[00:00:00] Speaker 04: next case for argument is 24-1273, Group 1 versus GTE. [00:00:07] Speaker 04: Before we start, I should have done this at the outset. [00:00:10] Speaker 04: We're grateful to have a district court judge sitting with our court today, Judge Wang, coming from Colorado here to join us. [00:00:18] Speaker 04: We very much appreciate her. [00:00:19] Speaker 04: Thank you. [00:00:20] Speaker 04: Okay. [00:00:22] Speaker 04: Mr. Davis, please proceed. [00:00:26] Speaker 00: Good morning, Your Honors, and may it please the Court. [00:00:29] Speaker 00: I'm Joshua Davis on behalf of Plaintiff from Appellant Group One. [00:00:34] Speaker 00: We're here on appeal of the denial of contempt sanctions against a non-party, the United States Tennis Association, in a case that involved a patent asserted against a German manufacturer that supplied the USTA with lead detection equipment for multiple US Open tennis tournaments. [00:00:57] Speaker 00: The district court erred in a couple of respects. [00:01:02] Speaker 00: First, by misinterpreting its own TRO as to require the non-party to commit direct infringement, I'm sorry, to require direct infringement be committed by the German manufacturer. [00:01:19] Speaker 00: And second, by reversing its initial factual finding that [00:01:26] Speaker 00: that those two parties were acting in concert with one another. [00:01:31] Speaker 00: I'll start with that prong. [00:01:34] Speaker 00: I would assert that a litigant that's been found to be a contributory infringer should ought to be considered [00:01:44] Speaker 00: as a presumption almost, acting in concert with its customer. [00:01:51] Speaker 00: There was an issue that arose during the hearing where as the parties had been arguing over whether this was merely a customer as a purchaser-seller relationship or whether there was an ongoing relationship between the German manufacturer [00:02:14] Speaker 00: and the USTA, which was using the equipment. [00:02:19] Speaker 00: Throughout the hearing, the court appeared to be under the impression that this was a purchase or all-out title transfer, such that there was no ongoing relationship between those two parties. [00:02:30] Speaker 00: While we were arguing that there must be an ongoing relationship because of the nature of the business, [00:02:38] Speaker 00: namely that one wouldn't simply send equipment and have nothing else to do with it throughout that tournament. [00:02:48] Speaker 00: At the end of the hearing, Council for USTA clarified that this was not, in fact, a title transfer, but it had been, as we had argued all along, an ongoing relationship such that these parties were acting in concert with one another throughout the tournament. [00:03:07] Speaker 00: turn back to the question of infringement and whether. [00:03:09] Speaker 03: Did counsel actually admit that they were acting in concert with each other, or did counsel simply concede that it was a lease arrangement and not a sale, per se? [00:03:23] Speaker 00: It was the latter. [00:03:24] Speaker 03: So it could be a lease arrangement without an ongoing active collaboration between the two entities. [00:03:33] Speaker 03: So for instance, if I rent a rental car, [00:03:36] Speaker 03: and I return the rental car, I don't necessarily infringe a claim of a patent by renting it if there are significant non-infringement leases of the car. [00:03:51] Speaker 03: So you're presuming that just because it was a lease that there was ongoing collaboration between [00:03:58] Speaker 03: the plaintiff and the USGA. [00:04:00] Speaker 00: And there was further evidence in the record as we briefed that in this particular industry, it's not a rental car. [00:04:08] Speaker 00: It's servicing the equipment throughout the tournament. [00:04:14] Speaker 00: It's returning the equipment at the end. [00:04:17] Speaker 00: You don't simply hand this stuff over and not have continued involvement with it. [00:04:23] Speaker 03: But it's not just the continued involvement. [00:04:25] Speaker 03: It's a particular continued involvement. [00:04:27] Speaker 03: that would infringe the patent. [00:04:30] Speaker 00: For purposes of the TRO, all we have to show is that there was acting in concert or acting in participation with that wouldn't necessarily rise to the level of contributory infringement. [00:04:42] Speaker 00: In fact, this TRO was written such that it would prohibit [00:04:50] Speaker 00: Just read in our opening brief, it's quoted at page seven. [00:04:54] Speaker 00: It prohibited acts directly or indirectly infringing or contributing in any way to infringing the 341 patent. [00:05:01] Speaker 00: And so any ongoing relationship between the parties, between the supplier and the customer, would be sufficient to show ongoing [00:05:17] Speaker 00: