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USPTO Patent Invalidation Precludes Judicial Equitable Remedies and Sanctions

July 31, 2014
Post by Blog Staff

The U.S. Court of Appeals for the Federal Circuit has issued a decision inePlus, Inc. v. Lawson. ePlus sued Lawson asserting infringement of two patents—U.S. Patent Nos. 6,023,683 ("the '683 patent") and 6,505,172 ("the '172 patent"). At trial, the district court held two of ePlus's asserted system claims and three of ePlus's asserted method claims not invalid, and the jury found those same claims infringed by Lawson.

The district court entered an injunction against Lawson, precluding Lawson from "directly or indirectly making, using, offering to sell, or selling within the United States or importing into the United States any of the [adjudged infringing] product configurations and/or installation, implementation, design, configuration, consulting, upgrade, maintenance and support and training and other related and associated services and any colorable variations thereof (the “Infringing Products and Services”)." Lawson appealed, and the Federal Circuit reversed in part, holding the system claims invalid and two of three method claims not infringed. The Federal Circuit remanded the case to district court to modify the injunction accordingly.

On remand the district court modified the injunction so that it only applied to infringement of claim 26 of the '683 patent—the sole remaining method claim. Further, the district court found Lawson in civil contempt for violating the injunction. Lawson appealed both the injunction and the contempt order. While the appeal was pended, the United States Patent and Trademark Office ("USPTO") completed a reexamination of the '683 patent and determined that the sole remaining claim from the litigation—method claim 26—was invalid and cancelled. In a separate appeal, the Federal Circuit affirmed the USPTO's invalidity determination. Thus, the present appeal presented two questions: (1) whether the district court’s modified injunction against Lawson should be set aside in light of the PTO's cancellation of the patent claim on which it was based; and (2) whether the civil contempt sanctions should be set aside.

The Federal Circuit held there was no sufficient legal basis to maintain the injunction and that it must be set aside. In support of this holding, the Federal Circuit noted, "It is well established that an injunction must be set aside when the legal basis for it has ceased to exist. . . . Our court has applied these principles to an injunction barring infringement of patents later found to be invalid." Because the sole remaining claim upon which the injunction was based had been invalidated—by the PTO; affirmed by the Federal Circuit—there was no legal basis for maintaining the injunction.

The Federal Circuit also held that the civil contempt sanctions should be set aside. This was, in part, due to the fact that the injunction was not final and because it was a civil contempt order that was meant to compensate the ePlus for injury suffered as a result of the Lawson's infringing activity. However, as the only remaining claim upon which the injunction was based was found invalid, the Federal Circuit concluded that "the compensatory award for the violation of the injunction must be set aside in light of the cancellation of claim 26."

The full opinion is available here.


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