In a case of first impression involving patent-royalty-settlement talks, the Federal Circuit in In re MSTG, Inc., Misc. Dkt. No. 966 (Fed. Cir. Apr. 9, 2012) has rejected a "settlement negotiation privilege," at least for non-mediated communications. This holding conflicts with Sixth Circuit precedent that protects settlement negotiations in general and casts doubt upon several district-court cases that have found such a privilege.
Brief History of the "Settlement Negotiation" Privilege
Evidentiary privileges in federal court are governed by Fed. R. Evid. 501, which authorizes federal courts to "define new privileges by interpreting the common law in the light of reason and experience." MSTG at*9. This is a dynamic provision, allowing for the "evolutionary development" of future privileges beyond well-known standards like the attorney-client privilege. In addition, in the context of settlement negotiations, Fed. R. Evid. 408 generally restricts the admissibility (if not the discoverability) of certain compromise-related communications and documents, though with an array of exceptions.