Court Opinion

ID: 2973121
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:58:33.245981+00
Date Added: 2024-06-11T15:03:41.116380
License: Public Domain

RECOMMENDED FOR FULL-TEXT PUBLICATION
                                    Pursuant to Sixth Circuit Rule 206
                                            File Name: 05a0484p.06

                       UNITED STATES COURT OF APPEALS
                                        FOR THE SIXTH CIRCUIT
                                          _________________

                                                     X
                                 Plaintiff-Appellee, -
 GNESYS, INC.,
                                                      -
                                                      -
                                                      -
                                                          No. 04-6048
          v.
                                                      ,
                                                       >
 BOYD B. GREENE, Individually, and d/b/a GREENE & -
                                                      -
                            Defendants-Appellants. -
 ASSOCIATES, and GREENE & ASSOCIATES, LLC,

                                                      -
                                                     N
                       Appeal from the United States District Court
                    for the Western District of Tennessee at Memphis.
                   No. 99-02659—Jon Phipps McCalla, District Judge.
                                         Argued: October 26, 2005
                                Decided and Filed: December 22, 2005
     Before: KEITH and BATCHELDER, Circuit Judges; OBERDORFER, District Judge.*
                                            _________________
                                                 COUNSEL
ARGUED: John J. Mulrooney, CRONE & MASON, Memphis, Tennessee, for Appellants. Grady
M. Garrison, BUTLER, SNOW, O’MARA, STEVENS & CANNADA, Memphis, Tennessee, for
Appellee. ON BRIEF: John J. Mulrooney, CRONE & MASON, Memphis, Tennessee, for
Appellants. Grady M. Garrison, Charles C. Harrell, Elizabeth Einstman Chance, BUTLER, SNOW,
O’MARA, STEVENS & CANNADA, Memphis, Tennessee, for Appellee.
                                            _________________
                                                OPINION
                                            _________________
        OBERDORFER, District Judge. This is an appeal from the district court’s decision finding
Defendant-Appellant Boyd B. Greene in contempt for violating its order enjoining him from using
the intellectual property of his former employer, Gnesys, Inc. It found that Greene had illegally used
confidential and proprietary information regarding Gnesys’s products in marketing his own product
overseas. The central issue on appeal is whether Greene timely appealed the district court’s orders
finding him in contempt and directing him to pay compensatory damages. We conclude that he did
not, and accordingly we dismiss the appeal of the district court’s ruling on these two substantive

        *
          The Honorable Louis F. Oberdorfer, United States District Judge for the District of Columbia, sitting by
designation.

                                                        1
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                            Page 2

issues. However, we affirm the district court’s finding that Greene willfully violated the Injunction
and its consequent award of attorney’s fees to Gnesys.
I.     Background and Procedural History.
        Gnesys manufactures and sells the HYDRASEP Oil Water Separator, a device that separates
oil from water. Until he left the company because of a salary dispute, Greene had served Gnesys
in several positions over the years: shareholder of Gnesys from mid-1993 to August 22, 2000;
employee and officer until his resignation on May 4, 1998; and a member of the Board of Directors
until he resigned that position on April 28, 1999.
        On August 2, 1999, Gnesys sued Greene in federal court. Gnesys alleged that Greene’s
unauthorized use of Gnesys’s intellectual property constituted unfair competition and violated state
tort law. According to Gnesys, after Greene left the company, it discovered that Greene sought to
obtain patent rights in India for Greene’s own StakPak product, and distributed to potential investors
in the United States and China StakPak business plans which contained information he knew to be
the confidential and proprietary information of Gnesys. He also allegedly used photographs of the
HYDRASEP device in promotional materials for the StakPak (albeit with the Gnesys logo digitally
removed), and used product specifications for the StakPak that were almost verbatim the same as
Gnesys’s specifications for the HYDRASEP device.
        On October 26, 1999, pursuant to a settlement agreement, the district court entered a Consent
Preliminary Injunction, which ordered Greene to stop using Gnesys’s intellectual property and
infringing its patents related to its HYDRASEP device. On August 22, 2000, the court entered a
Consent Permanent Injunction and Final Judgment (“Injunction”) to the same effect.
       In April 2001, Gnesys moved the court to cite Greene for contempt. The motion alleged six
separate violations of the Injunction, primarily related to Greene’s continued unauthorized use of
Gnesys’s confidential and proprietary information to market his StakPak device. Gnesys also sought
compensatory damages, expenses, and attorney’s fees.
        The district court found that Greene willfully violated four provisions of the Injunction and
consequently was in contempt. The court accordingly directed Gnesys to submit evidence that
would support an award of damages, “either compensatory or punitive.” See Contempt Order (Nov.
26, 2002) (J.A. 63), at 20. After receiving briefing from the parties, the court awarded Gnesys
$100,000 in damages, and ordered Greene to post a $25,000 bond pending rescission of the patent
application in India. See Damages Order (Aug. 26, 2003) (J.A. 101), at 6. After additional briefing,
the court also directed Greene to reimburse Gnesys $158,041.50 for attorney’s fees and $8,774.40
in costs that he had caused Gnesys to incur. See Attorney Fees Order (July 21, 2004) (J.A. 199), at
1-2. On August 20, 2004, Greene appealed all three orders.
II.    Timeliness of Appeal.
       Before reaching the merits of the district court’s decision, we consider whether Greene
timely appealed the orders finding him in contempt and awarding Gnesys compensatory damages.

