in the Central Contractor Registration (“CCR”), an organization that registers all private
contractors for the United States Department of Defense (“DOD”). Private contractors may
not conduct business with the DOD unless they are registered with CCR. The CCR is a
department within the Defense Logistics Agency (“DLA”), which itself is part of the DOD.
Through the CCR, the DOD or other contractors and suppliers are able to determine all
products offered for sale by any contractor or supplier. Because LTD parts numbers are still
registered under USA's profile, LTD alleges that a search for any of its products in the CCR
registry will bring up both LTD and USA parts.

In response to LTD’s motion, USA does not deny any of the allegations. Instead, it
explains that achieving total compliance with the permanent injunction and settlement
agreement has been more complicated than anticipated, and thus has taken much longer
than expected. USA points out that it is a small company which is basically run by only
three individuals’, and argues that it has been using its best efforts to comply. Further, it
admits that with regard to its military catalogue, it was originally under the misapprehension
that military parts were not subject to the injunction and thus the numbering system did not
have to be changed. USA alleges that it is now in compliance with the directive that it
change its parts numbers. USA also argues that it made a request to the CCR months ago
to change its profile and that it has no control over when the CCR complies. Finally, USA
states that although it is possible that it has overlooked some uses of the Nav-Aids
trademark, such occurrences are to be expected after twenty years in business with LTD,

and that it is making changes as they are discovered.

” A fourth individual, who was in charge of creating and updating USA's website,
departed the company in November, 2001. USA argues that her departure greatly
hampered its ability to make all necessary changes to its website.

4


USA’s business. We recognize that the parties may dispute the identification of USA's
relevant products or the exact amount of USA's profits, as well as the scope of LTD’s
alleged breach, and thus invite additional briefing on the issues after all discovery is
complete. At this point, each party is ordered to bear its own costs and fees. It is so
ordered.

ENTER:

Mk lie LF tin

MICHAEL T. MASON
United States Magistrate Judge

Dated: April 25, 2002


for non-military products that were based on, but not identical to, LTD’s numbers.* When
the District Court converted the preliminary injunction to a permanent injunction, it enjoined
USA from, inter alia, “using an identical product designation system to that of LTD.”

LTD alleges that USA has violated both the injunction and the parties’ settlement
agreement in at least three ways. First, LTD alleges that at an industry convention soon
after the permanent injunction was entered, USA displayed a military product that bore
LTD’s identical numbering designation.’ LTD contends that it requested that USA remove
the product from its display, but that USA never responded.

Second, LTD alleges that until it filed the present motion on January 28, 2002, the
military catalog on USA’s website used LTD’s identical product designation system. [na
supplemental memoranda filed about ten days after its original motion, LTD recognized that
USA subsequently removed the on-line catalog, but alleges that it failed to clean up all the
links on its website, so that the Nav-Aids trademark and certain LTD products could stil! be
seen on some of the site's pages.®

Finally, LTD alleges that LTD’s parts numbers are still registered under USA’s profile

* LTD’s parts designation system uses meaningful combinations of letters and
numbers to designate each product, the type of aircraft it is used for, and other specific
product features. USA had changed its non-military parts numbers by taking the LTD parts
numbers and adding a single letter prefix to each one; it had not changed its military parts
numbers at all.

5 It is important to understand that it is not the sale of identical aircraft products, but
the way they are numerically identified, that is at issue here. Many companies make,
distribute and sell similar or even identical products, identifying them using various
designations. LTD argues that its product designation system is identified as its own, and
potential customers use it to ask for particular LTD products.

°LTD’s reply brief alleges that USA continues to use LTD’s parts numbers and model
numbers throughout its on-line catalog.


