United States District Court, E.D. Virginia
[Copyrighted Material Omitted]
For ePlus, Inc., Plaintiff: Craig Thomas Merritt, LEAD ATTORNEY, Belinda Duke Jones, Henry Irving Willett, III, Paul Wilbur Jacobs, II, Rowland Braxton Hill, IV, Samuel Perry Coburn, Christian & Barton LLP, Richmond, VA; David Michael Young, LEAD ATTORNEY, April Elise Weisbruch, Goodwin Procter LLP (DC), Washington, DC; Jennifer Ann Albert, Scott Lynn Robertson, LEAD ATTORNEYS, PRO HAC VICE, Eleanor Martha Hynes, PRO HAC VICE, Goodwin Procter LLP (DC-NA), Washington, DC; Lana Svetlana Shiferman, LEAD ATTORNEY, PRO HAC VICE, Daniel Mark Forman, PRO HAC VICE, Michael Gavin Strapp, PRO HAC VICE, Srikanth Kadumpalli Reddy, PRO HAC VICE, Goodwin Procter LLP (MA-NA), Boston, MA.
For Lawson Software, Inc., Defendant: Daniel William McDonald, LEAD ATTORNEY, PRO HAC VICE, Eric Ronald Chad, PRO HAC VICE, Merchant & Gould PC, Minneapolils, MN; Christopher Dean Dusseault, PRO HAC VICE, Jason Charn-Jieh Lo, PRO HAC VICE, Timothy Patrick Best, PRO HAC VICE, Gibson Dunn & Crutcher LLP (CA-NA), Los Angeles, CA; Dabney Jefferson Carr, IV, Troutman Sanders LLP (Richmond), Richmond, VA; Daniel James Thomasch, PRO HAC VICE, Josh Krevitt, PRO HAC VICE, Richard William Mark, PRO HAC VICE, Gibson Dunn & Crutcher LLP (NY-NA), New York, NY; Donald Robert Dunner, PRO HAC VICE, Finnegan Henderson Farabow Garrett & Dunner LLP, Washington, DC; Erika Harmon Arner, PRO HAC VICE, Finnegan Henderson Farabow Garrett & Dunner LLP (VA-NA), Reston, VA; Megan Conway Rahman, Robert Armistead Angle, Timothy James St. George, Troutman Sanders LLP, Richmond, VA; Sarah Elizabeth Simmons, PRO HAC VICE, Gibson Dunn & Crutcher, Dallas, TX; Stephen Dennis Otero, Capital One Services LLC, Richmond, VA.
For ePlus, Inc., Counter Defendant: Craig Thomas Merritt, LEAD ATTORNEY, Henry Irving Willett, III, Samuel Perry Coburn, Christian & Barton LLP, Richmond, VA; David Michael Young, LEAD ATTORNEY, Goodwin Procter LLP (DC), Washington, DC; Scott Lynn Robertson, LEAD ATTORNEY, PRO HAC VICE, Eleanor Martha Hynes, PRO HAC VICE, Goodwin Procter LLP (DC-NA), Washington, DC; Michael Gavin Strapp, PRO HAC VICE, Srikanth Kadumpalli Reddy, PRO HAC VICE, Goodwin Procter LLP (MA-NA), Boston, MA.
For ePlus, Inc., Counter Defendant: Craig Thomas Merritt, Henry Irving Willett, III, LEAD ATTORNEYS, Samuel Perry Coburn, Christian & Barton LLP, Richmond, VA; David Michael Young, LEAD ATTORNEY, Goodwin Procter LLP (DC), Washington, DC; Scott Lynn Robertson, LEAD ATTORNEY, PRO HAC VICE, Eleanor Martha Hynes, PRO HAC VICE, Goodwin Procter LLP (DC-NA), Washington, DC; Michael Gavin Strapp, PRO HAC VICE, Srikanth Kadumpalli Reddy, PRO HAC VICE, Goodwin Procter LLP (MA-NA), Boston, MA.
