United States Court of Appeals for the Fifth Circuit United States Court of Appeals Fifth Circuit

FILED June 19, 2023 No. 21-40705 Lyle W. Cayce Clerk

CEATS, Inc., Plaintiff—Appellant, versus

TicketNetwork, Inc.; Ticket Software, LLC, Defendants—Appellees, consolidated with

No. 22-40028

CEATS, Inc., Plaintiff—Appellant, versus

TicketNetwork, Inc.; Ticket Software, LLC, Defendants—Appellees, versus Milford Skane; Brian Billett; Sonja McAuliffe, Appellants.

Appeals from the United States District Court for the Eastern District of Texas USDC No. 2:15-CV-1470 Case: 21-40705 Document: 00516791490 Page: 2 Date Filed: 06/19/2023

Before Elrod, Haynes, and Willett, Circuit Judges. Don R. Willett, Circuit Judge: This consolidated appeal concerns the injunctive and monetary sanctions that the district court imposed after a company and three individuals violated the court’s protective order. The company and the individuals challenge the sanctions on several grounds, many of which have merit. We hold that the district court erred by sanctioning the individuals without notice, by imposing litigation-ending sanctions without first finding bad faith, and by failing to adequately explain and failing to consider essential factors in its calculation of attorney fees. We AFFIRM in (small) part, VACATE in (large) part, and REMAND for further proceedings.

I A CEATS, Inc. is a non-practicing intellectual property company that owns patents for technologies used in online ticketing. TicketNetwork, Inc. and Ticket Software LLC (together “Ticket”) maintain an online marketplace for tickets to live events. More than a decade ago, CEATS filed a patent-infringement lawsuit against Ticket and other providers (the “2010 Lawsuit”). Two years later, CEATS and Ticket settled that suit. The settlement agreement gave Ticket a license to use CEATS’s patents in exchange for a lump-sum payment from Ticket and for ongoing royalty payments from Ticket and its affiliates (the “License Agreement”). CEATS continued its litigation against the remaining, non-settling defendants, but the jury in that case found that CEATS’s patents were invalid. The Court of Appeals for the Federal Circuit affirmed.1

1 CEATS, Inc. v. Cont’l Airlines, Inc., 526 F. App’x 966 (Fed. Cir. 2013). Case: 21-40705 Document: 00516791490 Page: 3 Date Filed: 06/19/2023

No. 21-40705 c/w No. 22-40028

Ticket then filed this suit seeking declarations that Ticket did not infringe CEATS’s patents, that the CEATS patents at issue in the License Agreement are invalid, and that the License Agreement is unenforceable. CEATS counterclaimed, arguing that Ticket breached the License Agreement. CEATS also sought an accounting of paym