ClearOne Communications, Inc. v. Chiang (670 F. Supp. 2d 1248, 2009)

United States District Court for the District of Utah 2009-11-19

Citations

Full opinion text

MEMORANDUM DECISION AND ORDER OF CONTEMPT

TENA CAMPBELL, Chief Judge.

This highly acrimonious and heavily litigated trade secret misappropriation case concerns the theft of Plaintiff ClearOne Communications, Inc.’s teleconferencing digital signal processing software (the “Honeybee Code”). Now, a year after the jury issued a verdict for ClearOne (which was followed by the court’s final judgment and permanent injunction), the matter has resulted in several contempt proceedings against certain Defendants and interested parties who continue to possess and use the stolen Honeybee Code while steadfastly attempting to hide their repeated violations of the court’s Preliminary Injunction and other pre- and post-trial orders.

In June and October 2009, the court issued two related orders to show cause, in which the court demanded that the WideBand Defendants and third-parties Donald Bowers, David Sullivan, Wide-Band Georgia, and DialHD, Inc. show good cause why they should not be held in civil contempt for violation of the court’s permanent injunction and post-judgment TRO.

Now, having considered the evidence presented at the two hearings, and for the reasons set forth below, the court finds that ClearOne has not shown by clear and convincing evidence that Andrew Chiang, Versatile, WideBand Georgia, and David Sullivan are in contempt of court. But, ClearOne has shown by clear and convincing evidence that Lonny Bowers, Jun Yang, WideBand Solutions of Massachusetts (“WideBand”), and third-party collaborator DialHD, Inc. (collectively the “Contemnors”) are in contempt of court for violation of the court’s April 2009 Permanent Injunction and August 2009 Temporary Restraining Order for selling Wide-Band’s Simphonix Si-400 product in the guise of DialHD’s AEC4 and HD4551 products, all of which contain the Honeybee Code. Not only are the Contemnors ordered to pay attorneys’ fees and damages sustained by ClearOne as a result of their contemptuous behavior, but they are required to perform certain acts set forth below in order to purge themselves of their contempt. If they do not purge their contempt in the manner and by the time set forth below, they face coercive incarceration.

I. FINDINGS OF FACT

A. Jury Verdict, Permanent Injunction, and TRO

On November 5, 2008, after a two-week trial, the jury issued its special verdict finding that all of the defendants had wilfully and maliciously misappropriated ClearOne’s Honeybee Code trade secret. (See Docket No. 1286.) The jury awarded ClearOne more than ten million dollars in compensatory and punitive damages.

Based on the jury’s verdict, and as part of the court’s final judgment against the Defendants, the court issued its Permanent Injunction on April 8, 2009. The Court’s April 2009 Permanent Injunction expressly restricts, in clear terms, any continued use of the intellectual property that was the subject of the trial, including WideBand’s Simphonix Product:

Each of the WideBand Defendants— Andrew Chiang, Jun Yang, Lonny Bowers, WideBand Solutions, Inc. (“Wide-Band”), and Versatile DSP, Inc. — is hereby permanently enjoined from disclosing, using or transferring in any way the trade secret owned by Plaintiff ClearOne Communications, Inc., called the Honeybee Code (including its unique algorithms or sub-algorithms that are not in the public domain), whether in the form of source code, object code, or any other form, and any code or product substantially derived from the Honeybee Code.

Each of the WideBand Defendants is also permanently enjoined from disclosing, using, or transferring in any way the product development documentation for the Honeybee Code or any other documentation that reveals the contents of the Honeybee Code.

Because the following infringing Products” contain or are substantially derived from the Honeybee Code, they are also subject to the permanent injunction: the AEC2W object code licensed to Biamp Systems Corporation (the Biamp Code); the computer code licensed to Harman Music Group, Inc. that was the subject of the October 30, 2007 Preliminary Injunction Order (the Harman Code); WideBand’s FC101 product; WideBand’s WC301 product; WideBand’s WC301A product; and WideBand’s Simphonix product.

The restrictions listed above include, without limitation, a restriction upon any further marketing, selling, manufacturing, development, modification, duplication, or transport or delivery of technology containing the Honeybee Code or any product substantially derived from the Honeybee Code. These restrictions also include, without limitation, a restriction upon any further marketing, selling, delivery, and/or use of technology or products containing the Honeybee Code to service any past or existing customers.

The restrictions set forth immediately above apply not only to each of the WideBand Defendants, but also to each of WideBand Defendant’s agents, servants, officers, employees, entities, and those acting in concert with them, and/or those acting under their direction or control, to the fullest extent allowed by law.

(Apr. 8, 2009 Permanent Injunction at 1-3 (emphases added) (Docket No. 1525).)

In July 2009, the court received evidence, culminating in a July 31, 2009 hearing, that certain Defendants and a third-party named DialHD, Inc. (acting in concert with certain Defendants) were surreptitiously selling products utilizing the Honeybee Code, all in violation of the court’s Permanent Injunction. Essentially, DialHD, along with Lonny Bowers and others, was selling products called the AEC4 that were simply a repackaged Simphonix product banned by the court’s Permanent Injunction.

At the end of the July 31, 2009 hearing, the court issued a temporary restraining order, noting as follows:

I BELIEVE, AND I AM CONFIDENT, THAT THE INFORMATION AND EVIDENCE THAT I HAVE HEARD TODAY SHOWS THAT THERE IS A SUBSTANTIAL LIKELIHOOD THAT CLEARONE WOULD PREVAIL ON THE QUESTION OF WHETHER THE PRODUCTS THAT ARE AT ISSUE HERE ARE IN FACT EMPLOYING THE HONEYBEE CODE. THAT BURDEN HAS BEEN MET. AND GIVEN THE EVIDENCE THAT I HAVE BEFORE ME, CLEARLY THE IRREPARABLE HARM THAT CLEARONE WOULD SUFFER IF THE ASSETS WERE TRANSFERRED. AGAIN, THIS T.R.O. MUST ISSUE. NOW, IT’S NARROWLY TAILORED TO THE ONLY TWO PRODUCTS.... HOWEVER, GENTLEMEN, I TELL YOU THAT IF I HAVE EVIDENCE THAT IN THE INTERIM ANY OF THESE PRODUCTS ARE SOLD OR TRANSFERRED, I WILL VIEW THAT AS CONTEMPT WORTHY OF CRIMINAL PROSECUTION.

(July 31, 2009 Hr’g Tr. at 174-75 (emphases added).) On August 5, 2009, the court formalized its oral ruling by entry of a written Temporary Restraining Order and Order from July 31, 2009 Hearing (the “TRO”). (See generally TRO (Docket No. 1819).)

Among other things, the written TRO repeated the court’s finding that ClearOne had shown a substantial likelihood of success on the merits, as follows:

7. ClearOne has shown a substantial likelihood of success on the merits on its TRO request with regard to the sale and/or marketing of the DialHD products sometimes identified as the “AEC4” and the “Mix-4” or “Auto-mixer,” including not only the physical products but also all firmware, software, accessories, installation materials, and support materials (the “DialHD Infringing Products”), including as reflected in Exhibit Nos. 10, 11, and 12, marked at the July 31, 2009 hearing. More specifically, ClearOne has demonstrated a substantial likelihood of success on the merits of its claim that the DialHD Infringing Products illegally utilize the Honeybee Code in the same or similar fashion to those “Infringing Products” identified in the Court’s Order Granting Permanent Injunction. [See Docket No. 1524 at 12 (defining “Infringing Products” that “illegally utilize the Honeybee Code”) ].