For Lawson Software, Inc., Counter Claimant: Daniel William McDonald, LEAD ATTORNEY, Eric Ronald Chad, PRO HAC VICE, Merchant & Gould PC, Minneapolils, MN; Christopher Dean Dusseault, PRO HAC VICE, Jason Charn-Jieh Lo, PRO HAC VICE, Timothy Patrick Best, PRO HAC VICE, Gibson Dunn & Crutcher LLP (CA-NA), Los Angeles, CA; Dabney Jefferson Carr, IV, Troutman Sanders LLP (Richmond), Richmond, VA; Daniel James Thomasch, PRO HAC VICE, Josh Krevitt, PRO HAC VICE, Richard William Mark, PRO HAC VICE, Gibson Dunn & Crutcher LLP (NY-NA), New York, NY; Donald Robert Dunner, PRO HAC VICE, Finnegan Henderson Farabow Garrett & Dunner LLP, Washington, DC; Erika Harmon Arner, PRO HAC VICE, Finnegan Henderson Farabow Garrett & Dunner LLP (VA-NA), Reston, VA; Megan Conway Rahman, Robert Armistead Angle, Troutman Sanders LLP, Richmond, VA; Sarah Elizabeth Simmons, PRO HAC VICE, Gibson Dunn & Crutcher, Dallas, TX; Stephen Dennis Otero, Capital One Services LLC, Richmond, VA.
For ePlus, Inc., Counter Defendant: David Michael Young, LEAD ATTORNEY, Goodwin Procter LLP (DC), Washington, DC; Henry Irving Willett, III, LEAD ATTORNEY, Henry Irving Willett, III, Samuel Perry Coburn, Christian & Barton LLP, Richmond, VA; Jennifer Ann Albert, Scott Lynn Robertson, LEAD ATTORNEYS, Eleanor Martha Hynes, PRO HAC VICE, Goodwin Procter LLP (DC-NA), Washington, DC; Lana Svetlana Shiferman, LEAD ATTORNEY, Michael Gavin Strapp, PRO HAC VICE, Srikanth Kadumpalli Reddy, PRO HAC VICE, Goodwin Procter LLP (MA-NA), Boston, MA.
Robert E. Payne, Senior United States District Judge.
This matter is before the Court on plaintiff ePlus, Inc.'s (" ePlus" ) MOTION TO SHOW CAUSE WHY LAWSON SOFTWARE, INC. SHOULD NOT BE HELD IN CONTEMPT (Docket No. 798). For the reasons set forth below, the Court concludes, by clear and convincing evidence, that Lawson Software, Inc. (" Lawson" ) is in contempt of the May 23, 2011 Permanent Injunction (Docket No. 729). Accordingly, ePlus' motion will be granted.
On May 19, 2009, ePlus filed this action against Lawson for infringement of three patents: U.S. Patent Nos. 6,023,683 (the " '683 Patent" ), 6,055,516 (the " '516 Patent" ), and 6,585,172 (the " '172 Patent" ). Following a three week trial, a jury determined that the '683 Patent and '172 Patent were infringed, and it found that the '516 Patent was not infringed, by Lawson's products. The jury further found that all asserted claims of the patents-in-suit were valid. On May 23, 2011, the Court issued a permanent injunction enjoining Lawson, its officers, agents, and employees and " any person in active concert or participation with them" " from directly or indirectly making, using, offering to sell, or selling within the United States or importing into the United States" certain product configurations (so-called Configurations Two, Three, and Five) and services. (Docket No. 729). Lawson appealed to the United States Court of Appeals for the Federal Circuit and ePlus cross-appealed.
On September 9, 2011, while the appeals were pending, ePlus filed its motion for order to show cause, alleging that Lawson was in contempt of the injunction. The focus of ePlus' contempt motion concerned
a module of the adjudged infringing system configurations called Requisition Self-Service (" RSS" ). After the trial, Lawson redesigned RSS and created Requisition Center (" RQC" ) in its stead. ePlus alleged that the new RQC product was not more than colorably different from RSS and that it infringed ePlus' patents. On November 23, 2011, the Court entered a Scheduling Order (Docket No. 849) setting the contempt proceedings to commence on February 27, 2012.
