On Aug. 20, the Ninth Circuit decided Koninklijke Philips Electronics, N.V. v. KXD Technology, Inc., involving the appealability of a contempt order stemming from the violation of a temporary restraining order and preliminary injunction.
The District of Nevada granted the plaintiff injunctive relief enjoining the defendants from selling any product that infringed the plaintiff’s registered trademarks. The court also ordered the defendants to file a report setting forth their inventory of counterfeit goods and another report detailing how they have complied with the preliminary injunction.
Within the next year, it became clear to the district court that the defendants had no intention of complying with those orders. The defendants filed no reports, even after the plaintiff moved for sanctions.
In response, the court granted plaintiff’s motion, holding the defendants jointly and severally liable to the plaintiff for $353,611.70 in attorney’s fees, $37,098.14 in seizure and storage costs, $1,284,090.00 in lost royalties, and $10,000 per day until the reports were filed beginning 14 days after the order was entered.
The defendants appealed these sanctions to the Ninth Circuit. The plaintiff argued that such an interlocutory appeal was impermissible and the Ninth Circuit lacked jurisdiction to hear it.
The court first considered whether the contempt order was civil or criminal. If civil, the court had no jurisdiction until the decision became part of a final judgment. If criminal, however, the court had immediate jurisdiction because criminal contempt orders are appealable when entered.
The court noted the “distinction between the two forms of contempt lies in the intended effect of the punishment imposed. The purpose of civil contempt is coercive or compensatory, whereas the purpose of criminal contempt is punitive.”
The court found the contempt order was civil and, therefore, not immediately appealable.
“The attorney’s fees, lost royalties, and storage costs were assessed in order to compensate the plaintiff for losses sustained. Furthermore, the per diem fine was not to be assessed until fourteen days after the entry of the order, and the defendants could avoid paying the fine by complying with the terms of the injunction. Because the per diem fine allowed the defendants the opportunity to purge the contempt before payment became due, it was a civil sanction.”
The court also found on policy grounds that “holding that a civil sanction is directly appealable if it is immediately payable risks eviscerating the fundamental rule that compensatory sanctions are civil and not appealable on interlocutory review. Further, we note that defendants will have the opportunity to appeal the sanctions imposed after a final judgment. In sum, we are not persuaded that the defendants face irreparable harm and, in any event, find that, because of the defendants’ conduct, any risk of harm is appropriately placed upon them.”
The case cite is Koninklijke Philips Electronics, N.V. v. KXD Technology, Inc., __ F.3d __, 2008 WL 3852719, No. 07-15310 (9th Cir. Aug. 20, 2008).