Federal Circuit Finds $100 Option Clause in Settlement a “Side Bet,” Dismisses Hybir Section 101 Appeal as Moot

The U.S. Court of Appeals for the Federal Circuit dismissed a patent eligibility appeal on April 21, 2026, holding that a settlement agreement’s $100 licensing option clause rendered the case moot. The decision, issued in In re Hybir, Inc., No. 25-1367, is nonprecedential. The court applied the “side bet” doctrine to find that because Veeam Software Corp. could license the disputed patent for $100 regardless of the appeal’s outcome, no live case or controversy remained to support appellate jurisdiction.

Background

Hybir, Inc. filed suit against Veeam Software Corp. in the United States District Court for the District of Massachusetts, alleging infringement of claims 3, 4, 7, 16, 17, and 20 of U.S. Patent No. 8,051,043. Veeam Software Corp. is a software company specializing in data backup and management. The district court granted Veeam’s motion to dismiss, holding the asserted claims ineligible under 35 U.S.C. § 101. Hybir appealed to the Federal Circuit.

The 0 Option Clause

During the pendency of the appeal, Hybir and Veeam entered into a Settlement and Limited Patent License Agreement. Under the agreement, Hybir licensed several patents to Veeam, while expressly reserving its right to appeal the district court’s ruling on the ’043 patent. The critical provision: following the conclusion of the appeal, Veeam would have the option to add the ’043 patent to the list of licensed patents for $100.

The Federal Circuit’s Analysis: The Side Bet Doctrine

The Federal Circuit held the appeal moot under the “side bet” doctrine it articulated in Allflex USA, Inc. v. Avid Identification Systems, Inc. (Fed. Cir. 2013). In that earlier case, the court found that a settlement term reducing a contingent payment by $50,000 if the appellant prevailed on appeal constituted a stake in the appeal’s outcome — effectively a side bet that eliminated the live controversy required to maintain appellate jurisdiction.

The court found the Hybir settlement indistinguishable. Because Veeam could obtain a license to the ’043 patent for $100 regardless of whether Hybir prevailed on the eligibility question, Hybir no longer had a cognizable legal interest in the outcome of the appeal. The economic logic is the same whether the contingent amount is $50,000 or $100: the opposing party’s economic position shifts based on the appellate outcome, eliminating the adversarial stake that Article III requires.

The Federal Circuit vacated its prior dismissal order and remanded to the district court with instructions to dismiss for lack of jurisdiction.

Practical Implications

The Hybir decision illustrates a recurring tension in patent litigation: the desire to resolve a dispute through settlement while preserving appellate rights on a legal question the patent owner believes will be favorably resolved. When the settlement is structured such that the opposing party’s economic position shifts based on the appellate outcome — even if only by $100 — a court may find the controversy has evaporated.

Patent litigants negotiating settlements pending appeal should carefully examine whether any economic term in the agreement is contingent on the appeal’s outcome. Provisions such as options to add patents to a license for a nominal payment, payment reductions tied to appellate success, or contingent royalty adjustments all carry the risk of triggering a mootness finding.

The decision is particularly noteworthy for its confirmation that dollar amount is not determinative. A $100 clause is just as capable of creating a “side bet” as a $50,000 clause. What matters is whether the economic structure of the settlement is contingent on who wins the appeal. Counsel designing settlements in § 101 cases — where both patent owners and accused infringers often have strong incentives to settle while leaving validity unresolved — should ensure that no settlement term creates a financial stake in the appeal’s resolution.

Although nonprecedential, In re Hybir reinforces the Allflex framework and serves as a useful data point on the boundaries of the side bet doctrine for practitioners navigating settlement strategy in ongoing patent eligibility appeals.