By Memorandum Opinion and Order dated February 21, 2012 (Docket No. 917), following extensive briefing, the Court found that Lawson had waived attorney-client privilege for a number of documents relating to the redesign process and ordered their production. On February 24, 2012, the Court entered an Order (Docket No. 930) staying the contempt proceedings to permit Lawson to seek a Writ of Mandamus in the Federal Circuit to review the Order of February 21. On August 16, 2012, the Federal Circuit denied the petition for a Writ of Mandamus (Docket No. 957). The Federal Circuit's Order was followed by ePlus' Motion to Enforce the Order of February 21 (Docket No. 958) which was, in turn, granted in part and denied in part by an Order dated December 14, 2012 (Docket No. 988).
Meanwhile, on November 21, 2012, the Federal Circuit had issued its decision reversing-in-part, vacating-in-part, affirming-in-part and remanding the action. In its decision, the Federal Circuit found that claim 1 of the '172 patent and claim 3 of the '683 patent were invalid for indefiniteness.
ePlus, Inc. v. Lawson Software, Inc., 700 F.3d 509, 519-20 (Fed. Cir. 2012). The Court of Appeals also held that claims 28 and 29 of the '683 patent were not " supported by substantial evidence" and vacated the judgment of infringement as to those claims. Id. at 521-22. The Court of Appeals, however, affirmed the finding of infringement as to claim 26 of the '683 patent and affirmed the breadth of the injunction. Id. at 520, 522.  ePlus filed a petition for rehearing and rehearing en banc. On January 29, 2013, the Federal Circuit denied that petition. The mandate of Federal Circuit was received and entered on February 11, 2013 (Docket No. 1006). The contempt proceedings thereafter resumed in this Court.
A hearing was held on the contempt motion on April 2, 2013 through April 9, 2013. Closing arguments were held on April 26, 2013. Pursuant to an Order entered January 24, 2013 (Docket No. 1002), ePlus filed post-hearing briefs on colorability (Docket No. 1057), infringement (Docket No. 1058) and remedies (Docket No. 1059). Lawson filed responses (Docket Nos. 1070, 1072, & 1072). ePlus filed replies (Docket Nos. 1073, 1074, & 1075). The parties also filed proposed findings of fact and conclusions of law (Docket Nos. 1060 & 1069). The issues were thereafter argued.
FINDINGS OF FACT
The Redesign Process
Following the jury verdict in this action, Lawson began efforts to design around ePlus' patent. Lawson had its first meeting to that end on the day after the jury verdict and placed Dale Christopherson in charge of redevelopment. Christopherson's redesign team consisted of a variety
of Lawson individuals including technical people and representatives of the legal department. Principally, Christopherson's team included Bruce McPheeters, Lawson's General Counsel; members of the law firm that represented Lawson during the underlying infringement action; Todd Dooner, who was responsible for actually writing the computer code; and Keith Lohkamp, who was to represent the " business side" of Lawson during the design effort. The team also included Keith Knuth, a product architect; Stephanie Lim, who was in charge of quality assurance testing; Dwight DeLancey, a software engineer; Darci Snyder, who was responsible for product management; and Donna Hircate, whose role in the redesign process is unclear. In addition, Lawson hired an independent attorney to assist with the redesign process.
The redesign team began work on February 8, 2011. It began unit testing of the redesigned product on March 1, 2011 and held a " start-up meeting" on March 30, 2011. The new product was released to customers on May 18, 2011. Patch 1 to the new product was made available to customers on June 9, 2011.
Lawson's initial plan was to present the redesigned product to the Court for approval before its public release; specifically, Lawson intended to present the product to the Court at the hearing scheduled on whether to enter a permanent injunction. Lawson decided not to follow that course.
