En Banc Federal Circuit: Adjudged Infringers and their “New” Products

TiVo v. EchoStar (Fed. Cir. 2010)

The Federal Circuit has announced an en banc rehearing of the TiVo appeal focusing on the process of chasing-down defendants to enforce an injunction — especially where the defendant has introduced a new device that is arguably infringing.  The patentee here has asked that the enforcement operate through a contempt proceeding while the accused infringer has demanded a new trial on the merits for the new device.

The questions on appeal include:

a) Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?

b) How does “fair ground of doubt as to the wrongfulness of the defendant’s conduct” compare with the “more than colorable differences” or “substantial open issues of infringement” tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985).

c) Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should be given to the infringer’s efforts to design around the patent and its 2009-1374 2 reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?

d) Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope?

On-point amicus briefs are welcomed.

 

39 thoughts on “En Banc Federal Circuit: Adjudged Infringers and their “New” Products

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  3. I am an investor (not an attorney) but a lot of money could be made if one could determine the general leaning of the court and how long it will take them to decide. If the court makes a definite decision supportive of TIVO and the decision is made before Jan 2012 then an investor could make a lot of money. What is the consensus?

  4. It is interesting that the Court is essentially taking a new look at KSM, F.R.C.P. R. 65(d) and F.R.C.P. R. 70 in light of the eroding landscape of patent protection (very little DOE protection left, no automatic right to an injunction, and teeth in 35 U.S.C. Sec. 103). In the “old days”, application of KSM was fairly straightforward and contempt proceedings could go forward very quickly for the reasons outlined in comments above.

    Now, there are countervailing forces at work. Because most of the people granted permanent injunctions are competitors, there is a real need to shut the competitor down with the injunction right through contempt proceedings. The patent holder looking “merely” to use the contempt proceedings for leverage in an enhanced license is basically gone. However, the scope of the infringement findings in the infringement action are more precise and there is no DOE-type argument for the patent holder at the contempt hearing (e.g., “Your honor, it’s doing the same thing in the same way…”). It will be interesting in light of the above on how much they tinker with the KSM standard.

  5. Thanks Ned for answering someone’s question. That wasn’t mine, but I’m sure that someone was wondering about the defendant running and hiding.

  6. Ned, IMHO is correct. Echo had an opportunity to appeal the order – but did not. But it would appear that CAFC is going to let there be an appeal of the order anyways, even thou that order was part of the final judgment appealed and affirmed many moons ago. Echo got off light – should have been unjust enrichment theory for the contempt fine – not an accounting of royalty damages.

  7. ping, the defendant can run, but he cannot hide. He at some time will be called to account by the PO. It is always better, in my view, to get out in front on these issues. Otherwise, his claims of good faith will fall on deaf ears.

  8. “Which secrets would those be in a patent infringement matter?”

    The software source code, sales figures, alternative changes considered, but not adopted and technical reports. I have yet to see an infringement matter where there wasn’t a protective order entered

  9. Well, lurking et al., clearly EchoStar was badly advised by itscounsel. They were advised they had a “right” to design around. Had they chosen to go to the judge and get his permission to cut in the new software instead of simply not disabling the DVR capability as ordered, they may have gotten his consent. Instead, they are now held in contempt and have been ordered to pay $90 million.

    In the words of Judge Devitt, you must comply with the court’s order even if you think it is wrong. Your only recourse (if you did not appeal the order) is to go to the court and argue your case.

  10. If the court ordered the infringer not to infringe, and they infringed, they are in violation of the order. If they thought they were not in violation it’s relevant, but more care is required by the previously adjudicated infringer than by others. If they were trying to skate close to infringement, but had a theory of why they weren’t infringing, well, that’s relevant, too.

    If they were not well clear of infringement, they could have gone to the court, and asked. It would have greatly improved their “good faith” argument. Yes, the PO should have a say in this, but only via attorneys and independent experts under the protective order, that was undoubtedly used in the original litigation to protect the parties secrets.

  11. Ned, it sounds like what you’re saying is that the defendant should have taken the new device to the court and asked the court to determine beforehand that the new device did not infringe, before trying to sell the new device. Would you also allow the patentee to examine the new device, or only the judge? I think this would give somewhat of an unfair leg up to the patentee, particularly if the design-around is successful and itself potentially patentable.

  12. and I certainly don’t trust Ned to faithfully reproduce it

    What? Of course you can trust Ned. After all, this is Ned.

    Oh wait. This is Ned.

    Nevermind.

  13. Once contempt is establish, I think the defendant has enough “unclean hands” to not be entitle to argue good faith in designing around.

