Where a settlement agreement included a condition precedent to dismissal, the district court was powerless to dismiss the case as settled as long as that condition remained unfulfilled. The U.S. Court of Appeals for the Federal Circuit dismissed for lack of appellate jurisdiction. Silicon Image, Inc. v. Genesis Microchip Inc., Case No. 04-1207 (Fed. Cir., Jan. 28, 2005).
As members of the Digital Display Working Group (DDWG), Silicon and Genesis agreed to share intellectual property, royalty-free, in order to promote an industry-standard digital video interface. Silicon sued Genesis claiming Genesis exceeded its rights under this agreement and infringed Silicon’s patents. Shortly before trial, the parties reached a settlement, memorializing their agreement in a Memorandum of Understanding (MOU). The MOU contemplated subsequent preparation of a Definitive Agreement.
While negotiating the Definitive Agreement, the parties disagreed as to the interpretation of the MOU. Silicon argued that under the Definitive Agreement, Genesis agreed to pay and was required to pay royalties on certain categories of products regardless of the DDWG agreement or infringement. Genesis argued that the royalties were due only on "infringing" products. Largely because of this dispute, the parties could not agree to a Definitive Agreement and the MOU became the binding settlement agreement.
After an evidentiary hearing, the district court concluded that an agreement had been formed and Silicon’s interpretation was correct. The district court issued an Amended Final Judgment Order, which incorporated the terms of the MOU and required Silicon to certify that it had received an up-front payment, as specified in the MOU. However, Genesis sought and obtained, over Silicon’s opposition, a stay of the Amended Final Judgment Order pending appeal. The specified up-front payment was placed in an escrow account and Silicon never received or certified receipt of the payment.
The Federal Circuit held that the contingency presented in the MOU — certification of receipt of the upfront payment by Silicon — was unmet and, therefore, the parties’ agreement precluded dismissal. The Federal Circuit reasoned that once the district court determined that the contingency was part of the bargain, it was powerless to dismiss Silicon’s infringement claims until the parties complied with the terms of their agreement.
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