         A party must file a notice of appeal with the district court “within 30 days after the judgment
or order appealed from is entered.” Fed. R. App. P. 4(a)(1)(A). The judgment must be a “final
decision” of the lower court. 28 U.S.C. § 1291. “‘A ‘final decision’ generally is one which ends
the litigation on the merits and leaves nothing for the court to do but execute the judgment.’”
Budinich v. Becton Dickinson & Co., 486 U.S. 196, 199 (1988) (citation omitted).
No. 04-6048            Gnesys, Inc. v. Greene, et al.                                             Page 3

        In this case, the district court issued its Contempt Order on November 26, 2002; its Damages
Order on August 26, 2003; and its Attorney Fees Order on July 21, 2004. Greene filed a Notice of
Appeal on August 20, 2004, within 30 days of the filing of the Attorney Fees Order, but almost a
year after the entry of the Damages Order. Gnesys contends that the Damages Order was a “final
decision” on the discrete issues of contempt and compensatory damages. Therefore, it urges that
the August 20, 2004 Notice of Appeal was not timely, because it was filed more than 30 days after
issuance of the lower court’s “final decision” of August 26, 2003.
        Greene responds that the attorney’s fees award was part of the merits decision and was
intertwined with the damages assessment. As a result, he contends, the August 2003 Damages Order
was not a final judgment, because an essential element of the damages award remained unresolved,
so that the contempt judgment is appealable.
         In Budinich, the Supreme Court held that the district court’s decision denying petitioner’s
new trial motion was final and appealable even when the court had not yet awarded attorney’s fees.
There petitioner sued pursuant to a Colorado statute to collect employment compensation that
respondent owed him. A jury awarded petitioner only $5,000, and petitioner timely moved for a
new trial and attorney’s fees. On May 14, 1984, the Budinich court denied the new trial motions,
found that petitioner was entitled to attorney’s fees, and ordered further briefing on the proper
amount. On August 1, 1984, the trial court issued its “final order” concerning attorney’s fees. On
August 29, 1984, petitioner filed its Notice of Appeal, which purported to cover all of the post-trial
orders. See 486 U.S. at 197-98. Respondent moved to dismiss the appeal as untimely, arguing that
the May 14 ruling was a final judgment. The Tenth Circuit agreed and granted the motion to dismiss
as to all issues except the attorney’s fees, which it affirmed on the merits.
         The question thus presented to the Supreme Court on appeal was “whether a decision on the
merits is a ‘final decision’ . . . when the recoverability or amount of attorney’s fees for the litigation
remains to be determined.” Id. at 199. The Court unanimously held that the district court’s May
1984 order was a final decision. It reasoned that “[a] question remaining to be decided after an order
ending litigation on the merits does not prevent finality if its resolution will not alter the order or
moot or revise decisions embodied in the order.” Id. (citations omitted). As the Court previously
held in another case involving a 42 U.S.C. § 1988 claim, a request for attorney’s fees is not a motion
to alter or amend the judgment under Fed. R. Civ. P. 59(e) because it does not seek “‘reconsideration
of matters properly encompassed in a decision on the merits. . . . [A] request for attorney’s fees
under § 1988 raises legal issues collateral to’ and ‘separate from’ the decision on the merits.” Id.
at 200 (quoting White v. N.H. Dep’t of Empl. Sec., 455 U.S. 445, 451-52 (1982)).
        Finally, the Court held that “[a]s a general matter . . . we think it indisputable that a claim
for attorney’s fees is not part of the merits of the action to which the fees pertain. Such an award
does not remedy the injury giving rise to the action, and indeed is often available to the party
defending against the action.” Id.
        The Colorado statute at issue in Budinich provided that, in a suit to collect compensation due
from employment, “the judgment shall include a reasonable attorney fee in favor of the winning
party, to be taxed as part of the costs of the action.” Colo. Rev. Stat. 8-4-114 (1986). The Budinich
petitioner argued that there must be an exception to the general rule when the statute itself appears
to make attorney’s fees part of the merits question. The Court rejected this argument. It held that
a determination as to whether a decision is “final” “should not turn upon the characterization of
those fees by the statute or decisional law that authorizes them.” Budinich, 486 U.S. at 201.
       In reaching this conclusion, the Court cited to the need for the judicial system to function
smoothly and the need for a uniform rule, even when an attorney’s fee provision appears to be more
of a “merits” issue. As the Court stated,
No. 04-6048                Gnesys, Inc. v. Greene, et al.                                                          Page 4

