MEMORANDUM OPINION
This matter is before the Court on the mandate, on remand, of the United States Court of Appeals for the Federal Circuit, instructing this Court “to consider what changes are required to the terms of the injunction consistent with this opinion”
PROCEDURAL BACKGROUND
ePlus, Inc. (“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 6,585,173 (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 '562 Patent was not infringed. 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 November 21, 2012, the Court of Appeals issued its decision reversing-in-part, vacating-in-part, affirming-in-part and remanding the action. In its decision, the Court of Appeals found that claim 1 of the '172 patent and claim 3 of the '683 patent were invalid for indefiniteness. ePlus, Inc.,
By Order dated November 27, 2012 (Docket No. 981), the parties were ordered to file statements of position setting forth their views as to the effect of the Federal Circuit’s opinion on how the injunction should be modified. ePlus filed its statement on December 10, 2013 (Docket No. 985); Lawson filed its statement on December 27, 2012 (Docket No. 990); and ePlus filed a reply on January 7, 2013 (Docket No. 993).
On December 21, 2012, ePlus filed a petition for rehearing and rehearing en banc, the effect of which was to stay issuance of the mandate. Thereafter, Lawson took the view, with which the Court agreed, that the Court was without jurisdiction to modify the injunction until the Court of Appeals had issued its mandate. The petition for rehearing and rehearing en banc was denied on January 29, 2013. The mandate was received February 5, 2013 (Docket No. 1006).
All the while, the parties were engaged in discovery and briefing respecting contempt proceedings that ePlus had initiated because of Lawson’s alleged violations of the injunction. Additionally, on February 7, 2013, the lead counsel for ePlus suffered a fatal heart attack, and thereafter proceedings were slowed for a while.
In a telephone conference held on March 14, 2013, both parties were asked whether they intended to offer evidence respecting modification of the injunction. Both parties declined to offer evidence.
Subsequently, Lawson filed its MOTION PURSUANT TO FED. R. CIV. P. 60 TO DISSOLVE OR MODIFY THE MAY 23, 2011 INJUNCTION (Docket No. 1011). An opposition (Docket No. 1027) and reply (Docket No. 1031) thereto were filed. Oral argument was held on April 9, 2013 (Tr. at Docket No. 1056).
DISCUSSION
Lawson argues that the appropriate analysis is for the Court to ask whether it would have issued the injunction if the state of the case had been then what it is following the Federal Circuit’s decision. If the Court concludes that an injunction would not have been appropriate, says Lawson, the Court should dissolve the injunction ab initio. Lawson Reply (Docket No. 1031) at 6-7 (“In light of these changed circumstances, the Court must go back and consider on the existing record whether an injunction could even issue based on the single remaining method claim.”). In the alternative, Lawson argues that the current record does not sup
ePlus takes the view that the Court should enter an order stating that the injunction “remains in full force and effect, with the lone exception that the injunction no longer applies to Configuration 2.” PI. Br. in Opp. (Docket No. 1027) at 1. ePlus also argues that the so-called “mandate rule” prohibits the Court from reevaluating the propriety vel non of the injunction. Id. at 4. Instead, ePlus maintains that the Court should simply accept the affirmance of the injunction as to all areas in which it would not be inconsistent with the Federal Circuit’s decision and issue an order clarifying that the injunction does not apply to those configurations for which the finding of infringement was vacated.
The Mandate Rule
“Few legal concepts are as firmly established as the doctrine that the mandate of a higher court is controlling as to matters within its compass.” United States v. Bell,
Whatever was before the [appellate court], and is disposed of, is considered as finally settled. The inferior court is bound by the decree as the law of the case; and must carry it into execution, according to the mandate. They cannot vary it, or examine it for any other purpose than execution; or give any other or further relief; or review it upon any matter decided on appeal for error apparent; or intermeddle with it, further than to settle so much as has been remanded.