The redesign team proposed several alternative " redesigns" that the Lawson attorneys rejected as being insufficient. Patch 1 was implemented at the behest of Lawson's attorneys who were concerned that the redesign effort had not gone far enough. However, additional redesign proposals were rejected because they would unacceptably limit the functionality of Lawson's software. For example, Lawson considered, and rejected, changes that would remove the search capabilities of the systems, the requisition building capabilities, and the purchase order creation capability completely. Most notably, the redesign team and the attorneys disagreed over whether the inventory checking capability of the product would, or must, be removed from the new product. The views of counsel on the subject were rejected by Christopherson, and the change was not made.
The Redesigned Product: RQC
RSS was the only component of the Infringing Configurations of Claim 26 of the '683 patent that was modified.  One of the primary goals of the redesign process was to minimize the impact on Lawson's current customers. For the present purposes, Lawson relies on two changes made to RSS which it claims renders RQC " more than colorably different" than RSS. First, Lawson made changes to RSS intended to prevent a customer from simultaneously using Item Master and Punchout in the same session. Essentially, RQC requires that a user using Item Master and Punchout place the products ordered from each on a different requisition form than the other. On May 18, 2011, Lawson released RQC with this modification.
The second change took place following the release of RQC when Lawson developed and released so-called " Patch 1." Lawson approved the development of Patch 1 on June 3, 2011 and released it on June 9, 2011. Patch 1 expanded the Item Master/Punchout " limitation" to sessions involving multiple Punchout vendors, so
that once a user accesses a Punchout vendor's website, RQC prevents the user from accessing another Punchout vendor's website without closing the first window. As a result of RQC and Patch 1, while a user can place multiple items from Item Master on one requisition or multiple items from a single Punchout vendor on one requisition, the user can no longer combine items from Item Master with items from Punchout vendors on the same requisition nor can he combine items from multiple Punchout vendors onto a single requisition. Further, as a general principle, there is no way for Lawson's users to disable these changes in the RQC module. 
The foregoing findings of fact provide a basic factual context for discussion of the procedural and substantive legal issues relevant to the contempt hearing. Further findings of fact are made as appropriate in the ensuing legal discussion and conclusions.
The TiVo Test
Contempt is a " severe remedy and should not be resorted to where there is fair ground of doubt as to the wrongfulness of the defendant's conduct."
Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618, 5 S.Ct. 618, 28 L.Ed. 1106, 1885 Dec. Comm'r Pat. 295 (1885). The analysis for whether a party should be held in contempt for violating an injunction issued in a patent infringement case as the result of its redesigned product is governed by the decision of the United States Court of Appeals for the
Federal Circuit in TiVo Inc. v. EchoStar Corp., 646 F.3d 869 (Fed. Cir. 2011). TiVo instructs that a contempt proceeding is appropriate upon a " detailed accusation from the injured party setting forth the alleged facts constituting the contempt." Id. at 881.
The contempt analysis is two-fold: " the party seeking to enforce the injunction must prove both that the newly accused product is not more than colorably different from the product found to infringe and that the newly accused product actually infringes." Id. at 882. Throughout the analysis, the Court must be mindful that " legitimate design-around efforts should always be encouraged as a path to spur further innovation." Id. at 883 (citing
State Indus. Inc. v. A.O. Smith Corp., 751 F.2d 1226, 1236 (Fed. Cir. 1985)). Nonetheless, " a defendant's diligence and good faith efforts are not a defense to contempt." TiVo, 646 F.3d at 880.
The Federal Circuit has emphasized that the " not more than colorably different" test should not be guided by the question of whether the new product actually infringes the patent. See TiVo,
646 F.3d at 882 (" Today, we reject that infringement-based understanding of the colorably different test." ). Rather, the focus must be on " the differences between the features relied upon to establish infringement and the modified features of the newly accused products." Id. Further,
The analysis must focus not on differences between randomly chosen features of the product found to infringe in the earlier infringement trial and the newly accused product, but on those aspects of the accused product that were previously alleged to be, and were a basis for, the prior finding of infringement, and the modified features of the newly accused product. Specifically, one should focus on those elements of the adjudged infringing products that the patentee previously contended, and proved, satisfy
specific limitations of the asserted claims. Where one or more of those elements previously found to infringe has been modified, or removed, the court must make an inquiry into whether that modification is significant.