         what is of importance here is not preservation of conceptual consistency in the
         statute of a particular fee authorization as “merits” or “nonmerits,” but rather
         preservation of operational consistency and predictability in the overall application
         of § 1291. This requires, we think, a uniform rule that an unresolved issue of
         attorney’s fees for the litigation in question does not prevent judgment on the merits
         from being final.
Id. at 202 (emphasis added); see also Morgan v. Union Metal Mfg., 757 F.2d 792, 794 (6th Cir.
1985) (“We ally ourselves with those circuits which have held that a judgment is final for purposes
of appeal although the amount of attorney fees have not been determined.”) (citation omitted).
Lastly, the Court also held that “[t]he time of appealability, having jurisdictional consequences,
should above all be clear. . . . Courts and litigants are best served by the bright-line rule[.]”
Budinich, 486 U.S. at 202.
        On appeal, Greene offers two arguments in an attempt to distinguish Budinich. First,
pointing to the fact that the Injunction was a product of a settlement agreement as distinguished from
an adjudication, he argues that Gnesys is not entitled to attorney’s fees because the court’s finding
of contempt was not a “merits” decision that disposed of the complaint. This argument is
unpersuasive. There is no meaningful distinction for these purposes between a complaint that is
resolved on the merits, and a complaint that leads to a consent injunction which is subsequently
violated. To find otherwise would mean that a decision finding a party in contempt of an injunction
as part of a settlement would not be appealable at all. Greene’s argument is also contrary to
prevailing caselaw, which routinely allows direct appeal from a contempt citation. See, e.g.,
Peabody Coal Co. v. Local Union Nos. 1734, 1508, and 1548, 484 F.2d 78 (6th Cir. 1973) (rejecting
appellee’s argument that lower court’s order holding appellant in contempt for violating injunction
was not a “final judgment”); see Rolex Watch U.S.A., Inc. v. Crowley, 74 F.3d 716 (6th Cir. 1996)
(defendant appealed lower court’s finding of contempt for violating a consent permanent injunction).
        Second, Greene argues that the award of attorney’s fees was part of the damages assessment,
so that the initial decision fixing the compensatory damages was not a final decision. The clear
message of Budinich is to the contrary: even when a statute provides that attorney’s fees are part
of the damages claim, an award of compensatory damages effectively renders the decision final.
         Budinich compels the conclusion that Greene’s appeal was not timely with respect to the
district court’s finding of contempt and its award of compensatory damages. Indeed, an untimely
appeal deprives a court of jurisdiction to consider the matter; “[c]ompliance with [the notice of
appeal] rule is a jurisdictional prerequisite which this court can neither waive nor extend.” United
States v. Christunas, 126 F.3d 765, 768 (6th Cir. 1997) (citations omitted).1
         As Budinich held, and we reaffirm today, a decision awarding attorney’s fees is not part of
the merits for purposes of determining if the lower court issued a “final decision.” This is so even
if the attorney’s fees are authorized by statute, and even if the attorney’s fees are construed to be part
of the damages or sanction awarded by the court. The primary interest in these matters is to draw
a clear line. The alternative would be unnecessary confusion for parties and the courts alike, with
the outcome turning on whether attorney’s fees in a particular case were deemed part of the “merits.”
We accordingly dismiss the appeal from the lower court’s decision finding Greene in contempt and
awarding Gnesys $100,000 in damages.

         1
           We note that the perfection of an appeal does not deprive the lower court of jurisdiction to award attorney’s
fees. See Jankovich v. Bowen, 868 F.2d 867, 871 (6th Cir. 1989) (“federal courts repeatedly have held that the filing
of a notice of appeal in the underlying action does not affect the district court’s jurisdiction to consider a post-judgment
motion for attorneys fees.”) (citation omitted).
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                            Page 5

III.   Attorney’s Fees.
        We review a district court’s award of attorneys’ fees and expenses under 15 U.S.C. § 1117(a)
for abuse of discretion. See Eagles, Ltd. v. Am. Eagle Found. 356 F.3d 724, 728 (6th Cir. 2004)
(“The district court’s denial of attorney’s fees under 15 U.S.C. § 1117(a) . . . is reviewed for abuse
of discretion.”) (citation omitted); see also Johnson v. Jones, 149 F.3d 494, 503 (6th Cir. 1998)
(“This court has held that, pursuant to § 35 of the Lanham Act, 15 U.S.C. § 1117, attorney’s fees
may be awarded in ‘exceptional cases.’ Thus, we review a district court’s decision to award
attorney’s fees under the Lanham Act in the same way as its decision to award attorney’s fees under
any discretionary provision; i.e., for an abuse of discretion.”) (citations omitted). “An abuse of
discretion occurs when the district court relies on clearly erroneous findings of fact, . . . improperly
applies the law, . . . [or] employs an erroneous legal standard.” Barner v. Pilkington, 399 F.3d 745,
748 (6th Cir. 2005) (internal quotations and citation omitted). This Circuit “has defined an abuse of
discretion as a definite and firm conviction that the trial court committed a clear error of judgment.”
Eagles, 356 F.3d at 726 (internal quotations omitted).
       A.       Waiver
         Before reaching the merits, Greene faces a procedural obstacle. He did not object in the
district court to the appropriateness of the attorney’s fees award; he only objected to the amount of
fees and the market rate for attorney’s fees in Memphis, Tennessee. On appeal, however, he argues
for the first time that no fees were justified.
        The Sixth Circuit “generally . . . will not hear issues raised for the first time on appeal. We
will deviate from this rule only in exceptional circumstances, such as when following the rule would
cause a miscarriage of justice, and particularly where the question is entirely legal and has been fully
briefed by both parties.” Golden v. Kelsey-Hayes Co., 73 F.3d 648, 657-58 (6th Cir. 1996) (citation
omitted).
        As explained below, an award of attorney’s fees in this case would not be a miscarriage of
justice. Nor is the award of attorney’s fees here a purely legal decision – the issue of whether
Greene’s violation was willful is a fact-based question. In short, Greene waived his right to argue
on appeal the appropriateness of any attorney’s fees.
         Even if Greene had not waived his right to appeal this issue, however, we conclude the
district court’s decision to award attorney’s fees was not an abuse of discretion.
       B.       Award of Attorney’s Fees
        On appeal, Greene contends that the attorney’s fees award statute relied on by the district
court, 15 U.S.C. § 1117(a), applies only to trademarks and is inapplicable here. This argument is
incorrect. Section 1117(a) provides that, in “exceptional circumstances,” a court may award
attorney’s fees for a violation of, inter alia, 15 U.S.C. § 1125(a) (also known as the Lanham Act).
That provision, in turn, concerns false representation by those engaged in commerce. By the
No. 04-6048                Gnesys, Inc. v. Greene, et al.                                                         Page 6