(TRO ¶ 7.) The TRO also expressly prohibited any further marketing or sale of the “DialHD Infringing Products,” including in particular the AEC4. (Id.) Of course the court’s earlier orders, including the Permanent Injunction, remained in effect. In essence, the August 5, 2009 TRO is an expansion of the content and spirit of the April 2009 Permanent Injunction.

Before getting into the facts constituting contempt, the court provides a brief background about the relevant technology to provide context for understanding the events that have occurred since the inception of this case.

B. The Honeybee Code Trade Secret

ClearOne’s trade secret is called the Honeybee Code, which was designed to enhance sound quality in audio conferencing equipment. It contains audio digital signal processing (DSP) algorithms and computer code. (See Oct. 20, 2008 Trial Tr. [hereinafter Oct. 20 Tr.] at 111-12 (programmers have developed audio DSP algorithms to enhance sound quality in audio conferencing); see also Trial Ex. 571.) Examples of audio DSP algorithms are acoustic echo cancellation (“AEC”) and noise filtration.

An algorithm- — -which often serves as the basis for computer programming — is a series of commands designed to accomplish a specific task. (Oct. 20 Tr. at 136-37 (witness Tracy Bathurst, ClearOne’s Chief Technical Officer).) Because an algorithm dictates a specific order of inquiries, different algorithms could achieve the same result even if the inquiries are in a different order. There are many choices, even in the most simple of algorithms, and there are no set rules for making those choices; different developers, even from the same company, would not come up with the same algorithm to solve the same problem. (Id. at 139-40; Oct. 20 Tr. at 95-96 (witness Tracy Bathurst); Oct. 22, 2008 Trial Tr. [hereinafter Oct. 22 Tr.] at 94, 128 (expert witness Thomas Makovieka).)

An algorithm may be depicted in different ways, including in a block or flowchart form, a text or instruction-like form (whether in, e.g., English, Spanish, French, or German), source (or assembly) code (e.g., the programming language called C code), or object (machine) code. (Oct. 20 Tr. at 142-48, 150; see also Trial Ex. 506 (demonstrative chart depicting different representations of the same algorithm).)

When designing software, a programmer will usually start with a schematic diagram — a flowchart — of the algorithm. (Oct. 20 Tr. at 137.) At this stage, the programmer will develop the architecture, and specify the functional blocks and design parameters. Once the flowchart is complete, the algorithm is generally converted into source code, which programmers are able to read and understand. (E.g., id. at 144-45, 237.) Often the source code is then converted into object code or machine code, which the computer can read and understand. (Id. at 145-46; Oct. 22 Tr. at 165-66.) Software known as a “compiler” is frequently used to convert the source code into object code. In this conversion, the compiler will remove the parts of the source code which the programmers could understand, leaving only code which is extremely difficult for a human to decipher. (Oct. 20 Tr. at 146-50; Oct. 21, 2008 Trial Tr. [hereinafter Oct. 21 Tr.] at 245 (witness Tracy Bathurst); Oct. 22 Tr. at 165-67.)

ClearOne and its predecessors (including “Old ClearOne”) used the Honeybee Code in their DSP products, such as the ClearOne speaker phone. {E.g., Oct. 20 Tr. at 28, 30, 155, 160.) Defendant Jun Yang was a software and signal processing engineer with Old ClearOne. {E.g., Oct. 24, 2008 Trial Tr. [hereinafter Oct. 24 Tr.] at 141-42, 204, 227-28.) Defendant Andrew Chiang also worked with Old Clear-One.

C. Procedural Background

In January 2007, Plaintiff ClearOne Communications, Inc. (ClearOne) filed a complaint against the WideBand Defendants alleging, among other things, misappropriation of ClearOne’s trade secret, the Honeybee Code. What followed is a tortured procedural history, including issuance of two temporary restraining orders (TROs), a preliminary injunction, expansion of the preliminary injunction, multiple orders to compel pre-trial and post-trial discovery, sanctions orders, a formal finding of perjury, a two-week trial, multiple contempt proceedings, numerous post-trial and post-judgment motions, and now bitter accusations of fraud, sordid gamesmanship, and evidence of post-trial machinations that led to ClearOne’s request to refer this matter to the United States Attorney’s Office for prosecution of criminal contempt charges. This order sets forth the more egregious events to provide context as well as to provide evidence supporting the court’s finding of civil contempt for multiple violations of the Permanent Injunction and August 2009 TRO.

1. Pre-Trial Events

a. The October 30, 2007 Preliminary Injunction

As noted above, in January 2007, ClearOne began this lawsuit against the WideBand Defendants and Biamp. By February of 2007, WideBand informed Harman — a prospective client — of this suit, but the two entities continued in negotiations for WideBand to license its acoustic echo cancellation technology to Harman. On July 26, 2007, WideBand and Harman consummated the licensing agreement, expressing that Harman “desires WideBand to develop AEC Technology specific to [Harman]’s intended application (the source code for which will be owned by WideBand and will constitute trade secret technology of WideBand), and to thereafter license to [Harman] the machine/object code for the same.... ” (License Agreement, ¶ 1.3, attached as Ex. 10 to PL’s Mem. Supp. of Mot. for Prelim. Inj. (Docket No. 345-2).)

After an emergency TRO hearing, the court found that ClearOne had demonstrated a substantial likelihood that the Harman Code and Algorithms were derived from the Honeybee Code. Accordingly, on October 30, 2007, 2007 WL 3231524, the court issued a Preliminary Injunction preventing WideBand and Harman from following through on the agreement. {See Docket No. 572.)

b. Sanctions and Adverse Jury Instruction

On June 4, 2007, ClearOne filed a Motion for Sanctions relating to false answers provided by Dr. Jun Yang to deposition questions regarding the production of certain source code and the existence of other versions of the source code containing programmer “comments.” After further briefing and a second deposition of Dr. Yang, Magistrate Judge Nuffer entered an “Order Granting in Part [ClearOne’s] Motion for Sanctions” on March 9, 2008, stating that “[t]he trier of fact in this case should be instructed” they “may consider that the court has found that Dr. Jun Yang did not answer some questions truthfully under oath in his deposition related to the existence of comments to the Wideband source code.” (Docket No. 779.)

Specifically, Judge Nuffer concluded that ClearOne was entitled to an adverse jury instruction, stating, in essence, that:

Parties in civil cases such as this have obligations to provide information in response to requests from the other party, and to answer questions truthfully under oath in depositions, where parties may ask questions [of] witnesses. Dr. Jun Yang did not answer some questions truthfully under oath in his deposition related to the existence of comments to the WideBand source code. This is serious interference with the truth-seeking process in the case and evidences the risk that parties may not be entirely trustworthy. You are the sole judges of credibility of parties and witnesses, but you may consider that the court has found that Dr. Jun Yang did not answer some questions truthfully under oath in his deposition related to the existence of comments to the WideBand source code.

(Id. at 12.) On May 15, 2008, the court affirmed Judge Nuffer’s order and specifically upheld the grant of the adverse jury instruction but stated that the “exact wording of the instruction will not be finally determined until trial.” (Docket No. 860 at 1.) The May 15, 2008 Order stated “the court will instruct the jury that among other things, Dr. Yang was not truthful in his sworn deposition in this action and that his dishonesty may be used in weighing his credibility.” (Id. at 2.)

