In EPLUS, INC. v. LAWSON SOFTWARE, INC., Appeal Nos. 2013-1506, 2013-1587, the Federal Circuit set aside an injunction and associated civil contempt sanctions after the USPTO, during reexamination proceedings, canceled the underlying patent claim forming the basis for the injunction.

A jury found Lawson to be infringing a number of claims asserted by ePlus.  Based on the jury verdict, the district court entered a permanent injunction against Lawson.  In a first appeal, 700 F.3d 509 (Fed. Cir. 2012), the Federal Circuit affirmed the infringement verdict as to only one of the asserted claims.  On remand, the district court modified the injunction based on the Federal Circuit’s decision and found Lawson in civil contempt for violating the injunction, despite Lawson’s arguments regarding equitable considerations and its attempts to redesign its products.  Lawson appealed.  While the appeal from the district court was pending, the USPTO found the remaining claim invalid after completing reexamination.  In an appeal from the USPTO, 760 F.3d 1350 (Fed. Cir. 2014), the Federal Circuit affirmed the USPTO’s invalidity determination.  

In the current appeal, the Federal Circuit considered whether an injunction can continue after the USPTO has canceled the only claim on which the injunction is based.  In addition, the panel addressed whether civil contempt remedies based on the violation of an injunction are appropriate when the injunction has been overturned on direct appeal.  The Federal Circuit held the injunction must be set aside because the legal basis for the injunction had ceased to exist.  The Federal Circuit also held the civil contempt sanctions should be set aside.  The Federal Circuit pointed out that, unlike criminal contempt sanctions, civil contempt sanctions award a compensatory fine to the other party.  The Federal Circuit determined this compensatory fine depends on the outcome of the controversy, and must be set aside when the basis for the sanctions is reversed.  The Federal Circuit also held that, because it had modified the district court’s infringement ruling in its first panel decision and did not specifically evaluate the district court’s injunction, the injunction was not final after the first appeal and could be set aside retrospectively.

In a separate order, the Federal Circuit denied ePlus’s petition for rehearing en banc.  Chief Judge Prost and Judge Dyk concurred in that denial arguing that, because an appeal to the Federal Circuit was pending regarding the scope of the injunction at the time the USPTO invalidated the underlying claim, the injunction was not final and both the injunction and civil contempt order must be vacated.

Judges Newman, Moore, and O’Malley authored separate dissents arguing that the civil contempt sanctions should not have been overturned because the injunction was final with respect to the remaining claim at the time the civil contempt order was issued.