statute’s clear language,2 it is not limited to trademark issues. As the Supreme Court held in Dastar
Corp. v. Twentieth Century Fox Film Corp., 539 U.S. 23 (2003):
       While much of the Lanham Act addresses the registration, use, and infringement of
       trademarks and related marks, . . . 15 U.S.C. § 1125(a) is one of the few provisions
       that goes beyond trademark protection. As originally enacted, [§ 1125(a)] created
       a federal remedy against a person who used in commerce either “a false designation
       of origin, or any false description or representation” in connection with “any goods
       or services.”
Id. at 28-29 (quoting 60 Stat. 441).
        The district court demonstrated how Greene violated the Injunction in four respects, and how
he did so deliberately. We agree. Rather than detailing once again the minutiae, we attach as an
appendix the district court’s Contempt Order.
        Most important for these purposes, the district court found that Greene violated Paragraph
4(e)(i) of the Injunction, which prohibited Greene from “using or causing to be used . . . any of
[Gnesys’] names and marks . . . on signs, decals, or other manner of display or in any promotional
materials . . . or from otherwise suggesting in any way that Defendants’ products or services have
been approved, endorsed, authorized or sponsored by or are in any way associated or connected with
[Gnesys.].” See Contempt Order at 4 (emphasis added). The district court found that Greene
violated this provision by using a picture of Gnesys’s HYDRASEP device in marketing his StakPak
product (with the Gnesys logo digitally removed) and by including a virtually verbatim description
of the HYDRASEP device in Greene’s description of his own product. See id. at 17-18. These
district court findings fully support its conclusion that Greene used a “false description or
representation” in marketing his product. Dastar, 539 U.S. at 29 (citation omitted).
       The foregoing considered, we are persuaded that Greene willfully disregarded the Injunction,
and that the district court’s decision to award attorney’s fees was not an abuse of discretion.
IV. Conclusion.
       The appeal of the district court’s decision finding Greene in contempt and awarding
compensatory damages is DISMISSED. The district court’s July 21, 2004 Order awarding Gnesys
attorney’s fees and costs is AFFIRMED.

       2
           Section 1125(a) establishes liability for:
       Any person who, on or in connection with any goods or services, or any container for goods, uses in
       commerce any word, term, name, symbol, or device, or any combination thereof, or any false
       designation of origin, false or misleading description of fact, or false or misleading representation of
       fact, which--
                   (A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation,
                   connection, or association of such person with another person, or as to the origin,
                   sponsorship, or approval of his or her goods, services, or commercial activities by another
                   person, or
                   (B) in commercial advertising or promotion, misrepresents the nature, characteristics,
                   qualities, or geographic origin of his or her or another person's goods, services, or
                   commercial activities.
No. 04-6048              Gnesys, Inc. v. Greene, et al.                                        Page 7

                                                 APPENDIX
                  IN THE UNITED STATES DISTRICT COURT
                FOR THE WESTERN DISTRICT OF TENNESSEE
                             WESTERN DIVISION
_________________________________________________________________
GNESYS, INC.,                    )
                                 )
                                 )
       Plaintiff,                )
                                 )
v.                               )                          No. 99-2659 Ml/Bre
                                 )
BOYD B. GREENE, individually     )
and d/b/a GREENE & ASSOCIATES    )
and GREENE & ASSOCIATES, L.L.C., )
                                 )
                                 )
                                 )
                                 )
   Defendants.                   )
        _________________________________________________________________
            ORDER FINDING DEFENDANTS IN CONTEMPT OF COURT
        _________________________________________________________________
       Before the Court is Plaintiff’s Motion for Issuance of Order to Show Cause and for Judgment
of Contempt filed on April 12, 2001. The Court held hearings on this motion on July 11-12, 2001.
The Court held a status conference on the matter on September 25, 2002.
        Finding that Defendant disclosed confidential and proprietary information belonging to
Plaintiff, pursued commercial exploitation of Plaintiff’s intellectual property, and induced, aided and
abetted other persons to commit the acts enjoined, the Court finds Defendant in contempt.
Facts and Procedural History
        Defendant Boyd B. Greene was a shareholder of Gnesys, Inc. from prior to July 1, 1993
through August 22, 2000. He was employed with Plaintiff until June 30, 1998. He resigned as an
officer of Plaintiff on May 4, 1998 and resigned from the Gnesys Board of Directors on April 28,
1999.
        Green & Associates and Green & Associates, LLP are the other defendants in the case. At
the request of Gnesys, Defendant Green established Green & Associates, a non-profit business, to
provide a forum to do work to comply with the requirements of the Tennessee Valley Authority
(“TVA”) for having manufacturing standardized plans to manufacture the equipment, the
HYDRASEP, and other equipment. Greene & Associates, LLC was a prior company that existed1
that was Defendant Greene’s personal company for his engineering services formed in July of 1998.
(Transcript, pg. 9, lines 7-11).

