Good Faith Efforts to Design Around an Infringement Verdict Are Not Sufficient to Avoid a Contempt Proceeding

Tivo, Inc. v. EchoStar Corp., No. 2009-1374 (Fed. Cir. Mar. 4, 2010).

Holding:

Good faith efforts to design around an infringement verdict are not sufficient to avoid a contempt proceeding. Slip op. at 12.

A contempt hearing may be proper even if the redesigned devices do not infringe in the exact same manner that has already been adjudicated to infringe. Id. at 9.

A contempt finding is improper if there is “more than a colorable difference” between the accused product and the adjudged infringing product such that “substantial open issues with respect to infringement” exist. Id. at 5.


Relevant Facts:

TiVo owns U.S. Patent 6,233,389 covering essential DVR features. Tivo sued Echostar and obtained a permanent injunction. In the previous appeal, EchoStar did not appeal the injunction. Subsequently, EchoStar redesigned its DVR software, but the district court found EchoStar in contempt of its injunction order. The Federal Circuit found that the district court did not abuse its discretion in imposing sanctions against EchoStar.


Comments:

Judge Rader wrote in his dissenting opinion that “this decision discourages good faith efforts to design around an infringement verdict.” Indeed, EchoStar is a really sympathetic figure here, because it was slapped with contempt despite that (1) it made good faith efforts to design around and (2) the redesigned software does not infringe in the exact same manner that has already been adjudicated to infringe.

The majority opinion, however, appears to suggest that EchoStar could have avoided this predicament if it had appeared the district court’s permanent injunction order previously. Because EchoStar did not do that, under the “abuse of discretion” review standard, the Federal Circuit had to affirm the district court’s contempt finding.

In light of this decision, I believe that the losing party will continue good faith efforts to design around an infringement verdict (sorry, Judge Rader), but there will be more appeals of injunction orders to the Federal Circuit. In addition, the losing party should also seek clarification from the issuing district court in order to avoid a potential contempt finding.

I do agree with Judge Rader in the sense that this decision, in its current form, seems very discouraging and inconsistent with sound public policy. A contempt finding, by its punishing nature to deter future violations, should have a bad faith element. If a party tried to comply with the orders in good faith by designing around, it seems to be unfair to hold it in contempt.