Several weeks ago TiVo filed its brief in the matter of Tivo, Inc. v. EchoStar Corp., which will be heard en banc by the United States Court of Appeals for the Federal Circuit on Tuesday, November 9, 2010. The dispute between TiVo and EchoStar dates back to 2004 when TiVo sued EchoStar in the United States District Court for the Eastern District of Texas, alleging that its receivers infringe “hardware” claims (claims 1 and 32) and “software” claims (claims 31 and 61) of US Patent No. 6,233,389. The jury found there was willful infringement and the district court entered an injunction ordering EchoStar to cease infringing. It is this injunction that now is at the root of the dispute to be heard by the Federal Circuit. TiVo did not believe EchoStar lived up to the Order of the district court. The district court, seemingly out of an abundance of caution, decided not to utilize its summary contempt powers but held a year long proceeding to determine if infringement was ongoing. The district court found EchoStar was violating the injunction Order and acted accordingly. EchoStar appealed and argued that only a full patent infringement trial would suffice. The panel sided with TiVo over a strong dissent by Judge Rader, now Chief Judge of the Federal Circuit, who felt the summary proceedings were inadequate. For more see Looking Ahead to TiVo v. Dish at the Federal Circuit. So as the full Federal Circuit hears this case it is anticipated that the inherent powers of a district court to enforce their own Orders and administer justice will be front and center.
On September 10, 2010, TiVo, by and through their attorneys at Wilmer Cutler Pickering Hale & Dorr, filed their Brief for Rehearing En Banc with the Federal Circuit. The opening paragraph of the Introduction sets an ominous tone:
This case tests whether courts can realistically enforce the right to exclude— and their own clear commands. Over four years ago, EchoStar was ordered to stop infringing TiVo’s DVR patent, and to “disable all storage to and playback from a hard disk drive of television data” in specific receivers. Since then, it has made billions more dollars by refusing to disable and continuing to infringe. It has manipulated current law by exaggerating inconsequential changes, dragging out proceedings, exploiting stays, and disregarding a plain order. Now it seeks to make enforcement even harder. If the injunction in this case cannot, at long last, be enforced, EchoStar will have shown how determined infringers can destroy the value of patents.
I am looking forward to the oral arguments and the final opinion by the entire Federal Circuit in this case. It does seem to me as if EchoStar flaunted the district court’s Order by taking the position that they didn’t have to do anything to come into compliance with the injunction because they had already, during the litigation, made the devices non-infringing by downloading corrective software onto the devices housed in the homes of consumers. That type of ignoring of a direct Order by a district court judge and basically saying “we don’t have to do anything because we already did, so we can ignore the Order” seems to be reckless, and rather not well thought out if you ask me.
Had I been the district court judge I suspect I would have been quite upset myself, and I am not sure I would have done anything other than used summary contempt powers; powers enjoyed by every district court judge to enforce their own Orders. Yet, the district court showed tremendous restraint and erred on the side of due process by specifically not relying upon a summary contempt proceeding and engaging in a quasi-trial. Certainly it was not a full blown patent infringement litigation, but why should TiVo have to go through that again after they had already prevailed? The district court engaged a procedure that allowed for discovery and full airing of the issues surrounding the alleged violation of the injunction Order. These proceedings took nearly a year to complete, so they cannot be at all characterized as anything other than thoughtful and thoroughly considered.
In any event, the TiVo brief tackles the question of whether there are open issues so substantial that a new trial is required by arguing that a district court determination must be afforded great latitude and reviewed for abuse of discretion, which is of course a might high threshold, but seemingly the appropriate standard of review. In summary the argument was presented in this way:
Under current law, courts decide whether it is appropriate to adjudicate continued infringement in an enforcement proceeding by (i) comparing the accused and adjudicated products in light of the claims as previously construed and (ii) determining whether any difference raises an infringement question that is too substantial to be resolved without a new suit. This determination is committed to the district court and reviewed for abuse of discretion. Properly applied, as it was here, this “substantial open issues” standard has worked well in practice and is consistent with both the “colorable differences” tradition on which it builds and the Supreme Court’s discussion in Molitor.
The TiVo brief moves on to discuss the very nature of a patent right, which is the right to exclude. Without a meaningful right to exclude patents simply cannot and do not reward innovation. The brief explains in summary:
Any standard must ensure that patentees and courts can meaningfully enforce infringement injunctions. The right to exclude can reward innovation only if reliably enforced. Determined infringers should not be allowed to make minor changes to enjoined devices, drag out judicial proceedings, and exhaust a new technology’s useful life while continuing a lucrative course of infringement and inflicting irreparable harm on patentees. The problem is particularly acute in rapidly evolving fields and for devices involving software or other features that can be modified with relative ease but little substance in ways that are not immediately transparent to a court.
Of course, the right to exclude will only be an important trumpeting point if it is believed that there are not substantial new issues that require a new trial, presumably as Chief Judge Rader thought there to be at the time of his dissent in the original panel decision.
In a nutshell I suspect this case will come down to one thing, which is how close is the theory of infringement post trial to the theory of infringement during the trial. TiVo makes the case that the theories need not be identical. This seems to be where Chief Judge Rader’s disagreement lies. In summary they explain:
TiVo did not change infringement theories. At trial, TiVo’s experts testified that PID filtering is parsing and defended validity on other grounds. Likewise, TiVo’s theory of flow control remains focused on the self-regulated movement of data through buffers. In any event, a modified device need not infringe in exactly the way proven at trial. Requiring plaintiffs to present evidence supporting every conceivable infringement theory to obtain a meaningful injunction would greatly multiply trials’ length, complexity, and cost. To preclude enforcement, product modifications must raise new issues that are genuinely too substantial to be resolved without a new suit.
I personally agree that it is unrealistic for plaintiffs to raise each and every theory of infringement, and even if they could and would it is reasonable to expect that a district court judge would not allow it anyway. District courts need to necessarily parse through the issues and settle on those to be litigated, and that requires a narrowing among viable issues to select the core to preserve on the record. (See An On the Record Interview with Judge Rader – “In order to correct errors based on a record you need to understand the challenges of making a record, you need to understand the challenges of administering a trial and narrowing issues.”) That being the harsh reality facing district courts, it seems particularly important not to require a kitchen sink approach or a belt and suspenders approach to infringement theories that would require the plaintiff to prove infringement plus, but rather further justification for the “substantial open issues” standard and awarding the district discretion, at least to the extent that a thorough and complete analysis of the issues was undertaken.
What is particularly interesting about the TiVo position, if you as me, is that they make a strong argument for the value of the patent system and for strong patent rights. At a time when patent rights are under assault from a variety of angles by those who neither understand innovation or incentive based economics this is quite refreshing. It is also at least a little bit odd. As a major technology company TiVo, like all others, is probably a defendant more than they are a plaintiff, particularly when you factor into the equation the numerous threat letters they undoubtedly receive on a daily basis demanding that dubiously related patents be licensed. Of course, this case is the big one, with two industry giants fighting each other, so achieving a positive outcome in this case might easily outweigh any potentially negative downstream consequences of a would-be TiVo defendant in another litigation, but still curious to note. So it is hardly fair to think they would be urging an obviously unfair or unjust rule for defendants when they are more often finding themselves in that role.