       1
           Gnesys’ name is Greene Nassif Environmental Systems, Inc.
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                          Page 8

       Plaintiff Gnesys, Inc. owns U.S. Patent No. 5,266,191 for “Immiscible Liquids Separator
Apparatus and Method” issued on November 30, 1993; U.S. Patent No. 5,433,845 issued on July
18, 1995 for “Flow Control Bypass Basin Apparatus;” and U.S. Patent No. 6,019,825 issued on
February 1, 2000 for “Hydrocyclone Gas Separator.” Plaintiff also owns trademarks HYDRASEP
and HYDRAPASS for mechanisms that separate oil from water.
       This case was originally filed on August 2, 1999 as a Complaint for Federal Unfair
Competition and Pendent State Claims. On October 26, 1999, the Court entered a Consent
Preliminary Injunction. The Court approved and entered the Consent Permanent Injunction and Final
Judgment on August 22, 2000 (“Injunction”).
       Paragraph 4 of the Injunction states as follows:
        Defendants, their officers, members, agents, servants and employees and those persons in
active concert or participation with them who receive actual notice of this order be, and they hereby
are, permanently enjoined from:
       A. Directly or indirectly making, using, offering to sell or selling any products, process or
          services which infringe upon any of the patents identified herein above in Paragraph 2.
       B. Directly or indirectly using, in any manner, or disclosing to any third party, the existence
          of contents of Plaintiff’s pending patent applications identified herein above in
          Paragraph 2, or Plaintiff’s trade secrets or proprietary information, namely, Plaintiff’s
          confidential information and know-how related to its products and processes, including
          those for separating two immiscible liquids of different densities, such as oil and water,
          and for removing sediment therefrom.
       C. Directly or indirectly claiming ownership of, or any right, privilege, or permission to use,
          any of the Gnesys Intellectual Property.
       D. Directly or indirectly pursuing commercial exploitation of, or United States or foreign
          patent or equivalent protection for, any of the Gnesys Intellectual Property.
       E. (i)     Directly or indirectly using or causing to be used, except as permitted
                  hereinbelow, any of Plaintiff’s names and marks, including without limitation,
                  GNESYS, HYDRASEP, and HYDRAPASS, or any combination thereof, or any
                  colorable imitations thereof, on signs, decals, or other manner of display or in any
                  promotional materials or telephone directories, or from otherwise suggesting in any
                  way that Defendants’ products or services have been approved, endorsed,
                  authorized or sponsored by or are in any way associated or connected with
                  Plaintiff; and
           (ii)   Committing any other acts calculated to cause the public to believe that
                  Defendants’ products or services originate with, are approved, endorsed,
                  authorized or sponsored by, or are in some way associated or connected with
                  Plaintiff and from otherwise competing unfairly with Plaintiff.
       F. Directly or indirectly representing that they are authorized representatives of Plaintiff,
          or that they have authority to transact business for or on behalf of Plaintiff.
       G. Directly or indirectly inducing, aiding or abetting any other person or company to
          commit the acts enjoined in paragraphs 1 through 5 herein.
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                          Page 9

THE INDIA PATENT
        On June 23, 1999, Defendant Greene and Manickam Athapa (“Athapa”) agreed for Athapa
to file patent applications in India in Defendant’s name on the patents comprising the Gnesys
Intellectual Property. (Def. Post-Hearing Brief, pg. 3). By letter dated July 6, 1999, Athapa informed
Greene that he had completed the formalities for filing the patent application in India on the
Immiscible Liquid Separator and Method that is the subject of U.S. Patent Number 5,266,191, (Stip.
Fact 8), owned in the United States by Plaintiff. On July 13, 1999, Grady M. Garrison, acting as
attorney for Plaintiff, sent Athapa a facsimile letter in which he informed Athapa that Defendant had
assigned to Plaintiff all of the United States and foreign rights in and to the Immiscible Liquid
Separator and Method. (Stip. Fact 9). Greene testified that he telephoned Athapa to “stop the patent”
on July 13, 1999 (Transcript, pg. 270, lines 2-4), but at no time did Defendant ask Athapa to
withdraw the patent application. (Athapa Dep., pg. 13, lines 16-23; Transcript, page 222, lines 14-
16).
        On July 22, 1999, Defendant authorized Athapa to be Defendant’s patent agent in the matter
of the patent application in India. (Stip. Fact 10). Athapa filed the patent application on August 27,
1999.
      Defendant received $5,000.00 from Athapa on November 10, 1999 and later applied that
payment to the patent application project. (Transcript, pg. 204, lines 7 - pg. 205, line 5).
THE NU-CORP BUSINESS PLAN
        Defendant Greene prepared the Nu-Corp Business Plan dated January 1, 1998, while he was
an officer, director and employee of Plaintiff for the purpose of purchasing Plaintiff’s assets. This
plan contained information regarding the markets that Plaintiff was planning to enter and identified
by product name and description Plaintiff’s several products and trademarks comprising the Gnesys
Intellectual property that Defendant sought to purchase. (Def. Post-Hearing Brief, pg. 3).
        Defendant gave a copy of the Nu-Corp Plan to Gary Green of Morgan Keegan in March,
1999. (Transcript pg. 278, lines 13-28). In October 2000, Defendant also gave a copy of the Nu-
Corp Business Plan to Jerry Miller, Riuxing Liu and Lei Zhai. (Transcript, pg. 141, lines 9-21).
Defendant directed these latter individuals to use the information contained in the plan, coupled with
proprietary and confidential information belonging to Plaintiff that he had stored on the hard drive
of his personal computer, to prepare the Entech Plan for the purpose of marketing Defendant’s
StakPak Oil Recovery System (“StakPak”) in China. (Transcript, pg. 133, line 9 - pg. 142, line 25).
        The Entech Plan stated that the StakPak introduced the “bubble spin” principle for the
separation of immiscible liquids. However, previously existing HYDRASEP literature demonstrates
that HYDRASEP introduced such a bubble spin principle. (Transcript, pg. 111, lines 12-20).
Furthermore, Defendant admits that similar descriptions exist for both StakPak literature and
HYDRASEP literature. (Id.)
       The Entech Plan was presented to Peter Tsoi of Golden Bridge Enterprises in China in
December, 2000 by Jerry Miller and Defendant, who were joint venturers at that time. (Stip. Fact
19) A letter of intent was executed on December 5, 2000, in which Tsoi, Miller, and Defendant
intended to market oil separators in China. (Transcript, pg. 23, lines 1-15).
No. 04-6048             Gnesys, Inc. v. Greene, et al.                                                  Page 10

