By Dennis Crouch
NCube (ARRIS Gp) v. SeaChange (Fed. Cir. 2013)
Injunctive relief is a powerful mechanism for stopping ongoing patent infringement and for forcing settlement by placing large hold-up costs on adjudged infringers who are locked-into maintaining their technology profile. In the area of multi-component systems, many accused-infringers and academics argue that the hold-up costs of injunctive relief sets-up an imbalance of power that results in a windfall settlement for minor-component patentees. The prototypical case is where an injunction is ordered to stop sales of a complex product based upon the finding that one of the many components infringes a patent.
The decision here offers a counterbalance based upon the recognition that product specifications and production methods are continually updated and modified. Major modifications may result in a new product version, but more minor changes regularly implemented without direct customer notification.
Here, the ARRIS patent covers a system of delivering streamed video that have been purchased online. Patent No. 5,805,804. A jury found that SeaChange’s ITV product was infringing and the district court entered a permanent injunction – enjoining SeaChange from using or selling the ITV product or “any devices not more than colorably different therefrom that clearly infringe the Adjudicated Claims of the ‘804 patent.” Although stated within the same paragraph here, it actually took four years for the court to order the permanent injunction following the jury verdict. The delay took into account post-verdict motions and briefing and then an appeal to the Federal Circuit where the verdict was affirmed.
By the time the injunction order became effective, SeaChange had modified its ITV system in order to avoid infringement. This approach is common. In essence, when an injunction issues regarding a minor component of a product, the outcome is normally not to cease manufacturing and sales but rather to modify or “patch” the product design and thus avoid the injunction. It’s also common that the work-around is – from the patentee’s point of view – still within the coverage of the patent.
After a failed settlement attempt, ARRIS filed a contempt motion asking the district court to stop the sales. However, the district court refused and that refusal has been affirmed on appeal the Federal Circuit. Rather, in order to stop the new product ARRIS would need to file an entirely new federal lawsuit.
Contempt motions are actually difficult to win. The basic rule is that the party seeking to enforce the injunction must provide clear and convincing evidence that the accused activity falls within the injunction. For new product designs, the courts only allow contempt when the new product is “no more than colorably different” than the one found to be infringing. See TiVo v. EchoStar (Fed. Cir. 2011) (en banc).
Here, the modification was to basically take a ClientID out of a particular table stored on the system and instead stored elsewhere on the system. Although the ClientID still performs the same function, the change “is a significant change to the system.”
The result then is that ARRIS only avenue for enforcement is to file a new infringement lawsuit.