A patent troll learned the hard way that agreement on a single term does not an agreement make. Following long-standing Fifth Circuit precedent, Chief Judge Barbara Lynn of the United States District Court Northern District of Texas (Dallas Division), held that an “agreement in principle” where the parties had only reached agreement on the price, was nothing more than an unenforceable “agreement to agree.”[1] 

In July 2020, Magnacross, LLC, a patent troll represented by Isaac Rabicoff, filed a complaint for patent infringement in the United States District Court for the Northern District of Texas (Dallas Division), against OKI Americas, Inc.

By January 2021, the parties had reached arrived at an amount which the Oki was willing to pay and  Magnacross willing to accept – a threshold “agreement in principle” – with all remaining terms of any agreement to be negotiated an set forth in a detailed settlement agreement thereafter.  As with many best laid plans, the parties were unable to reach agreement on various essential terms of the settlement agreement including, for example, the scope and duration of the patent license, a covenant not to sue, mutual releases, dismissal of litigation, licensed products, confidentiality, the parties to the agreement. As negotiations stalled OKI filed a Rule 12(b)(6) motion to dismiss the complaint.

Months later and literally the night before OKI's motion was to be heard by the court, Magnacross filed an Amended Complaint adding, inter alia, a claim for breach of contract against OKI for allegedly breaching a settlement agreement Magnacross claimed the parties reached in January 2021.  OKI disputed the allegation, asserting that no binding agreement had been reached. 

Magnacross alleged that the agreement was formed after negotiating over the price of the settlement over email, and that, in response to an email confirming the parties had reached an “agreement in principle,” OKI responded, “Thank you.”

The court, however, found that the Magnacross' allegations did not support that a binding agreement had been made for the following reasons: 

• The use of the phrase “in principle” by Mr. Rabicoff implied the agreement was contingent on other terms, or one that a person did not have the authority to enter into.
• The parties had only agreed to one term of the settlement – i.e., the price.
• Magnacross itself confirmed the agreement was not binding when it alleged that the parties “negotiated for several months” after Magnacross “sent over a draft written settlement agreement.”

Additionally, the court found that Attorney Rabicoff's own statements regarding various drafts of the settlement, after the “agreement in principle,” demonstrated Magnacross' understanding that no binding agreement had been reached. Such statements included:

• “[w]e can dismiss before the EOT deadline if we have a fully executed deal”;
• “[w]e weren't aware that your client was going to potentially pull out of negotiations;” and
• “any modification to the agreed payment amount sabotages the negotiation and scuttles any conceivable deal.”

Relying on well-established precedent, the court held that although “an agreement may exist when parties agree upon some terms and leave other terms to be negotiated later, there must be agreement on all essential details, such as the duration of the agreement, the grounds for renewal or termination, and time of performance.” (Internal citations omitted). Because there was no factual dispute that the parties were still negotiating material terms of the proposed settlement agreement, the parties' “agreement in principle” was “not a binding contract but, rather, an unenforceable ‘agreement to agree.'”

A copy of the Court's Decision is available here.

Oki Data Americas, Inc. was successfully represented by Marc R. Labgold, Patrick J. Hoeffner and Megan C. Labgold of Labgold Law (Reston, VA) and William D. Taylor of Taylor & Taylor Law, P.C. (Arlington, TX). 

[1]  Liberto v. D.F. Stauffer Biscuit Co., Inc., 441 F.3d 318, 323 (5th Cir. 2006).