THE 2001 NU-CORP TECHNOLOGIES BUSINESS PROPOSAL
        In January 2001, Defendant presented the 2001 Nu-Corp Technologies Business Proposal2
to Gary Green of Morgan Keegan in an attempt to raise money to manufacture and sell Defendant’s
StakPak design in China. (Transcript, pg. 175, lines 11-17). Although Defendant admits preparing
the Nu-Corp Technologies Business Proposal in his deposition, he stated at the hearing that Judy
Jones prepared the proposal with his assistance. (Transcript, pg. 172, line 22 - pg. 174, line 10). The
2001 Nu-Corp Proposal is substantially similar to the Entech Plan. (Def. Post-Hearing Brief, pg. 6).
Defendant testified that Green of Morgan Keegan made a verbal agreement to furnish sixteen million
dollars if Defendants raised four million on his own intiative. However, Green testified that such an
agreement did not exist. Green further testified that the 2001 Nu-Corp Technologies Business
Proposal represented that a patent for StakPak had been applied for and approved and that it was
introducing the bubble spin principle. (Gary Green Dep., pg. 14, lines 1-22)
       Defendant also used a photograph in the Entech Plan that depicted the StakPak device
operating at a FedEx fueling facility. The photograph of the StakPak contains a device that is the
HYDRASEP separator, but that had the label and the Gnesys logo digitally removed. (Transcript,
pg. 117, lines 12- pg. 120, line 14).
        In March, 2001, Miller informed Preston Grace, Chairman of the Board of Gnesys, of
Defendant’s deal with Tsoi to market StakPak in China and Defendant’s deal with Morgan Keenan
to finance the marketing plan. (Def. Post-Hearing Brief, pg. 6). After meeting with Grace, Miller
withdrew from the joint venture with Defendant and accepted employment with a business owned
by Grace in March, 2001, at a salary of $55,000.00 per year. (Transcript, pg. 58-59).
Standard
         Plaintiff moves the Court to find Defendants in civil contempt of the Injunction. A party may
be found in contempt if the petitioner shows that the respondent “violate[d] a definite and specific
order of the court requiring him to perform or refrain from performing a particular act or acts with
knowledge of the court’s order.” Id. (quoting NLRB v. Cincinnati Bronze, Inc., 829 F.2d 585, 591
(6th Cir. 1987). In a contempt proceeding, “the basic proposition [is] that all orders and judgments
of courts must be complied with promptly.” NLRB, 829 F.2d at 590 (quoting Jim Walter Res., Inc.
v. Int’l Union, United Mine Workers, 609 F.2d 165, 168 (5th Cir. 1980)). As the Sixth Circuit has
held, “civil contempt may be either intended to coerce future compliance with a court's order, or to
compensate for the injuries resulting from the noncompliance.” Glover v. Johnson, 199 F.3d 310,
313 (6th Cir. 1999)(internal citations omitted). Good faith is not a defense in civil contempt
proceedings. Glover, 934 F.2d at 708. Likewise, wilfulness is not an element of civil contempt, but
the state of mind of the contemnor is relevant only in the consideration of sanctions. Rogers v.
Webster, 776 F.2d 607, 612 (6th Cir. 1985).
        In a civil contempt proceeding, the burden is on the petitioner to “prove by clear and
convincing evidence that the respondent violated the court’s prior order.” Glover, 934 F.2d at 707.
The standard is whether “the defendants took all reasonable steps within their power to comply with
the court’s order,” which includes whether the defendants have “marshal[ed] their own resources,
assert[ed] their high authority, and demand[ed] the results needed from subordinate persons and
agencies in order to effectuate the course of action required by the [court’s order].” Id. at 708.

        2
         The 2001 Nu-Corp Technologies Business Plan is a different entity than the Nu-Corp Business Plan of 1998.
While Defendant claims that he has no interest in Nu-Corp Technologies, Defendant’s daughter is a part owner.
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                            Page 11