During the October/November 2008 trial, the court read the adverse jury instruction concerning Dr. Yang’s perjury to the jury, right before Dr. Yang testified. The adverse instruction, in its final version, was read to the jury as follows:

THE COURT: ALL RIGHT. I WANT TO TELL YOU AN INSTRUCTION. PARTIES IN CIVIL CASES SUCH AS THIS HAVE OBLIGATIONS TO PROVIDE INFORMATION IN RESPONSE TO REQUESTS FROM THE OTHER PARTY AND TO ANSWER QUESTIONS TRUTHFULLY UNDER OATH IN DEPOSITIONS WHERE PARTIES MAY ASK QUESTIONS OF WITNESSES. DR. JUN YANG DID NOT ANSWER SOME QUESTIONS TRUTHFULLY REGARDING — RELATED TO THE EXISTENCE OF COMMENTS TO THE WIDEBAND SOURCE CODE UNDER OATH IN HIS DEPOSITION. YOU ARE THE SOLE JUDGES OF CREDIBILITY OF PARTIES AND WITNESSES, BUT YOU MAY CONSIDER THAT THE COURT HAS FOUND THAT DR. JUN YANG DID NOT ANSWER SOME QUESTIONS TRUTHFULLY UNDER OATH IN HIS DEPOSITION RELATED TO THE EXISTENCE OF COMMENTS TO THE WIDEBAND SOURCE CODE.

(Oct. 24, 2008 Trial Tr. at 226 (Docket No. 1352).)

c. TRO Regarding Asset Sale

In the meantime, on June 17, 2008, months before trial, ClearOne filed a Motion for a Temporary Restraining Order and Preliminary Injunction Regarding Asset Disposition (the “TRO Motion”). The TRO Motion was brought in response to a transaction between Defendant WideBand Massachusetts (“WideBand”) and Wide-Band Georgia. Donald Bowers, Lonny Bowers’s father, was the principal owner of WideBand Georgia.

The transaction concerning ClearOne was at least partially reflected in a document titled “Agreement for Purchase and Sale of Business Including its Equipment, Software, and All Other Applicable Intellectual Property” (the “WideBand Sale Agreement”). (At that time, Donald Bowers was loaning a substantial amount of money to the WideBand Defendants (including the corporate defendants Wide-Band and Versatile DSP, Inc.) to pay their legal fees, and the Agreement was somehow connected to his ability to collect on the debt.)

The TRO Motion sought certain orders from the court to stop the transaction reflected in the WideBand Sale Agreement, or to the greatest extent possible, stop any further performance of that transaction by WideBand, Andrew Chiang, Jun Yang, Lonny Bowers and Versatile DSP, Inc.

At that stage in the litigation, the court had already found, through the 2007 preliminary injunction hearing and order, that ClearOne had established a likelihood of success on the merits, including a preliminary finding that the source and object code held by the WideBand Defendants was indeed ClearOne’s protected trade secret, the Honeybee Code. (See, e.g., June 20, 2008 Hr’g Tr. (Docket No. 925-2) at 3 (“[In 2007,] I found that ClearOne had demonstrated substantial likelihood that the Biamp code and algorithms were derived from the Honeybee.... And anyone even a little bit familiar with this litigation knows that my [2007 preliminary injunction] order went through and specifically traced the Biamp Code to the Honeybee Code. I mean there was no question.”); June 18, 2008 Hr’g Tr. (Docket No. 894) at 9 (acknowledging findings and expressing concern that court’s order may have been violated); Oct. 30, 2007 Prelim. Inj. (Docket No. 572) (barring transfer of any intellectual property or products containing the Honeybee Code).)

During the June 18, 2008 hearing, based on the representation of Donald Bowers’s attorney Randolph Frails that the language of the WideBand Asset Purchase Agreement excluded sale of the code addressed by the court’s 2007 injunction, the court denied ClearOne’s June 18, 2008 TRO motion. (See Tr. of June 18, 2008 Hr’g on TRO Mot. (Docket No. 894).) But the court ordered the parties to disclose information confirming the nature of the transaction. (See id. at 22; June 18, 2008 Minute Entry (Docket No. 911).)

The next day, ClearOne (who by then had received a copy of the WideBand Asset Purchase Agreement) filed a renewed Motion for TRO and preliminary injunction because, contrary to Mr. Frails’s representations, the terms of the agreement did transfer intellectual property that the court preliminarily had found to be Clear-One’s protected trade secret. (See Docket No. 897 [“TRO Motion”].) ClearOne’s TRO Motion sought an order stopping the transaction reflected in the WideBand Asset Purchase Agreement, or to the greatest extent possible, stopping any further performance of that transaction by any of the WideBand Defendants.

That same day — June 19, 2008 — Clear-One filed a separate lawsuit, in this court, against WideBand Georgia and Donald Bowers alleging fraudulent transfer. (See ClearOne Comm’ns, Inc. v. Wideband Solutions, Inc. (a Georgia corp.) & Donald Bowers, Case No. 2:08-CV-474-TS (D.Utah).)

The following day, on June 20, 2008, the court held a hearing on the renewed TRO Motion. (See Tr. of June 20, 2008 Hr’g on Renewed TRO Mot. (Docket No. 923).) During that hearing, the court discussed the 2007 preliminary injunction order:

The reason ... my preliminary injunction only went to [the Harman Code] is because nothing was imminent on other fields. But I can tell you, had I known if there had been a sale in the wings of all [of WideBand’s] code, like the Biamp Code, and they brought [sic] it, the order would have been broader. But what I’m saying is [my 2007 order] explains in connection with the complaint what code is at issue in this lawsuit. That is the code that has been transferred. That is the basis of this motion for a T.R.O.

(June 20, 2008 Hr’g Tr. (Docket No. 925-2) at 11.)

The court noted that it wished to issue an injunction to maintain the status quo. “I just don’t want this sale to in any way put that code another step away from whatever is going to happen in this litigation.” (Id. at 16.) The court expressly stated that it did not want WideBand Massachusetts “gutted.” (Id. at 22.)

Just don’t do anything [including sale of the products that the court preliminarily found contained the ClearOne trade secret] — so that let’s say worst case scenario for you I find that a majority or all of WideBand Massachusetts’ codes were derived from the ClearOne algorithm. [Then] I say all of it goes back.... But if you’ve transferred that code on to somebody else, there are all sorts of problems.

(Id.) ClearOne then expressed its concern about “dissipation of [WideBand’s] assets.” (Id. at 24.) The court further stated:

I’m going to freeze things right now as — and if I have to do it only from the side of the WideBand Massachusetts side, but I don’t want the sale going on getting more wound up until I can fully hear on whether what was sold could legitimately be sold. That’s the thing. I want to just stop everything in its tracks. I don’t want money going back and forth, because if in fact ClearOne prevails and shows that these products are derived from code that belonged to it, then WideBand Georgia has got the money, but ... the judgment would probably be against WideBand Massachusetts .... So money needs to stop. I don’t want WideBand Massachusetts sending any money out. They might need to make ClearOne whole. They might not. I haven’t had time and I won’t for sometime to decide that. Things must stop. That’s just what I’m saying.... [WideBand Massachusetts] can go on as it was just like before June 16th, whatever payments, whatever arrangements. I just don’t want money going to WideBand Georgia that ultimately — ■that might be from the sale of products [containing the trade secret].

