In Aevoe Corp. v. AE Tech Co., No. 12-1422 (Fed. Cir. Aug. 29, 2013), the Federal Circuit dismissed the appeal for lack of jurisdiction because the district court merely clarified the scope of the original injunction, and there was no modification that substantially changed the legal relationship between the parties.
Aevoe Corporation ("Aevoe"), assignee of U.S. Patent No. 8,044,942 ("the '942 patent"), directed to a touchscreen protector for electronic devices, sued AE Tech Co., Ltd. ("AE Tech"), alleging that AE Tech was infringing the '942 patent. Aevoe requested a temporary restraining order, which the district court granted, barring AE Tech from selling its touchscreen protector products. Despite receiving notice of the district court's restraining and show cause orders, AE Tech neither answered the complaint, responded, nor appeared, and the district court issued a preliminary injunction.
After entry of the preliminary injunction, AE Tech filed a motion to reconsider and vacate the preliminary injunction, which the district court denied and refused to vacate. The district court, however, entered an order altering the January 24, 2012, injunction as requested by AE Tech to remove the "counterfeit" and "colorable imitation" trademark language from the injunction.
After the hearing on AE Tech's motion for reconsideration, on March 5, 2012, AE Tech informed Aevoe that it had redesigned its product and was "intending" to sell the new product with the help of and through S&F Corporation and GreatShield, Inc. (collectively "S&F Defendants"). On March 14, 2012, Aevoe filed an amended complaint joining the S&F Defendants, alleging that the S&F Defendants sold infringing products obtained from AE Tech. Shortly thereafter, Aevoe filed a motion requesting that AE Tech and the S&F Defendants be held in contempt, and sanctioned for willfully disregarding the district court's preliminary injunction. The district court found that the added channels were a nonfunctional and trivial attempt to design around the '942 patent, and that the redesigned AE Tech screen protector was not more than colorably different than the enjoined products. Accordingly, the district court held all defendants in contempt, concluded that sanctions against AE Tech were appropriate, changed the language of the preliminary injunction by adding back the "colorable imitation" phrase, and explicitly named the S&F Defendants as enjoined parties.
On appeal, the Federal Circuit noted its obligation to consider whether it had jurisdiction over the appeal. The Court indicated that its focus would remain on the injunction and not on the district court's contempt order because a contempt order interpreting or enforcing an injunction is generally not appealable until final judgment. Notably, the district court issued its original preliminary injunction on January 24, 2012, and AE Tech did not appeal the injunction until May 2012. The Court pointed out that any appeal should have been filed within thirty days of the district court's grant of the original injunction; however, the district court twice altered the language of the injunction. Thus, the operative question on appeal was whether these changes amounted to a modification of the original injunction that in effect would reset the time for appeal of the injunction.
"A contempt order interpreting or enforcing an injunction, however, is generally not appealable until final judgment. This is particularly so where no sanction had yet been imposed for that contempt and proceedings with respect to that question remained ongoing at the time the appeal before us was filed." Slip op. at 9 (citations omitted).
Relying on regional circuit law to determine whether the injunction had been modified, the Court indicated that "[w]hether an order modifies an existing injunction rather than merely interprets it depends on whether it substantially alters the legal relations of the parties." Slip op. at 11 (alteration in original) (quoting Cunningham v. David Special Commitment Ctr., 158 F.3d 1035, 1037 (9th Cir. 1998)). That inquiry required the Court to consider whether the district court modified the injunction as to AE Tech by reinserting the "colorable imitation" language after finding the defendants in contempt and explicitly adding the GreatShield "redesign" to the injunction. The Court explained that whether "colorable imitations" were explicitly mentioned in the injunction language or not, such imitations fell within its scope; the district court was obligated to apply the colorable differences test in the contempt proceeding. Thus, the Court concluded, the legal relationship between the parties was in no way altered by the district court's changes to the injunction language. Further, the Court indicated that neither the excision and addition of the "colorable imitation" language nor the explicit description of the actual redesign amounted to a modification of the preliminary injunction upon which the Court could predicate jurisdiction. As such, the Court stated, the district court never modified the injunction such that it would reset AE Tech's time to appeal, and, therefore, AE Tech's appeal was untimely. Because the district court did not substantively modify the January 2012 injunction, the Federal Circuit held that AE Tech's appeal derived from a contempt order—not an appealable interlocutory order—and it did not have jurisdiction over AE Tech's appeal.
Finally, the Court considered whether the addition of the S&F Defendants amounted to a modification of the injunction. Though the S&F Defendants were not joined as defendants until March 2012, the Court determined they had notice of the injunction within a week of its original issuance in January 2012 and again in February 2012. The Court plainly stated that it was beyond debate that the S&F Defendants fell within the express language of the original injunction, whether or not they were explicitly named as enjoined parties, since the injunction was directed to AE Tech or any party that had notice of the injunction and was selling the barred products. Thus, the addition of the S&F Defendants as explicitly enjoined parties did not substantively modify the language of the preliminary injunction because they were already barred—on the face of the injunction—from selling the products. The Court noted, whether it does so expressly or not, however, a court generally may not enjoin a nonparty to the action before it. The Court, though, made the distinction that a party who acts in concert with an enjoined party may be subject to the strictures of an injunction. The Court ultimately found that the S&F Defendants fell within the purview of the original injunction because they were "acting in concert" with AE Tech in connection with the resale of the redesigned products, and failure to enjoin their conduct would thwart the purposes of that injunction. Therefore, the addition of the S&F Defendants only clarified, and did not modify, the original injunction because they always fell within the restrictions of the original injunction. Because the district court did not substantially alter the legal relationship between the parties by explicitly naming the S&F Defendants as enjoined parties, the Court concluded that it also did not have jurisdiction over the S&F Defendants' appeal.
Accordingly, because the district court merely clarified the scope of the original injunction, the Court found that there was no modification that substantially changed the legal relationship between the parties and dismissed the appeal for lack of jurisdiction.
Judges: Rader, Lourie, O'Malley (author)
[Appealed from D. Nev., Judge Navarro
This article previously appeared in Last Month at the Federal Circuit, September 2013
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
