This is an interesting case on several levels. The most important portion appears to be something of an afterthought in the opinion. This seeming afterthought gives district courts authority to issue a preliminary injunction to block non-parties from distributing products believed to be infringing (and sourced from a defendant). And further, the opinion holds that non-party has no right to appeal the preliminary injunction decision even after being named as a defendant.
By Dennis Crouch
Aevoe v. AE Tech (Fed. Cir. 2013)
The usual process of appellate procedure is that interlocutory decisions by a district court judge are not appealable. Rather, the losing party must ordinarily wait until a final judgment ends the lawsuit before filing an appeal. This is an often frustrating rule – especially when the future appeal involves a questionable court decision early in the litigation.
One exception to the appellate final-judgment rule involves interlocutory judgments on motions for injunctive relief. The appellate jurisdictional statute provides for immediate jurisdiction over appeals from the "granting, continuing, modifying, refusing or dissolving injunctions, or refusing to dissolve or modify injunctions". 28 U.S.C. § 1292(a)(1).
In this case, Aevoe sued AE Tech in January 2012 and immediately moved for a preliminary injunction to stop AE Tech's sales of allegedly infringing touch-screen protectors. U.S. Patent No. 8,044,942. The court quickly granted the motion for preliminary relief and, although AE Tech had a right to immediately appeal that decision, it failed to file its notice of appeal within the 30 day deadline found in the Federal Rules of Appellate Procedure. Fed. R. App. Proc. 4(a)(1).
In May 2012, AE Tech indicated that it had redesigned its products and had begun to sell them once again. However, on motion, the district court found that the new products represented a failed attempt to design around the patents with only "trivial" and "nonfunctional" design changes and that the new product was not colorably different from the enjoined products and consequently held AE Tech in contempt. At that point, the district court also changed the language of the preliminary injunction order to add language blocking enjoining "colorable imitations" of the patent and to particularly call-out the redesigned product. AE Tech immediately appealed that change in the preliminary injunction as well as the contempt order.
On appeal, the Federal Circuit has dismissed the case – finding that it lacks appellate jurisdiction since (1) the minor change to the preliminary injunction order does not account as a decision "modifying" the order; (2) AE Tech had waived it right to appeal the original order; and (3) contempt decisions regarding preliminary injunctions are not immediately appealable.
The court's basic point here is that the new product line here was already covered by the original injunction language and it is not a "modification" of the injunction to particularly call-out that fact in the language of the injunction grant.
Put simply, whether "colorable imitations" were explicitly mentioned in the injunction language or not, such imitations fell within its scope; the district court was obligated to apply the colorable differences test in the contempt proceeding. Thus, the legal relationship between the parties was in no way altered by the court's changes to the injunction language. Neither the … addition of the "colorable imitation" language nor the explicit description of the actual redesign amount to a modification of the preliminary injunction upon which this court could predicate jurisdiction. . . .
The result here is that the lower court's opinion was one "interpreting an injunction" rather than "modifying an injunction" Since the jurisdictional statute (1292) does not provide for immediate appeals based upon a lower court interpretation or minor clarification.
Because the district court did not substantively modify the January 2012 injunction, AE Tech's appeal derives from a contempt order which is not an appealable interlocutory order. Because the contempt order is not appealable under 28 U.S.C. § 1292(a), this court does not have jurisdiction over AE Tech's appeal.
Enjoining a Non-Party: One issue in the case is that one defendant (S&F) was not joined as a defendant until March of 2012. The appellate court found that it was "beyond debate" that S&F was also "within the express language of the original injunction" since it applied to any party who had notice of the injunction and S&F had been put on notice. A critical feature of the opinion is the conclusion that S&F was in cahoots with AE Tech and thus could be enjoined under FED. R. CIV. P. 65(d)(2)(C) and avoid the ordinary rule that non-parties are not subject to court injunctions. Rule 65(d) allows injunctions against non-parties "who are in active concert or participation" with an enjoined party.
To be clear, the relationship between the original defendant (AE Tech) and prior non-party (S&F) appears to be that S&F was the sole distributer of AE Tech products retail market. The court writes:
AE Tech sold its allegedly infringing products directly to the S&F Defendants for distribution who, in turn, sold the AE Tech products in the marketplace. At the time of those transactions, the S&F Defendants had notice of the injunction, had been apprised of which products were enjoined, and informed Aevoe that they obtained the barred products solely from AE Tech. The S&F Defendants did not obtain the redesigned product from any entity other than AE Tech and AE Tech did not distribute those products through any other entity. Accordingly, by virtue of their distribution agreement, the S&F Defendants were "privies" of AE Tech, did not act independently of AE Tech, and were, thus, subject to the original injunction.
This decision appears to fall roughly in line with the Supreme Court's decision in Golden State Bottling Co., v. NLRB, 414 U.S. 168 (1973) where the court wrote that Rule 65(d) was a codification of common law that allowed injunctions against a non-party "bona fide purchaser, acquiring, with knowledge that the wrong remains unremedied."