Id. At the most basic level, a product is not more than colorably different from another product if it " performs substantially the same function in substantially the same way with substantially the same result."
Arlington Indus., Inc. v. Bridgeport Fittings, Inc., Civ. A. No. 3:02-cv-134, 2013 WL 1149230, at *3 (M.D. Penn. March 19, 2013) (citing
Graver Tank & Mfg. Co. v. Linde Air Prods. Co., 339 U.S. 605, 608, 70 S.Ct. 854, 94 L.Ed. 1097, 1950 Dec. Comm'r Pat. 597 (1950)). 
The precise meaning of the Federal Circuit's instruction that the Court frame the " more than colorably different" analysis in perspective of " those elements . . . that the patentee previously contended, and proved," id. at 882, has been a source of considerable debate in this action. Lawson has doggedly maintained that the Court must first examine the trial record in the underlying infringement action and determine which arguments the jury accepted in finding that Lawson's product infringed. See generally (Def. Br. on More than Colorable Differences (Docket No. 1070) at 3-4). The parties agree that " only product features relied upon to prove infringement at trial, and subsequently modified by the infringer, are relevant." (Pl. Br. on TiVo (Docket No. 833) at 4); (Def. Br. on TiVo (Docket No. 837) at 5).
TiVo plainly instructs that the Court must compare the elements of the infringing products with the elements of the newly designed product. " If those differences
between the old and new elements are significant, the newly accused product as a whole shall be deemed more than colorably different . . . ." TiVo, 646 F.3d at 882. The question, then, is where the Court should look to determine which " elements" were found to infringe and to what extent, if any, the Court is permitted to inquire into the bases underlying the jury's determination that the original product infringed.
Lawson is undoubtedly correct that that ePlus is confined, in a contempt proceeding, to the theories of infringement that were advanced in the underlying infringement action and, similarly, is bound by the results in that action. As Lawson correctly argues, " where a plaintiff's infringement argument against a newly-accused product differs from that previously presented to the jury, [a] defendant is entitled to have a jury, not the Court, adjudicate the new theory." (Def. Br. on Colorable Differences at 6);
see also Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d 1345, 1350 (Fed. Cir. 1998);
Arbek Mfg. v. Moazzam, 55 F.3d 1567, 1570 (Fed. Cir. 1995).
Ordinarily, the Court would turn to the complaint to determine what was " contended." However, the complaint in this action contains nothing more than the cursory allegations that ePlus owns a patent, that Lawson " makes, uses, sells, offers to sell and/or imports" certain " products, services, methods, or processors that infringe" the patent, and that ePlus is, therefore, entitled to damages and injunctive relief. See (Complaint (Docket No. 1) at ¶ ¶ 20-23).  However, shortly before the Initial Pre-Trial Conference, the parties agreed to a scheduling and discovery order which required, inter alia, ePlus to file " a statement identifying, for each Defendant[,] the product, products, or part thereof, that are accused of infringement, and, for each such product or part thereof, shall identify on an element-by-element, claim-by-claim basis how such product or part thereof infringes." See (Proposed Discovery Plan filed November 18, 2009 (Docket No. 121)). As a result, on December 8, 2009, ePlus filed " Infringement Claim Charts" detailing the manner in which ePlus alleged that Lawson's products infringed upon three of ePlus' patents. See (Exs. To Pl.'s Infringement Claim Charts (Docket No. 133) (" Infringement Chart" )). These claims, as therein outlined, were pursued by ePlus in discovery and at trial. The Court concludes that the proper vehicle through which to determine what ePlus " contended" to be infringing is by an examination of the Infringement Charts as they apply to the relevant claims of the relevant patent.
The next question is the manner in which the Court is to determine what ePlus " proved" at the original trial.
