Contempt of Permanent Injunction Warrants Disgorgement of Profits and Coercive Penalty

The court found defendant in contempt of a permanent injunction after determining that defendant's new software product was not more than colorably different than the enjoined product. The court ordered a disgorgement of defendant's incremental (not gross) profits of $17 million through July 1, 2013, plus $24,850 per day thereafter, and provisionally imposed a coercive penalty in the amount of $67,362 per day. "Where, as here, 'awarding a reasonable royalty would simply encourage continued defiance of court orders and promote disrespect for the law, where a defendant's profits from wrongdoing are so much greater than any estimated royalty amount, and where it is difficult if not impossible to calculate the actual loss of the plaintiff attributable to the contempt,' the remedy of disgorgement of profits is appropriate. . . . [T[he Court can quickly dispense with gross profits finding that they are inappropriate measures of disgorgement, because they are not an appropriate measure of the extent to which [defendant] has profited from its contemptuous conduct. . . . [Defendant's] contumacious conduct . . . is . . . quite troubling because it reflects a willingness to be casual about its obligation to obey the injunction. Also, [defendant's] conduct in advising customers about how to run [the accused software] and [defendant's new product] in parallel and in not verifying whether customers had stopped using [the accused product] illustrates the need to use the coercive power of the Court to assure compliance with the injunction henceforth. However, [defendant] must be given an opportunity to purge the contempt before a coercive remedy is enforced. The appropriate coercive remedy is a fine of $62,362 per day for every day that [defendant] remains in contempt. If, however, [defendant] demonstrates by [next month] that it is in compliance with the injunction, no coercive remedy will be imposed."

ePlus, Inc. v. Lawson Software, Inc., 3-09-cv-00620 (VAED August 16, 2013, Order) (Payne, J.).