active in concert with or in participation with activities. [00:05:26] Speaker 00: So I return now to the infringement portion of the district court's opinion. [00:05:33] Speaker 00: Originally, the district court, in the order to show cause, had found that both there was active participation and that there was infringement of the patent. [00:05:43] Speaker 00: And in fact, in issuing the TRO, that was found to have been [00:05:47] Speaker 00: that was found to be likely. [00:05:56] Speaker 00: It appears that the district court misunderstood the concept of contributory infringement. [00:06:01] Speaker 00: As we read the transcript, the district court repeatedly says things like, how can I find [00:06:10] Speaker 00: How could I find the non-party liable, whereas the supplier did nothing wrong? [00:06:19] Speaker 00: They had been found already in the default judgment to have been contributing to an infringement. [00:06:40] Speaker 00: So what we had here, John, is an error in the interpretation of the TRO to require us to show direct infringement and a reversal of factual findings that we walked into the hearing believing had already been found in our favor, namely that there was active participation and that there was infringement by the USTA. [00:07:09] Speaker 02: Can I make sure I understand? [00:07:10] Speaker 02: You're saying that because the party originally sued for infringement did not respond, and therefore a default judgment was entered, a third party should be found to be acting in concert. [00:07:29] Speaker 02: with the accused infringer as a result of that default judgment. [00:07:35] Speaker 02: Do I have that right? [00:07:36] Speaker 02: Is that what you're saying? [00:07:38] Speaker 00: I don't think that those two are necessarily linked. [00:07:43] Speaker 00: I don't think we're arguing that because there was a default that liabilities shifted to the non-party. [00:07:51] Speaker 02: Well, you were saying that you've got a judgment in your favor of contributory infringement. [00:07:57] Speaker 02: And that's based on a default judgment, right? [00:08:00] Speaker 00: Right, right. [00:08:01] Speaker 00: That was reviewed by the court and entered as part of the default judgment. [00:08:06] Speaker 02: What other basis do you have for saying that USTA is a contributing infringer other than the default judgment? [00:08:13] Speaker 00: I'm saying that the German manufacturer is the contributory infringer. [00:08:21] Speaker 00: I don't believe that their role was disputed, actually, having supplied the equipment minus the one component, which they knew full well that the USTA was going to add back. [00:08:32] Speaker 00: So I don't think that was disputed during the hearing, that the German manufacturers had supplied the equipment minus one component. [00:08:48] Speaker 02: It's a unique scenario, right, where it's a non-party that you're seeking to have be held in contempt, right? [00:09:00] Speaker 01: It happens, certainly. [00:09:02] Speaker 01: The Marial case is a good example. [00:09:04] Speaker 02: Remind me again, what exactly are you relying on to say that USTA acted in concert or in participation with the German manufacturer? [00:09:18] Speaker 00: Right. [00:09:18] Speaker 00: as a customer that essentially creates the market for this type of equipment. [00:09:25] Speaker 00: There are very few of these grand slam tournaments. [00:09:29] Speaker 02: They're active in concert because they're a customer? [00:09:31] Speaker 00: Well, the idea is that they create the demand themselves for a supplier of this equipment. [00:09:40] Speaker 00: So they went to the German. [00:09:43] Speaker 00: I mean, this is in the record. [00:09:44] Speaker 00: They went to the German company and said, give us your equipment. [00:09:49] Speaker 00: Give us the downgraded version of your equipment that lacks the shot clock control. [00:09:53] Speaker 00: We're going to add it back. [00:09:55] Speaker 00: And this was presumably to avoid an accusation of direct infringement. [00:10:01] Speaker 02: Was USTA ever sued for infringement? [00:10:04] Speaker 00: Was the USTA ever sued for infringement? [00:10:06] Speaker 00: They have not been. [00:10:10] Speaker 00: not inclined to sue its customers. [00:10:13] Speaker 00: Again, there are very few Grand Slam tournaments around the world. [00:10:17] Speaker 02: But you're seeking to have your customer found in contempt. [00:10:20] Speaker 00: We wouldn't be seeking to have the customer held in contempt if things had not arisen during the motion to enforce the injunction. [00:10:28] Speaker 00: Namely, that they literally hid the ball from the court as to what they were actually doing. [00:10:33] Speaker 00: They kept saying, we're just using a legacy system. [00:10:37] Speaker 00: Well, they were just