(Id. at 26 (emphasis added).)

On June 25, 2008, the court issued a written TRO concerning the WideBand Massachusetts asset disposition. The TRO applied “not only to the WideBand Defendants, but also each and every one of their agents, servants, officers, employees, entities, attorneys, and those acting under their direction or control and any other persons who are in active concert or participation with any of the WideBand Defendants.” (June 25, 2008 Order (Docket No. 908).) The court further ordered that:

The WideBand Defendants will take no further action in connection with any sale or transfer of ownership of the following of the WideBand Defendants’ assets to WideBand Georgia or any other person or entity: the FC101 code, the WC301 code, the WC301A code, the Biamp code, the Harman code, and the SimphoniX code, whether consisting of source or object code, as well as the algorithms related thereto (collectively, the “Disputed Codes”). This includes, without limitation, a prohibition upon the execution of any additional documents related to or necessary for the performance of the WideBand Sale Agreement to the extent it effects a sale or transfer of ownership of the Disputed Codes. This further includes, without limitation, any other action to convey, transfer, encumber or pledge ownership in any or all of the Disputed Codes in favor of WideBand Georgia, including, without limitation, the performance of any licensing or other agreements encumbering the Disputed Codes through or in conjunction with WideBand Georgia, even if such agreements were executed prior to the Court’s issuance of a temporary restraining order on June 26, 2008. In other words, WideBand Defendants will not allow or assist WideBand Georgia in any efforts to license or to transfer or, convey ownership or otherwise effect in any way any of the Disputed Codes.... None of WideBand Defendants’ profits from the Disputed Code shall be transferred or conveyed to WideBand Georgia.

(Id. (emphases added).)

But on July 10, 2008, after ClearOne filed yet another TRO motion, the court held another hearing concerning the asset transfer (See ClearOne Mot. TRO & Prelim. Inj. Re: Asset Sale (Docket No. 914) (seeking broader injunction freezing disposition of all WideBand Massachusetts’s assets, not just the disputed codes).) Mr. Frails again appeared by telephone on behalf of WideBand Georgia and Donald Bowers. (See July 10, 2008 Hr’g Tr. (Docket No. 966) at 2-3.) During the hearing, the court noted its inclination to grant the motion because “[i]t seems to me that through the papers ClearOne has shown that they will suffer irreparable harm if all the assets leave WideBand Massachusetts, go to WideBand Georgia, even perhaps becoming insolvent, and if there’s a judgment, WideBand Massachusetts won’t be able to respond.... [I]t looks like there are some real concerns about the transfer itself.” (Id. at 3.)

Mr. Frails commented that:

My client believed that he suffered harm as it related to your order dated I believe it was June 27th [sic], 2008.... [M]y client would like to have settled this matter by rescinding the sale.... In spite of [ClearOne’s refusal to settle in that way], my client decided to rescind the sale anyhow. And so, therefore, the actual asset purchase has been rescinded because in essence my client felt that he was buying nothing.

(Id. at 3-4.) (Donald Bowers later confirmed Mr. Frails’s representation by filing a copy of the Agreement to Rescind. (See Ex. B to Don Bowers’s Answer (Docket Entry No. 12) in WideBand Georgia Case, 2:08-CV-474 (D.Utah).))

Mr. Frails then represented that the TRO motion would be moot “because we haven’t transferred anything.” (July 10, 2008 Hr’g Tr. at 5.) The court and Clear-One’s counsel agreed that the rescission mooted the basis for ClearOne’s motion. (See id. at 4-5 (ClearOne’s counsel said “we will rely on Mr. Frails’ representations that nothing has actually been transferred, the assets haven’t been transferred obviously, the code hasn’t been transferred.”).) Accordingly, the court denied the motion as moot. (See July 10, 2008 Order (Docket Entry No. 11 in WideBand Georgia Case); July 10, 2008 Order (Docket Entry No. 922 in this case).)

In October 2008, the court granted Don Bowers’s motion to dismiss the WideBand Georgia Case without prejudice on the basis that the claims, all of which concerned the rescinded asset purchase agreement, were moot. (See Oct. 20, 2008 Order (Docket Entry No. 23) in WideBand Georgia Case; Defs.’ Mot. to Dismiss Without Prej. (Docket Entry No. 21 in WideBand Georgia Case) at 2 (noting that ClearOne’s claims in WideBand Georgia Case were “based [entirely] on an asset purchase transaction that was rescinded”).)

2. Trial

In late October/early November 2008, the court held a two-week jury trial. On November 5, 2008, the jury issued its special verdict finding, among other things, that all of the defendants had wilfully and maliciously misappropriated ClearOne’s Honeybee Code trade secret. (See Docket No. 1286.) The jury awarded ClearOne more than ten million dollars in compensatory and punitive damages.

3. Post-trial Events

a. Expansion of the October SO, 2007 Preliminary Injunction

On February 4, 2009, 2009 WL 273325, the court expanded its October 30, 2007 Preliminary Injunction to preliminarily enjoin use of the following products containing the Honeybee Code:

(a) the AEC2W code licensed to Biamp Systems Corporation;

(b) the computer code licensed to Harman Music Group, Inc. that was the subject of the October 30, 2007 Preliminary Injunction Order;

(c) WideBand’s FC101 product;

(d) WideBand’s WC301 product;

(e) WideBand’s WC301A product; and

(f) WideBand’s Simphonix, including Si-40, and Si-400.

(Feb. 4, 2009 Order Expanding Prelim. Inj. (Docket No. 1428) (emphasis added).) The above list of products was referred to as the “Infringing Products” because evidence at trial showed that the products contained the stolen Honeybee Code. After the court made its findings, it ordered:

1. That Defendants Andrew Chiang, Jun Yang, Lonny Bowers, WideBand Solutions, Inc. (‘WideBand”), and Versatile DSP, Inc. (collectively, the “WideBand Defendants”); as well as WideBand Defendants’ agents, servants, officers, employees, entities, and those acting under their direction or control, are hereby enjoined, until such time as a permanent injunction is entered which supersedes and replaces this order, from disclosing or using in any way the following: (a) the Honeybee Code (including its unique algorithms or sub-algorithms that are not in the public domain), whether in the form of source code, object code, or any other form; (b) the product development documentation for the Honeybee Code or any other documentation that reveals the contents of the Honeybee Code; and (c) the Infringing Products (listed above).

2. These restrictions include, without limitations, a restriction upon any further marketing, selling, manufacturing, development, modification, duplication, or transport or delivery of technology containing the Honeybee Code. These restrictions also include, without limitation, a restriction upon any further marketing, selling, delivery, and/or use of technology or products containing the Honeybee Code to service any past or existing customers.