“Civil contempt proceedings are part of the action from which they stem, and their
purpose, of course, is to secure compliance with a prior court order.” D. Patrick, Inc. v. Ford
Motor Co., 8 F.3d 455, 459 (7" Cir. 1993). In this case, the parties agree that non-
compliance with an injunction need not be intentional to support a finding of contempt. See
McComb v. Jacksonville Paper Co., 336 US. 187, 191 (1949). Further, “a civil contempt
may be established even though the failure to comply with the Court's order was
unintentional or done with good intent. See, Select Creations, Inc. v. Paliafito America, Inc.,
906 F.Supp. 1251, 1272 (E.D.Wis. 1995), (internal citations omitted). However, USA
argues that it is in substantial compliance with the District Court's permanent injunction and
has been “reasonably diligent’ in attempting to comply, which should obviate the need for
a finding of contempt against it. /¢. LTD of course disagrees, and sets forth a litany of
examples which it says demonstrates how “out of compliance” USA remains.

An award of sanctions against a party in contempt of a court order can serve two
purposes, either to compel compliance with a previous order or to compensate the other
party for losses caused by previous non-compliance. See McComb Paper, 336 U.S. at 191.

In this case, USA argues that it is taking all possible steps to comply with the Court’s
directive and the settlement agreement, and that in fact, it has made even more strides
since the original motion was filed. | However, even assuming that USA is now in
substantial compliance with the injunction, it admits that it was in contempt of this Court’s

order (whether intentionally or not)? until very recently, and we believe that LTD should be

® Although we decline to opine on whether USA's breaches of the injunction and
settlement agreement were truly as innocent as it claims, we note that at least one of its
arguments — that its president, Robert Mansfield, did not know that military parts numbers
(continued...)


Binute Ord Form (9697

United States District Court, Northern District of Minois

Name of Assigned Judge
or Magistrate Judge

Sitting Judge if Other
than Assigned Judge

Marvin E. Aspen Michael T. Mason

CASE NUMBER 01C51 DATE 4/25/2002
CASE Nav-Aids Ltd. vs. Nav-Aids USA, Inc.
TITLE
[In the following box (a) indicate the party filing the motion, e.g., plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature
MOTION: of the motion being presented.]
DOCKET ENTRY:
q@) im) Filed motion of [ use listing in “Motion” box above.]
(2) a Brief in support of motion due
(3) Oo Answer brief to motion due. . Reply to answer brief due.
(4) 0 Ruling/Hearing on set for at
(5) Oo Status hearing[held/continued to] [set for/re-set for] on set for at
(6) Q Pretrial conference[held/continued to] [set for/re-set for] on set for at
(7) QO Trial[set for/re-set for] on at
(8) o [Bench/Jury trial] [Hearing] held/continued to at
(9) Oo This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]
COFRCP4(m) (General Rule 21 COFRCP41(a)(1) OI FRCP41(a)(2).
ao) = {Other docket entry] _ For the reasons stated in the attached Memorandum Opinion and Order,
plaintiffs motion for rule to show cause [42-1] and to enforce terms of settlement agreement [42-2] is
granted in part and denied in part and defendant’s motion to enforce the terms of the settlement agreement
[50-1], conduct limited discovery [50-2] and for damages [50-3] is granted in part and denied in part. All
matters relating to the referral of this action having been resolved, the referral is closed and the case is
returned to the assigned judge.
(1) [For further detail see order attached to the original minute order.]
No notices required, advised in open court. Document...
‘ A Number
No notices required. umber of notices f
wv | Notices mailed by judge’s staff.
Notified counsel by telephone. a
Docketing to mail notices.
Mail AO 450 form.
ov | Copy to judge/magistrate judge.

courtroom
deputy’s
initials

Sy
Date/time-received in
central Clerk's Office

railing deputy initials



compensated for USA’s non-compliance, as well as for its breach of the settlement
agreement. The Court has broad discretion to fashion an appropriate remedy for USA’s
contempt. See Connolly v. J.T. Ventures, 851 F.2d 930, 933 (7 Cir. 1988) citing United
States v. United Mine Workers of America, 330 U.S. 258, 303-04 (1947). Possible
remedies include a fine against USA or an award to LTD of USA's profits from the sale of
mis-numbered products, or a combination of both.

