In Proveris, the Federal Circuit recently vacated a district court's contempt order and sanction award and remanded to the district court in light of a new claim construction dispute that the infringer failed to raise during underlying infringement action. Slip op. at 2
Proveris Scientific Corp. v. Innovasystems, Inc., __ F.3d __ (Fed. Cir. January 13, 2014) (Prost, Lourie, Schall) (D. Mass.: Young)
In the district court, the accused infringer had conceded infringement of the original product and subsequently lost on its defense that the patent was invalid. Id. at 2-3. The district court enjoined the sale of the original product. Id. The accused infringer redesigned its infringing product and began selling the redesigned product, claiming the redesigned product did not perform a limitation in the preamble of the asserted claims - a limitation it previously failed to seek construed in the underlying infringement action. Id. at 3. The district court found the defendant could not raise new claim construction issues during the contempt proceedings and held the infringer violated the court's injunction. Id.
Courts follow a two-step process to determine whether a defendant violated an injunction against continued infringement by a redesigned product. TiVo Inc. v. Echostar Corp., 646 F.3d 869 (Fed. Cir. 2011) (en banc). First, a party that seeks to enforce an injunction must show that a "the newly accused product is not more than colorably different from the product found to infringe." Id. at 882. A redesigned product is more than colorably different from the product found to infringe where the defendant significantly modifies or removes the elements previously found to infringe. Id. Second, if the court finds that the differences between the old and new elements are significant, then contempt is not an appropriate remedy and a new infringement action must be brought regarding the redesigned product. Id. On the other hand, if a court concludes that the differences are not significant, then the court must determine whether the redesigned product in fact infringes the previously asserted claims. Id. at 883.
In Proveris, the Federal Circuit first considered whether the difference between the defendant's redesigned product and the previously infringing product were significant. Slip op. at 5-6. The Federal Circuit agreed with the district court and found that a comparison of the User Manuals for the two products demonstrated the products were "functionally identical." Id.
Next, the Federal Circuit considered whether the redesigned product in fact infringed the original patent. Id. The key dispute was whether the redesigned product satisfied a claim limitation found in the preamble that the accused infringer did not seek to construe in the underlying infringement action. The Federal Circuit conceded that in a contempt proceeding, "out of fairness, the district court is bound by any prior claim construction that it had performed in the case." TiVo, 646 F.3d at 883. But, in this case the Federal Circuit reasoned that because there was no prior claim construction, it cannot be said that a certain claim construction was the law of the case. Slip op. at 7. Consequently, the Federal Circuit remanded the case to the district court to determine the proper construction of the disputed claim. Id. at 10.
Although the Federal Circuit thought that it was premature to resolve the issues related to the plaintiff's cross appeal on sanctions, the Court held that it did not discern an error in the district court's sanction rulings. Id. at 12. The district court did not award sanctions for the defendant's overseas sale of component parts of the redesigned products because in the underlying action, the plaintiff only alleged direct infringement under 35 U.S.C. 271(a) and not infringement under 35 U.S.C. 271(f). Also, the district court properly excluded the profits from the sale of the redesigned product from the sanction award because the defendant actually lost money on the third party sale. Id.