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IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS MARSHALL DIVISION TIVO INC., Plaintiff, vs. DISH NETWORK CORPORATION, et al., Defendants. CIVIL ACTION NO. 2:04-CV-01 (DF)
AMENDED FINAL JUDGMENT AND PERMANENT INJUNCTION Pursuant to Rule 58 of the Federal Rules of Civil Procedure, and in accordance with the jury verdict delivered on April 13, 2006 and the Federal Circuit mandate issued April 18, 2008, and with the Courts contemporaneously filed opinions and orders, the Court hereby enters judgment for Plaintiff against Defendants for willful infringement of U.S. Patent No. 6,233,389 (the 389 Patent) claims 31 and 61 (the Infringed Claims) by Defendants following DVR receivers (collectively the Infringing Products): DP-501, DP-508, DP-510, DP-522, DP-625, DP-721, DP-921, and DP-942. The jury in this case found EchoStars infringement to be willful, but the Court, finding that Echostar did not act in bad faith and that this is not an exceptional case, has determined that there should be no enhancement of damages and no award of attorneys fees pursuant to 35 U.S.C. Sections 284 and 285. The Court also enters judgment for Plaintiff on Defendants counterclaims for declaratory judgment of non-infringement, invalidity, and unenforceability. IT IS THEREFORE ORDERED THAT Plaintiff shall have and recover from Defendants, jointly and severally, the total sum of $73,991,964.00, together with prejudgment interest at the rate
of prime, said prejudgment interest in the total sum of $5,367,544.00, together with supplemental damages in the amount of $10,317,108.00, together with post-judgment interest on the entire sum calculated pursuant to 28 U.S.C. 1961. In addition, Plaintiff shall have and recover from Defendants, jointly and severally, the sum of $103,068,836 in damages accrued during the stay of this Courts injunction, together with post-judgment interest on that sum calculated pursuant to 28 U.S.C. 1961. The amounts awarded in this judgment shall bear interest from the date of judgment at the lawful federal rate. It is FURTHER ORDERED that each Defendant, its officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with them who receive actual notice hereof, are hereby restrained and enjoined, pursuant to 35 U.S.C. 283 and Fed. R. Civ. P. 65(d), from making, using, offering to sell, selling, or importing in the Untied States, the Infringing Products, either alone or in combination with any other product and all other products that are only colorably different therefrom in the context of the Infringed Claims, whether individually or in combination with other products or as a part of another product, and from otherwise infringing or inducing others to infringe the Infringed Claims of the 389 Patent. Defendants are hereby FURTHER ORDERED to, within thirty (30) days of the issuance of this order, disable the DVR functionality (i.e., disable all storage to and playback from a hard disk drive of television data) in all but 192,708 units of the Infringing Products that have been placed with an end-user or subscriber. The DVR functionality, storage to and playback from a hard disk drive, shall not be enabled in any new placements of the Infringing Products. Defendants shall forthwith provide written notice of this judgment, and the injunction ordered herein, to their officers, directors, agents, servants, representatives, attorneys, employees, -2-
subsidiaries and affiliates, and those persons in active concert or participation with them, including any and all manufacturers, distributors, retailers, and service providers who have been involved in the making, using, selling, offering for sale or importing of any Infringing Products, and to all other persons or entities involved in any way with the making, using, selling, offering for sale or importing of any Infringing Products. Defendants shall take whatever means are necessary or appropriate to ensure that this order is properly complied with. This injunction shall run until the expiration of the 389 Patent. It is FURTHER ORDERED that Defendants shall inform this Court of any further attempt to design around the 389 Patent and shall seek approval from this Court before any such designaround is implemented. This Court retains jurisdiction over Defendants to enforce any and all aspects of this Judgment and Permanent Injunction, including the award of monetary sanctions for EchoStars contempt of this Courts injunction. The Court further retains jurisdiction to award Plaintiff amounts for supplemental damages,
. interest, costs, attorneys fees and such other or further relief as may be just and proper.
All relief not specifically granted herein is denied. All pending motions not previously ruled on are denied. This is a Final Judgment and is appealable.
SIGNED this 2nd day of June, 2009.
