The opinion of the court was delivered by: Magistrate Judge Morton Denlow
MEMORANDUM OPINION AND ORDER
This case is now before the Court on a motion for contempt brought by Plaintiff Heckmann Building Products, Inc. ("Plaintiff" or "Heckmann") against Defendant Hohmann & Barnard, Inc. ("Defendant" or "Hohmann"). Plaintiff seeks to hold Defendant in contempt for failure to comply with the Consent Decree entered by Judge William T. Hart on March 10, 2011 ("Consent Decree"). Under the terms of the Consent Decree, Defendant agreed not to manufacture, market, use, sell or distribute the wing nut masonry anchor ("Hohmann #1) which was the subject matter of this patent infringement lawsuit. Plaintiff contends that the newly designed anchor that Defendant began selling in the spring of 2011 ("Hohmann #2) violated the Consent Decree.
The Court held a two-day bench trial on April 26-27, 2012. The Court has carefully considered the testimony of the five witnesses who testified in person, the two witnesses who testified by means of video depositions, the parties' trial exhibits, the parties' proposed findings of fact and conclusions of law, and the closing arguments of counsel. The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure. To the extent certain findings of fact may be deemed conclusions of law, they shall also be considered conclusions. Similarly, to the extent matters contained in the conclusions of law may be deemed findings of fact, they shall also be considered findings.
A. THE PARTIES AND THE WITNESSES.
1. Plaintiff Heckmann manufactures masonry anchors and ties for the construction industry. T. 50-52.*fn1 The anchors and ties connect the backup wall to the outside brick wall, passing through the insulation to hold the brick in place. T. 51. Terry M. Curtis is Heckmann's Chief Executive Officer. T. 50. He testified at the trial. Terry's brother, Paul Curtis, is Heckmann's President and Chief Operating Officer. T. 89. He testified at the trial. The business was founded by Terry and Paul's grandfather and has been operated continuously as a family business since 1923. T. 52.
2. Plaintiff Masonry Tie Systems, Inc. ("MTS") was the owner of United States Patent No. 7,415,803 ("the '803 patent" or "Pos-I-Tie" patent") at the time the complaint was filed and at the time the motion for contempt was filed. Heckmann began selling the Pos-ITie in 2006, even before the patent was issued. T. 108. On December 31, 2008, MTS entered into an exclusive license with Heckmann to manufacture and market the '803 wing nut anchor. PX 35, T. 54-55. MTS terminated the exclusive license effective February 26, 2012. Dkt. 43. MTS is owned by Joseph Bronner, the inventor of the '803 patent. T. 54, PX1. Plaintiff MTS originally joined in this motion for contempt, but later withdrew its participation after it terminated its exclusive license with Plaintiff Heckmann and entered into an agreement with Defendant Hohmann by which MTS sold the '803 patent to Hohmann. Dkt. 43, 52. Joseph Bronner testified by means of a video deposition. PX 47, DX 37.
3. Defendant Hohmann has been a long time competitor of Plaintiff Heckmann.
T. 62-63. Hohmann manufactures different components for masonry and stone exterior support systems. T. 169. Ronald E. Hohmann, Jr. is Hohmann's President. He testified at the trial. Ronald Burkhardt is Hohmann's Executive Vice-President and Chief Financial Officer. He testified by means of a video deposition. Joseph C. Carr, Jr. is Hohmann's Vice-President, Secretary and General Counsel. T. 212. He testified at the trial. Hohmann was a family owned business until it was acquired by Mitek USA, Inc. in 2008. T. 242.
B. THE FILING AND SETTLEMENT OF THE LAWSUIT.
4. Plaintiffs filed this lawsuit on July 9, 2010 alleging that Hohmann was infringing on the '803 patent when it began selling the Hohmann #1 wing nut anchor which was called the Wing Nut 2 - Seal Tie. Dkt. 1, PX 13, DX 35.
5. Plaintiff's Pos-I-Tie was the first wing nut masonry anchor. T. 61. The masonry anchors help to keep brick walls in place. T. 91.
6. After service of process was made, the parties negotiated an early settlement of the case. PX 3. The business portion of the settlement negotiations were conducted between Terry Curtis on behalf of Plaintiffs and Ronald Burkhardt on behalf of Hohmann.
