Company must cough up $18M for contempt

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A Richmond federal judge has ordered a compensation payment of nearly $18 million against a company held in contempt for continued patent infringement.

The decision by U.S. District Judge Robert E. Payne in ePlus Inc. v. Lawson Software Inc. (VLW 013-3-423) builds on ground rules set in 2011 by the Federal Circuit for analyzing so-called “design-around” efforts by an alleged infringer.

In his case, Payne concluded Lawson had failed to adequately redesign software patents held by ePlus and thus violated a 2011 injunction barring infringement.

The two companies both market software for managing supply chains at large companies.

ePlus sued in 2009, claiming Lawson was infringing three patents. A jury in 2011 found that Lawson infringed two of those patents, and Payne ordered a halt to the practice. He even ordered Lawson to stop providing support to customers using the infringing software.

Later in 2011, ePlus charged that Lawson had made only cosmetic changes to its infringing software and should be held in contempt for violating Payne’s order.

Payne heard evidence over several days in April.

Interpreting the touchstone 2011 Federal Circuit case of TiVo Inc. v. Echostar Corp, Payne found ePlus had proved by clear and convincing evidence that Lawson’s product continued to infringe on ePlus’ patent.

Bolstering the finding of contempt was evidence that Lawson did little to ensure that its customers ceased use of the original infringing software product, Payne said.

Payne approved disgorgement of Lawson’s profits, saying that remedy was neither punitive nor coercive.

“Rather, disgorgement is a measure by which the Court can determine compensatory damages for contumacious behavior where actual damages have not been shown,” the judge wrote.

Payne adopted an incremental profit calculation to determine the amount to be disgorged by Lawson. He determined the “proper quantum for disgorgement” was $17 million from the date of the 2011 injunction to July 1 of this year, and a daily rate of $24,850 thereafter.

Payne rejected ePlus’ bids for enhanced damages and attorney’s fees, but he allowed a “coercive remedy” of $62,362 per day for every day that Lawson remained in contempt.

Lawson could avoid the coercive remedy by demonstrating by Sept. 20 that it is in compliance with the injunction, Payne said.

Failing such a showing, the fine would be imposed as of Aug. 16, Payne said.

“To my mind, this is the most expensive discussion of the standard for contempt in patent cases since TiVo,” said Michael G. Strapp of Boston, a member of ePlus’ legal team. The opinion, he said, provides “extensive and detailed guidance” for similar cases.

In TiVo, the Federal Circuit affirmed a $90-million contempt award while setting a standard for evaluating attempts to design around patented information.

Strapp noted that his client, ePlus, assumed a weighty burden in seeking a finding of contempt. ePlus had to show by clear and convincing evidence that Lawson’s “design around” effort was not more than colorably different from the infringing product, and that the resulting software still infringed on ePlus’ patent, Strapp said.

Daniel W. McDonald of Minneapolis, one of Lawson’s legal team, declined to comment on Payne’s decision.