United States Court of Appeals
For the First Circuit
No. 10-2415
CONTOUR DESIGN, INC.,
Plaintiff, Appellee,
v.
CHANCE MOLD STEEL COMPANY, LTD.,
a/k/a Chance Mold Company Ltd.;
EKTOUCH COMPANY, LTD.,
Defendants, Appellants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW HAMPSHIRE
[Hon. Joseph N. Laplante, U.S. District Judge]
Before
Lynch, Chief Judge,
Boudin and Howard, Circuit Judges.
Thomas J. Moore with whom Bacon & Thomas, PLLC, Peter G.
Callaghan and Preti Flaherty Beliveau Pachios PLLP were on brief
for appellants.
Jordan L. Hirsch with whom Michael J. Summersgill and Wilmer
Cutler Pickering Hale and Dorr LLP were on brief for appellee.
August 11, 2011
BOUDIN, Circuit Judge. This is an interlocutory appeal
from a district court order preliminarily enjoining
defendants-appellants Chance Mold Steel Company, Ltd. and EKTouch
Company, Ltd. ("Chance") from selling computer mouse products
similar to or derived from those made by plaintiff-appellee Contour
Design, Inc. ("Contour"). Because a merits trial has now been held
and the preliminary injunction will shortly be superceded, only
brief discussion is required.
Contour designs, manufactures, and sells ergonomic
computer mice. In 1995, Contour contracted with Chance to
manufacture its products in bulk. Contour's founder, Steven Wang,
chose Chance based on assurances that Chance would keep Contour's
product design information secret. The parties formalized that
understanding in a non-disclosure agreement ("NDA") dated June 15,
1995, which has a term of 20 years.
After identifying the "Product" as inventions, designs,
methods and related information concerning computer mouse products,
Section 1 of the NDA precludes Chance from disclosing, using, or
copying Contour's "Confidential Information," and Section 3 of the
NDA further prevents Chance from duplicating, producing,
manufacturing, or otherwise commercially exploiting the Product, or
developing other products derived from the Product.
For almost 15 years, Chance manufactured different
computer mouse products for Contour and kept confidential all of
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Contour's product information, but, in 2009, Chance began to make
near copies of two Contour mice and concedes that it used Contour's
production tooling to make them. Contour then filed suit against
Chance in federal district court in New Hampshire charging Chance
with violating the New Hampshire Uniform Trade Secrets Act, N.H.
Rev. Stat. Ann. § 350-B:1 to -B:9 (2011), and with breach of
contract.
In November 2010, after an evidentiary hearing, the
district court adopted a magistrate judge's report and
recommendation and entered a preliminary injunction against Chance.
Among other things, Chance was ordered to stop producing the two
mice or any other products derived from the two Contour mice from
which the Chance counterparts had been derived. Chance appealed
from the preliminary injunction and this court heard argument.
Following argument, the panel concluded at semble that
Contour had adequately shown that it was likely to prevail on the
merits and that the other familiar considerations--irreparable
injury, the equities and the public interest, Naser Jewelers, Inc.
v. City of Concord, 513 F.3d 27, 32 (1st Cir. 2008)--were
consistent with relief. However, because a trial was scheduled to
be held, the court made no announcement, expecting that the
preliminary injunction would be supplanted by a final injunction
and other possible relief. See, e.g., Smith v. Ill. Bell Tel. Co.,
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270 U.S. 587, 588-89 (1926); In re Estate of Ferdinand Marcos Human
Rights Litig., 94 F.3d 539, 544 (9th Cir. 1996) (collecting cases).
On May 24, 2011, after a six-day trial, a jury found that
Chance had misappropriated Contour's trade secrets and breached the
NDA, awarding $7.7 million in damages. At present, there are
post-trial matters pending in the district court and a permanent
injunction has yet to be framed. However, the district court may
be awaiting disposition of this appeal before entering final
judgment including a permanent injunction.
Because copying of Contour's mice was more or less
conceded, the principal issues raised by Chance on this appeal
concerned the validity and breadth of the NDA. Chance urged, in
particular, that what was protected under the NDA was unclear, that
the agreement was too vague to be enforced, and that in all events
the NDA should be read to protect only the Contour mice in
existence in 1995 and not those that Contour created afterwards and
asked Chance to produce for Contour.
But to the extent that the NDA's bare language might be
viewed as ambiguous, the district court was entitled to consider
the contract as a whole and any extrinsic evidence that might cast
light on the parties' mutual intent. See, e.g., Birch Broad., Inc.
v. Capitol Broad. Corp., 13 A.3d 224, 228 (N.H. 2010). At the time
of the preliminary injunction, Contour had pointed to various
circumstances supporting its position, including the duration of
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the NDA--hardly consistent with protecting only an existing
product--and extrinsic evidence of discussions between the parties.
There is no reason to describe in detail that evidence
which may have taken a different form at trial, nor to consider in
detail a patent license provided by Contour to a Swedish company
and now relied on by Chance.1 It is enough that what Contour
identified in the preliminary injunction phase of the case amply
supported the district court's decision to grant preliminary
relief--a decision that now appears to be vindicated by the jury's
verdict. Based on the then-existing record, the relief was
entirely proper.
It may be helpful to make clear for the benefit of future
controversies that the district court was free, and would remain
free even without this affirmance or leave from us, to enter a
permanent injunction based on the trial record while the original
appeal remained pending. True, once an appeal has been taken, a
district court ordinarily may not alter the judgment under review,
without leave of the appellate court. Fed. R. Civ. P. 62.1; Puerto
1
In May 2009, Contour apparently settled a patent dispute with
the Swedish company and licensed it to make, or have made, Contour
mice of the type copied by Chance. Chance in turn began to supply
Chance's knock-offs to the Swedish company. Whatever protection
Chance might collaterally derive from the license (e.g. from a
patent infringement suit)--which we do not decide--nothing
indicates that it would free Chance from the NDA restrictions
invoked in this case.
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Rico v. SS Zoe Colocotroni, 601 F.2d 39, 42 (1st Cir. 1979); cf.
Fed. R. Civ. P. 62(c) (contemplating limited exceptions).
However, in most respects and absent a stay, further
proceedings in the same controversy often may continue in the
district court while an appeal in an earlier phase is pending. See
Ex parte Nat'l Enameling & Stamping Co., 201 U.S. 156, 162 (1906)
("The case, except for the hearing on the appeal from the
interlocutory order, is to proceed in the lower court as though no
such appeal had been taken, unless otherwise specially ordered.").
To conduct a trial and grant or deny a permanent injunction based
on that trial is standard practice. See Ry. Labor Execs. Ass'n v.
City of Galveston, 898 F.2d 481 (5th Cir. 1990).
An appeal from the grant or denial of a
preliminary injunction does not divest the
trial court of jurisdiction or prevent it from
taking other steps in the litigation while the
appeal is pending. . . . The only restriction
on the trial court's power occurs if the
appellate court enters an order staying the
lower court until the appeal has been
completed.
11A Wright & Miller, Federal Practice and Procedure § 2962, at
438-39 (2d ed. 1995); accord Janousek v. Doyle, 313 F.2d 916, 920
(8th Cir. 1963).
As for appellate courts, there is no fixed rule as to
whether and when it makes sense to press ahead while the district
court acts. Sometimes, where the preliminary relief granted is
doubtful or resolving a pure issue of law may help with jury
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instructions, a prompt appellate decision on the preliminary
injunction may be important; in other cases, sometimes not. Either
way, the district court is free to carry forward and order
permanent relief after the merits are resolved.
Affirmed.
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