On May 14, 2010, the US Court of Appeals for the Federal Circuit granted a petition for rehearing en banc in a case involving contempt proceedings for patent infringement following issuance of an injunction. TiVo, Inc., sued various EchoStar entities for infringement of a patent related to DVR technology. After a jury trial, the district court entered a judgment finding that EchoStar’s receiver products infringed the patent-in-suit, and issued a permanent injunction against EchoStar to stop making, using, offering to sell, and selling the receivers that the jury found to be infringing and to disable the DVR functionality in existing receivers, with certain exceptions. The injunction was stayed during the first appeal to the Federal Circuit. 

After an affirmance-in-part with respect to some claims, TiVo moved the district court to find EchoStar in contempt of the court’s permanent injunction. The district court evaluated EchoStar’s modifications to its products and concluded that the modified products continued to infringe. The district court rejected EchoStar’s argument that the redesigned products were more than colorably different from the adjudged infringing devices and found EchoStar to be in contempt of the injunction. The district court also found that, even if EchoStar had achieved a noninfringing design-around, EchoStar still would be in contempt because it had failed to comply with the disablement provision in the injunction. The district court then imposed sanctions against EchoStar of nearly $90 million.

EchoStar appealed and argued, inter alia, that it was impermissible for the district court to try issues relating to continued infringement in a contempt proceeding. EchoStar argued that it undertook great efforts to modify its products, had completely transformed them, and had a good faith belief that the modified products did not infringe. In a panel decision, the Federal Circuit held that the district court did not abuse its discretion in holding contempt proceedings, and that the district court’s finding that the modified products continued to infringe was not clearly erroneous.

In its order granting EchoStar’s petition for rehearing en banc, the Federal Circuit requested that the parties file new briefs addressing the following issues:

  • 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?
  • 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).
  • 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 reasonable and good faith belief of noninfringement by the new device, for a finding of contempt?
  • 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?

The issues under consideration by the Federal Circuit may have a significant impact on the practice and procedures for addressing continuing activities of adjudicated infringers following the issuance of an injunction.

For more information about the issues raised in this Legal Update, please contact Sharon A. Israel at +1 713 238 2630 or Trenton L. Menning at +1 713 238 2621.

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