    You make an excellent point, in your strange backward world.

    Good faith in designing around is what would make your actions not contempt in the first place. Good faith in designing around means you were reasonably trying to not violate the court order. You have what you think is a different device that you think doesn’t infringe, so why should the court order prevent you from making/using/selling it? If you’re acting in good faith.

    There’s a difference between having a valid excuse for violating a court order and believing that you’re actually complying with the court order. If your “excuse” for “violating” a court order to stay 100 yards away from Charlene is that you’re pretty sure you were 150 yards away, you don’t need to go back to the court and ask their permission.

    I don’t know exactly what the wording of the original order was, and I certainly don’t trust Ned to faithfully reproduce it, but if the device is so far from the devices accused of infringement in the original trial that a fresh infringement analysis is required, the mere fact that the device infringes should not make the defendant liable for contempt.

  14. On reconsideration, I remember sitting in court one day waiting for my case to be called. Chief Judge Devitt of the D. of Minnesota was deciding a contempt motion in another case. The defendant gave excuse after excuse for not complying with the court’s order, some of which sounded quite reasonable. In the end, Judge Devitt admonished the defendant that if he had a valid excuse, he should have applied for relief from the court. He should not have take the law into his own hands and simply violated the court order.

    In the case at bar, the order was clear: disable DVR functionality in devices found to infringe. That order was not appealed. There is no legitimate question that the defendants did not comply with the order.

    Under the circumstances, the defendant had no legal recourse but to apply to the court for relief. Anything else WAS contempt. Rader is completely off base in his dissent on this issue.

    Once contempt is establish, I think the defendant has enough “unclean hands” to not be entitle to argue good faith in designing around. His allegedly non infringing apparatus should be dealt with in summary fashion.

  15. Hobbes, Ping, don’t be so mean. 6 is a very useful idio+. (old soviet reference for those too dense)

  16. I’ve been away for a while; it’s nice to see that 6 is still willing and able to respond to a plea for useless comments.

  17. “How about some discussion on why it’s taking so long and why this could be a very bad sign. Anyone have some useless speculation to spread around?”

    I think you mean why it could be a good sign ;)

  18. “The Supreme Court published its decisions for today. Sorry folks, no Bilski.”

    How about some discussion on why it’s taking so long and why this could be a very bad sign. Anyone have some useless speculation to spread around?

  19. Especially since DOE is now almost dead, old loose patent infringment contempt proceeding terms like “not a substantive variant” or “a mere colorable variant” seem particularly useless and dangerous. Likewise, “Performs essentially the same task, in substantially the same way” [per se] is loose DOE talk and ignores other now-vital requirements like the “all elements” rule If a defendant can design-out a claim element completely, they are no longer infringing]. Someone is either still infringing a claim, or not, and that requires a real and independent infringement determination, which is what I hope the CAFC will hold en banc.

    But I do think there should be some adverse consequences for delaying or prolonging a case [in which infringement of an original product has already been found] with a misrepresentation of a substitute product as a design-around when it still infringes.

  20. While designing around is, of course, permitted; there seems something quite fishy about designing around unilaterally after judgment and an injunction where the plaintiff and the court are not consulted and agree. It seems to me that such unilateral action exhibits a high degree of bad faith. Open kimono is the way to go when a district court judgment and an injunction is involved.

  21. Peter, I see. But the injunction is then potentially overbroad as it did not distinguish between infringing and non infringing devices.

    I think it fair to say that if Dish did not want to comply with the injunction because they believed they had a non infringing alternative, they should have gone to court and gotten its permission first.

  22. The “new devices” are the same dvr devices but updated with new firmware. The injunction is to shut off all recording to the hard disk which Dish did not do, hence the contempt.

  23. Whatever the outcome of this en banc review, manufacturors caught in a surprise infringement suit need a fair opportunity to prove to a judge that they have clearly “designed around” the patent by changing their product to no longer be infringing [if they can]. [But perhaps there needs to be some adverse consequences for not even trying to do so until way too late? Or for falsely claiming to no longer be infringing when they still are?]

  24. I think the injunction…should be sufficient penalty.

    Ok for penalty, but what’s the remedy?

    Remedy is not the Right, right?

  25. Ned, if the new device does infringe, I agree that the the court should enjoin its sale. I do not think though that any additional penalty should be added. The usual penalty for contempt, at least for a person, though is some jail time or a fine. Presumably the defendant did not intend to infringe with the new device, and I think it would be inappropriate to impose a fine because the defendant failed to successfully design around, when the law permits / encourages him to try and design around. Put another way, I think the injunction, when applied to the new device, should be sufficient penalty.

