Slowing the Rates of Innovation: How the Second Circuit Ban on No-Challenge Clauses in Pre-Litigation Settlement Agreements Hinders Business Growth

Abstract

On July 10, 2012, in Rates Technology Inc. v. Speakeasy, the U.S. Court of Appeals for the Second Circuit held that no-challenge clauses in pre-litigation settlement agreements are unenforceable. In its ruling, the court determined that sharing ideas and discovering invalid patents are policy considerations that supersede spurring innovation and settling litigation. This Comment argues that spurring innovation and settling litigation are policy considerations better aligned with modern business. As a result, this Comment asserts that no-challenge clauses should be enforceable.