Say you go to a meeting. You think the other company infringes your company’s trademark. To gain the other side’s confidence, you concede a weakness or two in your position. You go so far as to say that a particular design doesn’t "offend" you. The negotiations end without a settlement.
Four years pass. In the meantime, the other company licenses the non-offensive mark to a competitor of yours. Your company sues for trademark infringement. The licensor defends on the ground, among others, that what you said during the peace talks estops your company from claiming infringement. To your shock, the judges lets the jury hear testimony about your statment that you didn’t find the mark offensive. And you lose.
On appeal, you blame the error in admitting the evidence concerning your "offend" remark. You cite Rule 408 of the Federal Rules of Evidence, arguing that by its terms it bars evidence of "conduct or statements made in compromise negotiations" "to prove liability for or invalidity of [a] claim or its amount". The result? You lose again.
So said the Second Circuit in PRL USA Holdings, Inc. v. United States Polo Ass’n, Inc., No. 06-3691 (2d Cir. Mar. 4, 2008). The court pointed to language saying that Rule 408 "does not require exclusion when the evidence is offered for another purpose". It deemed United States Polo Association’s estoppel defense "another purpose" despite Ralph Lauren’s argument that USPA used the evidence to persuade the jury to find the USPA’s design/mark insufficiently similar to the Lauren mark.
How could the parties have avoided injecting settlement talks into the ensuing litigation? Simple — by entering into a confidentiality agreement, one that makes all discussions and conduct during negotiations off-the-record and unusable in court. Judges generally will enforce an agreement like that.