Energy Recover, Inc. v. Hauge: Acts did Not Violate Terms of Injunction, Infringement Unasserted

Category: Injunctions 


By: Christian Hannon, Contributor 

TitleEnergy Recovery, Inc. v. Hauge, No. 2013-1515 (Fed. Cir. Mar. 20, 2014).
Issue[W]hether Mr. Hauge by his conduct violated any terms of the district court’s 2001 Order [and was therefore rightly held in contempt of court].
Energy Recovery, Inc. at *7 (text added).
HoldingBecause the finding of contempt is reversed [since Mr. Hauge's conduct did not violate any specific terms of an injunction], there is no remedy necessary [as acutal patent infringement was not asserted]; the injunction is therefore vacated.
Id. at *12 (text added).



Procedural HistoryLeif J. Hauge appeals the district court’s decision finding him in contempt of that court’s March 19, 2001, Order (the “2001 Order”), which adopted Mr. Hauge and Energy Recovery, Inc.’s (“ERI”) March 16, 2001,
Settlement Agreement (the “Agreement”).
Energy Recovery Inc. at *2.
Legal Reasoning (Rader, Reyna, Wallach)
The AgreementThe Agreement and subsequent Order obligated Mr. Hauge to transfer ownership not only of the patents, but also all other intellectual property and other rights relating to pressure exchanger technology pre-dating the Agreement and 2001 Order.
Energy Recovery, Inc. at *2-3 (internal citations omitted).
Agreement Only Covered Preexisting Intellectual PropertyThe Agreement only required Mr. Hauge to transfer ownership of the pre-Agreement pressure exchanger intellectual property; cooperate fully in executing any and all documents necessary to do so; refrain from competing for two years; and announce in a press release that ERI was the sole source for Pressure Exchangers built pursuant to such patents, patent applications, and technology. Nothing in the 2001 Order expressly precludes Mr. Hauge from using any manufacturing process.
Energy Recovery, Inc. at *8 (internal citations omitted).
Civil Contempt StandardCivil contempt is an appropriate sanction only if the district court can point to an order of the court which sets forth in specific detail an unequivocal command which a party has violated. ERI cannot point to such a command. Mr. Hauge is not claiming ownership of ERI’s intellectual property. Nor did Mr. Hauge start selling pressure exchanger products before the expiration of the Agreement’s non-compete clause. Finally, if in fact Mr. Hauge is using ERI’s manufacturing processes, he may be in violation of the patent laws or state trade secret laws, but he is not in violation of any “unequivocal command” in the 2001 Order.
Id. at *8-9.
Infringement not at issueBecause ERI explicitly stated during the contempt hearing that it was not alleging contempt on the basis that Mr. Hauge’s new pressure exchanger, as described in the ’437 patent, infringes any of ERI’s patents, see J.A. at 59, the district court was not required to address patent infringement.
Id. at *10.
Contempt Order Set By the Injunction LiftedBecause Mr. Hauge did not violate any provision of the 2001 Order, the district court abused its discretion in holding Mr. Hauge in contempt. [...]Because the finding of contempt is reversed, there is no remedy necessary; the injunction is therefore
Id. at *12.
For the foregoing reasons, the district court’s finding
of civil contempt is reversed and its grant of the
injunction is vacated.
Energy Recovery, Inc. at *12.
 Image Attribution Statement: James Gillray, “The Reception,” available as public domain image due to expired copyright (published 1792), http://commons.wikimedia.org/wiki/File:The_Reception.JPG (last visited May 27, 2014) (image edited).
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