Evoqua Water Technologies, LLC v. M.W. Watermark, LLC, 100719 FED6, 18-2397

Docket Nº:18-2397, 18-2398
Opinion Judge:HELENE N. WHITE, CIRCUIT JUDGE.
Party Name:Evoqua Water Technologies, LLC, Plaintiff-Appellant/Cross-Appellee, v. M.W. Watermark, LLC; Michael Gethin, Individually, Defendants-Appellees/Cross-Appellants.
Attorney:Craig R. Smith, LANDO & ANASTASI, LLP, Cambridge, Massachusetts, for Appellant/Cross-Appellee. G. Thomas Williams, MCGARRY BAIR PC, Grand Rapids, Michigan, for Appellees/Cross-Appellants. Craig R. Smith, Eric P. Carnevale, LANDO & ANASTASI, LLP, Cambridge, Massachusetts, for Appellant/Cross-Appel...
Judge Panel:Before: WHITE, BUSH, and LARSEN, Circuit Judges. JOHN K. BUSH, Circuit Judge, concurring.
Case Date:October 07, 2019
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Evoqua Water Technologies, LLC, Plaintiff-Appellant/Cross-Appellee,

v.

M.W. Watermark, LLC; Michael Gethin, Individually, Defendants-Appellees/Cross-Appellants.

Nos. 18-2397, 18-2398

United States Court of Appeals, Sixth Circuit

October 7, 2019

Argued: June 27, 2019

Appeal from the United States District Court for the Western District of Michigan at Grand Rapids. No. 1:16-cv-00014-Robert J. Jonker, District Judge.

ARGUED:

Craig R. Smith, LANDO & ANASTASI, LLP, Cambridge, Massachusetts, for Appellant/Cross-Appellee.

G. Thomas Williams, MCGARRY BAIR PC, Grand Rapids, Michigan, for Appellees/Cross-Appellants.

ON BRIEF:

Craig R. Smith, Eric P. Carnevale, LANDO & ANASTASI, LLP, Cambridge, Massachusetts, for Appellant/Cross-Appellee.

G. Thomas Williams, MCGARRY BAIR PC, Grand Rapids, Michigan, for Appellees/Cross-Appellants.

Before: WHITE, BUSH, and LARSEN, Circuit Judges.

OPINION

HELENE N. WHITE, CIRCUIT JUDGE.

In 2016, Plaintiff Evoqua Water Technologies, LLC ("Evoqua") filed this action against Defendants M.W. Watermark, LLC ("Watermark") and Michael Gethin, asserting copyright, trademark, and false-advertising claims and seeking to enforce a 2003 consent judgment obtained by Evoqua's alleged predecessor against Watermark and Gethin. The district court dismissed Evoqua's claim that Watermark and Gethin were in contempt for violating the consent judgment, holding that the consent judgment was not assignable and therefore Evoqua lacked standing to enforce it. The district court also granted Watermark and Gethin summary judgment on Evoqua's copyright claim after concluding that the agreement selling assets to Evoqua unambiguously did not transfer copyrights. A jury later returned a verdict for Watermark and Gethin on Evoqua's false-advertising claim and for Evoqua on its trademark-infringement claim against Watermark but found that Gethin was not personally liable. Following trial, the district court denied Watermark's and Gethin's requests for attorney's fees on Evoqua's copyright and false-advertising claims. We conclude that the consent judgment is assignable, that the agreement transferring assets to Evoqua is ambiguous regarding copyrights, and that the district court did not abuse its discretion in declining to award Watermark and Gethin attorney's fees on the false-advertising claim. Accordingly, we VACATE the district court's dismissal of Evoqua's claim seeking to hold defendants in contempt of the consent judgment; VACATE the district court's grant of summary judgment on the copyright claim; AFFIRM the district court's denial of defendants' request for attorney's fees on the false-advertising claim; and REMAND for further proceedings.

I.

BACKGROUND

A.

The Parties

Evoqua and Watermark manufacture and sell equipment, such as sludge dryers and filter presses, that removes water from industrial waste. Both companies also sell replacement parts for used de-watering equipment originally manufactured by them or by other companies.

Evoqua's business can be traced back to a corporation called JWI, Inc. JWI was incorporated in the late 1970s and was acquired by U.S. Filter Corporation in 1997 to form a business called U.S. Filter/JWI Inc. ("U.S. Filter/JWI"). In 2006, U.S. Filter/JWI merged into Siemens Water Technologies Corp. and dissolved. In 2011, Siemens Water Technologies Corp. merged into Siemens Water Technologies Holding Corp., which then merged into Siemens Industry, Inc. ("Siemens"). On March 28, 2013, Siemens sold its water technologies business to Siemens Water Technologies LLC ("SWT"). SWT changed its name to Evoqua Water Technologies LLC in 2014.