Discussion
        Plaintiff moves the Court to find Defendants in contempt of court on six primary issues:
(1) Defendants have violated Paragraph 4(b) of the Injunction by directly or indirectly using in any
manner, or disclosing to third parties, Plaintiff’s trade secrets and proprietary information, namely
Plaintiff’s confidential information and know-how related to its products and processes, including
those for separating two immiscible liquids of different densities, such as oil and water, and from
removing sediment therefrom; (2) Defendants have violated Paragraph 4(c) of the Injunction by
directly or indirectly claiming ownership of, or any right, privilege, or permission to use, Gnesys
Intellectual Property; (3) Defendants have violated Paragraph 4(d) of the Injunction by directly or
indirectly pursuing commercial exploitation of, or United States or foreign patent or equivalent
protection for, the Gnesys Intellectual Property; (4) Defendants have violated Paragraph 4(e)(i) of
the Injunction by suggesting that Defendants’ products or services have been approved, endorsed,
authorized or sponsored by or are in any way associated or connected with Plaintiff; (5) Defendants
have violated Paragraph 4(f) of the Injunction by directly or indirectly representing that they are
authorized representatives of Plaintiff, or that they have authority to transact business for or on
behalf of Plaintiff; (6) Defendants have violated Paragraph 4(g) of the Injunction by directly or
indirectly inducing, aiding or abetting others to commit the acts enjoined.
        The Court will discuss each of these issues in turn.
        1. Whether Defendants violated Paragraph 4(b) of the Injunction
       Plaintiff argues that Defendants violated Paragraph 4(b) by disclosing Plaintiff’s confidential
and proprietary information in the distribution of the 1998 Nu-Corp Business Plan. Plaintiff asserts
that confidential information included Plaintiff’s anticipated markets of entry, confidential and
proprietary business plans and drawings of the HYDRASEP separators customized for TVA, as well
as parameters of how the HYDRASEP device operates. Defendant shared this plan with Ruixing
Liu, Lei Zhai and Jerry Miller. This information was, in turn, used by Miller and Liu in the
preparation of the Entech Plan.
        Defendant admits that such information was contained in the 1998 Plan and that this
information was indeed shared with others, but argues that it is not protected information under the
Injunction. Indeed, Defendant admitted that he had in his possession a standardized drawing of
HYDRASEP separators prepared for TVA. (Transcript, pg. 133, line 3 - pg. 134, line 5). Defendant
further admitted that he had used a pro forma statement of income and expense associated with the
HYDRASEP separator in the preparation of the plan. Defendant also admitted that he had taken
confidential information of the Plaintiff with him following the termination of his employment and
had used drawings of HYDRASEP and HYDRAPASS in the plan. (Transcript, pg. 9, line 133 - pg.
138, line 14).
        Defendant argues that the incorporation of this information into the Nu-Corp Business Plan
was not in violation of the Injunction since such information was not specifically listed in the
Injunction as prohibited from use. (Def. Post-Hearing Brief, pg. 11) Defendant argues that the
Injunction’s failure to identify those specific bits of information that are protected falls short of the
specificity requirements outlined in Rule 65 of the Federal Rules of Civil Procedure.
        Instead, Defendant argues that the only information protected by the Injunction was “the
secret know-how related to Plaintiff’s products and processes ... the secret formulas and Excel
spread sheet technical information that describes the internal parameters and set up for the
HYDRASEP that is not disclosed in the patents or published marketing literature.” (Def. Post-
Hearing Brief, pg. 10). Defendant asserts that the information he considered confidential to the
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                           Page 12

HYDRASEP system was not disclosed in the Indian patent application, nor in the 1998 Plan.(Def.
Post-Hearing Brief, pg. 10).
         The Court disagrees with Defendant and finds that this information was protected. The
drawings of the HYDRASEP and HYDRAPASS products that Defendant admitted he used in his
1998 Plan contained legends stating that such drawings were proprietary and confidential.
(Transcript, pg. 142). Additionally, the business plans of Plaintiff contain a legend stating that the
plans are confidential and proprietary. (Trial Exh. 19). Grace further testified that the licensing fee
agreed upon with TVA to fabricate oil/water separators was confidential and proprietary information
of Plaintiff, was not communicated to others by Plaintiff, and would be used by competition to bid
at a lower price. (Transcript, pg. 207, lines 20-21; pg. 215, lines 22- page 216, line 12). The Court
fails to see how Defendant, who worked for Plaintiff, could not have realized that this was sensitive
information belonging to Plaintiff and protected by the Injunction. Defendant testified at the hearing
that confidential and proprietary information of Plaintiff included certain formulas, even though they
were not specifically listed in the Injunction. (Transcript, pg. 263, lines 5-17). Accordingly, the
Court finds that Defendant violated Paragraph 4(b) of the Injunction.
       2. Whether Defendants violated Paragraph 4(e) of the Injunction
       Plaintiff alleges that Defendant violated Paragraph 4(e) of the Injunction in claiming
ownership of, or any right, privilege or permission to use the Intellectual Property. Miller testified
that Greene told him that he (Greene) had international marketing rights to the HYDRASEP and
would be marketing the HYDRASEP oil/water separator in China.
       However, Miller is the only witness that testified to this effect. Since Miller’S credibility was
impeached at the hearing, this evidence does not rise to the level of clear and convincing evidence
necessary to find in favor of the Plaintiff. Therefore, the Court finds that Defendant did not violate
Paragraph 4(e) of the Injunction.
       3. Whether Defendants violated Paragraph 4(d) of the Injunction
        Plaintiff alleges that Defendants violated Paragraph 4(d) by directly or indirectly pursuing
commercial exploitation of, or United States or foreign patent or equivalent protection for, Plaintiff’s
intellectual property. The Court finds that Defendant’s pursuit of a patent in India and his
incorporation of the HYDRASEP specifications into the StakPak design are violations of this portion
of the Injunction.
        Defendant authorized Athapa to act as his agent in procuring a patent in India for the
HYDRASEP system. This authorization was given prior to the Injunction. However, Defendant did
not ask Athapa to withdraw the application at any time after the Injunction, nor did he alert Plaintiff
after the Injunction that the application had been filed. Although Defendant asked Athapa to “stop
the patent” on July, 1999, he authorized Athapa to be his agent on July 29, 1999 and continued to
support the Indian patent application after the injunction was entered on October 26, 1999.
        Moreover, Defendant violated paragraph 4(d) in seeking to commercially exploit the
intellectual property by developing and promoting the Entech Plan. Several similarities exist
between the Entech Plan and the HYDRASEP specifications. The specifications and product
descriptions contained in the Entech Plan are exactly those contained in the Plaintiff’s specifications
and product descriptions for its HYDRASEP device except for the substitution of the word
“pressure” for the word “gravity”. (Trial Ex. 6 at D178-D188 and Trial Ex. 54, pg. 444-481).
Furthermore, Defendant admitted that the HYDRASEP separator was available in a pressure vessel
design and could be equipped to function as a crude oil recovery system. (Transcript, pg. 302, line
24 - pg. 304, line 25).
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                           Page 13

