Have you ever taken someone to court, based on ongoing offending activities of that person, won the case, and then found he/she was once again engaging in “the same” offensive activity?  If so, you are probably aware that a Court Order is enforceable through a “Contempt Action” to prevent the person from engaging in the activity.  Well, assume you own a patent, and a competitor infringes that patent – an ongoing tortious activity.  Assume further that you sue the competitor in Federal District Court for patent infringement.  And, during litigation, the competitor concedes the product it makes and markets infringes (some of) the patent claims.  The district court issues an Order with an injunction enjoining the competitor from engaging in any further infringing activity, such as marketing or making the infringing product.

Later, to your surprised chagrin, the competitor starts selling a “slightly altered” version of the product!  What to do?  File a contempt action, and try to enforce the Court Order against the “new” product?”  That is exactly what patent owner Proveris did in filing a contempt action against Innovasystems.[1]  On Proveris’ motion for summary judgment of contempt and for sanctions, the district court found in favor of Proveris, and enjoined further making and marketing of the new product, but Innovasystems appealed.  The Appellate Court’s opinion provides guidelines as to how a district court should analyze a contempt action, when the “new product” is represented as being “altered” from the original one that infringed.

The Appellate Court reviewed the appeal that Innovasystems filed, and looked at these two issues:

• Firstly, what are the standards the District Court should apply when deciding on a contempt action relating to patent infringement, where the product is asserted to be altered?
• Secondly, can the defendant Innovasystems raise a defense of invalidity of certain patent claims that it had previously conceded that it infringed, on grounds that an interpretation of those claims that Proveris urges for purposes of its charge of infringement, renders them invalid?

As to the first issue, the Court instructed that a two part test should be applied.  In the first part of the test, the district court has to ascertain whether the new product is “not more than colorably different” from the infringing product.  If the new product is only colorably different (i.e. has only insignificant differences from the prior infringing product), then the district court should proceed to the second step which is an analysis of whether the new product still infringes the patent claims.  On the other hand, if the new product is more than colorably different from the one that was previously held to infringe in the lawsuit, Proveris must file a new patent infringement action.  In other words, the contempt action will not be a sufficient vehicle for enforcing patent rights against the significantly altered product.

Assuming that the Innovasystems product is found to be not more than colorably different from the infringing product, as pointed out above, a second step of determining infringement must still be carried out.  In assessing whether there is infringement, the new product must be compared to the patent claims and a determination of infringement must be made.  Ordinarily, the latter would be a relatively straight forward exercise for the district court, but in this particular instance, Innovasystems had conceded infringement of certain of the patent claims.  As a result of that concession, the trial court could, and did, avoid the usual step of claim interpretation that precedes a finding of infringement (or non-infringement) in a patent lawsuit.  Because claim interpretation had not been necessary during trial of the patent infringement suit, but was necessary now for the contempt action, the Appellate Court remanded the case to the district court with instructions to conduct a “Markman Hearing[2]” to interpret the patent claims.

The Appellate Court’s further instructions regarding claim interpretation at the Markman Hearing were probably outcome determinative because the Court supported Proveris’ position in these instructions.  The Court instructed that a part of the contested patent claims, the “preamble[3],” should be construed as a limiting element in the claim.  While a claim preamble usually sets the context of the claimed subject matter that demarcate the “patent rights,” the preamble can in some instances also become a limiting element of the scope of the patent claim.  The Court’s instruction in this instance, that the preamble should be construed as a limiting element, would tip the balance in Proveris’ favor on the issue of patent claim validity, as explained below.

Innovasystems asserted a defense of patent invalidity against the same patent claims it had previously conceded at the trial court that its original product infringed.  Innovasystems based its assertion of invalidity on a new claim interpretation, which regarded the preamble as not being limiting of the scope of the claim.  This broader claim interpretation would increase the likelihood that the claim was invalid because it might cover prior technology (“prior art”).  Proveris opposed the broader interpretation because of this risk, and because it felt that the new product would infringe, even with a narrowed scope of the claim that included the preamble as a limitation.  In general, the Courts have allowed a defending party to reopen the issue of patent claim validity on grounds of claim interpretation.[4]  However, in this case, the Appellate Court instructed that the preamble was a limiting element of the patent claim, as explained above.  And, since the assertion of invalidity was based on the preamble not being a limiting element, Innovasystems’ invalidity argument was in vain, and was effectively “mooted” by the Appellate Court’s instructions to the district court.

Finally, on the issue of damages, Proveris could recover damages on sales made by Innovasystems, if the asserted “new” and altered product was found infringing.  As to some sales that were made to overseas buyers, the issue of where the sale took place – in the US where the patent is enforceable, or overseas where the patent is not – is an issue that could be submitted to a jury.

The case was remanded to the district court.  Having undertaken the expense of asserting its patent rights in a patent lawsuit, and protecting its markets, and having sued Innovasystems for contempt, Proveris is also entitled to recover damages equivalent to any gains that Innnovasystems may have made, if its latest product and activities are found to be infringing.  Patent rights endure for the term of the patent (20 years from its filing date) and injunctions are enforceable as long as the patent endures.