Codexis, Inc. v. Enzymeworks, Inc. ( 2019 )

NOTE: This disposition is nonprecedential.
United States Court of Appeals
for the Federal Circuit
______________________
CODEXIS, INC.,
Plaintiff-Appellee
v.
ENZYMEWORKS, INC., SUZHOU HANMEI
BIOTECHNOLOGY CO. LTD, DBA
ENZYMEWORKS, INC. (CHINA), JUNHUA TAO,
ANDREW TAO,
Defendants-Appellants
______________________
2018-1655
______________________
Appeal from the United States District Court for the
Northern District of California in No. 3:16-cv-00826-WHO,
Judge William H. Orrick, III.
______________________
Decided: February 8, 2019
______________________
DOUGLAS ETHAN LUMISH, Latham & Watkins LLP,
Menlo Park, CA, for plaintiff-appellee. Also represented by
GABRIEL GROSS; GABRIEL BELL, Washington, DC.
J. JAMES LI, LiLaw, Inc., Los Altos, CA, for defendants-
appellants. Also represented by ANDY PIERZ.
______________________
2 CODEXIS, INC. v. ENZYMEWORKS, INC.
Before DYK, CHEN, and HUGHES, Circuit Judges.
PER CURIAM.
EnzymeWorks, Inc., Suzhou Hanmei Biotechnology
Co., d/b/a EnzymeWorks, Inc. (China), Junhua Tao, and
Andrew Tao (collectively “EnzymeWorks”) appeal from or-
ders of the U.S. District Court for the Northern District of
California. The district court imposed sanctions on En-
zymeWorks’s counsel for unreasonably multiplying the
proceedings and violating the local rules (“Sanctions Or-
der”). The district court also held EnzymeWorks in con-
tempt of a district court protective order and imposed
sanctions for violating the order (“Contempt Order”). We
affirm the Contempt Order and remand to allow the dis-
trict court to vacate the Sanctions Order.
BACKGROUND
I
On February 19, 2016, Codexis, Inc. (“Codexis”) sued
EnzymeWorks, asserting patent infringement, trade secret
misappropriation, and various state law claims. On Au-
gust 11, 2017, Codexis filed a motion for leave to amend its
complaint to add two new state law claims. EnzymeWorks
opposed the motion. EnzymeWorks argued, among other
things, that the proposed amendments were futile and
would not survive a motion to dismiss. The district court
determined that the proposed amendments were not futile
and granted Codexis’s motion for leave on September 25,
2017. Three days later, Codexis filed a second amended
complaint adding these new claims.
On September 27, 2017, EnzymeWorks sought leave to
file a motion for reconsideration of the district court’s order
granting Codexis leave to amend the complaint. En-
zymeWorks “raised the same argument [it raised in oppo-
sition to Codexis’s motion for leave], without citing new
CODEXIS, INC. v. ENZYMEWORKS, INC. 3
facts, new law or a manifest failure by the Court to consider
such facts or law,” as required by the local rules. Codexis,
Inc. v. EnzymeWorks, Inc., No. 3:16-cv-00826, 2017 WL
5992130, at *5 (N.D. Cal. Dec. 4, 2017). On October 9,
2017, EnzymeWorks filed a motion to dismiss the new
claims, asserting the same arguments for a third time.
On December 4, 2017, the district court issued the
Sanctions Order. The court denied EzymeWorks’s motion
for leave to file a reconsideration motion and motion to dis-
miss and imposed sanctions on EnzymeWorks. The court
ordered EnzymeWorks’s counsel to “pay plaintiff’s counsel
$10,000 as a civil sanction for needlessly multiplying this
litigation and violating the Local Rules.” Id.
On February 5, 2018, the parties notified the district
court that they had settled the underlying dispute and sub-
mitted a stipulated consent judgment of patent infringe-
ment and a stipulated permanent injunction. The parties
also filed a stipulated protective order, which restricted the
parties’ comments on the settlement. The district court ap-
proved and entered the three stipulated orders. Pursuant
to the settlement agreement, the court dismissed the re-
maining claims with prejudice.
