed to CNC’s definition of the covered products but could not agree on the terms of the mutual release.  PlasmaCam then moved to enforce the settlement agreement as outlined in the parties’ December 20, 2019 email exchange.  In its reply brief, PlasmaCam informed the court that the parties had now reached agreement on the scope of the mutual release.  However, PlasmaCam’s reply brief also included PlasmaCam’s definition of covered products, and not CNC’s definition that the parties previously agreed on.  The court ultimately enforced PlasmaCam’s definition of the covered products.  CNC appealed. 

On appeal,  the Federal Circuit noted that the term to which the parties assented is a factual question reviewed for clear error.  The Federal Circuit then found clear error existed because there was mutual agreement to the definition of the covered products, even though there was no agreement on the mutual release term at that time. The Federal Circuit reversed and remanded to the district court to enter an order using CNC’s definition of the covered products. 

Judge Newman dissented, arguing that there could not be a piecemeal “agreement” to one provision in a settlement agreement, since this would run afoul of the settled contract principle of mutual assent.

Editor: Paul Stewart