    IANAE, res judicata applies when the new lawsuit is substantially identical to the old lawsuit. I can see the argument that the new device is different from the old device, so res judicata cannot apply. I suspect this question may be part of the parties’ briefs.

  26. I just had a chance to read Rader’s dissent from the court March 4, 2010 decision affirming the lower court’s contempt order. He does appear to have a point in that a critical claim element was removed in the design around. While the the district court found a PID element that had always been present to be the same thing as the removed element, TIVO had never accused this element of infringement — because it had been distinguished during prosecution according to Rader.

    See: link to docs.google.com

    The “ambiguity” had to do with the district courts order to disable DVR functionality in existing receivers. This apparently could be done via satellite, but the court construed the requirement to mean that Echostar had to physically replace all existing receivers with a software update (that it could download just as well from the satellite.)

  27. The only other main difference I can see is that in a contempt proceeding, presumably the claim construction / validity would have already been decided. Perhaps the defendant wants a new trial to be able to present new prior art?

    Presumably the previous holdings on validity and claim construction would be res judicata in any event.

    It’s probably much quicker to get a verdict on contempt than a full trial on infringement, and you get to put a little pressure on the infringer with the extra remedies for contempt.

    I think contempt is fully appropriate when you can show that the design-around leaves important infringing features unchanged or insufficiently-changed, or you can otherwise determine that the new device infringes more or less based on the earlier finding that the old device infringed. If you’ve already been found liable for infringement, you shouldn’t be treading so close to the line. If a completely new determination of infringement is needed, it’s probably not contempt and it should probably get a new trial.

    As to burdens of proof and such, this looks like another great opportunity for the Federal Circuit to follow the regional circuits.

  28. lurking less, if the design-around infringes, shouldn’t that decide the issue of contempt? Wouldn’t any injunction order the defendant not to infringe in the future any claim held to infringe without gloss.

    What was the order here?

  29. The practical difference between a contempt proceeding and a new trial of infringement on the merits is that for a contempt proceeding, the elements are different. To find contempt, one must generally fail to obey a court order or show disrespect to the court.

    I find it difficult to believe that if the defendant in good faith tried to design around the patent and simply failed, that the defendant should be found in contempt. I assume the defendant did not show disrespect, because designing around is a permitted activity. True, the defendant’s failure to successfully design around means the defendant failed to obey the court’s injunction. I think, though, that the defendant’s actions show no intent to fail.

    I would think it is still the patentee’s burden of proof to show the new device infringes, and the defendant would still get to show why it does not.

    The only other main difference I can see is that in a contempt proceeding, presumably the claim construction / validity would have already been decided. Perhaps the defendant wants a new trial to be able to present new prior art?

  30. When the remedy is entirely equitable, what is the practical difference between a “hearing” and a “trial.”

    I still think that the PO must show the newly accused device has all the elements of the claim or claims. If an injunction does not require this, it is indeed ambiguous.

  31. c) Civil or criminal contempt? Presumably civil as the patentee initiates the action. Then preponderance of evidence would apply? Can the civil offense be proven by evidence of conduct alone, or must subjective intent also be proven by circumstances?

  32. “Following a finding of infringement by an accused device at trial, under what circumstances is it proper for a district court to determine infringement by a newly accused device through contempt proceedings rather than through new infringement proceedings? What burden of proof is required to establish that a contempt proceeding is proper?

    Never and none because never. Unless there is some provision for this in the lawl.

    “b) How does “fair ground of doubt as to the wrongfulness of the defendant’s conduct” compare with the “more than colorable differences” or “substantial open issues of infringement” tests in evaluating the newly accused device against the adjudged infringing device? See Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885); KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1532 (Fed. Cir. 1985). ”

    None of that seems relevant since the answer above was never. Other than that I really couldn’t care less how they compare. If the court goes in the wrong direction from the get go then it may as well go in whatever wrong direction it pleases after that.

    “c) Where a contempt proceeding is proper, (1) what burden of proof is on the patentee to show that the newly accused device infringes (see KSM, 776 F.2d at 1524) and (2) what weight should be given to the infringer’s efforts to design around the patent and its 2009-1374 2 reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?”

    Never being answered above pretty much wraps up the discussion on this nonsense.

    “d) Is it proper for a district court to hold an enjoined party in contempt where there is a substantial question as to whether the injunction is ambiguous in scope?”

    No.

    You’re welcome for the amicus court. Glad I could be of assistance in this terribly difficult area of the no-law.

    Hey guys, on to something more sexay, when is the next date we might see Bilski get issued?

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