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 Post Posted: Thu Nov 11, 2010 11:43 pm 
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Federal Circuit Hears TiVo v. Dish Oral Arguments En Banc

IPWatchdog.com

On Tuesday, November 9, 2010, the United States Court of Appeals for the Federal Circuit heard oral arguments in TiVo, Inc. v. EchoStar Corp. The case pits TiVo versus Dish, and any ruling from the Federal Circuit will necessarily define the extent to which a district court judge can rely on contempt proceedings to enforce an injunction rather than simply order a full blown new trial. In process the en banc oral argument in this case at the Federal Circuit did not substantially differ from the oral argument held at the Supreme Court the day earlier in the Costco copyright case, where the Supreme Court was struggling with the meaning of the phrase “lawfully made under this Title.” There are two phrases that will be at the center of resolving the TiVo case. The first is “fair ground of doubt,” and the second is “merely colorably different.”

One important thing to keep in mind before proceeding is the reality that EchoStar refused to challenge the language of the injunction and under relevant Supreme Court jurisprudence they should be estopped from making arguments complaining that the injunction is ambiguous, vague or overbroad. Nevertheless, the priority of the injunction, its breadth and possible vagueness dominated the day at the Federal Circuit. The fact is that the remedy for an overbroad, ambiguous or vague injunction is to challenge the injunction in court, or to ask for clarification. EchoStar did ask for clarification on the disablement provisions, but not with respect to the scope of the injunction (i.e., what the injunction prevented them from doing with respect to future, modified products). Thus, that should not be taken into consideration, but it seems as if at least some of the Judges are chomping at the bit to consider that long since waived EchoStar argument. I doubt the Supreme Court would approve of that.

In any event, one of the cases critical to the ultimate decision in this en banc appeal will be California Artificial Stone Paving Co. v. Molitor, which was decided by the United States Supreme Court in 1885. In that case the Supreme Court concluded its decision by explaining: “Process of contempt is a severe remedy, and should not be resorted to where there is fair ground of doubt as to the wrongfulness of the defendant’s conduct.” Unfortunately, for EchoStar, the district court already determined after a lengthy contempt proceeding, included discovery and expert testimony, that there was no fair ground of doubt. Unfortunately for TiVo, the Federal Circuit is not known as a Court that is afraid to supplant the determination of a district court judge even when they are really only interjecting how they would have determined the issues had they been the one making the call. Said another way, unfortunately for TiVo the Federal Circuit frequently provides little or no deference to determinations, even factual determinations, made by the district court.

Leading off the the argument was the attorney for EchoStar, who was peppered with questions, but not quite badgered the same way that counsel for TiVo would later be badgered by Judges Moore and Dyke. EchoStar’s representative was asked questions such as the following:

* Should we revise the KSM case?
* Is “colorable” too vague?
* If the injunction is overbroad don’t you have to vindicate your position by appeal, not by going into contempt?
* Is “colorable differences” an infringement test or a comparison test?

One could have inferred that the Judges were leaning against EchoStar, at least until you heard the questioning of the TiVo representative. It should be noted, however, that the party receiving the brunt of the fire during oral argument is not always the one to lose. In fact, it is frequently difficult to make an accurate prediction on how the case will resolve based on which side took heavier fire at the Federal Circuit.

The representative for EchoStar explained that the injunction does not say what TiVo says it does, and that “TiVo had to map claim limitations that were never presented before and no jury previously considered…” Obviously, TiVo would disagree with this characterization, and did, getting into a lengthy back and forth with Judge Moore on the claim limitations in question.

Before proceeding further with the oral arguments, however, it is probably best to lead with some discussion of the core Federal Circuit case at issue, which is KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F. 2d 1522 (Fed. Cir. 1985). In this case the Federal Circuit said the following, all of which will be relevant to the ultimate determination in TiVo v. EchoStar.

* “Where an injunction is written narrowly against a particular infringing device, contempt may, nevertheless, be found on the basis of a modified infringing device. An enjoined party under a narrow decree will not be permitted to escape on a purely “in rem” theory that only a particular device is prohibited, where it is evident that the modifications do not avoid infringement and were made for the purpose of evasion of the court’s order. Again, the standard is whether the differences between the two devices are merely colorable.”
* “The authorities are uniform that the modified device must be an infringement to find contempt of such an injunction.”
* “Even if the new product may infringe the patent, as long as it is more than “colorably different” the infringement should not amount to a contempt nor should it be tested in contempt proceedings.”
* “Only where such constructions are merely ‘colorably’ different from the enjoined device or from the patent is the issue so triable. Such constructions may turn out to be infringements, but if they are more than “colorably” different, the issue of infringement must be otherwise determined than by a contempt proceeding.”