M.W. Watermark LLC was formerly named J-Parts LLC. J-Parts was founded by Gethin in 2003 after he left his position at U.S. Filter/JWI. J-Parts initially sold only replacement parts for filter presses manufactured by other companies.

B.

2003 Action and Consent Judgment

Shortly after Gethin formed J-Parts LLC, U.S. Filter/JWI filed an action against Gethin and J-Parts, LLC in Gethin I (Case No. 03-00127) in the Western District of Michigan for false designation of origin, trademark dilution, trademark infringement, unfair competition, unjust enrichment, misappropriation of trade secrets, breach of fiduciary duties, breach of contract, and conversion. U.S. Filter/JWI alleged, among other things, that Gethin had downloaded a large quantity of U.S. Filter/JWI's proprietary and trade-secret information before leaving his position and that the defendants were infringing on its J-PRESS® (the brand for its filter presses) and J-MATE® (the brand for its sludge dryers) trademarks by using the "J-Parts" name.

The parties settled the case and reached a final settlement agreement. As part of the settlement agreement, the parties agreed to stipulate to the entry of a final judgment, and the district court entered the "Final Judgment Including Permanent Injunction."1 (R. 1-7.) The injunction permanently enjoined "M.W. Watermark LLC, and Michael Gethin and its, his or their principals, agents, servants, employees, attorneys, successors and assigns" from using U.S. Filter/JWI's trademarks and from "using, disclosing, or disseminating any" of U.S. Filter/JWI's proprietary information. (Id. at PID 358.)

C. Sale to SWT

The business unit comprising U.S. Filter/JWI's business was sold to SWT pursuant to a Carve-Out Agreement between Siemens and SWT. Under the Carve-Out Agreement, SWT acquired "all Seller's books and records, files and other documents and data (including written and electronic training materials utilized to train the employees of the [water-technologies unit], including those related to regulatory and compliance matters), including all purchase and sold ledgers, purchase and sales day books and purchase and sales invoices." (R. 48-1, PID 780.)

SWT also acquired the business unit's "Know-how," defined as: all information and data (irrespective as to whether such information and data is available by way of documentation, orally or in electronic format and irrespective as to whether they are protected by copyrights or not), including business and trade secrets, technical and business information and data, inventions, experience and expertise, all to the extent that such information and data are not Software . . . and/or not a Patent . . . .

(Id. at PID 783.)

SWT further acquired the business unit's rights and obligations under its contracts, its trademarks, and its interest in litigation.

D. Siemens/SWT's Market Exit and Watermark's Entrance

Before selling the water-technologies unit to SWT in 2013, Siemens had prepared a multi-year plan to discontinue certain product lines, including J-MATE® sludge dryers. Following the sale, in early 2014, Evoqua notified its sales representatives that it was discontinuing the J-MATE® product line. In response to Evoqua's planned exit, Watermark decided to enter the sludge-dryer market. On March 23, 2014, Watermark announced that it was releasing a sludge dryer product called "DryMate."

E.

Evoqua's Re-entrance into the Sludge-Dryer Market

On July 9, 2015, Evoqua began plans to reintroduce the J-MATE® sludge dryer to the market. Around that same time, Evoqua's in-house counsel wrote to Watermark regarding, among other things, Evoqua's concerns that Watermark was violating the Consent Judgment, improperly using Evoqua's trademarks, and falsely advertising that it provided "OEM Parts" for a variety of manufacturers, including JWI.

II. PROCEDURAL HISTORY

A. Evoqua's Claims

On January 8, 2016, Evoqua filed this action against M.W. Watermark, LLC, Watermark's President Gethin, and current and former employees of Watermark. Evoqua alleged that Watermark and its employees violated the Consent Judgment by using Evoqua's proprietary information and infringing on its trademarks. Evoqua further alleged that Watermark infringed on its copyrights by adopting Evoqua's copyrighted brochures and presentations for its own use. Evoqua also asserted that Watermark impermissibly used its J-MATE® trademark on its website and adopted a confusingly similar name of "DryMate" for its own product. Evoqua finally alleged that Watermark falsely advertised itself as an original equipment manufacturer for Evoqua's products.

B. The District Court's Contempt Order

Evoqua filed a motion for sanctions and/or an order holding Watermark and Gethin in contempt of court for allegedly violating the Permanent Injunction. On September 12, 2016, the district court granted that motion and held Gethin and Watermark in contempt for violating the Permanent Injunction. The court found that Watermark violated the injunction by (1) using Evoqua's proprietary information and (2)...

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