ePlus, Inc. v. Lawson Software, Inc.

Addressing whether an injunction and civil contempt were proper after the sole claim on which the injunction was based was cancelled, the U.S. Court of Appeals for the Federal Circuit vacated a lower court’s injunction and civil contempt remedy, finding that the cancellation of the claim made it void ab initio and thus unable to support an injunction or lead to civil contempt remedies.  ePlus, Inc. v. Lawson Software, Inc., Case Nos. 13-1506, -1587 (Fed. Cir., July 25, 2014) (Dyk, J.) (O’Malley, J., dissenting).

Lawson Software had previously been found to infringe five claims of two ePlus patents based on three configurations of its e-commerce software.  The court thereafter entered an injunction barring sales and also barring other activities that were found to induce infringement by end users. Lawson appealed.  The Federal Circuit reversed as to all but one claim and remanded the case for the district court to determine the necessary modifications to the injunction.

On remand, Lawson moved to eliminate the sales bar in the injunction because the remaining claim was a method claim that only gave rise to inducement.  Lawson also argued that the court should reweigh the eBay factors and find that they no longer support any injunction.  ePlus responded that the court should merely remove the single configuration that did not infringe the sole remaining claim.  ePlus separately alleged that Lawson violated the injunction due to a failed re-design for the remaining configurations.  The district court agreed with ePlus and removed only the single configuration from the injunction while maintaining the sales bar.  The district court also found Lawson in civil contempt based on the redesign and ordered Lawson to pay a compensatory fine of over $18 million dollars along with daily coercive fines until it complied with the injunction.  Lawson appealed both the modified injunction and the contempt order.

While the second appeal was pending, the U.S. Patent and Trademark Office (PTO) cancelled the sole remaining claim as a consequence of an ex parte reexamination.  The Federal Circuit considered the issue of whether the injunction could continue in light of the PTO cancellation and, if not, whether civil contempt remedies were still available.  The Federal Circuit found that injunctions for patent infringement must be set aside when the underlying claims are later found to be invalid.  Regarding the contempt finding, the Federal Circuit followed the rule for civil contempt, which is based on the underlying controversy and thus rises or falls with the injunction, and thus vacated the contempt remedy.  The Court concluded that it did not matter that it was the PTO that invalidated the claim, as claims cancelled by the PTO are considered void ab initio.  The Court left for another day the question of whether a contempt remedy would survive if the injunction was final, rather than still under appeal as in this case.