using a legacy system, plus the additional component they were adding back that made it directly infringing the patent. [00:10:43] Speaker 00: And we had to call them on this. [00:10:47] Speaker 00: during the briefing on the order to show cause, we called them on this using photographic evidence. [00:10:52] Speaker 00: And finally, they coughed up the document that said, yes, all right, we do have the separate handset that we're adding in. [00:10:56] Speaker 00: We're not just using a legacy system. [00:10:59] Speaker 03: But they're only using the legacy system from the defendant. [00:11:03] Speaker 03: So they purposely took the legacy equipment so they wouldn't infringe. [00:11:13] Speaker 03: And then the TRO is directed to, [00:11:17] Speaker 03: the producer of that equipment. [00:11:21] Speaker 00: And to those acting in concert with them, of course. [00:11:28] Speaker 00: Yeah, the USTA requested that the German manufacturer send the version of the equipment that would not directly infringe the patent. [00:11:38] Speaker 03: Well, none of the equipment would directly infringe the patent. [00:11:41] Speaker 03: I'm sorry? [00:11:44] Speaker 03: The direct infringer here has to be USTA. [00:11:48] Speaker 03: But there is an action against USTA for that infringement. [00:11:53] Speaker 03: Correct. [00:11:53] Speaker 03: So essentially, aren't you asking that the court backdoor an infringement action through an interpretation of the TRO that is self-issued? [00:12:03] Speaker 03: I mean, the order to show cause can't be evidence, can it? [00:12:08] Speaker 03: An order to show cause is simply, I think this is what is in front of me. [00:12:14] Speaker 03: Um, show cause why I shouldn't issue contempt. [00:12:18] Speaker 03: USTA came in front of the trial court and said, this is why you shouldn't issue contempt. [00:12:24] Speaker 03: And the trial court agreed. [00:12:29] Speaker 00: Okay. [00:12:30] Speaker 03: So the order to show cause isn't really fact-finding, is it? [00:12:36] Speaker 00: We took it as such. [00:12:38] Speaker 00: We had submitted documents and evidence with our motion to enforce the TRO, which the court converted into a contempt proceeding. [00:12:49] Speaker 00: And with that, we submitted the letter that USTA had privately sent to us in which they discussed, here's our non-infringement position. [00:12:59] Speaker 00: We explained to the court they have no non-infringement position. [00:13:03] Speaker 00: So there was evidence on which the court could make fact findings in its order to show cause. [00:13:13] Speaker 04: Do you want to save your remaining time for rebuttal? [00:13:16] Speaker 00: Yes, sure. [00:13:20] Speaker 04: Mr. McLaughlin. [00:13:29] Speaker 05: Thank you, Your Honor. [00:13:30] Speaker 05: May it please the court? [00:13:31] Speaker 04: Before you get into the TRO issues, I'd like to ask you just about post-judgment interest, because I'm baffled. [00:13:39] Speaker 04: It seems like an open and shut case to me. [00:13:41] Speaker 04: Post-judgment interest is mandatory by statute, and yet it wasn't awarded in this case. [00:13:46] Speaker 04: So do you have any [00:13:47] Speaker 04: argument in response to why we shouldn't, at least on that point, reverse. [00:13:52] Speaker 05: Your Honor, I'm here only representing the USTA, which is not a party to the underlying dispute. [00:13:58] Speaker 05: So that question. [00:13:59] Speaker 04: So you don't care what we do on that? [00:14:00] Speaker 05: Ms. [00:14:01] Speaker 05: Davis-Zone's on that one. [00:14:02] Speaker 04: All right, very good. [00:14:04] Speaker 05: So to the TRO, though, and whether the USTA and non-party should be held in contempt of that TRO, I think Your Honor's correctly focused in on the threshold question. [00:14:15] Speaker 05: Is the USTA an entity that is within the scope of the TRO? [00:14:20] Speaker 05: Who does this TRO? [00:14:22] Speaker 05: enjoying. [00:14:24] Speaker 05: Clearly it's the defendants and it's anyone in privity, concert, participation with. [00:14:29] Speaker 05: Some of the case law talks about parties that aid and abet a violation of the TRO by the enjoined party. [00:14:37] Speaker 05: The USTA is none of those things and the evidence presented at the district court [00:14:43] Speaker 05: did not show that the USDA was acting in concert with the defendants in this case. [00:14:51] Speaker 05: In fact, I'm reading from Appendix 27, lines 3 to 5, the district court said, your argument is that they're also acting with the defendants to infringe. [00:15:06] Speaker 05: But the facts just aren't there to support that. [00:15:09] Speaker 05: And so today, the question is, [00:15:12] Speaker 05: Did the district court abuse its discretion, and was that finding clearly erroneous? [00:15:19] Speaker 05: