No Violation of Injunction Where Party Failed to Prohibit Conduct of Affiliate
May 14, 2001
Last Month at the Federal Circuit - June 2001
Judges: Bryson (author), Lourie, and Linn
In Tegal Corp. v. Tokyo Electron Co., No. 00- 1239 (Fed. Cir. May 14, 2001), the Federal Circuit reversed a contempt citation and imposition of sanctions.
Tegal Corporation (“Tegal”) sued Tokyo Electron America, Inc. (“TEA”) and other Defendants for infringement of U.S. Patent No. 4,464,223 that relates to plasma-etching equipment used in fabricating semiconductor chips. Following a bench trial, the district court had entered judgment against TEA. As part of the relief granted, the district court had enjoined TEA from engaging in any further infringement “or in any way facilitating infringing acts by related corporations or corporate affiliates or corporate parents.” (Emphasis added.)
Following entry of the injunction, Tegal filed a petition to show cause, charging that TEA and its parent corporation, Tokyo Electron Company (“TEL”), had violated the court ordered injunction. Specifically, Tegal alleged that TEA and TEL transferred the function of servicing semiconductoretching systems from TEA to Tokyo Electron Massachusetts, Inc. (“TEM”), a wholly owned subsidiary of TEL. The district court agreed, finding both TEA and TEL in contempt of court for violating the injunction.
On appeal, TEA asserted that the district court had abused its discretion, because TEA had failed to stop any of its corporate affiliates from selling or servicing infringing products, which amounted to “facilitating” infringement.
The Federal Circuit disagreed with Tegal, however, and ruled that, absent a showing of control over another party, facilitating infringing acts requires some affirmative act beyond permitting that party to commit infringing acts. The Court noted that Tegal’s assertion that inaction may constitute facilitation finds no basis in any legal principle and contradicts the statutory provisions governing active inducement of infringement, which similarly require an affirmative act of some kind.
In reviewing the record, the Federal Circuit concluded that Tegal had not only conceded TEA’s inaction in TEM’s alleged infringing acts, but also offered no evidence of TEA’s control over TEM’s activities. The Court, therefore, reversed the contempt citation and sanctions, explaining that the failure to take legal steps that could conceivably prevent particular conduct may permit the conduct to take place, but it does not constitute facilitation.