T. 66, Burkhardt Dep. 23-27. At the time, Plaintiff and Hohmann were the only two companies selling wing nut type masonry anchors. T. 103-04. On November 1, 2010, Burkhardt emailed Terry Curtis and offered to settle the lawsuit by, among other things, accepting "a court injunction to cease manufacturing, marketing and selling the accused product." PX 39. In addition, Burkhardt offered to pay a royalty on past sales, offered to sell its Hohmann #1 inventory to Plaintiffs or sell it as scrap, and also advised Plaintiffs that it was "in the process of developing alternative products to the Pos-I-Tie which will not infringe on the Pos-I-Tie patent." Id. After receiving this email, Terry Curtis does not recall any further discussion with Burkhardt about Hohmann's alternative products. T. 73. Plaintiffs did not ask for a sample of the redesign prior to the settlement of the lawsuit. T. 154.
7. On November 2, 2010, Terry Curtis, acting on behalf of Plaintiffs, emailed 4
Burkhardt and accepted Hohmann's offer to settle the lawsuit. DX 7. Plaintiff understood that as part of the settlement, Hohmann would agree to cease manufacturing, marketing and selling the accused product, the Hohmann #1. T. 153.
8. After Plaintiffs accepted Hohmann's settlement offer, counsel for the parties began the process of drafting and negotiating the settlement documents. T. 72, 215-23, 244-45.
9. On November 18, 2010, Nicholas Schmidbauer, Plaintiffs' counsel, emailed a draft set of settlement documents, including a draft Consent Decree and Settlement Agreement to Joseph C. Carr, Jr., Hohmann's counsel. DX 8. Schmidbauer did not testify at the trial. After receiving the drafts, Carr called Schmidbauer to express concerns regarding three major issues: (a) the definition of the term "accused wing nut," (b) the absence of a no admission of liability provision, and (c) a definition of net sales rather than gross sales in determining the royalty. T. 218-20, 244-47. Carr told Schmidbauer that the definition of the accused product would have to be very specific and cover only the specific anchor (Hohmann #1) that Hohmann was then manufacturing. T. 218-20.
10. Paragraph 3 of the draft Consent Decree prepared by Mr. Schmidbauer stated: Hohmann, their successors and assigns, and their officers, agents, servants, representatives, and employees, and all persons in active concert or participation with them who receive actual notice of this Consent Decree by personal service or otherwise, are hereby enjoined, directly or through any corporation, subsidiary, division, website, or other device, from manufacturing, using, selling or distributing any wing nut identified in the Amended Complaint in the United States, or from importing or exporting any wing nut identified in the Amended Complaint into or outside of the United States. (Emphasis added).
11. The amended complaint filed by Heckmann and MTS identified the following wing nut products: (1) "Wing Nut 2-Seal TieTM"; (2) "2-Seal Wing Nut Anchor Body;" and
(3) "any other infringing wing nuts." Dkt. 7. This language was too broad for Carr and he so advised Schmidbauer. T. 218-220.
12. On November 30, 2010, Carr revised and returned an edited version of the settlement documents to Schmidbauer for his review. DX 9. Carr revised the Settlement Agreement and Consent Decree to limit the scope of the injunction to the accused wing nut specifically referenced in the amended complaint. DX 9, T. 221-28, 260-61. Of relevance here, the revised Consent Decree sent by Carr provided:
3. Hohmann, their successors and assigns, and their officers, agents, servants, representatives, and employees, and all persons in active concert or participation with them who receive actual notice of this Consent Decree by personal service or otherwise, are hereby enjoined, directly or through any corporation, subsidiary, division, website, or other device, from manufacturing, marketing, using, selling or distributing any masonry anchor of the type heretofore marketed by Hohmann, as depicted in Figures 1-3 of attached and incorporated Exhibit A hereto, which anchor includes, in pertinent part, a wing nut 1 having a central hollow barrel 2 mounted on the shaft 3 of a bolt, the nut 1 having two generally planar side wings 4, 5 extending laterally from the central barrel and being rotatable independently of the shaft 3 in both clockwise and counterclockwise directions about the shaft, or from importing or exporting any such masonry anchor into or outside of the United States.
13. The revised Settlement Agreement also provided a new definition of "Accused Double - Wing Nut Anchor:"
1.02.1 "Accused Double-Wing Nut Anchor" means a masonry anchor of the type heretofore marketed by Hohmann, as depicted in Figures 1-3 of attached and incorporated Exhibit A hereto, which anchor includes in pertinent part, a wing nut 1 having a central hollow barrel 2 mounted on the shaft 3 of a bolt, the nut 1 having to generally planar side wings 4, 5 extending laterally from the central barrel and being ...