____________________________________ DAVID FOLSOM UNITED STATES DISTRICT JUDGE
DP-501, DP-508, and DP-510operate using a chip from ST Microelectronics and are referred to as the 50X Products. The second categorycontaining model numbers DP-522, DP-625, DP-721, DP-921, and DP-942operate using a Broadcom chip and are appropriately referred to as the Broadcom Products. In its verdict, the jury found that all asserted claims of the 389 Patent were valid and that EchoStars accused DVRs infringed each of those claims. See Dkt. No. 690 (verdict form). Specifically, the jury found that the 50X Products literally infringed all claims, while the Broadcom Products literally infringed the Hardware Claims and infringed the Software Claims under the doctrine of equivalents. Finally, the jury awarded TiVo $73,991,964 in damages and found by clear and convincing evidence that EchoStars infringement was willful. Following the jurys verdict, EchoStar immediately assigned some of its best engineers the task of designing around the 389 Patent. Dkt. No. 919 at 71-74. Although this Court, as more fully explained below, enjoined EchoStar from further infringement and ordered it to disable the DVR capability in the infringing products, that order was stayed pending an appeal to the Federal Circuit. By the time that stay was lifted and this Courts injunction was once again in effect, EchoStar had long since downloaded its design-around effortmodified DVR softwareinto its DVR products. It is TiVos position, however, that EchoStar never complied with this Courts order and to this date provides infringing DVR service to its customers on the very products that the jury found to infringe. As a result, TiVo requests that EchoStar be found in contempt. Dkt. No. 832. In response, EchoStar contends that it has successfully designed around the 389 Patent. Dkt. No. 839. As a result, EchoStar believes that this Courts injunction, meant to enjoin only infringing activities, cannot cover EchoStars modified products. Id. -3-
A. Following the jury verdict in its favor, TiVo asked this Court to issue an injunction prohibiting EchoStar from further infringement of the 389 Patent and requiring EchoStar to disable the DVR functionality in its infringing products. Dkt. No. 733. EchoStar opposed TiVos request and asked the Court to stay any injunction that might issue pending appeal. Dkt. Nos. 737 and 754. After considering both parties positions, this Court entered its Final Judgment and Permanent Injunction on August 17, 2006. Dkt. No. 776. This Court also denied EchoStars request to stay the injunction pending appeal. Dkt. No. 773. The Courts injunction, as later amended by joint motion (Dkt. No. 800), reads: Each Defendant, its officers, agents, servants, employees and attorneys, and those persons in active concert or participation with them who receive actual notice hereof, are hereby restrained and enjoined, pursuant to 35 U.S.C. 283 and Fed. R. Civ. P. 65(d), from making, using, offering to sell, selling or importing in the United States, the Infringing Products, either alone or in combination with any other product and all other products that are only colorably different therefrom in the context of the Infringed Claims, whether individually or in combination with other products or as part of another product, and from otherwise infringing or inducing others to infringe the Infringed Claims of the 389 patent. Defendants are hereby further ordered to, within thirty (30) days of the issuance of this order, disable the DVR functionality (i.e. disable all storage to and playback from a hard disk drive of television data) in all but 192,708 units of the Infringing Products that have been placed with an end user or subscriber. The DVR functionality, (i.e. disable all storage to and playback from a hard disk drive of television data) shall not be enabled in any new placement of the Infringing Products. Dkt. No. 806 at 2.
As can be seen, the injunction contained two major provisions. First, it contained an Infringement Provision, which prohibited further infringement of the 389 Patent by the infringing DVRs. Second, it contained a Disablement Provision, which required EchoStar to disable the DVR functionality, as specifically defined by the Court, in the infringing DVRs. The Disablement Provision did provide an exception for 192,708 DVR units, the number of units for which TiVo received lost profit damages and against which TiVo did not pursue an injunction. See Dkt. No. 747 at 16. EchoStar took issue with the exact language of the Disablement Provision. Specifically, EchoStar argued that the provision was overbroad and EchoStar contended that the appropriate scope of the injunction, if one were to issue, would enjoin only the provision of infringing DVR software to those boxes upon activation. Id. (emphasis added). TiVo opposed EchoStars proposal and warned that it would be an invitation for EchoStar to engage in mischief. [and] would only result in EchoStar providing what it deemed as non-infringing DVR software to its already-foundto-be-infringing DVRs, creating the opportunity for interminable disputes to determine what exactly is infringing DVR software. Dkt. No. 747 at 15. Such a dispute is presently before this Court. While the parties were disputing the form that the injunction should take, EchoStar was already well on its way to implementing its design-around effort. Before this Court entered its Amended Final Judgment and Permanent Injunction on September 8, 2006, EchoStars development efforts were so far advanced that it had obtained three written opinions of counsel. Id.; see also PX3028, PX3029, and PX3030. At that time, however, EchoStar had not informed this Court of any design-around efforts.
After this Court entered its permanent injunction, EchoStar asked the Federal Circuit to stay the injunction during EchoStars pending appeal. In that request, EchoStar represented that without the stay it would be unable to provide DVR service and would risk losing a significant portion of its existing or potential customers, which could cost the company $90 million per month. See Dkt. No. 920 at 20 (citing EchoStars Reply Brief In Support of Its Emergency Motion to Stay the District Courts Injunction, at 9). EchoStar never mentioned its design-around efforts to the Federal Circuit. As a result of EchoStars representations, however, the Federal Circuit granted EchoStars request for a stay of the injunction on October 3, 2006. Dkt. No. 812. Later that month, EchoStar began downloading modified software into its customers DVRs (Dkt. No. 839 at 8); this fact did not become known to any court until May 2008, after the appellate process had concluded. TiVo contests whether EchoStar actually downloaded the modified software into all of its infringing products. Indeed, EchoStar has admitted that it do[es] not have a way to check if every unit actually received the new software. Dkt. No. 912 at 30:11-15. For the purposes of this opinion, however, the Court will assume that the new software was downloaded to all infringing DVRs. B. On appeal, EchoStar challenged this Courts claim construction on a number of grounds. See TiVo, Inc. v. EchoStar Commcns Corp., 516 F.3d 1290, 1295-1307 (Fed. Cir.), cert. denied, 129 S. Ct. 306 (2008). While most of those challenges concerned the Hardware Claims, EchoStar did challenge this Courts interpretation of one termobjectwithin the Software Claims. Id. at 1306-07. Although the Federal Circuit reversed this Courts construction of certain terms within the Hardware claims (id. at 1304-05), it affirmed this Courts construction of object in the Software
The Delaware Court recently denied TiVos motion to dismiss the declaratory judgment action. Dish Network Corp. v. TiVo, Inc., Civil Action No. 08-327-JJF (March 31, 2009). The Delaware court found that it had jurisdiction to decide the action under MedImmune, Inc. v. Genentech, Inc., 549 U.S. 118 (2007) and that EchoStar was not engaged in improper forum shopping because TiVo is a Delaware corporation. The Delaware court, however, found that it was unable to make a concrete determination as to whether the redesigned products present more than a colorable difference over the infringing products. That determination, in the opinion of the Delaware court, is one best made by this Court given its experience with the case. Accordingly, the parties have been ordered by the Delaware Court to brief whether transfer of the declaratory judgment action to this Court would be appropriate. In its original formulation, the February hearing would have considered the continued infringement of both the Software Claims and the Hardware Claims. Dkt. No. 864. Although the jurys finding of literal infringement of the Hardware Claims had been overturned, the Federal Circuit did not render an opinion regarding EchoStars infirngement of those claims under the doctrine of equivalents. TiVo, 516 F.3d at 1304-05. The Circuit remanded that issue for further proceedings should TiVo wish to pursue such. Id. TiVo, however, indicated that it did not wish to do so in these contempt proceedings, so the Hardware Claims have been dropped from consideration at this time.
