The opinion of the court was delivered by: Frank Maas, United States Magistrate Judge.
RECOMMENDATION TO THE HONORABLE P. KEVIN CASTEL
In this lawsuit, defendant Ontira Communications, Inc. ("Ontira") has moved to compel plaintiff Trapeze Software Group, Inc. ("Trapeze") to participate in an arbitration pursuant to the terms of a settlement to which the parties orally agreed at the conclusion of extensive settlement discussions. For the reasons set forth below, that motion should be denied.
I. Factual and Procedural Background
Trapeze commenced this action in an effort to secure, among other forms of relief, a declaration that U.S. Patent No. 5,214,689 (the "Patent"), which has been assigned to defendant Ontira Communications, Inc. ("Ontira"), is not infringed by Trapeze's Interactive Voice Response system ("IVR"), which is used to provide information to consumers regarding such matters as public bus schedules. Because Trapeze provides many public transportation companies with the technological backbone for their information systems, when Ontira is the successful bidder on an IVR project, it often must install its own technology on a customer's system in a manner which coordinates with the customer's simultaneous use of a proprietary "INFOserver" system previously installed by Trapeze.
In its complaint, Trapeze alleges that, during the course of the two competitors' efforts to secure contracts to provide IVR technology to public transportation companies, Ontira has made false statements to Trapeze's customers and prospective customers in an effort to convince them to use Ontira's IVR product rather than Trapeze's allegedly infringing product. (Compl. ¶¶ 36-42).
By order dated March 14, 2005, Your Honor assigned this case to me for settlement purposes only. (Docket No. 17). By then, Ontira had moved to dismiss Trapeze's claims for false advertising under the Lanham Act and deceptive acts and practices under Section 349 of the New York Business Law. (Docket Nos. 9, 23-25). That motion was fully submitted by late March 2005. (See Docket Nos. 20-22).
While the motion was pending, I held two settlement conferences, on June 9 and 22, 2005, which were attended by counsel and representatives of both parties. At the end of the second settlement conference, I put on the record the terms of a settlement pursuant to which the case would be discontinued with prejudice and without costs. The settlement was subject to a "number of conditions," of which the principal ones were as follows:
# The parties would arbitrate their dispute concerning the Patent "as expeditiously and inexpensively as possible."
# The parties would agree on an arbitrator or each would appoint an arbitrator whose sole function would be to confer with the other arbitrator to select an agreed single arbitrator.
# If the arbitrator found that Trapeze was an infringer, Trapeze could revise its IVR technology to circumvent the Patent or, at its option, could license Ontira's technology for a reasonable royalty. Any disputes as to whether a Trapeze work-around infringed the Patent or the reasonableness of the royalty would be presented to the same arbitrator.
# Trapeze would license its INFOserver to Ontira for IVR usage for the duration of the Patent on a most-favored-nation basis.
(See Decl. of David A. Beke, Esq., dated Oct. 17, 2005 ("Beke Decl."), Ex. D (Tr. of 6/22/05 settlement) at 3-6).
Counsel and their clients' principals agreed to these terms in open court and signed a written Order of Discontinuance, which provided that the case could be reinstated by counsel for Trapeze within thirty days by letter request. (See id. at 8-9;Decl. of Steven R. Schoenfeld, Esq., dated Nov. 3, 2005 ("Schoenfeld Decl."), Ex. 2). The Order further provided that "the parties and their counsel . . . consented to the undersigned exercising jurisdiction over this case for the limited purpose of entering this Order of Discontinuance." (See Schoenfeld Decl. Ex. 2). Pursuant to that consent, I signed the Order, which was entered the following day. (Docket No. 26).
After several extensions of the thirty-day period, plaintiff's counsel wrote to Your Honor on August 25, 2005, to request that ...