Tivo v. Echostar: New Rules for Post Injunction Contempt Proceedings against Modified Products

Tivo Inc. v. Echostar Corp. (Fed. Cir. 2011) (en banc)

At trial, Echostar was held liable as an infringer and was permanently enjoined from making or selling the infringing products as well as “all other products that are only colorably different therefrom.” Echostar then modified and continued to market its product. Rather than filing a new lawsuit, Tivo filed a contempt action arguing that Echostar’s activities violated the permanent injunction already in place. The district court held Echostar in contempt after ruling that the modified product was not colorably different from the infringing product and therefore that its sale violated the permanent injunction.

Normally, a contempt proceeding is the appropriate vehicle for judging violations of a permanent injunction. However, when a company’s new product is sufficiently different from its prior infringing product, courts instead require the patentee to pursue an entirely new case on the merits of the new product. In a rare en banc decision penned by Judge Lourie, the Court of Appeals for the Federal Circuit has provided new guidance as how courts should structure a contempt proceeding when an adjudged infringer releases a new or modified product.

The new rules of contempt proceedings for modified products following an injunction:

  1. Good Faith Design Around: A good faith effort to modify a product in order to avoid infringement will not avoid a contempt proceeding. However, the good faith of someone held in contempt may be used in lessening the penalty for contempt.
  2. Overrule Two-Step Process: The two-step test defined in KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1530–32 (Fed. Cir. 1985), is overruled as unworkable. That test required courts to first determine whether a contempt proceeding is appropriate based upon the colorable difference test and then determine whether contempt actually occurred. Under the new approach, courts will have broad discretion in judging whether to hold a contempt proceeding so long as the injured party offers “a detailed accusation … setting forth the alleged facts constituting the contempt.”
  3. Appealing Decision to Hold a Contempt Proceeding: A confused aspect of the decision is whether the lower court’s decision to hold a contempt proceeding will be appealable. In one portion of the opinion, the court states that the question of whether the contempt proceeding was proper will not be directly appealable. “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.” In the next paragraph, however, the court notes “that there may be circumstances in which the initiation of contempt proceedings would constitute an abuse of discretion by the district court.” The court then went on to hold that the decision in this particular case was not an abuse of discretion.
  4. Colorably Different: In order win a contempt proceeding, the patentee must show that “the newly accused product is [not] 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.’” In conducting this analysis, the court should focus on the portions of the accused product that were a basis for the prior finding of infringement and consider whether those portions have been significantly modified or removed. “If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one” and a contempt finding would be inappropriate. At that point, the patentee could still pursue a full infringement action.
  5. Infringement and Claim Construction: Even when the new product is not colorably different from the prior infringing products, the court must also determine that the new product actually infringes the asserted patent claims. In this process, the court will be bound by its prior claim construction ruling.

In this case, the district court failed to explicitly consider whether Echostar’s modified product met each limitation of the asserted claim. On remand, the district court must make that factual determination.

The court was unanimous as to this new approach to contempt proceedings.

Dissent: The dissent filed by Judge Dyk primarily challenges whether a particular portion of the injunction can be challenged as vague and overbroad in a contempt proceeding. Judge Dyk’s dissent was joined by Chief Judge Rader and Judges Gajarsa, Linn, and Prost. Looking at the tallies, for this portion of the opinion, there were seven judges in the majority and five in dissent. [updated to fix counting error] The majority included Judges O’Malley and Reyna who were not on the bench until well after briefing and oral arguments had been complete.

20 thoughts on “Tivo v. Echostar: New Rules for Post Injunction Contempt Proceedings against Modified Products

  1. Curious on two items related to this case (whether or not they make wtvlfdt’s “important” list):

    1) One of the ten elements in the new paradigm is that of a fact specific inquiry taking prior art into consideration. Part of this is “the determination if the modification merely employs or combines elements already known in the prior art in a manner that would have been obvious to a person of ordinary skill in the art at the time the modification was made.”

    Will the rationale behind the broad double edged sword of KSR play out in this obviousness test? In other words, will “ordinary creativity” and BUI have roles in figuring out just what is “obvious”? In other words, if the work around couldn’t get a patent on its own, (for obviousness reasons) should the work around thus “fail” ?

