Monday, September 9, 2013

Two Recent U.S. Federal Circuit Opinions on Preliminary Injunctions, Declaratory Judgments

Two opinions handed down on August 29 address patent remedies.  Dennis Crouch has already blogged on both of them, here and here.

The first, Aevoe Corp. v. AE Tech Co., involves the scope of a preliminary injunction.  Aevoe had obtained a preliminary injunction against AE, which as originally drafted enjoined "AE Tech, its agents, servants, employees, confederates, attorneys, and any persons acting in concert or participation with them, or having knowledge of this Order by personal service or otherwise"  from "practicing, making, manufacturing, importing, offering for sale, selling, and/or otherwise using U.S. Patent No. 8,044,942, or any reproduction, counterfeit, copy, or colorable imitation of the same . . . including but not limited to ACase APlus Shield Anti–Glare products . . . ."  The order was later amended, at AE's request, to remove the "reproduction, counterfeit, copy, or colorable imitation" language.  AE meanwhile began selling a redesigned product through a company called S&F.  Aevoe then filed an amended complaint seeking to join S&F, and moved to hold both parties in contempt on the ground that the redesigned product infringed.  The district court agreed that the changes made to the product were "nonfunctional" and "trivial," and therefore that the redesigned product "was not more than colorably different".  The court also amended the preliminary injunction to put back the "colorable imitation" language and held the two parties in contempt.

AE appealed, but a problem was that the contempt order by itself was not immediately appealable.  On the other hand, you can appeal from the entry of a preliminary injunction, but the notice of appeal must be filed within 30 days.  AE's notice of appeal was within 30 days of the second amended order (the one that reinserted the "colorable imitation" language) but not the first.  

The Federal Circuit held that the appeal was untimely, stating that (under applicable Ninth Circuit law) "whether an order modifies an existing injunction rather than merely interprets it depends on whether it substantially alters the legal relations of the parties."  Here, the "operative question" was whether the reinsertion of the "colorable imitation" language substantially altered the relations of the parties.  The court held that it did not:

As this court held in TiVo Inc. v. Echostar Corp., 646 F.3d 869 (Fed.Cir.2011) (en banc), when determining whether a redesigned product falls under the strictures of an existing injunction, the primary question is whether the “new” product is “colorably different” from the old product. 646 F.3d at 882. In other words, whether a redesigned product is “colorably different” from, or a “colorable imitation” of, the previously enjoined products is directly relevant to the contempt standard in patent law. While AE Tech convinced the district court to excise that language, along with the “counterfeit” language, the legal relationship between the parties did not change. Put simply, whether “colorable imitations” were explicitly mentioned in the injunction language or not, such imitations fell within its scope; the district court was obligated to apply the colorable differences test in the contempt proceeding. See id. at 882–83. Thus, the legal relationship between the parties was in no way altered by the court's changes to the injunction language. Neither the excision and addition of the “colorable imitation” language nor the explicit description of the actual redesign amount to a modification of the preliminary injunction upon which this court could predicate jurisdiction. 
Further, the addition of the S&F defendants did not modify the injunction, since it was directed to anyone with knowledge of the injunction, which S&F had within a week of its entry.  Moreover, while "a court generally may not enjoin a non-party to the action before it,"

A party who acts in concert with an enjoined party . . .  may be subject to the strictures of an injunction. . . .  These common law principles are codified in Rule 65(d)(2)(C), which provides that an injunction binds “other persons who are in active concert or participation with [the parties].” . . . “Active concert or participation” has been interpreted to include both aiders and abettors of, and privies of, an enjoined party. . . .  Such interpretations of “active concert or participation” recognize “that the objectives of an injunction may be thwarted by the conduct of parties not specifically named in its text.” . . .
The court concluded that the S&F Defendants "were 'acting in concert' with AE Tech in connection with the resale of the redesigned products" because  they were on "notice of the injunction, had been apprised of which products were enjoined, and informed Aevoe that they obtained the barred products solely from AE Tech." 

In the other opinion, Cisco Systems, Inc. v. Alberta Telecommunications Research Center (nonprecedential), the defendant (patentee) has sued various Cisco customers (network providers) for infringement.  Cisco sought a declaratory judgment of noninfringement and invalidity.  The district court held that it lacked jurisdiction, and the Federal Circuit affirmed.  As Dennis Crouch notes on his blog post on the case, the Federal Circuit relied heavily on statements made by counsel at oral argument, among them defendant’s concession that it had no basis for suing Cisco for either direct or indirect infringement; that there were substantial noninfringing uses of Cisco’s products; and that it was happy to give Cisco a covenant not to sue, which Cisco had rejected only because it did not extend to Cisco’s customers.  Cisco’s counsel, meanwhile, could not point to any agreement Cisco had made to the effect that it would indemnify the customers. 

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