En Banc Federal Circuit Adopts New Standard for Determining Contempt in TiVo v. Echostar
Much of the reaction to the Federal Circuit’s en banc decision yesterday in TiVo Inc. v. EchoStar Corp., No. 2009-1374 (Fed. Cir. April 20, 2011) (found here), will focus on the Court’s affirmance of the $90 million contempt sanction and the holding that EchoStar waived its challenges to the scope and specificity of the permanent injunction.
That aspect of the decision offers an important cautionary lesson for patent litigators, but the more significant ruling in TiVo was the Court’s unanimous decision to overrule the two-step analysis set forth in KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522 (Fed. Cir. 1985) for determining whether a contempt hearing is appropriate for evaluating the effectiveness of a design-around. In TiVo, the Court collapsed “the current two-fold KSM inquiry into one, eliminating the separate determination whether contempt proceedings were properly initiated.” TiVo, slip op. at 17.
The contempt analysis for redesigned products will now proceed as follows:
- The patentee moving for contempt “must prove 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” by clear and convincing evidence.
- “the contempt analysis must focus initially on the differences between the features relied upon to establish infringement and the modified features of the newly accused product.” The analysis must focus on “those aspects of the product that were previously alleged to be, and were a basis for, the prior finding of infringement.”
- “Where one or more of those elements previously found to infringe has been modified, or removed, the court must make an inquiry into whether that modification is significant. If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one” and contempt is inappropriate.
- “The court must also look to the relevant prior art, if any is available, to determine if the modification merely employs or combines elements already known in the prior art …”
- “[W]hen a court concludes there are no more than colorable differences between the adjudged infringing product and modified product ... the court is required to evaluate the modified elements of the newly accused product against the asserted claim, on a limitation by limitation basis, to ensure that each limitation continues to be met.”
- The Court’s finding on both whether the modified product is colorably different and whether the modified product continues to infringe are reviewed for clear error.
In TiVo, the Court vacated the finding of contempt on the infringement portion of the injunction because the feature accused of infringement in the contempt proceeding was different from the feature accused of infringement at trial. The Court remanded the case to the district court for a determination of whether the differences between the two features at issue were significant. If that were the case, the new device would be more than colorably different, and TiVo would have to pursue a new infringement proceeding against the modified product.
In many instances, the TiVo analysis may cut off a patentee’s ability to use the relatively swift contempt process to attack the sufficiency of a design-around. Where a design-around eliminates or even just changes the feature accused of infringement at trial, a patentee may find it easier to file a new infringement action rather than attempt to meet the heavy clear and convincing burden of proof to obtain a contempt sanction.