Id. If the lower court “mistakes or misconstrues the decree of [the appellate] court, and does not give full effect to the mandate, its action may be controlled, either upon a new appeal ... or by a writ of mandamus to execute the mandate of [the appellate] court.” In re Sanford Fork & Tool Co.,
On November 21, 2012, the Federal Circuit issued its decision in this case. ePlus, Inc. v. Lawson Software, Inc.,
Compliance with the mandate also must take into account that, on appeal, Lawson also argued that the Court erred in entering a permanent injunction relating to claim 26 of the '683 patent. See generally Brief for Defendant-Appellant Lawson Software at 41, ePlus, Inc. v. Lawson Software, Inc, No. 2011-1396,
Considering that the Federal Circuit affirmed the judgment of direct and indirect infringement of Claim 26, rejected Lawson’s challenge to the breadth of the injunction, and held that “[t]o the extent that we have not addressed any of the parties’ arguments on appeal or cross-appeal, we have determined them to be unpersuasive,” it is rather clear that the Court of Appeals affirmed the decision to issue the injunction. Moreover, in explicitly rejecting Lawson’s argument that the injunction is overbroad, the decision per force affirms the entry of the injunction in the first place. That is further confirmed by the Federal Circuit’s instruction to consider, on remand, “what changes are required to the terms of the injunction” consistent with its opinion. Id. at 523. Rather clearly, that instruction presupposes the affirmance of the injunction that is to be modified. The question, then, is for the Court to determine “what was intended by [the] mandate.” In re Sanford Fork & Tool Co.,
According to ePlus, the Court is simply without authority to revisit the propriety vel non of the injunction and, instead, is limited by the mandate rule to adjusting the scope of injunction to exclude those configurations for which the judgment of infringement was vacated. See ePlus Br. in Opp. at 4. In response, Lawson argues that “fresh consideration of the injunction must occur because of the Federal Circuit mandate.” Lawson Reply at 2. While ePlus’ argument rests on a fairly straightforward interpretation of the mandate rale (i.e., that because remand was only to consider the “terms” of an otherwise-affirmed injunction, the Court must limit the scope of its review to the terms of an injunction that must continue to exist), Lawson seems to conflate the Court’s obligation under the mandate with the provision of Fed R. Civ. P. 60(b)(5) that permits the Court prospectively to alter an injunction.
As Lawson correctly contends, requests to modify injunctions generally ask “whether changes in conditions after entry of the injunction warrantf ] revision of the restraints originally imposed.” Lawson Reply at 3; see also United States v. Swift & Co.,
During oral argument and in its briefing, Lawson placed principal reliance on the decision of the Federal Circuit in Amado v. Microsoft Corp.,
Upon review, the district court dissolved the injunction (which had remained stayed through the initial appeal and the district court’s further consideration). See Amado,
Thus, Amado quite clearly stands for the proposition that, if the grant of the injunction “was within the scope of the
Under the mandate rule, the Court is prohibited from retrospectively dissolving the injunction as to issues that were affirmed by the Federal Circuit. Thus, the Court concludes that the “mandate rule” prohibits it from heeding Lawson’s call to dissolve the injunction ab initio.
Federal Rule of Civil Procedure 60(b)(5)
Having found that the mandate of the Federal Circuit does not require, and that, indeed, the “mandate rule” in fact forbids, the Court from retrospectively reassessing the propriety of an injunction in this action, it nonetheless remains necessary to determine whether the injunction remains prospectively appropriate. Lawson filed its motion pursuant to Fed. R.Civ.P. 60(b)(5), which provides, in relevant part, that
On motion and just terms, the court may relieve a party ... from a final judgment, order or proceeding, [where] the judgment ... is based on an earlier judgment that has been reversed or vacated; or applying it prospectively is no longer equitable.