It is fair to say that KSM states, and the parties largely would agree, that a district court should not and cannot proceed with a contempt proceeding when the differences between the adjudicated device and the modified device are more than “colorably different.” In her concurring opinion in KSM, Judge Newman pointed to the fact that it is appropriate to take into consideration the type of analysis envisioned by the doctrine of equivalents, which seems to be a fair way to approach the problem.

While the doctrine of equivalents is largely dead today, at the time Judge Newman wrote this it was quite alive and asked whether the infringer had only made minor changes that were so insignificant that it is not fair to say that there was anything other than copying that should in all fairness be considered infringement. Looked at this way it seems fair, and appropriate, to say that the question of whether there are more than colorable differences ought to be asking whether the changes are so insignificant between the modified product and the accused product that the injunction ought to pertain and the underlying infringement action was appropriate to have elucidated the issues required to be considered in a follow-on contempt proceeding.

To me, this all comes down to judicial efficiency, and if the Federal Circuit is not going to grant deference to the district court with respect to the administration of justice, the enforcement of an injunction and whether new facts are involved that warrant the time, money and expense of many more years of litigation, when will the Federal Circuit provide deference? If no deference now, when? Particularly given the fact that KSM explains that the decision to rely on contempt proceedings is discretionary, which means it must be reviewed for the abuse of discretion. (See KSM: “[W]hether infringement should be adjudicated in contempt proceedings, is difficult to articulate with precision, since it involves, to a large extent, the exercise of judicial discretion.”)

Returning to the oral arguments, one of the more interesting things that the EchoStar representative said, at least in my opinion, was: “the contempt proceeding devolved into a battle, a fact battle, about what exactly this devices does…” Whenever I analyze a brief or an argument I ask myself how I would decide and whether anything in particular influences me significantly one way or another. Here I think this helps TiVo. One of the reasons that contempt proceedings are so frowned upon and cautiously implemented in narrowly tailored circumstances is because they are ordinarily summary proceedings. In this case, however, it was anything but a summary proceeding. The proceeding at the district court took nearly a year, there were hearings, briefings and testimony taken, including testimony of experts. After what can only be characterized as either an extraordinarily long contempt proceeding, or a swift trial, the district court concluded that there was infringement and that TiVo should not have to bring an entirely new trial to vindicate its patent rights. No one has yet convinced me that the district court did anything other than one heck of a good job. In fact, if I were on the Federal Circuit I would say that what the district court did ought to be the model of how to proceed; namely to proceed cautiously and fully consider whether a new trial ought to be required.

In an exchange with Judge Newman, the EchoStar representative also made this argument: “does a judge ever get to infringement if the devices are more than colorably different… that becomes a jury question.” The trouble for EchoStar, however, is that the district court judge, after thorough consideration and an elongated process that was anything but a summary proceeding, determined that the differences were only colorable and the underlying patent infringement trial was sufficient to litigate the issues in the contempt proceeding. So a district court judge DID determine the critical issue and it seems to me the standard of review is an abuse of discretion, which I just don’t see.

Next up was the TiVo representative, who was peppered with questions right out of the box, and then later was really badgered by Judge Moore, and to a lesser extent by Judge Dyk. He conceded that if the differences are more than merely colorable then the plaintiff has to initiate a new infringement case; which would be the case when there are “substantial open issues of infringement to be resolved…” He then went on to make one of the more persuasive points, which was made extremely quickly given the hot court and the rapid fire questions. He explained that in a contempt proceeding that the district court has the option at any point along the way to change its mind and determine that as the matter is being considered that the differences between the adjudicated device are just too great in comparison with the modified device. If such a determination would be made the district court could break off the contempt proceedings and rule that a new trial is required. That, however, did not happen in this case.