pending the appellate courts decision. Dkt. No. 865. This Court denied EchoStars request for stay; due to the agreement of the parties, however, the Court limited the scope of the February hearing. Dkt. No. 869 and 870. The Court limited the hearing to two discrete issues: (1) whether the software downloaded to EchoStars DP-501, DP-508, DP-510, DP-522, DP-625, DP-721, DP-921, and DP-942 is no more than colorably different from the adjudged software; and (2) whether those receivers continue to infringe claims 31 and 61 of U.S. Patent No. 6,233,389, either literally or under the doctrine of equivalents. Dkt. No. 870. With these changes in hand, EchoStar voluntarily moved to dismiss its mandamus petition. Dkt. No. 873. After the parties had conducted discovery, the Court held a hearing to address these issues on February 17-19, 2009. Dkt. Nos. 910-914 (transcripts). Now that the parties have submitted proposed findings of fact and conclusions of law for this Courts consideration (Dkt. Nos. 919 and 920), this Court addresses all issues raised by TiVos motion to hold EchoStar in contempt. II. A contempt proceeding for violation of an injunction issued in a patent case, while primarily for the benefit of the patent owner, nevertheless, involves also the concept of an affront to the court for failure to obey its order. KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1524 (Fed. Cir. 1985). The process of contempt, however, is a severe remedy, and should not be resorted to where there is fair ground of doubt as to the wrongfulness of the defendants conduct. Id. at 1525 (quoting Cal. Artificial Stone Paving Co. v. Molitor, 113 U.S. 609, 618 (1885)). Such restraint is even more warranted when an enjoined party has taken steps to reform its conduct. See id. ([W]here the patent owner seeks to enforce an injunction against an enjoined infringer by reason
of a manufacture which was not the subject of the original litigation, the courts have been uniform in exercising restraint.). In determining whether such restraint should be set aside and contempt found in a patent case, a court must address two separate questions. First, the court must decide whether contempt proceedings are the appropriate forum to determine whether the modified device infringes. Id. at 1530-32; see also Additive Controls & Measurement Sys., Inc. v. Flowdata, Inc., 154 F.3d 1345, 1349 (Fed. Cir. 1998). In making this threshold determination, the court must compare the adjudged and modified products; if the products are more than colorably different such that substantial open issues of infringement exist, then contempt proceedings are inappropriate. KSM, 776 F.2d at 1528-32; Additive Controls, 154 F.3d at 1349. In the event that contempt proceedings are inappropriate, the patent owner must enforce its rights in a separate infringement action. KSM, 776 F.2d at 1530-32; Additive Controls, 154 F.3d at 1349. If the court, however, finds that contempt proceedings are appropriate, then it must resolve a second questionwhether the modified products continue to infringe the claims of the patent at issue. KSM, 776 F.2d at 1532; Additive Controls, 154 F.3d at 1349. In addressing this second question, the court cannot avoid looking at the claims of the patent. KSM, 776 F.2d at 1528. The scope of those claims must be interpreted using the courts previous rulings and may not be broadened so as to catch the modified product. Id. at 1529. In some cases, however, it may only be necessary to determine that the modified device has not been changed from the adjudged device in a way which affects an element of a claim. Id. at 1528-29. In such a case, the modified and adjudged devices may be treated as the same. Id. at 1529.
Within the general constraints of this two-step test, the district court has broad discretion to determine how best to enforce its injunctive decrees. Additive Controls, 154 F.3d at 1349. To this end, a court may request the benefit of expert testimony to determine whether more than colorable differences and continued infringement exist. See id. (Although [Federal Circuit] case law suggests that the need for expert testimony counsels against the use of contempt proceedings. the district court satisfied the procedural requirements of KSM by separately analyzing the questions whether contempt proceedings were appropriate and whether the redesigned device infringed the patent.); Abbot Labs. v. Torpharm, Inc., 503 F.3d 1372, 1379 (Fed. Cir. 2007) (court did not abuse discretion in electing to try issues in contempt proceedings even though expert testimony was needed).4 A. As mentioned above, the Federal Circuit has cautioned that contempt is a severe remedy, which should not be resorted to lightly. KSM, 776 F.2d at 1525; see also Arbek Mfg., Inc. v. Moazzam, 55 F.3d 1567, 1569 (Fed. Cir. 1995). As a result, the Federal Circuit has stated that the movant bears the heavy burden of proving violation by clear and convincing evidence. KSM, 776 F.2d at 1524 (citing 11 CHARLES ALAN WRIGHT & ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE : CIVIL 2960 at 591). There is some question, however, as to whether a clear and convincing burden applies to both steps of the KSM test. EchoStar argues that it does (Dkt. No. 919 at 17-19), while TiVo argues that
Given the complex technology in this suit, this Court believes that expert testimony was helpful in resolving both steps of the KSM test, as both steps required this Court to analyze the source code in EchoStars modified software. Although expert testimony may not be necessary with regard to more tangible technology, the Court found it helpful under the circumstances of this case.
