On April 20, 2011, the en banc Federal Circuit changed
the standard for deciding when a contempt proceeding is the right
way to evaluate whether a modified product continues to infringe.
TiVo Inc. v. EchoStar Communications Corp., No.
2009-1374.
In 2006, a jury found that EchoStar had infringed a TiVo patent
relating to digital video recorder (DVR) technology. The district
court permanently enjoined further infringement and ordered
EchoStar to disable the DVR functionality in the adjudged satellite
receivers. EchoStar modified its software and continued to provide
DVR services. In 2008, TiVo moved to enforce the injunction. After
further proceedings, the district court found EchoStar in
contempt.
After a divided panel of the Federal Circuit affirmed, the court
granted en banc review, posing broad questions pertaining
to the use of contempt proceedings.
After en banc review, the court held that the provision of
the injunction requiring EchoStar to disable all DVR functionality
in the adjudged receivers gave EchoStar clear notice of what it was
required to do. Because EchoStar had fair notice, its failure to
challenge the scope or substance of the disablement provision on
direct appeal foreclosed raising any such challenge as a defense to
enforcement in the contempt proceeding.
As to the anti-infringement portion of the injunction, the en
banc court revised the standard for deciding when contempt
proceedings may be used to evaluate a purported re-design. In
KSM Fastening Systems v. H.A. Jones Co., 776 F.2d 1522
(Fed. Cir. 1985), the court had established a two-step test. At
step one, the district court was to determine whether contempt
proceedings were appropriate by examining whether the adjudged and
modified products were "more than colorably different,"
such that they raised "substantial open questions of
infringement." If the modified product was not more than
colorably different, then the district court could proceed to step
two and determine whether the modified product still infringed, in
which case a contempt finding was warranted. The en banc
Federal Circuit declared this two-step framework
"unworkable."
In its place, the court established the following framework.
First, a district court may entertain a contempt
proceeding based on "a detailed accusation from the injured
party setting forth the alleged facts constituting the
contempt." A decision to hold such a proceeding will be
reviewed only for abuse of discretion.
Second, the adjudged infringer's good faith in
attempting to design around the patent is irrelevant to whether its
modifications are in fact significant enough to avoid violation of
the injunction.
Third, "the party seeking to enforce the injunction
must prove," by clear and convincing evidence, "both that
the newly accused product is not more than colorably different from
the product found to infringe and that the newly accused product
actually infringes." In this inquiry, "[t]he primary
question ... should be whether the newly accused device is 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.'" Thus, "[w]here one or more
of those elements [of the original product] previously found to
infringe has been modified, or removed, the court must make an
inquiry into whether that modification is significant." If it
is, contempt is inappropriate and the claim of continued
infringement must be pursued in a new proceeding.
Applying this new standard, the court remanded the case for further
findings concerning whether EchoStar's modified DVRs are more
than colorably different from its original devices and continue to
infringe in relevant respects.
Judge Lourie wrote the court's en banc opinion, joined
by Judges Newman, Mayer, Bryson, Moore, O'Malley, and Reyna. In
partial dissent, Judge Dyk, joined by Chief Judge Rader and Judges
Gajarsa, Linn, and Prost, would have held that the injunction's
disablement provision was not sufficiently clear to be enforceable
in contempt and that no remand was required to determine that
EchoStar's modified software made its newly-accused receivers
more than colorably different from those adjudged at trial.
Note: WilmerHale represents TiVo in this matter.
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