Graco Childrens Products Inc. (“Graco”) filed a patent infringement action against Kids II, Inc. (“Kids II”). During discovery, Graco and Kids II agreed to discuss terms to settle the dispute. As part of that process, Graco’s in-house counsel sent an email to Kids II’s in-house counsel, with a settlement proposal calling for a two-year mutual non-solicitation provision and a purchase by Kids II of the family of patents-in-suit with a non-exclusive license back to Graco for $1,150,000 or, in place of an outright purchase of the patents, a full settlement of the pending claims for $750,000. The offer was contingent on the execution of a mutually agreeable settlement agreement and was to expire on March 15, 2013.
On March, 19, 2013, Kids II’s in house counsel set forth a counterproposal, offering $750,000 for, among other things, the purchase of the patents previously identified by Graco and a mutual two-year moratorium on employee solicitation. Graco responded by seeking clarification on whether Graco would be granted a right to practice the patents and the parties then attempted to reach an agreement on the amount for the settlement.
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