And here today, there's no evidence to revoke that. [00:15:22] Speaker 04: Well, what do we do with the show cause order on page 857? [00:15:25] Speaker 04: On page 857, where do you have that handy? [00:15:28] Speaker 04: You can look at it, page 857. [00:15:29] Speaker 05: Yes, sir. [00:15:34] Speaker 04: So where it says, the court has reviewed plaintiff's motion and documents attached to it. [00:15:39] Speaker 04: And the next sentence says, the USTA email makes clear that the USTA had actual notice of the TRO and is acting in concert or participation with defendants to employ their Trinity systems at the 2021 US Open. [00:15:53] Speaker 04: What do we do with that? [00:15:54] Speaker 05: Well, I would submit that our response to this order to show cause is our first [00:16:00] Speaker 05: opportunity to address the arguments that plaintiff put forward. [00:16:03] Speaker 04: So you don't think that was a fact finding? [00:16:04] Speaker 04: He's trying to argue that was a fact finding that the district court made. [00:16:08] Speaker 04: And so that's in their favor. [00:16:11] Speaker 05: If it was, then at the hearing that occurred subsequently, the court heard from us, the other side, on this issue [00:16:20] Speaker 05: and made a different judgment. [00:16:22] Speaker 04: And I think that in the... Where is your best evidence that they made a different determination after hearing from you? [00:16:31] Speaker 05: It's in that passage that I just read. [00:16:33] Speaker 04: In 27? [00:16:33] Speaker 04: 27. [00:16:36] Speaker 05: Three to five, I think it was. [00:16:37] Speaker 05: That the court heard the evidence, including our side of the evidence, and concluded that the facts weren't there to support that. [00:16:46] Speaker 05: And again, the district court, in deciding whether there was contempt, was applying a clear and convincing standard. [00:16:54] Speaker 05: And I think it's perfectly within her rights to listen to the evidence and find that there was not clear and convincing evidence that the USTA was acting in concert. [00:17:11] Speaker 05: Aside from the question of whether the USTA was acting in privity with or concert with the defendants, another important issue to highlight here is the timeline of events. [00:17:22] Speaker 05: The legacy Trinity systems were delivered in July of 2021. [00:17:26] Speaker 05: The technical assistance provided by defendants, the USTA relating to those legacy systems, ended August 1st. [00:17:37] Speaker 05: The TRO was issued August 23rd. [00:17:41] Speaker 05: in the middle of the US Open that was then ongoing. [00:17:47] Speaker 05: And so after the TRO issued, there's no evidence that the defendants did anything with relation to the legacy Trinity systems in use at the US Open that year. [00:18:02] Speaker 05: So if the defendants didn't do anything after the TRO, how could they be contributing to the infringement of anybody, including the USTA? [00:18:13] Speaker 05: And there's never been a finding that the USDA infringed these patents to begin with. [00:18:19] Speaker 05: There's never been an application of the claims to the actual product that was used that year or any other year to determine if there was, in fact, direct infringement by the USDA. [00:18:30] Speaker 02: You're saying that because of the default judgment, right? [00:18:32] Speaker 05: That's right. [00:18:33] Speaker 05: The default judgment, the defendant, the manufacturer chose to give up the fight and not appear. [00:18:40] Speaker 05: And so there was a finding based on the default that there was an infringement. [00:18:44] Speaker 05: But the USTA, as a non-party, has not had its day in court to dispute this infringement claim. [00:18:52] Speaker 05: And so the other aspect, aside from the timeline, [00:18:57] Speaker 05: that I'd like to address is that the district court, when we're talking about indirect infringement, either induced infringement or contributory infringement, the district court found that the defendants had no knowledge of what the USTA was going to do with this legacy Trinity system. [00:19:16] Speaker 05: And so without that knowledge component of how its non-infringing products were going to be used, [00:19:22] Speaker 05: That prevented any finding of indirect infringement by the defendants. [00:19:28] Speaker 05: So if the defendants ship off their non-infringing product, don't know how we're going to use it, don't know what we're going to add to it, they're just waiting for it to come back after the tournament so they can refresh the batteries as a part of this lease agreement, without the knowledge of infringement, there could not have been a finding of contributory or induced infringement. [00:19:49] Speaker 05: And the district court properly found that as well. [00:19:52] Speaker 05: And so the last argument that I heard Mr. Davis make was that you could be in contempt of the TRO, even if there was no direct infringement by the defendants, even if there was no indirect infringement by the defendants. [00:20:09] Speaker 05: There could also be a violation of the TRO if the defendants contributed in any way to the infringement of their patent. [00:20:20] Speaker 05: And so here, again, there's no evidence of aiding and abetting the defendants to contribute to the USDA infringing the patents. [00:20:29] Speaker 05: And so all of these findings by the district court, again, applying a clear and convincing standard of evidence, were well-founded. [00:20:41] Speaker 05: And there's certainly no abuse of discretion, no finding that was clearly around use. [00:20:46] Speaker 04: OK, anything further? [00:20:47] Speaker 05: Nothing, Your Honor. [00:20:48] Speaker 04: OK, thank you. [00:20:50] Speaker 04: Mr. Davis, you have some rebuttal time. [00:20:52] Speaker 00: On the issue of whether the defendants did anything after the TRO was issued, a contributory infringement [00:21:11] Speaker 00: happens every time there's a direct infringement, liability for contributory. [00:21:15] Speaker 02: No, there is a knowing component. [00:21:17] Speaker 02: There is a requirement for contributory infringement. [00:21:20] Speaker 02: It's right in the statute that they have to know the same to be especially made or especially adapted for use in infringement of the patent, right? [00:21:26] Speaker 00: I'm not saying there's not a knowledge clause. [00:21:29] Speaker 02: I mean, it's not true that every time there's direct infringement, there's necessarily contributory or induced infringement, right? [00:21:35] Speaker 00: On these facts, in this specific case. [00:21:37] Speaker 02: In this case, there's a default judgment. [00:21:40] Speaker 00: Well, in this case, the defendants undisputedly gave over the equipment that they gave to USTA. [00:21:46] Speaker 00: And if we skip for a moment the question of whether there was knowledge, I'm saying that that contributory infringement that happened initially back in June, July, it also occurred in August when [00:22:00] Speaker 00: a let was called by the system, you know, every time. [00:22:03] Speaker 04: But what's crazy about this, you're treating a default judgment as if it means that there has been a finding that since they are using or contributing or doing whatever, it's automatically infringement. [00:22:17] Speaker 04: You have a default judgment against the infringer. [00:22:20] Speaker 04: You want to go after somebody who was not a defendant to this case for contempt after a default judgment. [00:22:27] Speaker 04: They have a right to their day in court, too. [00:22:29] Speaker 04: And I don't know. [00:22:31] Speaker 04: I don't see much merit to her case. [00:22:33] Speaker 00: When the TRO issued the court, as rule 62 said, anyone who receives notice of this TRO can come in, two-day notice, and make a case. [00:22:46] Speaker 03: The district court issues the TRO in order to show cause. [00:22:56] Speaker 03: They came in and persuaded her [00:22:58] Speaker 03: that there was no contempt. [00:23:00] Speaker 03: I mean, that's the way it works in district court. [00:23:05] Speaker 03: So I guess I'm struggling to see how if this defendant gives a legacy system, which you would agree and concede is not infringing, correct? [00:23:19] Speaker 03: And then she says maybe inarticulately in her order to show cause that this demonstrates [00:23:27] Speaker 03: that there is infringement, they come into court and they persuade the district court, actually the entire record shows that there isn't infringement. [00:23:37] Speaker 03: And they haven't been acting in concert. [00:23:41] Speaker 03: Isn't that the way it works in district court? [00:23:46] Speaker 00: I'm not sure that I understand the question. [00:23:49] Speaker 03: I guess what I'm struggling with [00:23:53] Speaker 03: in this case is that you're saying, because there was a default judgment, then for all purposes, any system that these defendants provide any other customer necessarily infringes, and they're acting in concert. [00:24:12] Speaker 00: The default judgment covered what had been alleged in 2019, 2020. [00:24:17] Speaker 00: We made fresh submissions that the [00:24:23] Speaker 00: about what the USDA was doing. [00:24:28] Speaker 00: We showed photographic evidence indicating that it was a legacy system plus the handset. [00:24:34] Speaker 00: So we submitted that evidence. [00:24:38] Speaker 00: The district court appeared not to consider. [00:24:42] Speaker 04: Okay. [00:24:42] Speaker 04: I think your time is up. [00:24:44] Speaker 04: I thank both counsel. [00:24:45] Speaker 04: This case is taken under submission.