    2) Another of the ten elements is the policy favoring designing-around and the implications of the so-called “negative incentive”

    As a question of fact, determining a level of difference between “masking” infringement and promoting design around will be interesting (especially given 1) above)

  2. Just saw where Mattel not only lost its case of copyright infringement against MGA, but has been in turn been found guilty of trade secret misappropriation and ordered to pay $88.4 mil. Including attorneys fees, Mattel is out of pocket $400 million.

    Earlier, Mattel had won $100mil, but that verdict was reversed. MGA’s attorneys then quit (like rats abandoning ship) after MGA refused to pay their bill. Obviously, the replacement firm did a lot better for MGA. I would like to know who ended up representing MGA and who ended up representing Mattell.

    Again, if I were on the board of Mattel and based only on the facts above, I would fire all involved in this affair and seek new counsel. Particularly, I would get rid of the chief executive officer and general counsel.

    link to news.yahoo.com

  3. TLG, while the public are presumed not guilty requiring proof and a trial, and enjoined infringer has no such luxury. I think this case is right in that if there is any ambiguity, the enjoined infringer must seek guidance and clairification from the courts. They do not have the privilege of the non enjoined to be presumed innocent. Their ever action is suspect and all but presumed non innocent.

    I think the dissent is flatly wrong.

  4. Even when the new product is not colorably different from the prior infringing products, the court must also determine that the new product actually infringes the asserted patent claims”

  5. Here is Related Story

    The en banc US Court of Appeals for the Federal Circuit heard oral arguments in an extremely important patent infringement case (mp3 of oral argument here). Hanging in the balance are the very incentives for technological innovation and the seeds of economic progress. The arguments made in the case by the infringer, EchoStar, would have the effect of reducing the certainty and thus the efficacy of patent rights by weakening the ability of the courts to define and enforce patents clearly, quickly and efficiently.

  6. Saweet.

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  7. I haven’t read the dissent yet, but the Majority’s position on the disablement section is laughable. I know they cannot make arguments for Echostar, but their reading of the court’s order amounts to a distinction without a difference.

    If Echostar had issued new model numbers to those units with modified software, then they would not have been in violation of the court’s order. Further, Echostar’s interpretation was reasonable under the circumstances. Certainly, in this case, the infringing device consists of hardware and software. The software is found to be infringing, but the hardware is enjoined from employing any DVR software?

    At any rate, my real point is that you cannot just look at a model number and understand that to be absolute, because you can change a model number. Determined infringers have to interpret an injunction whether its meaning appears clear or not.

  8. Personally, I would sanction Echostar on general principles. They were quite arrogant in not returning to court and getting its sanction on its redesign. They seem to have a real bad attitude about this whole affair.

    Reminds me of Microsoft in the i4i case. They continually ignored the courts orders and in the end were appropriately sanctioned for contempt in the form of increased damages.

    If I were Echostar’s board, I would fire all involved with this matter and hire new counsel to advise on further “remedies.”

  9. “Infringement and Claim Construction: Even when the new product is not colorably different from the prior infringing products, the court must also determine that the new product actually infringes the asserted patent claims. In this process, the court will be bound by its prior claim construction ruling.”

    So now we will essentially have another round of claim construction. Technically that is not the case because the court is “bound by its prior claim construction ruling”, but there is usually enough wiggle room…

    Hopefully Echostar has modified the product in a way that fits perfectly into one of holes created by a claim scope disclaimer by Tivo during prosecution or litigation.

  10. Is it the theory of the dissent that if an injunction is unclear that the enjoined infringer has a free hand and does not have to return to court for clarification?

  11. Even when the new product is not colorably different from the prior infringing products, the court must also determine that the new product actually infringes the asserted patent claims

    Shades of eBay smackdown: b e – e x p l i c i t.

  12. Seems a reasonable test. Although I have my doubts as to whether or not they will be judged to infringe this time around.

  13. I think Paul’s right. The vote was 7-5. Mayer’s listed in the coram and as joining the majority opinion. Reyna and O’Malley still seemed to make a difference, as it would have been 5-5 without them.

  14. Dennis- Seven judges in the majority, no? You may have overlooked Judge Mayer, who was able to vote because he was on the original panel.

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