As in Connolly, we believe that an appropriate remedy is to award LTD the profits
USA received as a result of selling products using LTD’s product numbering system.
Although this amount may not exactly reflect LTD's lost sales, it does serve to compensate
LTD for losses that cannot be calculated, such as those resulting from USA’s continued use
of the Nav-Aids designation on its website, and will also deter future non-compliance. We
recognize that an exact determination of USA's profits will require additional discovery by
the parties and find that the relevant time period for discovery of USA's profits is January
15, 2002 (the end of the 45 day wind-up period), to the date of this order. Because it
appears from LTD’s briefs that it has a record of which products USA continued to offer for
sale using LTD’s identical and similar product numbers, it should provide a list of such
products to USA along with any additional discovery requests it needs to determine the
amount of the award. As for USA's allegations against LTD, before deciding whether it is
appropriate to award damages, we will allow USA to conduct its own limited discovery

regarding LTD’s use of the Nav-Aids USA designation and its alleged interference with

8(...continued)
were included in the injunction — is not very credible. Both the preliminary and permanent
injunction clearly prohibit the use of “identical” parts numbers and in fact, it was only the
military aircraft parts that used identical numbers.

6


IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

NAV-AIDS LTD.,
a Quebec corporation,

Plaintiff,
No. 01 C 0051
Vv.
Chief Judge Aspen
NAV-AIDS USA, INC., Mag. Judge Mason

an Illinois corporation,

Defendant.
MEMORANDUM OPINION AND ORDER

Michael T. Mason, United States Magistrate Judge:

On November 30, 2001, the District Court issued a permanent injunction against
defendant Nav-Aids USA, Inc. (“USA”), ordering that it cease its use of the Nav-Aids
designation and also make changes to its product numbering system so that it was no
longer identical to the product-designation numbering system used by plaintiff Nav-Aids, Ltd.
(‘LTD’). The parties entered into a settlement agreement which reiterated and expanded
upon these terms to include USA’s agreement that it would also cease using product-
designations that were derived from, but not identical to, those of LTD.

LTD alleges that USA has not complied with the terms of the injunction and has also
breached the settlement agreement. It has filed a motion for a rule to show cause why USA

should not be held in contempt and also to enforce the settlement agreement.’ After this

* Although the plaintiff's motion was styled as a motion for an Order for a Rule to
Show Cause, the parties addressed the merits of the ultimate question before us — whether
USA should be held in contempt — in their briefs as well. Because there are no disputed
facts at issue, we impliedly grant LTD’s motion for a Rule to Show Cause and consider its
request that we find USA in contempt.


opinion was completed, but before it was entered, the District Court referred to us a motion
from USA which alleged that LTD has breached the settlement agreement by disparaging
USA to its customers and tortiously interfering with its business, and also by using the name
Nav-Aids USA on its website. For the following reasons, we grant LTD’s motion for a rule
to show cause and find USA in contempt of the permanent injunction and settlement
agreement. Additionally, we order both parties to comply with their responsibilities under
the settlement agreement and grant each party the right to conduct limited discovery on
outstanding issues, as we explain below. We decline to order USA damages at this time,
reserving the issue until after additional discovery is completed.

Until October, 2000, USA acted as a distributor for LTD, selling ground support
products LTD manufactured for use with commercial, private, and military aircraft. After
LTD terminated the distributorship, it requested that USA cease selling other manufactures’
products using LTD’s product designation system? and also stop using LTD’s trade name
(Nav-Aids) and trademarks on its websites, in its domain names, and in any other
advertising. When USA failed to do so, LTD sought and obtained a preliminary injunction
which prevented USA from using LTD's identical parts numbers to sell non-LTD
equipment.? During the pendency of the preliminary injunction, the parties entered into a

settlement agreement under which, inter alia, USA also agreed to change its parts numbers

2 As explained in the District Court’s order granting partial summary judgment and
a preliminary injunction in favor of LTD, during the pendency of the parties’ business
relationship, USA apparently used LTD’s numbering system for all of its products, with
LTD’s tacit approval. LTD contends that consumers associate the parts-designation system
with it and its company.

$ At the time the preliminary injunction was entered, only USA's military products
used a designation system identical to LTD’s; the Court declined to enjoin USA from using
a similar, but not identical numbering system on its non-military products.

2