Fed.R.Civ.P. 60(b)(5).’ The discretion of the Court to modify or dissolve the prospective effect of its equitable remedies is an inherent power of a court sitting in equity. See Sys. Fed’n No. 91, Ry. Emp. Dept., AFL-CIO v. Wright,
Because Rule 60 is a procedural rule, it is assessed “under the law of the particular regional circuit court where appeals from the district court would normally lie.” Ashland Oil, Inc. v. Delta Oil Products Corp.,
“When confronted with any motion invoking [60(b)(5) ], a district court’s task is to determine whether it remains equitable for the judgment at issue to apply prospectively and, if not, to relieve the parties of some or all the burdens of that judgment on ‘such terms as are just.’ ” Alexander v. Britt,
(1) the circumstances leading to entry of the injunction and the nature of the conduct sought to be prevented; (2) the length of time since entry of the injunction; (3) whether the party subject to its terms has complied or attempted to comply in good faith with the injunction; (4) the likelihood that the conduct or conditions sought to be prevented will recur absent the injunction; (5) whether the moving party can demonstrate a significant, unforeseen change in the facts or law and whether such changed circumstances have made compliance substantially more onerous or have made the decree unworkable; and (6) whether the objective of the decree has been achieved and whether continued enforcement would be detrimental to the public interest.
Crutchfield v. U.S. Army Corps of Engineers,
Lawson made clear in oral argument that it is pursuing its Rule 60 motion under the theory that the injunction “is based on an earlier judgment that has been reversed or vacated” and, therefore, must be dissolved. Fed.R.Civ.P. 60(b)(5); see (Tr. at 1181:15-18 (THE COURT: “You are going under Rule 60(b)(5), the component that says, it has been based on an earlier judgment that has been reversed.” MR. THOMASCH: “That is correct.”)). Indeed, Lawson made clear that its “fundamental attack” under Rule 60 was its view that “this injunction needs to be dissolved ab initio.” (Tr. at 1180:7-8). Lawson distinguished the assertion that it was primarily pursuing from the conventional “prospective application” prong of Rule 60(b)(5) which Lawson, correctly, described as
[A]llow[ing] us to argue that even though the injunction on May 23rd, 2011, was properly granted, something has happened since then by way of new facts that we could bring to the Court’s attention, and we would have a burden to show to the Court that those new facts justify the Court in amending or modifying or even dissolving the injunction on a prospective basis, because while it was appropriate when rendered, it became inappropriate in light of things.
(Tr. at 1180:11-19). Lawson specifically eschewed that theory of relief as its primary argument.
It is only as an “alternative argument” that Lawson argues for prospective relief from the injunction and then on the basis that there are substantial non-infringing uses of the configurations that remain following the Federal Circuit decision and that, as a result, an injunction cannot issue
As a result of the Order of March 12, 2013 (Docket No. 1019), the parties have presented their arguments regarding the dissolution of the injunction with reference to the four factor test set forth in eBay Inc. v. MercExchange, LLC,
In eBay, the Supreme Court of the United States set forth a four-fact test to be met before a court may issue a permanent injunction. The moving party must show:
(1) that [the plaintiff] has suffered an irreparable injury; (2) that remedies available at law, such as monetary damages, are inadequate to compensate for that injury; (3) that, considering the balance of hardships between the plaintiff and defendant, a remedy in equity is warranted; and (4) that the public interest would not be disserved by a permanent injunction.
eBay Inc. v. MercExchange, LLC,
The question before the Court at this stage, then, is whether the Federal Circuit’s decision otherwise altered the circumstances undergirding the Court’s analysis pursuant to eBay such that the prospective application of the injunction as to Claim 26 of the '683 patent is inequitable. Indeed, although the Court is uncertain whether the four-factor eBay test must be the appropriate test to apply to the continued application to an injunction that has, itself, been affirmed by the Court of Appeals but which was based on a judgment that has, in part, been reversed or vacated, it is not incompatible with the “principles of equity” that guide both eBay and the Court’s authority to dissolve an inequitable injunction to reassess the continued propriety of the injunction in terms of the eBay factors. Compare eBay,
In assessing the first eBay factor, irreparable harm to ePlus absent and injunction, the Memorandum Opinion of May 23, 2011 (Docket No. 728), found that ePlus and Lawson directly compete in the marketplace, that such competition “weighs heavily in favor of a finding of irreparable harm,” and that ePlus “has shown lost sales and lost market share because of Lawson’s infringement.” Mem. Op. of May 23, 2011 at 12-22. The Court further found that Lawson’s infringement had deprived ePlus of the ability to attract other customers by offering exclusive access to an innovative product, and that this factor also supported a finding of irreparable injury. Id. at 26-27. As a result of those factors, and others, the Court concluded the ePlus had “established that, without a permanent injunction, it will suffer irreparable injury.” Id. at 33.