In connection with the settlement, EnzymeWorks also
filed an unopposed motion to vacate the Sanctions Order.
The district court did not immediately act on the motion.
On March 6, 2018, EnzymeWorks filed a notice of appeal
with respect to the Sanctions Order. While the appeal was
pending, the district court purported to vacate the Sanc-
tions Order.
II
Immediately after the parties settled, and after entry
of the district court’s protective order, EnzymeWorks is-
sued a series of press releases. On February 20, 2018, Co-
dexis filed a motion to hold EnzymeWorks “in contempt for
4 CODEXIS, INC. v. ENZYMEWORKS, INC.
violating the [stipulated protective order] because defend-
ants issued press releases that did not use the agreed upon
statement and that spun the litigation and parties in a way
that the [stipulated protective order] was designed to
avoid.” Codexis, Inc. v. EnzymeWorks, Inc., No. 3:16-cv-
00826, 2018 WL 1536655, at *1 (N.D. Cal. Mar. 29, 2018).
On March 29, 2018, the district court issued the Con-
tempt Order. The court found EnzymeWorks in contempt
of the stipulated protective order and sanctioned En-
zymeWorks. Specifically, the court (1) “award[ed] Co-
dexis’s counsel the full amount of its reasonable attorneys’
fees and costs incurred in connection with these contempt
proceedings and with their efforts to secure defendants’
compliance with the [stipulated protective order]”; and (2)
ordered EnzymeWorks to retract the press releases and, in
that same retraction, publish the following statement:
EnzymeWorks has been ordered by the United
States District Court for the Northern District of
California to retract its prior statements and press
releases pertaining in any way to the settlement of
the lawsuit filed against it by Codexis, Inc. The
Court has found EnzymeWorks’s prior statements
on the matter were made IN VIOLATION OF A
COURT ORDER, and the Court has found En-
zymeWorks . . . IN CONTEMPT OF COURT as a
result of those prior statements.
Id. at *9. EnzymeWorks subsequently amended its March
6, 2018 notice of appeal to appeal the Contempt Order.
III
We have jurisdiction pursuant to 28 U.S.C. § 1292(c).
When reviewing non-patent law issues, such as the impo-
sition of sanctions or the standard for contempt, we apply
the law of the regional circuit. The Ninth Circuit reviews
a district court’s “decision to impose sanctions for contempt
for an abuse of discretion.” In re Crystal Palace Gambling
CODEXIS, INC. v. ENZYMEWORKS, INC. 5
Hall, Inc., 817 F.2d 1361, 1364 (9th Cir. 1987). “A con-
tempt order will not be reversed unless [the court] ha[s] a
definite and firm conviction that the court below committed
a clear error of judgment in the conclusion it reached after
it weighed the relevant factors.” Id.
DISCUSSION
I
EnzymeWorks argues the district court abused its dis-
cretion in holding it in contempt because its press releases
did not violate the stipulated protective order. We disa-
gree.
A district court has the authority to punish “contempt
of its authority,” including a party’s “[d]isobedience” of an
“order.” 18 U.S.C. § 401(3); accord Int’l Union, United
Mine Workers of Am. v. Bagwell, 512 U.S. 821, 831 (1994);
Reebok Int’l Ltd. v. McLaughlin, 49 F.3d 1387, 1390 (9th
Cir. 1995). Civil contempt “consists of a party’s disobedi-
ence to a specific and definite court order by failure to take
all reasonable steps within the party’s power to comply.”
Reno Air Racing Ass’n, Inc. v. McCord, 452 F.3d 1126, 1130
(9th Cir. 2006) (quoting In re Dual–Deck Video Cassette Re-
corder Antitrust Litig., 10 F.3d 693, 695 (9th Cir. 1993)).
The contempt “need not be willful,” but “a person should
not be held in contempt if his action appears to be based on
a good faith and reasonable interpretation of the court’s or-
der.” Id. (internal quotation marks and citations omitted).
