On April 20, 2011, the Federal Circuit sitting en banc vacated a $110 million damage award against Dish Network Corp. and EchoStar Corp. The Court rejected its two-step test that had been used to determine infringement of a redesigned product in a contempt hearing and instead adopted a single-step test for determining infringement in a contempt hearing. The new single-step standard focuses solely on whether there is "more than a colorable difference" in a newly redesigned product from a product that was previously found to infringe.
The district court had previously found that defendants' DVR products infringed a patent held by TiVo. After entering a judgment in favor of TiVo based on a jury verdict, the district court also entered a permanent injunction that required defendants to stop making products and to disable products it had already sold. Defendants redesigned their DVR products and TiVo, claiming that the redesigned products still infringed, moved for contempt. The district court found contempt based on continuing infringement and awarded $110 million to TiVo.
A Federal Circuit panel affirmed in a 2-1 decision and the Federal Circuit subsequently agreed to hear defendants' petition for a rehearing. Sitting en banc, the Federal Circuit addressed its two-step analysis set out in the KSM Fastening Systems, Inc. v. H.A. Jones Co., KSM Fastening Systems, Inc. v. H.A. Jones Co., 776 F.2d 1522 (Fed. Cir. 1985) decision. KSM set forth a two-step analysis involving first whether there was "more than a colorable difference" between the redesigned product and the infringing product and, if not, a second step would determine whether the redesigned product still infringed the patent.
The Federal Circuit rejected the KSM two-step test as "unworkable" and overruled KSM. The Court then held that a single step of determining whether there was "more than a colorable difference" between the old and new products would govern. Importantly, the Court noted that this single step test must focus on what attributes of the adjudicated product were previously found to infringe and those attributes must be compared in the newly redesigned product to determine if there is significant modification. "If those differences between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different from the adjudged infringing one, and the inquiry into whether the newly accused product actually infringes is irrelevant."
When it applied this new standard to the facts, the en banc Court concluded that the district court had erred because it did not compare the adjudicated feature to the same feature in the newly designed product, but rather analyzed another feature and held that this feature infringed and, therefore, defendants were in contempt. The Court held that a new feature, that was not comparable to a previously adjudicated feature, could not be determined to infringe in a contempt proceeding. Accordingly, the Court vacated and remanded the district court's contempt finding and directed the district court to compare the adjudicated features to the newly designed features to determine contempt under the single-step standard of "more than colorable differences."
TiVo Inc. v. EchoStar Corp., Case No. 2009-1374 (Fed. Cir. April 20, 2011)
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