(Id. at 5-6.)

b. Asset Preservation Order

On February 24, 2009, the court issued an order setting forth procedures to preserve and return to ClearOne the Honeybee source code and object code that the WideBand Defendants had misappropriated (the “Infringing Products”):

12. At the same time as the Computer Forensic Expert supervises and participates in the gathering of the ClearOne Protected Information, the Computer Forensic Expert shall also do the following, and the WideBand Defendants shall fully cooperate in all regards to assist the Computer Forensic Expert in accomplishing the following:

a. The Computer Forensic Expert shall participate in and supervise the gathering of all source code and object code files comprising code for or relating to the Infringing Products, as described in the Court’s February 4, 2009 Order Expanding Preliminary Injunction.

b. The Computer Forensic Expert shall participate in and supervise the duplication of all object code and source code fíles relating to the Infringing Products onto a separate hard drive. The Computer Forensic Expert shall retain and maintain this hard drive pending further order of the Court.

c. The Computer Forensic Expert shall then participate in and supervise the permanent deletion of all of these object code and source code files from WideBand Defendants’ computers.

d. The Computer Forensic Expert shall create a log, identifying the information permanently deleted, as described above, such as file name, file type, file size, location within the directory structure on the hard drive, and the hard drive/computer on which it was located. The Computer Forensic Expert shall retain and maintain this log pending further order of the Court.

(February 24, 2009 Order at 11-12 (emphases added) (Docket No. 1475) (“Preservation Order”).)

c. The WideBand Defendants Intentionally “Scrubbed” Computers and Replaced the Hard Drives in the Wide-Band Massachusetts Server Before the Court-Ordered Imaging Could Take Place

Despite the court’s Preservation Order, Dr. Yang, at his July 8, 2009 deposition, claimed that he, and the other WideBand Defendants, had permanently deleted and destroyed every copy of the WideBand Massachusetts source and object code for all of the WideBand Massachusetts products, i.e., the FC101, the WC301, the Biamp or AEC2w code, the Simphonix codes, and the Harman code. (See Yang Dep. at 81-82, 100-107, 109-112, 115-116, 151-152 (attached as Ex. G to Mem. to Enforce).) The formatting of the hard drives destroyed not only the WideBand Massachusetts codes, but also any other discoverable evidence. (Yang Dep. at 104-05.) Dr. Yang said he did not make any backup of the source code or keep any copy of the source or object code. (See Yang Dep. at 102-03,115-16.)

He also claimed that he and the other WideBand Defendants permanently deleted and destroyed all of the WideBand Massachusetts source code and object code because this court ordered them to do so. (Id. at 81-82, 101-01.) But he is mistaken about what the court ordered. The court did not order them to permanently delete and destroy all of the evidence. That is made clear in the court’s February 24, 2009 Order (the “Preservation Order”) quoted above.

On June 22-24, 2009, and pursuant to the court’s February 24, 2009 Order, after much stalling by the WideBand Defendants, ADR Forensics (“ADR”) was finally able to image the computers of the Wide-Band Defendants. (July 2009 Hr’g Exs. 45, 46.) But the imaging was not fruitful, because after the imaging done in the summer of 2007 (at the court’s order), and before ADR performed the imaging, someone had physically opened the server and swapped out the two hard drives. (July 2009 Hr’g Exs. 45, 46, 48.)

The scrubbing of the computers, the claim that the source code was deleted, the swapping out of hard drives, and the obstruction and delay is further evidence of the Subject Parties’s disregard for the court’s orders and their efforts to obstruct ClearOne’s ability to obtain assurance that copies of the Honeybee Code are not in the wrong hands.

c. Issuance of the Permanent Injunction

As noted above, on April 8, 2009, the court issued its Permanent Injunction. (See Apr. 8, 2009 Permanent Injunction (Docket No. 1525).)

d. Donald Bowers’s Personal Civil Contempt

On September 3, 2009, the court issued an order finding Donald Bowers in civil contempt of court. The following describes the history leading up to the contempt order.

A day after the jury issued its verdict against the WideBand Defendants, and despite Donald Bowers’s notice of the TRO barring any encumbrance of WideBand Massachusetts assets, he knowingly violated it when he filed a UCC financing statement in Massachusetts encumbering all of WideBand Massachusetts’s assets, including intellectual property. The UCC filing prompted another order to show cause to Donald Bowers (and others) for alleged violation of the court’s prohibition on transfer or encumbrance of WideBand Massachusetts’s assets. (The UCC filing was circumstantial evidence that an agreement encumbering WideBand Massachusetts’s intellectual property still existed or had been executed since the court’s June 26, 2008 Order, the July 7, 2008 Agreement To Rescind, and the court’s October 20, 2008 dismissal of the WideBand Georgia Case.)

After two hearings, the court found Donald Bowers in contempt of court “for filing a UCC-1 Financing Statement in Massachusetts on November 6, 2008, thereby encumbering WideBand Solutions’ intellectual property at issue in this trade secret litigation in violation of the court’s June 26, 2008 Order,” and “for failing to appear at the February 10, 2009 contempt hearing.” (Sept. 3, 2009 Order of Contempt (Docket No. 1902) at 2.) The September 3, 2009 Contempt Order sets forth a complete history of that contempt matter. In that order, the court described the contemptuous behavior:

The pledging of the assets and the signing of such security or other agreements granting a security interest, as well as the UCC filing, are direct violations of the court’s June 26, 2008 Order. Stated another way, Donald Bowers either withheld the information from the court in 2008 when it clearly should have been disclosed during the TRO proceedings, or he concocted [i.e., forged] the April 2008 agreements in a short-sighted attempt to justify the UCC filing for which he was facing contempt charges. Either way, he has committed fraud on the court.

(Docket No. 1902 at 22 (footnote omitted).)

Upon finding Donald Bowers in contempt, the court also noted that Donald Bowers (1) attempted to avoid service of papers; (2) failed to appear at the first OSC hearing despite proper notice; (3) apparently misrepresented facts to the court about the existence of the agreement concerning transfer of WideBand Massachusetts’s assets to WideBand Georgia (he allegedly rescinded the agreement, which caused the court to forego further injuncfive remedies and to dismiss a related fraudulent transfer case as moot); and (4) withdrew the UCC filing without informing ClearOne or the court until much later, even after an OSC had been issued. (See id. generally.)

The court ultimately issued an order of contempt and required Donald Bowers to take actions to assure the court that no encumbrances on WideBand Massachusetts’s assets existed and to pay Clear-One’s attorneys’ fees and costs. Instead of paying the fees and costs, Donald Bowers filed a personal bankruptcy petition in Georgia on September 17, 2009, the same day that ClearOne submitted its application for fees and costs awarded by the court for Donald Bowers’s contempt. The automatic stay, currently in place, bars ClearOne from collecting on the contempt judgment for fees and costs.

D. Current Contempt Proceedings

1. The July 2009 OSC and July 31, 2009 Evidentiary Hearing

While the contempt matter concerning Donald Bowers was pending, ClearOne filed a sixth motion for order to show cause (the July 2009 Motion for OSC). In that motion, ClearOne alleged that the WideBand Defendants continue to sell products containing the Honeybee Code (which the jury found had been wilfully and maliciously misappropriated by the WideBand Defendants) through a new company named DialHD, Inc. At the time of ClearOne’s motion, the DialHD products at issue were the “AEC4” and the “Mix-4” (or “Automixer”).

The court issued an order to show cause (“First OSC”) to Lonny Bowers, Andrew Chiang, Jun Yang, WideBand Solutions, Inc. (a Massachusetts company) (“Wide-Band” or ‘WideBand Massachusetts”), Versatile DSP, Inc., WideBand Solutions, Inc., a Georgia Company (“WideBand Georgia”), Donald Bowers, David Sullivan, and DialHD, Inc. (the “Subject Parties”), requiring them show good cause why they should not be held in contempt for violating certain court orders, including the Permanent Injunction. (See July 17, 2009 Order (Docket No. 1750) at 1-2.)