As to the second factor, “adequate remedy at law,” the Court noted that “whether a patentee has an adequate remedy at law ‘inevitably overlaps’ with whether a patentee has suffered irreparable harm.” Id. at 33 (quoting MercExchange, LLC v. eBay, Inc.,
The third factor, balance of hardships, required the Court to assess “the relative effect of granting or denying an injunction on the parties.” i4i Ltd. v. Microsoft Corp.,
The fourth eBay factor requires the Court to consider the public interest. In that section of its analysis, the Court gave “considerable weight to the strong public interest favoring entry of injunctive relief to protect ePlus’ patent rights.” Id. at 44. However, recognizing the public interest implications, the Court created a “sunset provision” for Lawson’s 277 “healthcare customers” to allow adequate time for healthcare customers to “transition to non-infringing systems.” Id. at 48. The Court also recognized that customers of Lawson’s infringing products would have access to non-infringing products. Id. at 47. As a result, the Court found that the public interest favored entering injunctive relief. Id. at 49. That finding remains valid.
On this record, it is clear that Lawson has not carried its burden to show that the foregoing findings as to the eBay factors are no longer viable or that continuing the injunction as to configurations infringing Claim 26 of the '683 patent is inequitable. In fact, the only change to those findings that Lawson identifies is that, as a result of the Federal Circuit’s decision, only 150 Lawson customers would be affected by the injunction. Lawson Reply at 18. Lawson argues that this diminishes the Court’s finding that ePlus suffered an irreparable injury because, says Lawson, there is insufficient evidence in the record to conclude that ePlus directly competed for those customers. Id. In response, ePlus emphasizes the Court’s previous findings that ePlus is a small company and it argues that lost sales for even 150 customers constitutes irreparable harm. ePlus Opp. at 21; see also Mem. Op. of May 23, 2011 at 26 (“Consequently, though there may not be a large number of lost sales to Lawson’s infringing software, due both to the fact that vendors compete against one another in secret generally and that ePlus is a relatively smaller vendor in the defined market, ePlus has put forth sufficient evidence of lost sales and lost market share to support a finding of irreparable harm.”). The Court rejected Lawson’s argument that ePlus had demonstrated an insufficient amount of lost sales in its original opinion. There is no reason to alter that conclusion here. Further, as ePlus correctly notes, the reduction in the number of affected Lawson customers also serves to shift the balance of hardships even more in ePlus’ favor as the hardship to Lawson has, by its own admission, been substantially reduced. As ePlus notes, the Court’s earlier finding that an injunction effecting a larger number of customers would have “little collateral effect on Lawson as a whole,” augurs heavily in favor of the conclusion that an injunction effecting few fewer customers would have, at least, a similarly limited collateral effect, see Mem. Op. at 41; ePlus Opp. at 22.
At the very least, however, Lawson argues that the injunction cannot be continued as to the sale of the infringing configurations. Lawson argues that since Claim 26 of the '683 patent is a “method claim” the Court may not enjoin the sale of the configurations simply because they may be used to infringe ePlus’ patent. See Mem. in Supp. at 5. As Lawson notes, mere sale of a product that can be used to perform an infringing act does not constitute “direct infringement.” See e.g., Ormco Corp. v. Align Tech., Inc.,
Lawson also argues that the sale of Configurations 3 and 5 cannot constitute contributory infringement because both configurations have substantial non-infringing uses. That, says Lawson, forecloses the prospective continuation of the injunction.
