In Contempt of Patent Infringement Injunctions – New Standard

The Federal Circuit Court of Appeals has revised contempt proceedings for those who violate patent infringement injunction orders. The earlier two-step inquiry in contempt proceedings is now devolved into a single inquiry. Tivo Inc. v. Echostar Corp., Case No. 2009-1374 (Fed. Cir. Apr. 20, 2011) en banc (available here). In Tivo, the Court eliminated “the separate determination [regarding] whether the contempt proceeding were properly initiated.” Opn. Pg. 17. “What is required for a district court to hold a contempt proceeding is a detailed accusation from the injured party setting forth the alleged facts constituting the contempt. As with appeals from findings of civil contempt in other areas of law, we will only review whether the injunction at issue is both enforceable and violated, and whether the sanctions imposed were proper. Allegations that contempt proceedings were improper in the first instance do not state a defense to contempt. As to the question whether an injunction against patent infringement has been violated, courts should continue to employ a more than colorable differences standard as discussed below.” Opn. pg. 17-18.

Tivo (www.tivo.com) owns U.S. Patent No. 6,233,389 which generally covers a DVR which allows users to fast-forward, rewind, pause, and replay a “live” television program while it is playing on the television set. TiVo’s patent covers various features essential to the working of a DVR. (Tivo website here).

In 2006, a jury had found that Echostar (www.echostar.com) willfully infringed Tivo’s product patent. The district court ordered EchoStar: (1) to stop making, using, offering infringing by the jury (the “infringement” provision) and (2) to disable the DVR functionality in existing receivers that had already been placed with EchoStar’s customers and in new placements that were yet to be placed with EchoStar’s customers (the “disablement” provision). The infringement order reads:

“Each Defendant, its officers, agents, servants, employees, and attorneys, and those persons in active concert of participation with them who receive actual notice hereof, are hereby restrained and enjoined, pursuant to 35 U.S.C. 283 and Fed. R. Civ. P. 65(d), from making, using, offering to sell, selling, or importing in the United States, the Infringing Products, either alone or in combination with any other product and all other products that are only colorably different therefrom in the context of the Infringed Claims, whether individually or in combination with other products or as a part of another product, and from otherwise infringing or inducing others to infringe the Infringed Claims of the ’389 patent.” Opn. pg. 10.

Echostar spent 8000 hours (with 15 engineers) to redesign the accused product, compromised the operating performance of its redesigned units and obtained a non-infringement opinion from a patent attorney on the new units. The trial court found, based upon clear and convincing evidence from Tivo, that the redesigned units were “not more [] colorably different from infringing software.” Opn. Pg. 13. The trial court awarded $90M in sanctions to Tivo due to Echostar’s contempt of the court’s order.

As for Echostar’s intent not to violate the injunction, the Court stated: “We have made it clear that, under Supreme Court precedent, a lack of intent to violate an injunction alone cannot save an infringer from a finding of contempt. Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d 1345, 1353 (Fed. Cir. 1998) (The general rule in civil contempt is that a party need not intend to violate an injunction to be found in contempt.). ‘Since the purpose [of civil contempt] is remedial, it matters not with what intent the defendant did the prohibited act. . . . An act does not cease to be a violation of a law and of a decree merely because it may have been done innocently.’ McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949).” Opn. pg. 16.

The new test for patent infringement contempt proceedings is whether the injunction at issue is both enforceable and violated, and whether the sanctions imposed were proper. Defense “allegations that contempt proceedings were improper in the first instance do not state a defense to contempt. As to the question whether an injunction against patent infringement has been violated, courts should continue to employ a ‘more than colorable differences’ standard.” Opn. pg. 18. The district courts must apply Federal Circuit law regarding violations of injunctions.

“The Supreme Court has cautioned that contempt is a severe remedy, and should not be resorted to where there is a fair ground of doubt as to the wrongfulness of the defendant’s conduct. Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); see also MAC Corp. of Am. v. Williams Patent Crusher & Pulverizer Co., 767 F.2d 882, 885 (Fed. Cir. 1985) (citing Cal. Artificial Stone Paving Co., 113 U.S. at 618). We have previously interpreted that inquiry in patent cases as one of colorable differences between the newly accused product and the adjudged infringing prod-uct. Abbott Labs. v. TorPharm, Inc., 503 F.3d 1372, 1380 n.3 (Fed. Cir. 2007). Thus, the party seeking to enforce the injunction must prove both that the newly accused product is not more than colorably different from the product found to infringe and that the newly accused product actually infringes.” Opn. pg. 18-19. The “test for colorable differences as one that requires determining whether substantial open issues with respect to infringement to be tried exist.” KSM Fastening Sys. v. H.A. Jones Co., 776, F.2d 1522, 1532 (Fed. Cir. 1985).

“The primary question on contempt should be whether the newly accused product is so different from the product previously found to infringe that it raises a fair ground of doubt as to the wrongfulness of the defendant’s conduct. Cal. Artificial Stone Paving Co., 113 U.S. at 618. The analysis must focus not on differences between randomly chosen features of the product found to infringe in the earlier infringement trial and the newly accused product, Additive Controls, 154 F.3d at 1350, but on those aspects of the accused product that were previously alleged to be, and were a basis for, the prior finding of infringement, and the modified features of the newly accused product.” Opn. pg. 19-20.

Related Posts