District Courts Have the Authority to Prospectively Amend Their Permanent Injunictions in Light of eBay

Amado v. Microsoft Corp., [2007-1236, -1255] (February 26, 2008) [LINN, Bryson, Clevenger] The Federal Circuit affirmed the district court extension of the stay stay of the permanent injunction, dissolving the permanent injunction, and denying Microsoft’s motion for relief from judgment, but reversed the award of $0.12 per infringing unit sold during the stay of the permanent injunction, and vacated and remanded the case because recent Supreme Court action may affect post-verdict damages.
SIGNIFICANCE: A district court can reconsider and modify a permanent injunction if appropriate on the application of traditional equitable factors.
Post judgment damages should not necessarily reflect any increase for willfulness that might have been appropriate for pre-judgemenet damages.
BRIEF: A district court’s decision granting, denying, or modifying an injunction in a patent case is reviewed for abuse of discretion. In order to prevail on appeal on an issue of damages, an appellant must convince us that the determination was based on an erroneous conclusion of law, clearly erroneous factual findings, or a clear error of judgment amounting to an abuse of discretion. Finding that a district court’s interpretation of its order is entitled to deference unless the interpretation is unreasonable or is otherwise an abuse of discretion, the Federal Circuit affirmed the district court's interpretation of its injunction while an appeal is pending included a petition for certiorari.
Regarding the extension of the stay, the Federal Circuit noted that district courts possess broad equitable authority to modify injunctions. This broad authority, coupled with the wide discretion to manage the order in which they address issues pending before them, necessarily vests district courts with the authority to extend the stay of an injunction, particularly under these circumstances where it is done to preserve the status quo while motions affecting that injunction are under advisement.
Amado argues that because the eBay decision was handed down before our decision in Amado I, albeit after the completion of briefing, and because the permanent injunction was included within our mandate in Amado I, the mandate rule foreclosed
Regarding the dissolution of the permanent injunction, the Federal Circuit rejected Amado's argument that the district court "improperly concluded that eBay eliminated the presumption of irreparable harm that follows a judgment of validity and infringement." because the district court was within its discretion to find an absence of irreparable harm based on the evidence presented at trial. Microsoft argued that the propriety of the permanent injunction was not an issue in the earlier appeal, and thus was not within the scope of the mandate. Alternatively, Microsoft argued that eBay is an intervening decision and is thus an exception to the mandate rule. The Federal Circuit explained that a decision is generally considered to be intervening when it comes between an appellate decision and the proceedings on remand. A decision is not intervening, however, if the parties have a reasonable opportunity to raise an issue with respect to that decision prior to issuance of the appellate mandate. Whether eBay constitutes an intervening decision, and forecloses application of the mandate rule, turns on whether Microsoft had a reasonable opportunity to claim the decision’s benefit prior to our issuance of the Amado I mandate. The Supreme Court’s decision in eBay was handed down on May 15, 2006—after the completion of briefing but prior to oral argument in Amado I. Following issuance of the decision, it was incumbent upon Microsoft, if it desired to do so, either to alert this court that the recently-decided case affected its position on appeal or to explicitly reserve the right to seek retrospective relief from the injunction on remand, which it did not do, even when questioned as to its position at oral argument. Because Microsoft had a reasonable opportunity to raise an issue with respect to eBay prior to issuance of our mandate, and, indeed, expressly declined that opportunity, eBay is not an intervening decision and thus does not preclude application of the mandate rule. The mandate rule provides that issues actually decided on appeal—those within the scope of the judgment appealed from, minus those explicitly reserved or remanded by the court—are foreclosed from further consideration. Thus, an issue that falls within the scope of the judgment appealed from but is not raised by the appellant in its opening brief on appeal is necessarily waived. The Federal Circuit said that the proper inquiry is whether the district court’s grant of the permanent injunction was within the scope of the judgment appealed from in Amado I, and found that it was. Thus, the mandate rule operates as a bar to the district court’s reconsideration of the initial issuance of the injunction. However, the Federal Circuit said that while the mandate rule would prevent the district court from dissolving the injunction ab initio, it does not preclude the district court from modifying, or dissolving, the injunction if it determines that it is no longer equitable. The Federal Circuit found that that the district court was well within its discretion in this case to reconsider the prospective application of the permanent injunction on remand in light of the Supreme Court’s decision in eBay. The Federal Circuti also concluded that the district court’s ultimate decision to dissolve the injunction was not an abuse of discretion, when, after applying the traditional four-factor test, it determined that an injunction was no longer equitable under the circumstances.
The last issue in the case was the amount of damages to be paid from the escrow created when the permanent injunction was stayed. The Federal Circuit rejected Amado's argument that it was entitled to the entire $2.00 per unit escrowed, because that was just an amount to ensure that Amado would be made whole, not the amount determined appropriate to compensate Amado. The Federal Circuit also rejected the $0.12 per unit actually awarded because it represented the trebled royalty the district court imposed for willfully infringing sales. The Federal Circuit remanded the case for the district court to set an appropriate royalty rate.