Patent Case Summaries July 25, 2014

Federal Circuit Patent Case Summaries for the Week Ending July 25, 2014

The following is a summary of the precedential patent-related opinions issued by the Court of Appeals for the Federal Circuit for the week ending July 25, 2014. Tom Davison and Mike Connor prepared this edition.   

Case Summaries

Litigation Practice and Procedure: Procedure: Special Writs

In re Nokia Inc., et al., 14-133 (Fed. Cir. (I.T.C.) July 24, 2014). Before Newman, Mayer, and Bryson. Order by Daniel E. O’Toole, Clerk of Court. Dissenting opinion by Newman.

The Federal Circuit denied Nokia Inc. and Nokia. Corp.’s (collectively “Nokia”) petition for a writ of mandamus to the United States International Trade Commission (“Commission”) in Investigation Number 337-TA-613.

In a previous appeal, the Federal Circuit reversed an order of the International Trade Commission finding infringement and remanded the matter for additional proceedings. The Federal Circuit’s prior decision referred to Nokia’s argument that “there can be no infringement in this case because the scrambling codes in the Nokia system are not transmitted,” and stated: “[t]hat issue, if Nokia wishes to raise it again before the Commission, may be raised on remand.”

On remand, the Commission determined that Nokia had waived any argument that the scrambling codes in their accused systems are not transmitted as required by the patent claims in the underlying investigation. Nokia sought a writ of mandamus to compel the Commission to address the noninfringement argument, asserting that the Commission’s decision on remand unlawfully deviates from the Federal Circuit’s mandate.

While mandamus is an available remedy to enforce compliance with a prior mandate, the majority held that nothing in the Federal Circuit’s prior decision compelled the Commission to address the petitioners’ noninfringement contention. The Federal Circuit wrote that “[t]he language cited by petitioners in the original opinion simply explained that, as to an issue they sought to raise as an alternative ground for affirmance, that issue could not be addressed
by this court, as it was not the rationale of the agency’s decision on appeal.” The Federal Circuit stated that the previous opinion “explained that petitioners were free to raise the issue, if they chose to do so, on remand. But that did not suggest, and did not mandate, that the Commission could not consider whether the issue had been preserved for review.”

Judge Newman dissented. She explained that she “understood the Federal Circuit’s mandate as did Nokia and the Commission’s Investigative Staff, that [the Federal Circuit] authorized Nokia to raise its scrambling-code argument on remand to the Commission.” In Judge Newman’s view, the majority opinion “erases the plain words that the issue ‘may be raised on remand.’” Judge Newman believes “that remand instruction is clear, and the Commission is required to follow it.”  

Remedies: Injunctions: Generally

ePlus, Inc. v. Lawson Software, Inc., Nos. 13-1506, -1587 (Fed. Cir. (E.D. Va.) July 25, 2014). Opinion by Dyk, joined by Prost. Dissenting opinion by O’Malley.

The Federal Circuit vacated an injunction and contempt order that were based upon a prior determination of infringement of a patent claim because the United States Patent and Trademark Office (“USPTO”) cancelled the claim after finding it invalid in a reexamination.

In 2009, ePlus, Inc. (“ePlus”) sued Lawson Software, Inc. (“Lawson”) for infringement of several patents, including U.S. Patent No. 6,023,683 (“the’683 patent”). The district court found two of the asserted system claims and three of the asserted method claims not invalid, and a jury found that Lawson infringed those claims. In an earlier appeal, the Federal Circuit reversed in part, holding that the system claims were invalid and that two of the asserted method claims were not infringed. See ePlus v. Lawson, 700 F.3d 509 (Fed. Cir. 2012) (“ePlus I”). In ePlus I, the Federal Circuit affirmed the infringement verdict as to only one method claim, Claim 26 of the ’683 patent. The Federal Circuit then remanded the case to the district court to make necessary modifications to the injunction in accordance with the appellate opinion.

On remand, the district court modified the injunction and found Lawson in civil contempt for violating the injunction. It ordered Lawson to pay a compensatory fine of $18,167,950 and coercive daily fines of $62,362 until Lawson could show compliance with the injunction.

Lawson appealed both the injunction and contempt orders. During the pendency of Lawson’s appeals, the USPTO completed a reexamination of the ’683 patent and determined that Claim 26 was invalid. In an appeal from the reexamination, the Federal Circuit affirmed the USPTO’s invalidity determination, and the USPTO subsequently cancelled Claim 26. See In re ePlus, Inc., 540 Fed. App’x 998 (Fed. Cir. 2013).

In the present appeal, the Federal Circuit addressed two issues. First, the Federal Circuit considered whether the district court’s modified injunction against Lawson must be vacated because the USPTO had cancelled the claim on which the injunction was based. The Federal Circuit noted that it was “well established that an injunction must be set aside when the legal basis for it has ceased to exist.” At oral argument, ePlus admitted that there could be no injunction moving forward. Thus, the Federal Circuit concluded that the USPTO’s cancellation of Claim 26 required that the injunction be vacated.

Second, the Federal Circuit addressed whether civil contempt remedies based on violation of an injunction are appropriate when the injunction has been overturned on direct appeal. The court noted that the Supreme Court has set aside civil contempt sanctions that were imposed for violating an injunction based on patents that were subsequently found to be invalid. Worden v. Searls, 121 U.S. 14, 26 (1887). Thus, the Federal Circuit wrote that “[u]nder Worden, compensatory civil contempt remedies must be set aside when the injunction on which they are based is set aside because the patent is determined to be invalid.” The Federal Circuit noted that this case is not distinguishable on the ground that the injunction has been set aside as the result of a USPTO proceeding rather than a court judgment. The Federal Circuit also concluded that, “[t]his case does not require us to decide whether civil contempt sanctions would survive if the injunction had been final at the time the district court imposed civil contempt sanctions,” because, under Fresenius USA, Inc. v. Baxter International, Inc., 721 F.3d 1330 (Fed. Cir. 2013) (“Fresenius II”), cancellation of claims by the USPTO “requires that non-final judgments be set aside.”

Judge O’Malley dissented. She agreed that the ongoing injunction must be vacated but concluded that Fresenius II is distinguishable from the present appeal, and that it therefore does not apply.  

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