        Defendant admitted that the photograph of the alleged StakPak included a device that was
a HYDRASEP separator. (Transcript, pg. 117, lines 12 - pg. 120, line 14). Defendant argues,
however, that since the photograph does not contain any indicia that the equipment belongs to
Plaintiff, he is in compliance with the Injunction as nothing suggests an association between himself
and Plaintiff. This argument is unconvincing to the Court. The Court finds that merely removing any
insignia that identifies equipment with a particular owner does not absolve Defendant of all
responsibility for pursuing commercial exploitation of Plaintiff’s intellectual property.
        Defendant further argues that to violate Paragraph 4(d), there must have been a sale or profit
of equipment belonging to Plaintiff. Since there was not such a sale or profit, Defendant asserts that
he could not have engaged in commercial exploitation. The Court disagrees with Defendant’s
interpretation of “commercial exploitation” as it is used in the Injunction. Plaintiff does not contend
that Defendant has used the HYDRASEP separator by buying or selling it, but states that Defendant
violated the Injunction by pursuing commercial exploitation. The Court agrees that Paragraph 4(d)
is aimed at preventing the pursuit of commercial exploitation, and the Defendant’s use of the
HYDRASEP in its StakPak promotion materials does just that. Also, the incorporation of Paragraph
4(a), explicitly prohibiting Defendant’s sale or profit from the HYDRASEP indicates that this matter
was considered in the Injunction. Paragraph 4(a) of the Injunction states that Defendant is prohibited
from “directly or indirectly making, using, offering to sell, or selling any products, process or
services which infringe upon any of the patents identified herein above in Paragraph 2.”
       4. Whether Defendants violated Paragraph 4(e)(i) of the Injunction
        Plaintiff alleges that Defendants violated Paragraph 4(e)(i) of the Injunction by suggesting
that Defendant’s products or services have been approved, endorsed, authorized or sponsored by
Plaintiff.
        Even though Plaintiff removed the Gnesys logo from the HYDRASEP device in the picture
showcasing the StakPak, its inclusion could lead a viewer of that picture to the conclusion that
Defendant’s StakPak was associated with Plaintiff, or that Plaintiff’s HYDRASEP system was
associated with Defendant. Also, the incorporation of verbatim descriptive language of the
HYDRASEP device into the 2001 Nu-Corp Technologies Business Proposal given to Gary Green
of Morgan Keegan denotes an association between Plaintiff and Defendant. Accordingly, the Court
finds that Defendant violated Paragraph 4(e)(i) of the Injunction.
       5. Whether Defendants violated Paragraph 4(f) of the Injunction
         Plaintiff argues that Defendant has violated Paragraph 4(f) of the Injunction by directly or
indirectly representing that he is an authorized representative of Plaintiff, or that they he has the
authority to transact business for or on behalf of Plaintiff. Once again, Plaintiff relies solely on the
testimony of Miller to establish the fact that Defendant represented to Miller that he had marketing
rights to the HYDRASEP separator outside the U.S. and Canada and that he would be marketing the
HYDRASEP in China. The Court finds that since Miller’s credibility has been impeached, his
testimony does not rise to the level of clear and convincing evidence necessary to hold the
Defendant in violation of this provision.
       6. Whether Defendants violated Paragraph 4(g) of the Injunction
         Plaintiff argues that Defendant has violated Paragraph 4(g) of the Injunction by directly or
indirectly inducing, aiding, or abetting others to commit the acts enjoined as set forth above.
Namely, Plaintiff points to the fact that Defendant induced Jerry Miller, Riuxing Liu, and Lei Zhai
to participate in the preparation of the Entech Plan. Plaintiff also asserts that Defendant induced Judy
Jones to participate in the preparation of the 2001 Nu-Corp Technologies Business Proposal.
No. 04-6048           Gnesys, Inc. v. Greene, et al.                                          Page 14

        Defendant does not dispute that he directed Miller, Liu, and Zhai to form a business plan to
market the StakPak in China using the 1998 Nu-Corp Business Plan as a template. Defendant
admitted that he had used confidential and proprietary information belonging to the Plaintiff in the
preparation of the 1998 Nu-Corp Plan. Additionally, Defendant gave these individuals permission
to use the information that was on his computer consisting of protected information belonging to
Plaintiff. Much of the information that was included in the resulting Entech Plan was the same
information that was in the 1998 Nu-Corp Plan. The 2001 Nu-Corp Technologies Business Proposal
prepared by Judy Jones was substantially similar to the Entech Plan. Accordingly, the Court finds
that Defendant’s actions in enlisting the assistance of these individuals for the commercial
exploitation of Plaintiff’s proprietary and confidential information violates Paragraph 4(g) of the
Injunction.
Conclusion
        For the reasons listed above, the Court finds, by clear and convincing evidence, that
Defendant violated Paragraphs 4(b), 4(d), 4(e)(i), and 4(g) of the Injunction. The evidence supports
a finding that the Defendants’ actions were wilful and intentional in that Boyd Greene acted in
disregard of the intellectual property rights of the Plaintiff and without sound reason to believe that
the rights were not infringed. Plaintiff shall submit within twenty (20) days any documents and
materials necessary to support an award of damages, either compensatory or punitive.
       ENTERED this 26th day of November, 2002.
                                               /s/
                                               ______________________________
                                               JON P. McCALLA
                                               UNITED STATES DISTRICT JUDGE