The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.
Medinol sued Guidant alleging patent infringement. During the course of a jury trial, the parties resolved the dispute when Medinol granted Guidant a license to use certain Medinol patents. The parties notified the Court that they had settled the action. Calling this a "delightful piece of news" the Court directed the parties to state the terms of their settlement on the record.*fn1 An attorney for each side then outlined the settlement on the record and all parties agreed that the attorneys' statements accurately expressed the terms of their agreement. Medinol's lawyer summarized the settlement in the following words: "Guidant will pay $[sealed] for a paid up license with respect to the '381 patent and its family, and there will be a covenant not to sue with respect to actions in the United States, and we will dismiss this action."*fn2 In the colloquy that followed, Abbott's attorney, Medinol's representative, and Medinol's counsel specified the subject matter and geographic scope of the license, the breadth of the covenant not to sue, and the nature of the dismissal.*fn3 With these clarifications, Abbott's counsel affirmed that the statements on the record appropriately summarized the terms of the settlement.*fn4 Representatives of both Medinol and Abbott*fn5 confirmed that they accepted the terms of the settlement as stated on the record.*fn6 Though both sides still agree that the "settlement agreement stated on the record is valid and enforceable",*fn7 there is no doubt that the parties intended to prepare a written settlement agreement, setting forth the terms of their settlement in legal language and in complete detail.
Unfortunately, as the parties circulated draft settlement agreements, they found that they disagreed with respect to one essential term of the settlement: whether the license Medinol granted to Abbott was restricted with respect to Abbott's use of the patented technology. Both sides agreed -- and continue to agree -- that the case was indeed settled, but each side argued that its interpretation of that one essential term was the correct interpretation. Because the parties could not agree on this term, each side moved to enforce the settlement that it believed had been reached. This Court referred those motions to the Magistrate Judge to prepare a report and recommendation to the Court.*fn8 After receiving written submissions and holding an evidentiary hearing, the Magistrate Judge issued a sealed Report and Recommendation ("R&R") on February 14, 2007. Abbott filed timely objections to the R&R.
When asked to place the settlement on the record, the parties made the following statements:
Medinol Counsel: Guidant will pay $[sealed] for a paid up license with respect to the '381 patent and its family, and there will be a covenant not to sue with respect to actions in the United States, and we will dismiss this action.
Abbott Counsel: If I could add at least one thing, and that would be a clarification on what [Medinol counsel] said about the '381 patent family. That's all related patents. It includes continuations, reexamination, anything that is related.
The Court: [Abbott counsel] stated it included patents, related patents, continuations and reexaminations. Is that acceptable, Dr. Richter [Medinol representative]?
Dr. Richter: That's acceptable. This is what we meant by the family.
The Court: It's best to be clear. [Abbott counsel], is there anything else?
Abbott Counsel: I am not sure that [Medinol counsel] said there would be a dismissal with prejudice.
The Court: There will be a dismissal with prejudice; is that correct, [Medinol Counsel]?
Medinol Counsel: Absolutely.
The Court: Anything else?
Abbott Counsel: Just to clarify, there is a covenant not to sue, paid up on all of these patents?
The Court: He actually said in the U.S.
Medinol Counsel: This relates to the U.S. ...