The First OSC also required the Subject Parties to make a full written disclosure to ClearOne before the hearing regarding their knowledge of the condition of the business of WideBand Massachusetts and DialHD, including information about DialHD products. (Id. at 4-5.)

The court held an evidentiary hearing on July 31, 2009, to investigate the alleged contemptuous actions of marketing and selling the AEC4 and Mix-4 products by DialHD. The Court heard testimony from private investigator Andrew Moan, ClearOne employee Derek Graham, and ClearOne expert witness Thomas Makovicka, and received into evidence exhibits submitted by ClearOne (the “July 2009 Hr’g Exs.”). (See July 31, 2009 Transcript (Docket No. 1849) [hereinafter “July 2009 Tr.”].)

At the end of the hearing, the court issued the TRO which was memorialized on August 5, 2009. But the contempt matter has been under advisement until now.

2. The October 2009 OSC and November 9, 2009 Evidentiary Hearing

In October, while the July contempt matter remained pending, ClearOne filed its seventh motion for an order to show cause, in which ClearOne presented further evidence that the Permanent Injunction and now the August 2009 TRO have been violated by the some of the same Subject Parties.

In that motion, ClearOne alleges that the WideBand Defendants and third parties are continuing to sell products containing the Honeybee Code through DialHD under yet another product name: the DialHD HD4551 Product (a repackaged AEC4 or Simphonix product).

The court issued its Second OSC to the same parties as those named in the First OSC, with the exception that Donald Bowers, as an individual, is excepted because the automatic stay in his recent personal bankruptcy action has not been lifted. The court’s Second OSC also required disclosure of certain information to ClearOne concerning the latest allegations of contempt and fraud on the court. Then the court held an evidentiary hearing on November 9, 2009. (See Nov. 9, 2009 Hr’g Tr. (Docket No. 1999).) During the November 9, 2009 hearing, further evidence suggested that certain Subject Parties are selling a repackaged WideBand WC301 under the name Longoo ACON1001. (See id. at 37-38, 75-88.) (The court does not find the Subject Parties’s attempt to blame Longoo as a rogue company persuasive.)

In sum, the court finds that DialHD was created and used as a vehicle to repackage the WideBand Simphonix Si-400 product as the DialHD AEC4 and HD4551 products, and that the Subject Parties’s blame of an alleged “rogue” Chinese company, Longoo, is a red herring used in an attempt to deflect the truth: that DialHD was established to carry on the enjoined business of WideBand Massachusetts. The court further finds that DialHD is in possession and control of WideBand Massachusetts’s technology, code, algorithms, and other assets.

E. Specific Evidence of Contempt

1. DialHD, Inc.

DialHD, Inc. is a company registered to conduct business in the State of Georgia, and was established on November 17, 2008 — just days after the jury returned its verdict. (See DialHD Cert, of Incorp. from State of Georgia, July 2009 Hr’g Ex. 37.) Donald Bowers, the father of Wide-Band Defendant Lonny Bowers, is the incorporator of DialHD:

The name and address of incorporator(s) are:

Donald Bowers

4141 Columbia Road, Suite C

Augusta, GA 30907

(See id.)

Donald Bowers is also the only member of the Board of Directors, and the Chief Executive Officer and Chief Financial Officer for DialHD:

The optional provisions are:

Board of Directors. The initial Board of Directors shall consist of the following Company Members:

Donald Bowers, CEO; CFO

4141 Columbia Road

Suite C

Augusta, GA 30907

(See id.)

The DialHD address is the same as that registered to WideBand Georgia, the company of Donald Bowers. (WideBand Georgia was the subject of the Court’s June 26, 2008 TRO barring transfer of certain intellectual property assets through any asset disposition agreement, especially the one between WideBand Georgia and Wide-Band Massachusetts. (See Docket No. 908.))

According to Donald Bowers, he started DialHD as a company to work with his son, Lonny Bowers, in the teleconferencing industry. (See June 3, 2009 Hr’g Tr. (Docket No. 1672) at 82-83.) He also told the court that DialHD hired David Sullivan, former Chief Information Officer of WideBand Massachusetts, to create the DialHD website. (Id. at 83.) ClearOne has since presented payroll records for Mr. Sullivan dated June 2009, long after the creation of the DialHD website in November 2008, that undermine Donald Bowers’s repx*esentation that Mr. Sullivan’s involvement with DialHD was fleeting. (See Payroll Records, July 2009 Hr’g Ex. 64.)

Although DialHD is incorporated in Georgia, it operates out of the same Connecticut office space previously occupied by WideBand. (See June 3, 2009 Tr. at 72-73 (Donald Bowers admits that DialHD is also using the address of 37 Northwest Drive, Plainville, Connecticut, “because WideBand vacated that location”); July 2009 Hr’g Ex. 33 at 31 (DialHD manual, identifying same Connecticut business address as WideBand).)

DialHD maintains a public website, http://www.dialhd.com, which was created on November 12, 2008 — less than one week after the jury’s verdict, with Lonny Bowers as the “Administrative Contact” and David Sullivan as the “Technical Contact” for the site. (See Whois Record for DialHD, July 2009 Hr’g Ex. 38.)

On its website, DialHD says it sells Polycom telephones. (See DialHD Webpages, July 2009 Hr’g Ex. 39; see also June 3, 2009 Tr. at 72 (Donald Bowers represented to the court that DialHD was formed on November 17, 2008, because “that’s when we got our distributorship for Polycom”).) The DialHD website does not reveal that the company offers products called the “AEC4” and the “Mix-4” or “Automixer.” (See DialHD Webpages, July 2009 Hr’g Ex. 39.) It does, however, offer the vaguely named “BoardroomHD” solutions. For that product or service, the company does not list any vendor, product, or brand, but rather provides a button asking the potential customer to “E-mail us About BoardroomHD.” (See id.)

2. The Subject Parties Violated the First OSC’s Disclosure Requirements through False or Non-Responsive Answers about DialHD and WideBand.

In response to the First OSC’s disclosure requirements, some, but not all, of the Subject Parties provided information. (See July 2009 Hr’g Exs. 53, 54, 56, 57.) But that information was false or non-responsive, without any valid excuse for withholding documentation that clearly exists.

Perhaps most egregious is Lonny Bowers’s response. Mr. Bowers gave false answers to the court and withheld information he was obligated to disclose. Paragraphs 7c through 7g of the court’s order required disclosure of information about the business and products of DialHD; the owners and investors in DialHD; the office locations of DialHD; the persons working for DialHD; and the persons or entities selling or marketing DialHD products. In response to each such inquiry, Lonny Bowers claimed that he did “not have sufficient personal knowledge to answer this question.” (July 2009 Hr’g Ex. 53.)

His response was false. For example, before the court issued the First OSC, Lonny Bowers sent out e-mail communications using the e-mail address of Lonny@ dialhd.com, and which included other references and contact information for Lonny Bowers at DialHD. (July 2009 Hr’g Exs. 11, 60, 63.) And on July 17, 2009, in one of those e-mails, Lonny Bowers attached a DialHD Power Point presentation that promoted the very same “BoardroomHD” solution that Lonny Bowers claimed that he had “no knowledge” about in his July 24, 2009 Disclosure. (July 2009 Ex. 11-12. )

Moreover, ClearOne’s private investigator Andrew Moan spoke directly with Lonny Bowers, who claimed to be the “Technology Evangelist” for DialHD, and spoke to Mr. Moan about DialHD products. (July 2009 Tr. at 24.) Specifically, the evidence shows that in July 2009, Mr. Moan spoke to Douglas Pervis of Spectrum Audiovisual Systems in Virginia about installing an audio conferencing system. (July 2009 Tr. at 21.) The Spectrum Audio Visual Systems website contained a DialHD logo. (Id.; July 2009 Ex. 58.) Mr. Pervis recommended that Mr. Moan speak to Lonny Bowers about the system because Mr. Bowers “could explain to [Mr. Moan] the ins and outs” of the system. (July 2009 Tr. at 22.)