See TiVo, 646 F.3d at 882 (noting that the Court must focus on " those elements of the adjudged infringing products that the patentee previously contended, and proved, satisfy specific limitations of the asserted claims." ) (emphasis added). Lawson insists that the proper approach is for the Court independently to examine the underlying trial evidence in an effort to determine exactly what the jury found. The Court consistently has taken the view
exthat " the Federal Circuit, in TiVo, did not intend for district courts to attempt to devine [sic] what was in the mind of juries when they returned their verdicts." See Memorandum Opinion dated March 27, 2013 (Docket No. 1035) at 7.  The approach urged by Lawson runs afoul of a fundamental principle of our jurisprudence: that " the controlling distinction between the power of the court and that of the jury is that the former is the power to determine the law and the latter to determine the facts." Dimick v. Schiedt,
293 U.S. 474, 485, 55 S.Ct. 296, 79 L.Ed. 603 (1935). Indeed, as a general matter, " it would be constitutionally impermissible for the district court to re-examine the jury's verdict." Duro-Last, Inc. v. Custom Seal, Inc.,
321 F.3d 1098, 1107 (Fed. Cir. 2003); see also Connell v. Sears, Roebuck & Co., 722 F.2d 1542, 1545 (Fed. Cir. 1983) (" Jury verdicts must be treated with great deference. The Seventh Amendment to the Constitution preserves the right to trial by jury in suits at common law and also provides that United States Courts shall not re-examine facts tried by jury except under the rules of common law." ).
Lawson relies, principally, on two decisions to support its contention that the Court must " go back and look at the evidence" at the original trial in order to determine what was " contended and proved" at trial. See (Tr. of Closing Argument (Docket No. 1078) at 24:12-18). First, Lawson points to
Taser International, Inc. v. Stinger Systems, Inc., No. CV07-42-PHX-JAT, (D. Az. Jan 18, 2012). In Taser, the district court had decided the underlying case on summary judgment and later was faced with the claim that a redesigned product was " apart from a few cosmetic changes, essentially the same" as the infringing product. Taser, Slip Op. at 2. After setting forth the TiVo " colorable differences" test, the district court examined its summary judgment opinion, and the findings contained therein, to determine the nature of the previous infringement and the relevant features of the product in order to determine the elements relevant to the colorability analysis. The court detailed those features that it had " emphasized" in its opinion finding infringement as well as the evidence upon which it relied in arrived at its conclusion. Id. at 8. The court then examined the features of the new product in perspective of those features. After its analysis, the Taser court concluded that the products were more than colorably different and that, therefore, a contempt proceeding was not appropriate. Id. at 10.
Taser is not helpful to the present analysis simply because it was a summary judgment case. A court assessing the reasons underlying its own decision does not threaten the " traditional sanctity of jury verdicts" nor does it invite " speculation as to the manner in which the jurors arrived at it."
Mid-West Underground Storage, Inc. v. Porter, 717 F.2d 493, 501 (10th Cir. 1983).
Second, Lawson emphasizes the decision in nCube Corp. v. SeaChange International, Inc., 809 F.Supp.2d 337 (D. Del. 2011). There, the injunction at issue followed a jury verdict. In nCube, the district court compared the trial testimony with the testimony at the contempt hearing. See e.g. id. at 355 (" The Court concurs that [the witnesses] hearing testimony was consistent with his trial testimony." ). The court went on to articulate the expert's trial testimony and then contrast it with the record established during the contempt hearing. Id. Indeed, the nCube court addressed the argument that, because the
plaintiff's expert had testified at trial that a particular feature of the infringing product satisfied a particular limitation, the removal of that feature made the product more than colorably different. Id. at 354. The court rejected that argument both on the basis that the expert had not limited his opinion to that particular feature and on the basis that TiVo permitted a contempt finding if the infringing feature was merely replaced with a component that " does not amount to a significant change." Id. at 354 n. 6, 355.
The nCube court provided no analysis or explanation for its decision to return to the trial testimony other than the statement that " any analysis about whether colorable differences exist with respect to the modified ITV product must focus on how ARRIS alleged and proved to the jury that" the original product infringed. Id. at 354. The court neither addressed nor ...