ePlus Inc. v. Lawson Software, Inc., No. 3:09cv620, 2013 WL 1287714 (E.D. Va. March 26, 2013).
A Defendant seeking to limit contempt remedies to a reasonable royalty had no luck in ePlus Inc. Based on Supreme Court precedent, the court found disgorgement was a proper contempt remedy, then refused to limit damages to a reasonable royalty only 1/80th of the disgorgement remedy.
A jury found that Defendant infringed Plaintiff’s patents, and the district court judge entered a permanent injunction. Plaintiff subsequently filed a motion to show cause, alleging Defendant was in contempt of the injunction. Id. slip op. at 1-2.
Plaintiff’s damages expert, Dr. Keith Ugone, filed a report suggesting disgorgement was the most appropriate remedy for contempt. Defendant moved to strike the report, arguing disgorgement is a punitive remedy and inappropriate in a civil contempt proceeding. Id. slip op. at 3.
The district court:
- Relied on Leman v. Krentler-Arnold Hinge Last Co., 284 U.S. 448 (1932) for the proposition that disgorgement was an appropriate remedy for civil contempt. Id. slip op. at 7-8. The court also concluded U.S. v. United Mine Workers of Am., 330 U.S. 258 (1947) did not overrule Leman. Id. slip op. at 9.
- Held that “Disgorgement of profits remains a viable remedy in civil contempt proceedings, even when a plaintiff cannot demonstrate ‘actual pecuniary’ loss.” Id. slip op. at 9.
- Held that the Patent Act of 1946 did not eliminate disgorgement as a remedy in civil contempt proceedings, even though they were eliminated as damages. Id. slip op. at 11-12.
- Concluded the cost of Defendant’s propose royalty was so minimal (1/80th) in comparison to disgorgement that there would be an economic incentive not to comply with the injunction. Id. slip op. at 15-16 (“little more than flies buzzing in the contemnor’s ear, annoying but easily swatted away.”).
- Refused to limit disgorgement damages, even though they were far higher than a reasonable royalty. Id. slip op. at 16-19.