Mr. Moan received a telephone number from Mr. Pervis. When Mr. Moan called the number on July 29, 2009, a man answered the phone with the statement, “Dial H.D.” (Id.) When Mr. Moan asked to speak to Lonny Bowers, he was transferred to an individual who identified himself as Lonny Bowers. (Id.) The following description of the conversation comes from Mr. Moan’s testimony during the July 31, 2009 hearing:

Q (BY MR. MAGLEBY) AFTER [LONNY] BOWERS IDENTIFIED HIMSELF, TELL U.S. WHAT WAS— WHAT YOU SAID TO HIM.

A I INFORMED MR. BOWERS THAT DOUGLAS PERVIS OF SPECTRUM HAD GIVEN ME HIS TELEPHONE NUMBER IN REGARDS TO LEARNING SOME MORE INFORMATION ABOUT THE DIAL H.D. PRODUCT. AND HE ACKNOWLEDGED HIS ACQUAINTANCE OF MR. PERVIS. HE STATED THAT HE HAD COMPLETED MANY JOBS OVER THE LAST FEW YEARS WITH — WITH MR. PERVIS.

Q OKAY. DID HE SAY SOMETHING ABOUT IT BEING A BIG BUSINESS BUT A SMALL NEIGHBORHOOD?

A HE DID. HE SAID, “IT’S A BIG BUSINESS BUT A SMALL NEIGHBORHOOD, AND WE ALL TRY TO WORK TOGETHER.”

Q DID YOU INQUIRE OF MR. BOWERS ABOUT THE COMPONENT THAT DIAL H.D. WOULD BE PROVIDING FOR YOUR AUDIO VISUAL PRODUCT — PROJECT?

A I DID. I ASKED HIM, YOU KNOW, HOW LARGE THE UNIT WOULD BE THAT I WOULD NEED. AND HE SAID — HE DESCRIBED IT AS BEING 19 INCHES WIDE, FIVE INCHES DEEP, ONE-AND-A-HALF INCHES TALL. AND HE COMPARED IT TO A STEREO SYSTEM COMPONENT.

Q DID HE SAY WHETHER OR NOT THE SYSTEM MIXED SIGNALS FROM MICROPHONES?

A HE DID. HE STATED IT WOULD MIX THE SIGNALS.

Q (BY MR. MAGLEBY) OKAY. DID YOU ASK MR. BOWERS WHAT HE DID FOR DIAL H.D.?

A I DID. AT ONE POINT I ASKED HIM IF HE WAS A SALESMAN FOR DIAL H.D., AND HE RESPONDED NO, THAT HE WAS THE TECHNOLOGY EVANGELIST.... HE THEN SAID THAT IN THE TECHNOLOGY FIELD THEY TRY TO GET AWAY FROM TRADITIONAL TITLES.

Q (BY MR. MAGLEBY) DID MR. BOWERS, MR. LONNY BOWERS, TALK ABOUT ANY OTHER DIAL H.D. JOBS OR CUSTOMERS?

A YES, HE DID. HE SPECIFICALLY MENTIONED GOOGLE AND G.M. HE SAID WHEN GOOGLE NEEDS A THOUSAND ROOMS TO ROLL OUT OR WHEN G.M. NEEDS ANSWERS, THEY CALL HIM.

Q OKAY. DID HE SAY ANYTHING ABOUT A.O.L.?

A YES. IT WAS MENTIONED IN THE CONVERSATION WITH MR. PERVIS. HE SAID MR. PERVIS FROM SPECTRUM STATED THAT HE WAS WORKING IN JOINT PARTNERSHIP WITH DIAL H.D. TO GET A CONTRACT WITH A.O.L. TO PROVIDE AUDIO SYSTEMS. SO I ASKED MR. BOWERS IF HE INDEED WAS TRYING TO GET A CONTRACT WITH A.O.L., TO WHICH HE REPLIED, ‘YES, WE ARE.”

Q NOW, MR. MOAN, WOULD YOU BE SURPRISED TO HEAR THAT MR. BOWERS HAS CLAIMED TO THIS COURT THAT HE DOES NOT KNOW WHAT DIAL H.D. SELLS?

A I WOULD BE.

Q HOW COME?

A HE WAS THE PERSON I SPOKE TO REGARDING THE EQUIPMENT.

Q AT ANYTIME IN YOUR CONVERSATION WITH MR. LONNY BOWERS DID HE EVER SAY TO YOU, “I HAVE NO IDEA WHAT PRODUCTS DIAL H.D. SELLS”?

A NO, HE DID NOT.

Q DID HE EVER SAY, “I DON’T KNOW ANYTHING ABOUT DIAL H.D.’S EMPLOYEES OR CUSTOMERS. WHY ARE YOU BOTHERING ME”?

A NO, HE DID NOT.

Q DID HE EVER SAY ANYTHING TO YOU ABOUT ANY COURT ORDERS THAT APPLIED TO HIM OR WOULD RESTRICT HIS ABILITY TO SELL YOU THE PRODUCT?

A NO, HE DID NOT.

Q OKAY. AND DID YOU GET THE IMPRESSION THAT HE WAS TRYING TO PROMOTE OR SELL THE DIAL H.D. PRODUCT?

A I WOULD SAY PROMOTE IS A GOOD WORD. I DON’T BELIEVE HE WAS TRYING TO SELL ME THE PRODUCT BECAUSE HE KNEW THAT I WAS ALREADY WORKING WITH MR. PERVIS OF SPECTRUM AUDIO VISUAL.

Q OKAY. DID YOU HAVE ANY DOUBT THAT IF YOU WANTED TO, YOU COULD GET THE DIAL H.D. AEC4 PRODUCT THROUGH MR. PERVIS AND SPECTRUM AND GET ASSISTANCE FROM MR. BOWERS IN GETTING THAT PRODUCT INSTALLED?

A I HAVE NO DOUBT.

(July 2009 Tr. at 22-26.) Contrary to his claimed ignorance, Lonny Bowers had a wealth of information about DialHD.

DialHD, through Donald Bowers, also violated the First OSC’s disclosure requirements. At a minimum, Donald Bowers was aware of the DialHD offices in Connecticut. As the CEO and CFO of DialHD, Donald Bowers cannot credibly claim no knowledge about the AEC4 and Mix-4/Automixer products, particularly after he represented to the court that those DialHD products were purchased as “turnkey” products from a company in China. (July 2009 Tr. at 165.) The court views his refusal to provide any information or documents under the guise that the information was “confidential business information and should not be provided to our competitor,” (see July 2009 Hr’g Ex. 56), as obstruction.

