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Federal Circuit on finding a party in contempt for a redesigned product that violates an injunction

Federal Circuit on finding a party in contempt for a redesigned product that violates an injunction

In KSM Fastening v. HA Jones (1985), the Federal Circuit laid out the law for finding a defendant in contempt of an injunction for an infringing redesigned product. This was the law for more than twenty five years, until 2011. Under the KSM test, the court first determines whether a contempt hearing is appropriate to adjudge the infringement of the redesigned product. The court does this by comparing the redesigned product with the adjudged infringing product to determine if there is “more than a colorable difference” between the two products. If a contempt hearing is appropriate, the court then decides whether the redesigned product continues to infringe the claims as previously construed. In 2011, the en banc Federal Circuit, in TiVo v. Echostar, overruled this two-part test for being “unworkable.”

In TiVo, the Federal Circuit normalized patent law with other laws. Normally, “district courts do not separately determine the propriety of a contempt proceeding before proceeding to the merits of the contempt itself.” So the court overruled the threshold step of KSM. The district court no longer needs to determine the propriety of a contempt proceeding. To hold a contempt proceeding, the district court only needs “a detailed accusation from the injured party setting forth the alleged facts constituting the contempt.” And on appeal, the Federal Circuit will only review whether the injunction is both “enforceable and violated,” and whether the “sanctions imposed were proper.” Allegations that contempt proceedings were improperly instituted do not state a defense to contempt, although “there may be circumstances in which the initiation of contempt proceedings would constitute an abuse of discretion.” TiVo. As to whether an injunction has been violated, the Federal Circuit retained the “more than colorable differences” standard from KSM.

Under TiVo, a party seeking to enforce a valid injunction against a redesigned product must first show that “the newly accused product is not more than colorably different from the product found to infringe.” If the court concludes that the differences between the two products are not more than colorable (that the differences are insignificant), the court must then go on to the second step and determine whether the redesigned product in fact infringes the relevant claims. If there are more than colorable differences between the two devices (the differences are significant), the defendant “is entitled to a new infringement proceeding.” The patentee bears the burden of proving both steps by clear and convincing evidence. TiVo. The Federal Circuit reviews the grant or denial of a motion for contempt of an injunction for abuse of discretion, and reviews the finding as to whether the two products are more than colorably different for clear error. Ncube v. Seachange. In Proveris v. Innovasystems, the Federal Circuit “review[ed] the contempt ruling de novo” because “the district court decided contempt based on the parties’ cross-motions for summary judgment.”

First step. The colorable-differences standard focuses on how the patentee in fact proved infringement, not on what the claims require. Ncube. At this first step, the district court focuses on the features relied upon to show infringement of the earlier adjudged product, on the modified features of the redesigned product, and on the differences between the two sets of features. The primary question is “whether the newly accused product 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.” TiVo. Specifically, the court should focus on those elements of the adjudged infringing product that the patentee previously contended, and proved, satisfy specific limitations of the asserted claims. “Where one or more of those elements previously found to infringe has been modified or removed, the court must [determine] whether that modification is significant.” If those differences between the old and new elements are significant, the redesigned product is more than colorably different from the adjudged infringing one, and contempt is inappropriate. See Ncube (affirming the district court’s denial of contempt)

Determining the requisite level of difference between the two products is a question of fact. TiVo. The inquiry depends on the nature of the products at issue. The court must look to the relevant prior art, if available, to determine if the feature modification merely employs “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.” TiVo. “A nonobvious modification may well result in a finding” that the redesigned product is more than colorably different than the adjudged product. Id. A district court may seek expert testimony in making the determination. Id. A modification that puts the redesigned product outside of the asserted claim is a significant change; Ncube; although all that is needed is a fair ground of doubt.

Second step. After finding that the two products are not more than colorably different, the district court must determine whether the redesigned product in fact infringes the original patent. The court evaluates the modified elements of the redesigned product against the asserted claim, “on a limitation by limitation basis,” to ensure that each limitations continues to be met. TiVo. The patentee must show violation of the injunction by clear and convincing evidence.

Claim construction. In the infringement analysis, the district court must “first determine the meaning of any disputed claim terms,” and then compare the redesigned device to the claims as construed. Proveris. The district court is bound by any prior claim construction that it performed in the earlier infringement action. Id. But when there was no prior claim construction, for example because the accused party conceded infringement, the district court commits error “by failing to engage in a claim construction analysis relating to the contempt proceedings.” Proveris (remanding to the district court for claim construction after finding no colorable difference between the products.)

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Patent validity and infringement of adjudged product.“Patent validity and infringement by an originally accused product are generally not open to challenge.” Merial v. Cipla. The earlier validity and infringement findings provide the law of the case for the contempt proceeding. A default judgment similarly provides the law of the case as to patent validity and infringement by the adjudged product. Merial (affirming the district court’s contempt holding.)

Opinion of counsel. A “lack of intent to violate an injunction alone cannot save an infringer from a finding of contempt.” TiVo. So a good-faith reliance on opinions of counsel will not save a defendant accused of infringing with a redesigned product. Id. Though “a defendant’s diligence and good faith efforts…may be considered in assessing penalties.” Id.

Sanctions. Upon a finding that the redesigned product infringes, the district court has broad discretion in sanctioning the infringer, which includes awarding attorney fees, costs, and trebled compensatory damages. Stryker v. Davol (affirming the district court’s award of trebled compensatory damages, attorney fees, and costs.) Sanction awards are reviewed for an abuse of discretion. Proveris.

 

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