the heightened burden applies only to step two, infringement by the modified device (Dkt. No. 920 at 27-29). After reviewing both KSM and its progeny, this Court agrees with TiVo. The Federal Circuits only mention of the clear and convincing burden in the KSM decision comes at the very beginning of the opinion. KSM, 776 F.2d at 1525. At that point in the opinion, Judge Nies is discussing contempt proceedings in their broadest sense. See id. (Contempt proceedings are generally summary in nature and may be decided by the court. without the formalities of trial, although the movant bears the heavy burden of proving violation by clear and convincing evidence.). Once the opinion turns to its two-step test, however, the Circuit is silent regarding this heightened burden. In later iterations, however, the Circuit has suggested that the clear and convincing burden only applies to the second step of the KSM test. Specifically, the Circuit has stated that to show contempt, the patent owner must prove by clear and convincing evidence that the modified device falls within the admitted or adjudicated scope of the claims and is, therefore, an infringement. Arbek, 55 F.3d at 1569 (quoting KSM, 776 F.2d at 1530). This comparison of modified device to the claims and the connected conclusion that the modified device is or is not an infringement is what the second KSM step is designed to accomplish. Compare Arbek, 55 F.3d at 1569, with KSM, 776 F.2d at 1529-30, and Additive Controls, 154 F.3d at 1349 (discussing second step). While a heightened burden clearly applies to step two of the KSM test, it is less clear what, if any, burden applies to the first step. Recall that under the KSM two-step test, the first and threshold question determines whether contempt proceedings are even appropriate given the facts of a case. KSM, 776 F.2d at 1530-32; Additive Controls, 154 F.3d at 1349. Although some district courts have applied a heightened burden to this threshold determination (see e.g. Brine, Inc. v. STX,
L.L.C., 367 F. Supp. 2d 61, 67 (D. Mass. 2005)), this Court does not believe that such is proper. Instead, this Court finds that no burden attaches to the first KSM step as it is a purely procedural standard entrusted to the discretion of the trial court. See KSM, 776 F.2d at 1532. To clarify this Courts finding, it is helpful to quote KSM at length. After determining that the colorable differences test should be used over a competing doctrine-of-equivalents-based test, the Circuit concluded as follows: With respect to the issue of when contempt proceedings will be allowed, we conclude that the procedural analysis used by the majority of courts should be adopted as the general rule. A standard based on procedural considerations is more likely to meet due process requirements, considering the usual summary nature of contempt proceedings. Under a procedural standard, the district court is able to utilize principles of claim and issue preclusion (res judicata) to determine what issues were settled by the original suit and what issues would have to be tried. Such a determination may vary depending upon whether the original suit was settled by consent or fully litigated. If there are substantial open issues with respect to infringement to be tried, contempt proceedings are inappropriate. The presence of such disputed issues creates a fair ground for doubt that the decree has been violated. So long as the district court exercises its discretion to proceed or not to proceed by way of contempt proceedings within these general constraints, this court must defer to its judgment on this issue. In sum, the initial question to be answered in ruling on a motion for contempt is whether contempt proceedings are appropriate. That question is answered by the trial court's judging whether substantial disputed issues must be litigated. The second question, whether an injunction against infringement has been violated, requires, at a minimum, a finding that the accused device is an infringement. Id. (emphasis added, internal citations omitted). Thus, the threshold question of whether contempt proceedings are appropriate is left entirely to the discretion of the trial court. It is not for one party to prove that such proceedings are or are not appropriate. If, and only if, the trial court determines that contempt proceedings are appropriate does -13-
the movant bear a burden of proving the second questioninfringement by the modified deviceby clear and convincing evidence. B. Answering the steps of the KSM test requires comparisons between the original product, the modified product, and the claims. The first step determines whether there are more than merely colorable differences between the products. KSM, 776 F.2d at 1530-32. As such, the first step turns on a comparison between the original infringing product and the redesigned device. Additive Controls, 154 F.3d at 1549. The actual claims of the patent are not truly at issue in KSMs first step, though to be certain, any difference between the products must relate to some claim element. See id. at 1350 (finding no more than colorable differences or substantial questions of infringement because the differences related to no elements of the pertinent patent claim). If no more than colorable differences are found such that there are no substantial open issues of infringement, then the second step of the KSM test compares the redesigned product to the patent claims as previously adjudged. KSM, 776 F.2d at 1529-30. In making this comparison, the Court is bound by its previous rulings on the scope of the claims and may not broaden the scope of the claims to catch the modified device. Id. at 1530. This Court also finds, however, that the scope of the patent claims is not, as EchoStar contends (Dkt. No. 919 at 19-45), limited by a jurys verdict or a patentees theories at trial. As the second step of the KSM analysis is nothing more than a normal patent infringement analysis involving the modified product, the proper scope of the patent claims is governed by the trial courts prior decisions on claim construction as upheld by the Federal Circuit. See Markman v. Westview Instruments, Inc., 52 F.3d 967, 976 (Fed. Cir. 1995), affd, 517 U.S. 370 (1996) (An infringement analysis entails two steps. The first step is determining the
Claim 61 is similar to claim 31, except that it recites an apparatus rather than a process. 389 Patent at 18:3-30. For all intents and purposes, however, the parties have treated the two claims alike for these proceedings.
