Trading Techs. Int’l., Inc. v. BCG Partners, Inc., No. 10 C 715 (Consolidated), Slip Op. (N.D. Ill. Sep. 2, 2011) (Kendall, J.). 

Judge Kendall granted defendants’ motion to strike references to settlement discussions in plaintiff Trading Technologies ("TT") complaints, and denied the parties’ various motions to dismiss each others pleadings in their patent cases involving trading software. TT used various of its settlement documents to allege certain defendants’ actual knowledge of both TT’s patents and defendants’ alleged infringement of those patents. TT acknowledged that the documents were settlement documents. The Court noted that TT could not waive FRE 408 even for its own documents and held that TT’s attempted use was improper pursuant to FRE 408. TT used the documents to prove two elements of liability for indirect infringement – knowledge of the patents and the alleged infringement. The Court, therefore, struck all references to the documents pursuant to Fed. R. Civ. P. 12(b). The Court denied defendants’ motions to dismiss TT’s indirect infringement claims. Even after striking the settlement documents, TT pled sufficient facts:

  • TT made a general allegation of knowledge which was not alone sufficient, but was adequately supported. 
  • TT alleged that each defendant competed with TT. It was "not a stretch" to presume that TT’s competitors would be watching TT’s patents. 
  • TT alleged that defendants were aware of the patents through various suits. The Court voted conflicting case law regarding whether these suits could create notice. 
  • TT denied that defendants encouraged infringement by advertising allegedly infringing products and encouraging them to infringe by using the software products. 

The Court denied TT’s motion to strike defendants’ noninfringement and invalidity affirmative defenses and then related counterclaims calling the motions a "waste of time":

  • The defendants’ bare-bones affirmative defenses were consistent with standard patent litigation practice and put TT on notice.
  • The defenses were also consistent with the Local Patent Rules which require more detailed allegations early in discovery. See LPR 2.3.
  • TT’s affirmative defenses as to one defendant were "really identical" to those TT sought to strike.
  • Defendant had a right to maintain their declaratory judgment counterclaim for findings of noninfringement and invalidity.