That contention is without merit. In i4i Ltd. v. Microsoft Corp.,
For the foregoing reasons, the Court concludes that the record established, and the findings made, in the Court’s initial opinion granting injunctive relief continues to support ePlus’ request to continue the injunction as to all configurations covered by Claim 26 of the '683 patent. Nothing in the Federal Circuit’s decision undermined those conclusions and, for the foregoing reasons, the Court concludes that injunctive relief remains appropriate and
The Changes to the Injunction
Having concluded that the mandate rule precludes the Court from retrospectively revisiting the injunction and that Lawson has not made an adequate showing to support the prospective dissolution of the injunction and that the eBay four-factor test continues to support the grant of injunctive relief based on the record presently before the Court, the question remains as the appropriate scope of the injunction at this point.
There is no doubt that the Federal Circuit mandate requires some modification to the terms of the injunction. The verdict can no longer support any injunction of those configurations no longer found to be infringing. Nevertheless, for the reasons set forth above, the injunction shall remain in force as to those configurations that infringe Claim 26 of the '683 patent. The jury found that Configurations No. 3 and No. 5 infringed that claim. See Verdict Form (Docket No. 600) at 2-3. Configuration No. 3 consists of Lawson’s “Core S3 Procurement System (Lawson System Foundation/Process Flow, in combination with Inventory Control, Requisition, and Purchase Order Modules), Requisition Self-Service, and Punchout.” Id. at 2. Configuration No. 5 is formed by Lawson’s “Core S3 Procurement System (Lawson System Foundation/Process Flow, in combination with Inventory Control, Requisition, and Purchase Order Modules), Requisition Self-Service, Punchout, and Electronic Data Interchange.” Id. at 3. As a result, the Court entered an injunction against those Configurations. Order of May 23, 2011 (Docket No. 729) at 2-3. In addition, the Court enjoined Lawson’s “M3 e-Procurement Software” based on a pretrial stipulation that, if any of the S3 Procurement products were found to be infringing, then the M3 e-Procurement System would also be found to infringe. See Amended Final Pretrial Order (Docket No. 480) at 4. Those aspects of the injunction remain undisturbed by the Federal Circuit decision. However, the Court also entered the injunction against Configuration No. 2 (“Core S3 Procurement System” and “Requisition Self-Service”) on the basis of the finding of infringement as to Claim 1 of the '172 patent. See Order of May 23, 2011 at 2; Verdict at 1. The Federal Circuit having concluded that Claim 1 of the '172 patent is invalid for indefiniteness, that provision of the injunction cannot stand. Accordingly, the injunction must be modified so as to no longer apply to Configuration No. 2. The injunction shall remain in effect in all other respects.
CONCLUSION
For the reasons set forth above, the Court will modify the original injunction pursuant to the mandate of the Federal Circuit and will deny Lawson’s MOTION PURSUANT TO FED. R. CIV. P. 60 TO DISSOLVE OR MODIFY THE MAY 23, 2011 INJUNCTION (Docket No. 1011), except insofar as the modification shall operate to dissolve the injunction as to Configuration No. 2. The injunction shall remain in effect in all other respects.
It is so ORDERED.
Notes
. ePlus, Inc. v. Lawson Software, Inc.,
. There is no question that Lawson’s end goal is for the Court to conclude that the injunc
. Both ePlus and Lawson declined the Court’s invitation to hold an evidentiary hearing on the continuation of the injunction. See (Tr. of Conference Call on March 14, 2013 (Docket No. 1025) at 11:11-18). Lawson took the position that ePlus carried the burden of showing that an injunction was appropriate "solely on the findings of the infringement of method claim 26.” (Id. at 10-20-22). ePlus took the position that the record was fully developed before the injunction initially issued (Id. at 12:3-8) and that, what is more, Rule 60(b)(5) placed the burden of production on Lawson. (Id. at 13:5-12). The latter point is, of course, true. See Rufo v. Inmates of Suffolk Cnty. Jail,
. The Court also noted that Lawson purported to be designing around the patent and