ePlus, Inc. v. Lawson Software, Inc.

Addressing the issue of contempt for violation of a non-final injunction, a divided U.S. Court of Appeals for the Federal Circuit declined to rehear en banc a panel decision that vacated a civil contempt holding for violation of an injunction in a case where the underlying patent was cancelled by the Patent and Trademark Office (PTO). ePlus, Inc. v. Lawson Software, Inc., Case Nos. 13-1506 and -1587 (Fed. Cir., June 18, 2015) (Prost, J. and Dyk, J.) (O’Malley, J., dissenting).

Lawson originally appealed after an infringement verdict and subsequent injunction. In a 2012 opinion (IP Update, Vol. 15, No. 12), the Federal Circuit found the system claims to be invalid due to an indefinite means-plus-function element and reversed the infringement verdict as to two of the three method claims. The Federal Circuit remanded the case, instructing the district court to modify the injunction as necessary.

On remand, Lawson argued for extensive modifications to the injunction, but the district court only eliminated a single configuration that was not implicated by the remaining claim. The court also held Lawson in civil contempt based on a failed re-design and ordered it to pay a compensatory fine of over $18 million, along with daily coercive fines until Lawson complied with the injunction.

Lawson appealed both the contempt order and the refusal to modify the injunction. While that appeal was pending, the sole remaining claim was cancelled by the PTO after an ex parte reexamination. In a 2014 opinion (IP Update, Vol. 17, No. 8), a Federal Circuit panel held the cancelled claim to be void ab initio and set aside the injunction. The panel also considered the injunction to be non-final because it was still under appeal and thus vacated the contempt order based on the rule that contempt of a non-final injunction rises or falls with the underlying injunction.

ePlus moved for rehearing en banc. On June 18, 2015, after a deadlocked five to five vote (with Judge Chen not participating), the Federal Circuit issued an order denying an en banc rehearing. The panel also issued a revised opinion that same day, which added further discussion emphasizing that the decision was limited to non-final injunctions. The majority panel judges also wrote a concurrence to the en banc denial, characterizing their decision as nothing more than the application of well-established precedent for non-final injunctions.

In dissent, Judge O’Malley addressed what she considered to be the majority’s attempt to re-characterize the injunction as non-final.

Practice Note: As Judge Moore warns in her dissent, this holding should encourage defendants to scrap and fight to keep an underlying district court litigation pending in the hope of faring better with the PTO.