No. 910 at 66:9-67:19. Specifically, TiVo contends that the limitation is still met by PID filtering, which involves analyzing the incoming data stream and selecting the appropriate packets of data associated with a program or channel selected by the viewer. Id. In support of this position, TiVo cites to testimony at the 2006 trial in which experts, including EchoStars own experts, testified that PID filtering satisfied the parsing limitation in the Software Claims. Dkt. No. 716 at 110:10-111:14; Dkt. No. 722 at 99:17-100:23. In response, EchoStar argues that judicial estoppel bars TiVo from arguing that PID filtering satisfies the parsing limitation. Dkt. No. 919 at 21-38, 92-98. EchoStar contends that TiVo argued at trial that the parsing limitation was satisfied by start-code detection and indexing. Id. Because the jury agreed with this position, in that it returned a verdict favorable to TiVo, EchoStar believes that TiVo cannot now assert that parsing is met by something other than start-code detection and indexing. Id. In addition, EchoStar argues that PID filtering does not involve the analyzing of data; instead, it involves merely looking at the header of an incoming packet of data rather than its payload. Dkt. No. 912 at 171:14-172:2; Dkt. No. 919 at 99-103. Moreover, EchoStar contends that the 389 Patents specification makes it clear that PID filtering is not parsing and that PID filtering, common to digital receivers without DVR capability, is not central to the invention embodied in the 389 Patent. Dkt. No. 919 at 29-33, 103-107 With respect to EchoStars Broadcom Products, EchoStar contends that it made two changes. First, EchoStar implemented the same indexless system found in the 50X Products. Dkt. No. 919 at 53-55. Thus, EchoStar argues that its Broadcom Products also do not satisfy the parses limitation of the Software Claims. Dkt. No. 919 at 92-119. Second, EchoStar modified the
buffering structure used to record data to the Broadcom Products hard drive. See Dkt. No. 919 at 38-42, 55-58. At the time of trial, EchoStars infringing Broadcom receivers utilized a pool of ten buffers (collectively the transport buffer) and an intermediate record buffer. Dkt. No. 910 at 219:24223:20. When one of the ten buffers in the transport buffer was full, EchoStars software would copy the data from that single buffer into the record buffer. That data would then be written to the hard drive from the record buffer. Additional data would not be transferred from any of the nine remaining buffers to the record buffer until the record buffers data had been transferred to the hard drive. In other words, EchoStars infringing product would never extract data from the transport buffer until the record buffer was empty and available. This blocking of access to the record buffer prevented data already in the record buffer from being overwritten. Id.; Dkt. No. 919 at 55-58. EchoStar modified its software by removing the record buffer such that data is now transferred directly from the transport buffer to the hard drive. Dkt. No. 910 at 110:7-112:8, 217:6218:19. Thus, EchoStar contends that the blocking function performed by the record buffer is no longer present in its modified receivers. Because it removed this blocking function, EchoStar believes that its DVR software no longer satisfies the automatic flow control limitation of the Software Claims. Dkt. No. 910 at 226:1-231:14; Dkt. No. 912 at 222:15-235:19; Dkt. No. 919 at 119-139. The fifth step of claim 31s storage and playback process requires a source object [that] is automatically flow controlled by said transform object. 389 Patent at 15:1-2 (emphasis added). TiVo argues that this limitation is still satisfied by EchoStars modified Broadcom Products because data transfer is still self-regulated in those products. During claim construction, this Court construed the term automatically flow controlled in claims 31 and 61 to mean self-regulated.
Dkt. No. 185 at 24. On appeal, EchoStar did not challenge this Courts construction of that term. See TiVo, 516 F.3d at 1295-1307. TiVo argues that self-regulation is not limited to the blocking of data flow. Dkt. No. 910 at 87:9-25; Dkt. No. 920 at 41-44, 53-56. As EchoStars modified products still operate using ten buffers in a circular formation, in which data is written into one buffer at a time, TiVo argues that self-regulation is still present. Dkt. No. 910 at 86:9-117:19. In response, EchoStar once again argues that judicial estoppel bars TiVos arguments. Dkt. No. 919 at 38-42, 119-25. Echostar contends that TiVo argued at trial that the record buffer provided automatic flow control. Id. Because the jury agreed with this position, in that it returned a verdict favorable to TiVo, EchoStar believes that TiVo cannot now argue that the redesigned Broadcom receivers infringe notwithstanding the removal of the record buffer. Id. In addition, EchoStar argues that a circular buffer cannot by itself provide for flow control because overflow is still a possibility in such a system. Dkt. No. 910 at 221:15-222:9; Dkt. No. 912 at 227:24-228:5; Dkt. No. 919 at 13032. Finally, EchoStar contends that the redesigned circular buffer system lacks the required source object and transform object. Dkt. No. 919 at 129-130. To summarize, EchoStar contends that it made one change to its 50X Productsit removed start-code detection and implemented a indexless system. Under this system, EchoStar believes that its products no longer parse incoming data as required by the 389 Patent. EchoStar also implemented this indexless system in its Broadcom Products. Moreover, EchoStar changed the buffering structure in its Broadcom Productsit removed an intermediate buffer dubbed the record buffer. EchoStar believes that its Broadcom Products, in the absence of this record buffer, are no longer automatically flow controlled as required by the 389 Patent.
