## Facts

- Alpex Computer Corporation held rights under U.S. Patent No. 4,026,555 involving early video game technology and obtained the right to sue for past infringement from a prior licensee.
- Alpex pursued industry-wide enforcement, including sending letters to video game companies asserting infringement and offering licensing terms.
- Alpex entered (1) pre-suit license offers to many companies, (2) licenses reached after business negotiations without litigation, and (3) licenses and related documents reached during litigation with other companies.
- Nintendo, sued for infringement and contesting validity, sought to introduce evidence from all three categories at trial.
- Alpex moved in limine under Federal Rule of Evidence 408 to exclude evidence of compromise efforts and amounts connected to those efforts.

## Issues

1. Whether Federal Rule of Evidence 408 barred Nintendo from introducing evidence of Alpex’s pre-suit license offers, negotiated licenses, and litigation-related licenses to prove liability/invalidity or the amount of Alpex’s claim.
2. Whether Alpex’s disclosure of settlement or license terms to other companies in later negotiations eliminated Rule 408 protection.

## Decision

- The court granted Alpex’s motion to preclude the evidence under Rule 408.
- The court treated all three categories of materials as compromise-related efforts within Rule 408’s scope.
- The court found Nintendo’s intended use went to merits questions (liability/invalidity and damages/royalty), the precise use Rule 408 prohibits.
- The court rejected Nintendo’s waiver argument, holding that Rule 408 is an admissibility rule not dependent on confidentiality; Alpex’s disclosures to others did not permit the prohibited use at trial.

## Legal Principles

- Federal Rule of Evidence 408 excludes offers, acceptances, and related statements made in compromise negotiations when offered to prove liability for, invalidity of, or the amount of a disputed claim.
- Rule 408 can cover pre-litigation communications and agreements (including business-form licenses) when they function as efforts to resolve asserted infringement disputes.
- A party does not “waive” Rule 408’s exclusion merely by disclosing settlement or license terms to third parties in subsequent negotiations; the controlling question is the purpose for which the evidence is offered in court.
- Rule 408 is applied to protect settlement incentives by preventing compromise efforts from being used as admissions on infringement/validity or damages.

## Conclusion

The court excluded Alpex’s license offers and settlement-related agreements from trial because Nintendo sought to use them to prove patent liability/invalidity and damages, and Alpex’s prior disclosures to others did not remove Rule 408’s bar on that merits use.


Alpex Comput. Corp. v. Nintendo Co., Ltd., 770 F. Supp. 161 (S.D.N.Y. 1991)