In TiVo Inc. v. EchoStar Corp., 646 F.3d 869 (Fed. Cir. 2011), the Federal Circuit outlined new rules for contempt proceedings against a new or modified product when the original product has been barred by permanent injunction. The new rules effectively lower the burden for initiating such proceedings, but arguably raise the threshold required to establish the contempt itself.
After a jury found Echostar infringed TiVo’s DVR software patent, the district court entered a permanent injunction requiring in part that EchoStar disable certain infringing features for products placed with end users. TiVo later persuaded the district court to find EchoStar in contempt based on design-around activities it initiated as an alternative to the disabled features.
The Federal Circuit rejected Echostar’s argument that a finding of contempt is improper when a defendant has engaged in diligent and good faith efforts to avoid violating an injunction. In doing so, it overruled the two-part contempt inquiry established in KSM, which required that a district court first decide whether a contempt hearing is an “appropriate setting.” Doing so required that the redesigned product first be compared with the original to determine whether there was “more than a colorable difference” between them such that “substantial open issues with respect to infringement” existed. After that, the court was required to determine whether the redesigned product was also infringing. The Federal Circuit’s new test combines the two parts of the inquiry into one, leaving that appropriateness determination to the trial court’s sound discretion.
The new test also arguably increased the threshold for an actual finding of contempt by clarifying that the colorable difference consideration is not determined by simply judging whether the redesigned product continues to infringe, but rather by focusing on differences between the infringing features of the original product and the modified features of the newly accused product.
Finally, the majority held that a vagueness defense to contempt may be waived if not raised by the defendant at the first opportunity, suggesting that it might be wise to challenge ambiguities in an injunctive order when it is granted rather than within the context of a contempt proceeding.