Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc.

154 F.3d 1345, 1998 WL 553669
CourtCourt of Appeals for the Federal Circuit
DecidedSeptember 2, 1998
DocketNo. 98-1035
StatusPublished
Cited by4 cases

This text of 154 F.3d 1345 (Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals for the Federal Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc., 154 F.3d 1345, 1998 WL 553669 (Fed. Cir. 1998).

Opinion

BRYSON, Circuit Judge.

Following a trial, the United States District Court for the Southern District of Texas issued an injunction prohibiting Additive Controls & Measurement Systems, Inc., (Ad-Con) from selling certain positive displacement flowmeters that were determined to infringe Flowdata’s United States Patent No. 4,815,318. Appellants Galen M. Cotton, Jack D. Harshman, and Truflo Instrumentation, Inc., (Truflo) were subsequently determined to be in contempt of that injunction and were assessed civil contempt penalties in the amount of Flowdata’s damages and attorney fees. We affirm the district court’s contempt findings with respect to Cotton and Truflo, but reverse the portion of the court’s order holding Harshman in contempt.

I

At one time, AdCon and Flowdata were competitors in the market for positive displacement flowmeters, which are used to measure the flow of liquids. Following a trial, AdCon was found to have willfully infringed Flowdata’s patent and engaged in unfair competition. The district court subsequently entered an injunction barring AdCon from further sales of its infringing meter or any colorable imitations.

Shortly after the injunction was issued in August 1993, Flowdata began investigating sales of a redesigned positive displacement flowmeter by AdCon’s president and majority stockholder, Galen Cotton. Flowdata requested that the district court institute contempt proceedings to determine whether the new meter was being marketed in violation of the injunction. Ultimately, Cotton and the other two appellants, Harshman and Truflo, were found to be in contempt of the injunction for their roles in developing and marketing the new flowmeter.

The sequence of events preceding the contempt findings is complicated and requires some additional explanation. In February 1994, the district court held a three-day show-cause hearing with testimony from Cotton and experts for both AdCon and Flowda-ta. The testimony adduced at the hearing established that Cotton had designed the new flowmeter during the pendency of the patent infringement suit and had enlisted Harshman to develop the engineering drawings for the new meter. Cotton then participated in forming two companies, Truflo and TruGear, Inc., to produce and manufacture the new meters, which were to be marketed [1349]*1349as “TruGear meters.” Cotton maintained a majority interest in Truflo, with Harshman receiving a 10% share for his efforts. Neither Harshman nor Truflo participated in the February 1994 contempt proceeding.

Following the February 1994 hearing, the district court concluded that the TruGear meters were merely colorable variations of the infringing AdCon meter and held Cotton in contempt of the 1998 injunction. In an order issued in October 1994, Harshman, Truflo, and several other non-parties were enjoined from disposing of inventory of the TruGear meter and ordered to show cause why they should not be held in contempt for actively participating with Cotton in violating the court’s injunction. The part of the court’s order enjoining the non-parties was later vacated by this court in Additive Controls & Measurement Systems, Inc. v. Flowdata, Inc., 96 F.3d 1390, 40 U.S.P.Q.2d 1106 (Fed.Cir.1996).

The show cause hearing was held in March 1995. The non-parties, including Harshman and Truflo, appeared and presented evidence regarding the extent of their participation with Cotton in designing and selling the Tru-Gear meter. In September 1997, the district court issued an order dismissing several non-parties, including TruGear, Inc., from the contempt action but finding that Harshman and Truflo had actively participated with Cotton in violating the injunction. Harsh-man and Truflo were made jointly and severally liable with Cotton for Flowdata’s damages and attorney fees, an amount in excess of $350,000. This appeal followed.

II

The first issue in this appeal is whether it was permissible for the district court to try issues relating to the TruGear meter in a contempt proceeding. Appellants argue that the contempt findings in this case must be vacated because the contempt proceeding should never have been convened. Instead, according to appellants, Flowdata should have been required to litigate its claims regarding the TruGear meter in a separate infringement action. We review the district court’s decision to proceed via a contempt healing for abuse of discretion. See KSM Fastening Sys., Inc. v. H.A. Jones Co., 776 F.2d 1522, 1530, 227 U.S.P.Q. 676, 682 (Fed.Cir.1985).

Before entering a finding of contempt of an injunction in a patent infringement case, a district court must address two separate questions. The first is whether a contempt hearing is an appropriate forum in which to determine whether a redesigned device inflinges, or whether the issue of infringement should be resolved in a separate infringement action. See KSM, 776 F.2d at 1530-32, 227 U.S.P.Q. at 682-84. That decision turns on a comparison between the original infringing product and the redesigned device. If the differences are such that “substantial open issues” of infringement are raised by the new device, then contempt proceedings are inappropriate. Id. at 1532, 776 F.2d 1522, 227 U.S.P.Q. at 683-84. If contempt proceedings are appropriate, the second question the district court must resolve is whether the new accused device infringes the claims of the patent. See id. at 1528-30, 776 F.2d 1522, 227 U.S.P.Q. at 680-82. Within those general constraints, the district court has broad discretion to determine how best to enforce its injunctive decrees. Id. at 1532, 776 F.2d 1522, 227 U.S.P.Q. at 684.

The district court in this case recognized its responsibility to compare the TruGear meter both to the original AdCon meter and to the patent claims. Following the testimony of Flowdata’s expert, the court denied Cotton’s motion to dismiss the contempt proceedings. Subsequently, after considering all the evidence, the court issued an opinion characterizing the TruGear meter as a mere colorable variation of the AdCon meter. In the same opinion, the court compared the TruGear meter to the patent claims and found infringement. Although our cáse law suggests that the need for expert testimony counsels against the use of contempt proceedings to try infringement, the district court satisfied the procedural requirements of KSM by separately analyzing the questions whether contempt proceedings were appropriate and whether the redesigned device infringed the patent.

[1350]*1350On the merits, the district court did not abuse its discretion in finding that the TruGear meter raised no substantial open questions of infringement and infringed the claims of Flowdata’s patent. The TruGear meter differs from the AdCon meter principally by including a ball-bearing sleeve and by using different-sized rotors to measure flow. In addition, the main chamber of the TruGear meter is round rather than oval-shaped.

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