December 6, 2016

Injunction Against Dismissed Party Remanded to Make Sure it Had its Day in Court

By Bryan K. Wheelock, Principal

In Asmark Danmark A/S v. CMI USA Inc., [2016-1026, 2016-1183] (December 6, 2016), the Federal Circuit affirmed the district court’s rulings on infringement, invalidity and damages, but remanded as to the injunction insofar as it covered conduct of Cooler Master (who was not a party) that goes beyond abetting a new violation by CMI.

The Federal Circuit said that the standards for reaching conduct by persons not adjudicated liable for the underlying wrong, reflected in Federal Rule of Civil Procedure 65(d), are highly fact specific, and the Federal Circuit said that a determination of the propriety of the injunction’s reach “would benefit from further findings and, if sought and needed, further record development.”

The district court granted the prevailing patent owner’s motion for an injunction against both CMI and Cooler Master, even though Cooler Master had dismissed as a party.  Cooler Master appealed the injunction, and rejoined as a party.  Cooler Master argued that its dismissal with prejudice precluded the district court from subjecting Cooler Master to the injunction’s obligations, and that, in any event, the injunction is too broad in scope insofar as the injunction reaches Cooler Master’s conduct (sale, importation, etc.) involving the products other than conduct that abets a new violation by CMI, the only party adjudicated liable for infringement.

The Federal Circuit said that Cooler Master did not argue that the district court lacked personal jurisdiction; that Cooler Master lacked notice or an opportunity to be heard; or that the injunction is improper under eBay, or because Cooler Master does not sufficiently threaten to engage in the covered conduct.  Cooler Master’s complaint was that the challenged obligations imposed on Cooler
Master were improper for reasons it could invoke if they were imposed through contempt.

The Federal Circuit rejected Cooler Master’s contention that it could not be enjoined because the dismissal with prejudice was an adjudication that has claim-preclusive effect.  While the premise was correct, the “claim” covered by the dismissal, which concerned Cooler Master’s pre-dismissal conduct, which was different from the conduct subject to the injunction, is Cooler Master’s future conduct.

The fundamental principle relevant to appellants’ narrower, scope objection to the injunction was that an injunction may not “make punishable the conduct of persons who act independently and whose rights have not been adjudged according to law.”  The Federal Circuit, however, said that an injunction may reach certain conduct by persons not held liable where the conduct is not undertaken “independently” of the persons who have been held liable.  The injunction imposed two sorts of obligations on Cooler Master: it restricts conduct by Cooler Master that abets a new violation by CMI; but it also restricts conduct by Cooler Master that does not abet a new violation by CMI.  The Federal Circuit found that there is a there is a current live dispute about the permissibility of barring Cooler Master from engaging in U.S.-focused activities involving the infringing products other than through CMI.  The Federal Circuit did not think it advisable to resolve the issue of the proper scope of the injunction without a fuller picture of the facts described by the district court, so it remanded the case for further development of the record, while leaving the injunction intact.