The stipulated protective order provided that
[t]he parties may make only the agreed statement,
attached as Exhibit 1, to any third party concern-
ing the settlement of the above-captioned action.
The parties are prohibited from making any other
statement or disclosure regarding the settlement of
this action to any third party.
6 CODEXIS, INC. v. ENZYMEWORKS, INC.
Codexis, 2018 WL 1536655, at *3 (alteration in original)
(emphases added). The agreed statement was a single par-
agraph and stated that the parties “have reached a settle-
ment concerning the lawsuit filed by Codexis against
EnzymeWorks,” the terms of the settlement “are confiden-
tial,” the parties have “stipulated to a judgment of patent
infringement . . . and a permanent injunction barring any
future infringement,” and the remaining claims “have been
dismissed with prejudice.” Id. It is undisputed that En-
zymeWorks did not use the agreed statement verbatim in
its press releases, which were each multiple paragraphs.
For example, one of the press releases stated that “[f]rom
the very beginning, EzymeWorks decided not to oppose the
patent infringement claims because of the limited expo-
sure, but fiercely denied any other liabilities throughout
the case.” Id. at *6, *8. The press release then directed the
reader to a prior EnzymeWorks press release discussing
Codexis’s claims negatively. Id.
The district court found that the press releases con-
tained more than mere stylistic changes from the agreed
upon language. It found that the press releases materially
deviated from the agreed statement and spun the litigation
and settlement in a way more favorable to EnzymeWorks.
The court found that EnzymeWorks did not take all rea-
sonable steps within its power to comply with the order and
that its interpretation of the stipulated protective order
was not reasonable. Thus, it held EnzymeWorks in con-
tempt.
We do not find that the district court abused its discre-
tion in holding EnzymeWorks in contempt for violating the
stipulated protective order. We have considered En-
zymeWorks’s remaining arguments and find them without
merit.
CODEXIS, INC. v. ENZYMEWORKS, INC. 7
II
EnzymeWorks also asks this court to vacate the Sanc-
tions Order because the district court purported to vacate
the order after EnzymeWorks filed its first notice of appeal
and thus lacked jurisdiction to vacate the order.
We agree that the filing of EnzymeWorks’s first notice
of appeal divested the district court of jurisdiction to vacate
the Sanctions Order. “The filing of a notice of appeal is an
event of jurisdictional significance—it confers jurisdiction
on the court of appeals and divests the district court of its
control over those aspects of the case involved in the ap-
peal.” Griggs v. Provident Consumer Discount Co., 459
U.S. 56, 58 (1982) (per curiam). 1
1 This is in contrast to the Contempt Order entered
after the first notice of appeal was filed, because the con-
tempt proceeding was a separate proceeding for purposes
of finality. Although EnzymeWorks should have filed a
separate notice of appeal rather an amended notice of ap-
peal as to the Contempt Order, it is the substance, not the
form, of the notice that counts for purposes of Federal Rule
of Appellate Procedure 3. See Becker v. Montgomery, 532
U.S. 757, 767–68 (2001) (collecting cases) (“[I]mperfections
in noticing an appeal should not be fatal where no genuine
doubt exists about who is appealing, from what judgment,
to which appellate court.”); Intercargo Ins. v. United States,
83 F.3d 391, 394–95 (Fed. Cir. 1996) (“[W]hile it is the filing
of the notice of appeal that confers jurisdiction on the ap-
pellate court . . . , strict adherence to the requirements of
Rule 3 is not a prerequisite to a valid appeal, as long as the
litigant's action is ‘the functional equivalent of what the
rule requires.’”); Cel-A-Pack v. Cal. Agric. Labor Relations
Bd., 680 F.2d 664, 667 (9th Cir. 1982) (“[C]ourts of appeals
have discretion, when the interests of substantive justice
8 CODEXIS, INC. v. ENZYMEWORKS, INC.
We therefore remand to the district court to allow the
court to vacate the Sanctions Order.
AFFIRMED AND REMANDED
COSTS
Costs to Codexis.
require it, to disregard irregularities in the form or proce-
dure for filing a notice of appeal.”).