David Sullivan also violated the First OSC’s disclosure requirements by providing false and non-responsive answers. He did not provide any information, claiming in response to each and every question that “David Sullivan lacks sufficient personal knowledge to answer this question.” (July 2009 Hr’g Ex. 57.) His claim that he has no personal knowledge of DialHD is false; he is employed by DialHD, as confirmed by the DialHD website registration documents and the DialHD payroll records presented by ClearOne. (July 2009 Hr’g Exs. 38, 39, 64.) And evidence undermines his claim that he does not have any knowledge about DialHD products: he created the DialHD website (where such products were promoted) and was listed as the technical contact for DialHD. Instead of relying on his objection to jurisdiction, Mr. Sullivan chose to provide false answers to the questions and disregard the court’s order to produce documents concerning DialHD.

Jun Yang violated the Disclosure Order by failing to respond to it, as did Versatile and WideBand Georgia.

3. ClearOne Purchases Infringing Products

In its attempt to protect its intellectual property, ClearOne retained a private investigator, the Airde Group, Inc. (“Airde”), to research possible violations of the Permanent Injunction. Through Airde, Clear-One learned that DialHD is selling the WideBand Simphonix Product through DialHD under new product names,

a. Acquisition of WideBand Simphonix Si-WO and DialHD AECl

Airde found that it could purchase a WideBand Simphonix Si-400 from a company called Lucid Corporation (“Lucid”) of Bristol, Connecticut. According to Lucid’s website, it maintains a partnership with WideBand. (Lucid Website, available at http:/Aucidcorp.net/Vendors.html, July 2009 Hr’g Ex. 40.)

On June 16, 2009, licensed Airde private investigator Andrew Moan (whose testimony about his conversation with Lonny Bowers was quoted supra) placed a telephone call to Lucid and spoke with Lucid’s President, Robert Berube. (July 2009 Tr. at 15.) Mr. Berube told Mr. Moan that Lucid had the WideBand Simphonix Si-400 for sale and “that WideBand had gone through some corporate changes and had revised their company line and changed their name to Dial H.D. and had also updated some technology.” (Id. at 16.) When Mr. Moan asked Mr. Berube who the contact would be for DialHD or Wide-Band, he said the name “Lonny.” (Id.)

On June 22, 2009, Mr. Moan again spoke with Mr. Berube on the telephone to obtain a price quotation for the purchase and installation of the WideBand Simphonix Si-400. (Id. at 17.) Mr. Berube advised Mr. Moan that it would be better “to purchase the Dial H.D. AEC-4 unit. Since [Mr. Moan was supposedly] starting a new system, it would make sense to start with the new product with the new company name.” (Id.)

On June 30, 2009, Mr. Moan paid for and received a new DialHD AEC4 plus unit in its box from Lucid. (July 2009 Hr’g Exs. 9, 10, 100.) Mr. Moan then shipped the DialHD AEC4 unit to Clear-One’s counsel, after photographing the box and its contents. (July 2009 Hr’g Exs. 75, 100.)

For comparison of products, ClearOne also recently purchased a WideBand Simphonix Si-400 product through eBay. The Simphonix unit arrived in its original packaging box, which appeared to have been unopened, and contained the main unit, a disc labeled “SimphoniX GUI and Manual Installation,” and a WideBand power supply. (July 2009 Hr’g Ex. 101.)

b. Acquisition of DialHD HDJ.551

Later, as ClearOne continued to investigate violations of the Permanent Injunction and the more recent August 2009 TRO, it purchased more infringing products bearing yet a different product name.

During the second week of September 2009, ClearOne’s Tracy Bathurst was traveling in China and Asia for business and acquired a DialHD HD4551 Product. Mr. Bathurst personally inspected and took photographs of the product purchased by ClearOne, in his hotel room in China, immediately upon its receipt by ClearOne. (See Bathurst Decl. ¶ 7.)

ClearOne made arrangements to have the DialHD HD4551 shipped from China to ClearOne’s headquarters in Salt Lake City. The DialHD HD4551 product arrived on Friday, October 16, 2009 in a shipping box with the DialHD logo on it. (See Bathurst Decl. ¶ 8; Product Photographs by Tracy Bathurst, attached as Ex. 1 to Bathurst Decl.) Mr. Bathurst inspected the contents of the box delivered to ClearOne and confirmed that it contained the HD4551 unit and other materials that were obtained by ClearOne in China, and which he examined in China in September 2009. (Bathurst Decl. ¶ 16.) The box contained the HD4551 unit, a CD, a user’s manual, and a power supply bearing the DialHD logo. (See Bathurst Decl. ¶ 9; Product Photographs by Tracy Bathurst, attached as Ex. 1 thereto; Second Declaration of Derek Graham (“2nd Graham Decl.”) ¶ 7 (Docket No. 1959-8).)

4. Comparison of WideBand Simphonix Products to DialHD Products

The WideBand Simphonix products contain the Honeybee Code and so the acts of marketing and selling those products are banned by the court’s Permanent Injunction. Evidence shows that the DialHD AEC4 and HD4551 products are repackaged WideBand Simphonix products and so the acts of marketing and selling them are also banned by the Permanent Injunction.

a. The WideBand Simphonix and the DialHD Products Are Physically Identical.

The WideBand Simphonix and DialHD products are in all material respects physically identical, with the only perceptible difference being the different product names on the boxes: i.e., the “WideBand Solutions” logo has been replaced by a “DialHD” logo, and the Simphonix name has been replaced by the AEC4 or HD4551 name.

The record contains photographs showing the essentially identical front and back sections of the Simphonix and AEC4 units. (See July 2009 Hr’g Ex. 16.) The interiors of the WideBand Simphonix product and the DialHD AEC4 products appear to be identical. (See id.)

The HD4551 unit appears identical to the AEC4 unit, with the exception that the front panel was changed to make the product look slightly different than before. Specifically, the spacing of the buttons on the front panel has been changed, plastic buttons have been replaced with metal buttons, and the AEC4 logo has now been replaced with “HD4551,” but the order, labels, and functionality of the buttons remain the same. (See Bathurst Decl. ¶ 10; Product Photographs by Tracy Bathurst, attached as Ex. 1 thereto.) In particular,

a. The text printed on the front panel of the HD4551 reads, from left to right, as follows: DialHD logo, RS232, 2W Hook, 2W Mute, Auto Answer, Vol +, Vol -, HD4551, power.

b. The text printed on the front panel of the Wideband Solutions Si-400 and DialHD AEC4 follows a similar format. The text on the front of the AEC4 reads, again from left to right: DialHD logo, RS232, 2W Hook, 2W Mute, Auto Answer, Vol +, Vol -, AEC4, power.

c. The Wideband Solutions Simphonix Si-400 text reads: Wideband logo, RS232, 2W Hook, 2W Mute, Auto Answer, Vol +, Vol -, Simphonix Si-400, power.

(2nd Graham Deck ¶ 9.)

As shown in Figures 3 and 4 of Mr. Graham’s Second Declaration, the back of the HD4551 is essentially identical to the back of the Si-400 and the AEC4 units: it has the same connector locations, terminal colors, and text labels. (2nd Graham Deck ¶ 10.)

An inspection of the interior printed circuit boards shows that the DialHD HD4551 uses a main printed circuit board identical to that used by the WideBand Simphonix and DialHD AEC4 products. 0Compare Fig. 5 of 2nd Graham Deck (photograph of the interior of the HD4551 showing the revision of the main printed circuit board) with Fig. 6 (photograph of a similar region within the DialHD AEC4 showing the same revision of the main printed circuit board); see a