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

Additive Controls & Measurement Systems, Inc. (Additive) (plaintiff) sued Flowdata, Inc. (defendant) in federal district court in connection with a patent owned by Flowdata. After trial, the district court entered an injunction that prohibited Additive from selling infringing flowmeters. Flowdata discovered that Galen Cotton, who was president of Additive at the time of the injunction but had resigned, was selling redesigned flowmeters (TruGear meters). Flowdata requested contempt proceedings. Evidence showed that Cotton designed the TruGear meters while the infringement suit was pending and hired Jack Harshman to make drawings. Harshman did not receive actual notice of the injunction until after the drawings were completed. Cotton formed Truflo Instrumentation, Inc. (Truflo) to make the new flowmeters. The district court found that Cotton established Truflo as a successor to Additive to evade the injunction and held that Truflo had acted in concert with Additive to violate the order. The district court found that Cotton had served as the incorporator, president, and majority shareholder of both Additive and Truflo, and that both companies were operated out of Cotton’s home. Cotton, Harshman, and Truflo were held in contempt for their involvement in the sale of the redesigned flowmeters. Cotton, Harshman, and Truflo appealed the findings of contempt. Cotton, Harshman, and Truflo argued that only Additive was identified in the injunction, so only Additive, or parties acting in concert with Additive, could be held in contempt. Cotton, Harshman, and Truflo denied acting in concert with Additive. Additive became inactive after the injunction was issued and was not involved with the development or sale of the TruGear meters.