Having now outlined the parties basic positions with respect to the actual changes made to the infringing products, the Court will address EchoStars judicial estoppel arguments before analyzing EchoStars modifications under the two-step KSM test. A. The doctrine of judicial estoppel prohibits a party from taking inconsistent positions in the same or related litigation. Transclean Corp. v. Jiffy Lube Intll, Inc., 474 F.3d 1298, 1307 (Fed. Cir. 2007) (citation omitted). The doctrine is designed to protect the integrity of the judicial process and may be invoked by the court at its discretion. New Hampshire v. Maine, 532 U.S. 742, 749-50 (2001). In determining whether to invoke judicial estoppel courts typically look to several factors: (1) whether a partys later position is clearly inconsistent with its earlier position; (2) whether the party has succeeded in persuading the court to accept that partys earlier position, so that acceptance of the later position would create the perception that either the first or second court was misled; and (3) whether the party seeking to assert an inconsistent position would cause unfair prejudice if not estopped. Id. Here, EchoStar argues that TiVo should be estopped from taking positions that EchoStar believes are inconsistent with positions taken at trial. Dkt. No. 919 at 19-45. Specifically, EchoStar argues that TiVo should be prevented from arguing that start-code detection is not necessary to claims 31 and 61 when it argued at trial that start-code detection satisfied the parsing limitation. In addition, TiVo should be prevented from arguing that those claims do not require the blocking of access to buffers to prevent the overflow of data when it argued at trial that automatic flow control was satisfied by such blocking.
out start-code detection and indexing, it is possible for the physical data source to do less. In other words, the physical data source could carry out a much simpler task than start-code detection and indexing while still satisfying the parsing limitation of the Software Claims. TiVo may take this position without being inconsistent, without creating the perception that the Court was misled, and without the danger of unfair prejudice to EchoStar. Finally, EchoStars argument that this Court must accept the scope of the claims as adjudicated by the jury (Dkt. No. 910 at 33:5-6) is unpersuasive. EchoStar would have this Court introduce start-code detection, indexing, or blocking requirements into claims 31 and 61. EchoStar believes such is proper because the jury seemingly accepted TiVos arguments at trial. Dkt No. 910 at 32:15-25. As a result, EchoStar argues that the adjudicated scope of the claims was determined by jury deliberations rather than this Courts claim construction. Dkt. No. 910 at 23:23-24:2 (modifications attempted to design-around the scope of the claims as adjudicated by the jury), 33:5-6 (We have to be looking at contempt in the scope of the claims as adjudicated by the jury.). EchoStars position is erroneous in a number of ways. First, this Court instructed the jury as to the meaning of the claims. The jury was told that it had to apply this Courts interpretations of the claims. Dkt. No. 691 at 6. The Court must assume that the jury complied with its instruction and did not apply its own interpretation to the claims. Second, even if this Court accepted EchoStars position, there is no way to determine the thought process of the jury. Some or even all members of the jury may have believed from the testimony that parsing was satisfied by PID filtering rather than start-code detection. Finally, EchoStars position would allow experts to once again argue about the scope of claim terms. Indeed, at the February hearing EchoStars expert, Dr. Rhyne, testified that he considered what had been successful in the eyes of the jury to determine his
opinion of claim scope. Dkt. No. 912 at 168:6-169:9. Such postulation by experts as to the scope of patent claims has been repeatedly deemed improper by the Federal Circuit. Markman, 52 F.3d at 970-721 (the interpretation and construction of patent claims, which define the scope of the patentee's rights under the patent, is a matter of law exclusively for the court); O2 Micro Intl Ltd. v. Beyond Innovation Tech. Co., 521 F.3d 1351, 1362 (Fed. Cir. 2008). In the end, this Court finds EchoStars judicial estoppel argument to be a thinly veiled attempt to reargue claim construction and limit the scope of the 389 Patent. Such is not proper. This Courts constructions, which were affirmed by the Federal Circuit, are the settled law of the case and must be applied without further broadening or limitation. W.L. Gore & Assocs. v. Garlock, Inc., 842 F.2d 1275, 1279 (Fed. Cir. 1988). As such, parses, in the context of the Software Claims, means analyzes and is not limited to start-code detection or indexing. Likewise, automatic flow control means self-regulated and is not limited to the blocking of access to buffers to prevent overflow. B. The Court now turns to the first step of the KSM test. Recall that this first stepthe threshold question of whether contempt proceedings are appropriaterequires a comparison between the infringing and modified products. This comparison must be made in light of the claims; any difference will be deemed more than colorable if, and only if, it touches on some claim limitation. EchoStar argues that the changes made to its DVR software were significant. To that
end, EchoStar points to the amount of source code that it changed5,000 of the 10,000 lines of DVR code. Dkt. No. 912 at 26:8-14. TiVo argues that this change is insignificant when compared