A rather lengthy answer by counsel followed shortly after, which was probably the longest he was allowed to speak without interruption. It also rather succinctly points out the TiVo position on the critical issues:

The court makes a determination of what is being done, and in the infringement context that is comparing the accused product in light of the claims in order to determine, first, whether the products are sufficiently similar so that any open issues can be resolved in a relatively streamlined follow on to the original proceeding and, second, that there is a reasonable likelihood that the patentee will be able to prove by clear and convincing evidence that the modified products continue to infringe. If the answer to those questions is yes, then the court proceeds with a contempt proceeding to hear testimony and can find that the defendant is in contempt only if the court finds by clear and convincing evidence that the injunction was violated.

Judge Dyk followed up with what is likely the critical issue from the Court’s perspective. He explained: “we are trying to figure out when a judge is enforcing the terms and conditions of the injunction versus a new product which would not fit in with the original determination. It might take a new claim construction, right?” Counsel agreed that it might, but not in this case.

Judge Moore then proceeded to get into the minutia of the meaning of claim 31, which prompted counsel to explain what happened at trial. Counsel for TiVo repeatedly explained that Judge Moore’s characterizations, which seem to be straight from the EchoStar brief, were simply incorrect and, in fact, could be contradicted by the testimony and arguments made at trial. In fact, counsel for TiVo explained that all three of their experts testified that the EchoStar device met the specific limitation Judge Moore identified, which is important because if that limitation was not a part of the underlying case then it would seem that contempt proceedings would be inappropriate because the litigation would not have resolved the matter presented during contempt adjudication.

After really badgering and continually making assertions about the technology, claim limitations and testimony that counsel for TiVo said were simply incorrect, Judge Moore asked “doesn’t this suggest a fair ground of doubt?” Counsel for TiVo stood tall and explained:

It doesn’t suggest there is a fair ground— I don’t see how there can be a fair ground of doubt with a claim construction that was not appealed, a limitation that all five experts at trial agreed was met, following a statement before trial by EchoStar’s counsel that the filters are the physical data source in claim 31.

Judge Dyk chimed in asking: “where do we find in the district court opinion finding contempt that the pit filter was found in the original trial to satisfy the parsing limitation?” “I don’t think the district court found that.” Counsel for TiVo pointed to the district court Order, which says: “some or all of the jury may have found that —” He was interrupted by Judge Dyke saying: “so if they may have found it that means they may not have found it… so that suggests there is a fair ground of doubt.” Counsel for TiVo then asserted: “The question is not what the jury found, the question is whether there is a fair ground of doubt over whether these supposedly modified devices infringe the claims as construed.” Judge Dyk then said: “That’s your problem. You are conflating the colorable differences test and the infringement test.”

Judge Prost then stepped into the fray and asked whether counsel for TiVo agreed that if the Court were to find ambiguity in the original injunction, wouldn’t it be appropriate for the Court to rule that contempt couldn’t be used? This elicited an unequivocal NO. Counsel for TiVo explained that under Supreme Court precedent EchoStar was required to seek clarification, which they did not do with respect tot he scope of the injunction. The law required for them to seek clarification and only when clarification was sought and refused should a reviewing court err on the side of the party under the restraint of the injunction. In fact, it was pointed out that EchoStar did seek clarification of the disablement proceeding, but did not raise an issue with respect to the scope of the injunction, thus any argument about ambiguity must be waived.

Again, something I found persuasive was TiVo’s counsel explaining that there was nothing that has precluded EchoStar to ask for modification, but the consequences of “laying in the weeds for four years” must be borne by them. He said: “they can win only if they can show that their reading is the only possible reading of the injunction.”

So what is the outcome going to be? It is always hard to handicap any court, and reading too much into the questions on oral argument is difficult because sometimes Judges play devil’s advocate to bring out facts or to provide softball questions, sometimes for the purpose of trying to convince another Judge who may be leaning the other way. I think it is fair to say that Judge Rader, who was the dissenter in the panel decision, will rule against TiVo. I think it is also probably fair to say that Judge Dyk and Judge Moore will rule against TiVo as well. That still leaves enough Judges to rule in favor of TiVo and against EchoStar, which is how I would rule, but I haven’t yet been called to serve!

Sticking my neck out on a limb, I say that TiVo wins because I think they have the superior legal argument, and because I think it is pretty clear that EchoStar received some bad legal advice and under the law they now have to live with the consequences of what could really be an injunction that deserved to be narrowed, modified or at least clarified. But everyone who has ever gone to law school knows — you cannot violate an injunction because you think it is erroneous; you MUST appeal rather then engage in contempt.


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