In a December 19, 2013 ruling, Judge Coleen McMahon
dismissed with prejudice plaintiff Commercial Recovery Corporation’s patent
infringement claim against Bilateral Credit Corp., LLC upon Commercial Recovery’s
filing of a covenant not to sue, and dismissed as moot Bilateral’s
counterclaims of non-infringement and invalidity. The covenant not to sue filed by Commercial
Recovery “is unconditional and irrevocable, and reaches beyond Bilateral to
protect Bilateral’s suppliers, distributors, customers, and partners.” Judge McMahon found it “’hard to imagine a
scenario’ under which Bilateral could infringe the [patent-in-suit] and yet not
fall under [Commercial Recovery’s] covenant.”
Bilateral argued that the covenant was ineffective because Commercial Recovery was in receivership and held title to the patent only for purposes of the suit against Bilateral, so Bilateral remained exposed to claims from successors-in-title. Judge McMahon rejected this argument, ruling that under 35 U.S.C. § 281, the term “patentee” includes “’not only the patentee to whom the patent was issued but also the successors in title to the patentee,’” so any successor-in-title would be bound by the covenant.
Bilateral also argued that the covenant was not necessarily broad enough to cover Bilateral’s future activities. The Court held, however, that given the breadth of the covenant not to sue, it was incumbent upon Bilateral to proffer evidence of sufficiently concrete plans to engage in conduct not covered by the covenant. Judge McMahon found that Bilateral had failed to provide any such evidence.
The Court also rejected Bilateral’s request to condition Commercial Recovery’s request for a voluntary dismissal with prejudice on the payment of Bilateral’s attorneys’ fees. Judge McMahon noted that courts frequently condition requests for dismissal without prejudice on the payment of fees because plaintiffs can, and frequently do, refile such cases leading to duplicative expenses for the defendants, but that fees are rarely awarded for a dismissal with prejudice because there is no risk of duplicative work. The Court also rejected Bilateral’s request for fees under 35 U.S.C. § 285 and 28 U.S.C. § 1927, finding no evidence that Commercial Recovery had engaged in objectively baseless litigation in bad faith.