to the millions of lines of code found in the EchoStar boxes, of which hundreds of thousands could be characterized as DVR code. Dkt. No. 920 at 32; Dkt. No. 708 at 44:1-22. In addition, EchoStar contends that it invested 8,000 man-hours of work and over $700,000 in its redesign efforts. Dkt. No. 912 at 19:1-16. TiVo points out, however, that these amounts are minimal when compared to the more than $120 million that EchoStar spent on advertising during the same time period, including $50 million on a campaign utilizing the slogan Better than TiVo. Dkt. No. 291 at 140-12-141-13; PX3101, PX3102. The price-tag of EchoStars alleged designaround effort is also well below its CEOs previous estimates that such a design-around could cost tens of millions of dollars. Dkt. No. 793 at 43:8-44:2 (noting that litigation would have cost less than pursuing a viable design-around). Although the Court notes the amount of money spent by EchoStar in its design-around effort and the amount of source code that was modified, this evidence has no effect on the KSM analysis. In the end, such evidence is just as insignificant as the amount of money EchoStar spent on advertising. EchoStar also points to opinion of counsel letters received during the development of its new software and relies on the testimony of the letters authors. Dkt. No. 912 at 59:17-61:10, 67:2-13, 97:18-98:2; DX5073, DX5074, DX5076. The Court, however, chooses to give this evidence little weight. For the most part, the letters and testimony are evidence of EchoStars alleged good faith, which is irrelevant in these proceedings. See Additive Controls, 154 F.3d at 1353. To the extent that the letters and testimony analyze EchoStars modifications, their conclusions are cumulative of the testimony provided by EchoStars expert, Dr. Rhyne. Furthermore, as the letters were drafted early in the modification process, their authors did not have benefit of the actual source code that implemented the modifications. Dkt. No. 912 at 61:11-19, 97:2-7.
For these reasons, this Court finds that any differences between the infringing and modified products are no more than colorable and that no substantial open issues of infringement exist. As a result, contempt proceedings in this case are appropriate.6 C. The Court now turns to second step of the KSM test. Recall that this step requires a comparison between the modified products and the patent claims as construed by the court to determine if those products continue to infringe. The movant must demonstrate continued infringement by clear and convincing evidence. The Federal Circuit has allowed, however, that in some cases it may only be necessary to determine that the modified device has not been changed from the adjudged device in a way which affects an element of a claim. KSM, 776 F.2d at 1528-29. In such a case, the modified and adjudged devices may be treated as the same. Id. at 1529. As discussed above, EchoStars modifications do not affect express elements of the disputed claims. The disputed claims do not require start-code detection, indexing, and/or blocking. The disputed claims also do not require a specific buffering structure, much less a specific number of buffers. Instead, the claims require that the incoming data be parsed, which this Court has construed to mean analyzed, and also require automatic flow control, which this Court has construed to mean self-regulated. If this Court was to adopt EchoStars view of the claim requirements, then it would effectively be re-construing the claims. The time for this has long passed. Even if this Court believed that its constructions were overly broad, it is bound by its earlier constructions as affirmed
This Court finds that no burden of proof is attached to step one of the KSM test (as it is ultimately a procedural determination). If, however, EchoStar is correct and TiVo must prove no colorable differences by clear and convincing evidence, then this Court finds that TiVo has also met this heightened burden.
by the Federal Circuit. See Del Mar Avionics, Inc. v. Quinton Instrument Co., 836 F.2d 1320, 1324 (Fed. Cir. 1987) (The prior determination of certain issues, including the issues of claim construction., bars judicial redetermination of those issues. [T]he relitigation of issues previously decided is barred on principles of finality and repose.). This Courts constructions as affirmed are the law of the case. See W.L. Gore & Assocs., 824 F.2d at 1279. If EchoStar wished to argue for a more limited interpretation of parsing or automatic flow control, then it should have done so on appeal. Because EchoStar did not, it has waived any argument that this Courts constructions are incorrect. Because Echostars modifications do not affect elements of the disputed claims as construed, this Court finds that the infringing and modified devices may be treated as the same. As such, this Court finds that EchoStars modified software continues to infringe the Software Claims of the 389 Patent. Furthermore, even if this Court were to assume that EchoStars modifications affected elements of the Software Claims, this Court still finds that the modifications continue to infringe the 389 Patent and that TiVo has proven such by clear and convincing evidence. With regard to EchoStars indexless or brute-force modification, this Court finds by clear and convincing evidence that the modified productsboth the 50X and Broadcom Productsstill parse video and audio data from said broadcast data. It is undisputed that EchoStars products filter incoming data using a PID filter. Internally, EchoStar engineers refer to PID filtering as parsing. Dkt. No. 912 at 41:19-42:1. Furthermore, an EchoStar technical document on the modification uses the term TS Parsing to describe the design-around. PX3277. Numerous experts, some of them EchoStars own, have testified that PID filtering is a form of parsing. Dkt. No. 716
functionality (i.e. disable all storage to and playback from a hard disk drive of television data) in all but 192,708 units of the Infringing Products that have been placed with an end user or subscriber. Whether EchoStar did or did not comply with the Disablement Provision of this Courts order does not raise any issue unique to patent law. As a result, the regional circuit law of the Fifth Circuit applies to this issue. See Eagle Comtronics, Inc. v. Arrow Commcn Labs., Inc., 305 F.3d 1303, 1313 (Fed. Cir. 2002) (applying regional circuit law to civil contempt proceedings). In civil contempt proceedings, the party seeking an order of contempt need only establish (1) that a court order was in effect, and (2) that the order required certain conduct by the respondent, and (3) that the respondent failed to comply with the courts order. FDIC v. LeGrand, 43 F.3d 163, 170 (5th Cir. 1995) (citation omitted). The movant must prove such by clear and convincing evidence. Id.; Martin v. Trinity Indus., Inc., 959 F.2d 45, 47 (5th Cir. 1992). This Courts permanent injunction, which was issued on September 8, 2006, was stayed by the Federal Circuit pending EchoStars appeal. On appeal, EchoStar did not challenge the language or validity of this Courts injunction. Thus, the Federal Circuit upheld the injunction and dissolved its stay once EchoStars appeal became final, which occurred on April 18, 2008. TiVo, 516 F.3d at 1312. This Court, aware of the Federal Circuits general disdain for broad or vague prohibitions of future infringement, drafted its permanent injunction in narrow terms that captured particular infringing devices and required EchoStar to take certain action regarding those devices. See KSM, 776 F.2d at 1526 (those against whom an injunction is issued should receive fair and precisely drawn notice of what the injunction actually prohibits). In particular, EchoStar was ordered to disable DVR functionality in the infringing products that had been placed with an end-user. For the
sake of clarity, this Court provided EchoStar with a definition of DVR functionality: storage to and playback from a hard disk drive of television data. Although EchoStar did not challenge the scope of this Courts order on appeal, EchoStar now argues that the injunction only covers Infringing Products, which in terms of the Software Claims would be infringing software. See Dkt. No. 839 at 10-12. EchoStar argues that it complied with this Courts order when it downloaded new software into the infringing receivers, thus disabling their infringing DVR functionality. This Courts order, however, was not limited to infringing software; rather the infringing receivers in their entirety were subject to the order. Indeed, although claims 31 and 61 have been referred to as the Software Claims they actually cover a process and apparatus that may also contain hardware elements. See TiVo, 516 F.3d at 1309 ([T]he hardware/software distinction made by EchoStar is unhelpful. What matters is whether the operations performed by the interaction of software and hardware in the accused DVRs, taken as a whole, are covered by the claim term.). By not disabling DVR functionality in adjudged receivers that had been placed with end-users, EchoStar failed to comply with the plain language of this Courts order. If EchoStar believed that this Courts order was overly broad or that it improperly covered non-infringing practices, then EchoStar should have requested that this Court modify its order or should have challenged the scope of this Courts order on appeal. Because EchoStar failed to do either, it has waived any argument that this Courts order is overbroad. See W. Water Mgmt., Inc. v. Brown, 40 F.3d 105, 108 (5th Cir. 1994) ([C]ollateral attack on an injunction during contempt proceedings is prohibited if earlier review of the injunction was available.). Instead of requesting review of this Courts order by itself or another court, EchoStar merely ignored this Courts order because it subjectively believed it to be improper or overly broad. This cannot be allowed. See GTE
Sylvania, Inc. v. Consumers Union, 445 U.S. 375, 386-87 (1980) ([P]ersons subject to an injunctive order issued by a court with jurisdiction are expected to obey that decree until it is modified or reversed, even if they have proper grounds to object to the order.); Carborundum Co. v. Molten Metal Equip. Innovations, Inc., 72 F.3d 872, 883 (Fed. Cir. 1995). A party may not unilaterally decide whether it will or will not comply with a court order. Accordingly, this Court finds by clear and convincing evidence that a court order, which required certain conduct by EchoStar, was in effect as of April 18, 2008, and that EchoStar failed to comply with that order. Therefore, this Court finds EchoStar in contempt of this Courts permanent injunction. Specifically, EchoStar is in contempt of the Disablement Provision, which ordered EchoStar to disable the DVR functionality (i.e. disable all storage to and playback from a hard disk drive of television data) in all but 192,708 units of the Infringing Products that have been placed with an end user or subscriber. V. For the reasons set forth above, this Court finds EchoStar in contempt of its permanent injunction. EchoStars modified software is not more than colorably different from the products adjudged to infringe; furthermore, EchoStars products continue to infringe TiVos patent. Finally, EchoStar failed to comply this Courts order that it disable the DVR functionality in the infringing products. The harm caused to TiVo by EchoStars contempt is substantial. EchoStar has gained millions of customers since this Courts injunction issued, customers that are now potentially unreachable by TiVo. See Dkt. No. 773 at 10. As this Court has noted in the past, loss of market share and of customer base as a result of infringement cause severe injury, and every day of
Defendants infringement affects Plaintiffs business. Id. at 10-11. Although EchoStar requests that this Court stay its injunction further, this Court declines to do so. EchoStar has escaped this Courts injunction for over two years and further delay will be manifestly unjust to TiVo and cause TiVo substantial harm. Although EchoStar is required to bring itself into compliance with this Courts permanent injunction, the Court will defer any ruling on the issue of monetary sanctions at this time. Additionally, EchoStar is required to inform this Court of any future attempts to design-around the
389 Patent and obtain Court approval before any such design-around is implemented. An Order and an Amended Final Judgment and Permanent Injunction will soon be entered in accordance with this opinion.
SIGNED this 2nd day of June, 2009.
____________________________________ DAVID FOLSOM UNITED STATES DISTRICT JUDGE
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