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GENERAL INSTRUMENT CORP. v. NU-TEK ELECS. & MFG.

April 7, 1998

GENERAL INSTRUMENT CORPORATION OF DELAWARE, Plaintiff,
v.
NU-TEK ELECTRONICS & MANUFACTURING, INC., Defendant.



The opinion of the court was delivered by: GAWTHROP

MEMORANDUM

 A jury found defendant Nu-Tek Electronics & Manufacturing, Inc. ("Nu-Tek") liable to plaintiff General Instrument Corporation of Delaware ("GI") *fn1" for willful violation of the Cable Communications Policy Act of 1984 ("Cable Act"), 47 U.S.C. § 553, with respect to 5,376 cable descrambling devices Nu-Tek had sold. Before the court are sundry post-trial motions, including Nu-Tek's motions (1) for reconsideration of the order granting relief from stipulated confidentiality orders, (2) to amend the final injunction order, (3) and for judgment as a matter of law on the Cable Act claim. In addition, Nu-Tek has petitioned for attorney's fees related to GI's unsuccessful copyright and Lanham Act claims. Also before the court are GI's motions for attorneys' fees related to the Cable Act claim, and for sanctions. Upon the following reasoning, I shall deny Nu-Tek's motions and its petition for attorneys' fees. I also shall grant GI's motion for attorneys' fees, but deny its motion for sanctions.

 I. Background

 Cable operators ordinarily deliver programming signals to subscribing households in scrambled form, both basic service and premium channels. Scrambled signals must then be deciphered by a device known as a decoder or descrambler, which cable operators provide to subscribers for a monthly charge. A subscriber paying for basic service, however, can gain unauthorized access to premium channels by purchasing a "pirate" descrambler from a source other than the cable operator.

 GI, a cable box manufacturer, brought suit against Nu-Tek alleging that Nu-Tek, without authorization, sold devices designed to descramble cable signals. The complaint alleged violations of the Cable Act, the Lanham Act, and copyright laws. GI manufacturers and sells cable-signal descrambler units to cable operators around the country. These units contain computer chips or integrated circuits which descramble the cable signals. GI claimed that Nu-Tek's business consisted of modifying GI-manufactured cable boxes and selling them to subscribers, who could then access premium channels without knowledge or authorization from the cable operator. Although GI does not sell any of its boxes directly to Nu-Tek, Nu-Tek nevertheless obtained original GI descrambler boxes and converted them for this unlawful purpose. From about 1992 to 1995, Nu-Tek sold over 5,000 such cable theft devices.

 Before the trial, the parties voluntarily agreed to a dismissal of GI's copyright claims. (Stipulation of Dismissal of Count XI, 11/9/95.) This court also dismissed GI's claim brought under 47 U.S.C. § 605. See General Instrument Corp. of Delaware v. Nu-Tek Elec. & Mfg. Inc., 1996 U.S. Dist. LEXIS 4946, No. 93- CV-3854, 1996 WL 402511 (E.D. Pa. April 12, 1996). The remaining claims went to trial, and the jury returned a verdict for GI on the Cable Act § 553 claim, and for Nu-Tek on the Lanham Act claims.

 II. Discussion

 A. Nu-Tek's motion to reconsider, vacate, or modify the order granting plaintiff's motion for relief from the stipulated confidentiality orders

 The parties had entered two Stipulated Confidentiality Orders, on January 20 and August 29, 1995. The January 20 order prohibited the disclosure of documents obtained in this litigation to third parties, except for those certain individuals involved in this case, and the August 29 order similarly prohibited the disclosure of Nu-Tek's tax returns.

 Following the trial, GI moved for relief from the confidentiality orders, which I granted on May 23, 1997. (Order, 5/23/97.) There, I applied the balancing test set out in Pansy v. Borough of Stroudsburg, 23 F.3d 772 (3d Cir. 1994). In addition to Nu-Tek's liability for its willful violation of the Cable Act, I noted that "David J. Abboud, a Nu-Tek principal, testified very unconvincingly that he did not know that the federal government had charged his father and brother, two men involved in similar business ventures, with violations of § 553(b)." (Order, 5/23/97 at 2.) I concluded that "the public interest strongly favors modification of the order to permit GI to provide documents to law enforcement officers." (Id.) Overall, the importance of the public interest in obtaining knowledge of the cable theft operations outweighed the harm to Nu-Tek that their business practices would be disclosed to third parties.

 A federal district court will grant a motion for reconsideration based upon one of three reasons: "(1) an intervening change in controlling law, (2) the emergence of new evidence not previously available, or (3) the need to correct a clear error of law or to prevent a manifest injustice." Environ Products, Inc. v. Total Containment, Inc., 951 F. Supp. 57, 62 n.1 (E.D.Pa. 1997); see also Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985), cert. denied, 476 U.S. 1171, 90 L. Ed. 2d 982, 106 S. Ct. 2895 (1986) ("The purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present newly discovered evidence.").

 Nu-Tek bases its motion on the third reason stated above, a clear error of law. In particular, it seeks reconsideration of the provision allowing GI to disclose Nu-Tek's tax returns. It argues that distributing its tax returns to third parties serves no legitimate interest, and therefore, does not satisfy the requirement in Pansy that "the party seeking to modify the order of confidentiality must come forward with a reason to modify the order." 23 F.3d at 790. It also asserts that during oral argument GI conceded that the tax return provision allowing for disclosure could be removed from the final order. GI's counsel stated "that subparagraph, Your Honor, we could eliminate subparagraph 3 [i.e., the tax return paragraph]." (Tr. Oral Argument, 4/7/97 at 59-60.)

 GI responds that the motion is moot since it has already disclosed and used information from Nu-Tek's tax return -- although it does not say to whom. GI's counsel also maintains that at oral argument he did not withdraw his request for relief, but rather, he characterizes the above-quoted remarks as simply addressing the court's concerns. Lastly, GI states that Nu-Tek has filed for bankruptcy, providing an additional need for the tax returns.

 I find that Nu-Tek has failed to present a sufficient reason to vacate or modify the tax return provision of the May 23 Order. The harm that Nu-Tek now complains of is no different than the harm that existed when the order was first entered. In that order, I found that the public interest is served by whatever information of criminal activity may be disclosed to law enforcement officers in this case. I made this finding with full knowledge of the comments at oral argument, which are not necessarily indicative of a final ruling. After careful consideration of the arguments and competing interests, there was a balanced determination made as to whether the tax returns should remain confidential. I concluded that they should not, and I see no reason here to disturb that decision. Accordingly, I shall deny the motion for reconsideration.

 B. Nu-Tek's motion to amend the final injunctive order

 Nu-Tek, pursuant to Federal Rule of Civil Procedure 59(e), seeks to amend the June 11, 1997 Order, which permanently enjoins it from manufacturing or distributing GI descrambler boxes, modified to descramble cable signals without authorization. The injunction also prevents Nu-Tek from transforming into a new entity to continue its cable-theft business, or to contribute to other cable theft businesses.

 Nu-Tek objects to the injunction on several grounds. It first argues that the injunction imposes permanent restrictions going beyond the scope of reasonable relief that the court may grant in a final injunction. See 47 U.S.C. § 553(c). Specifically, it asks that the court remove the terms "employees" and "related companies" in paragraph 2 of the order, arguing that these groups are not before the court and are beyond its control. *fn2" Although Nu-Tek concedes that the court may restrict the activities of its employees occurring within the scope of employment, it suggests the court cannot include "employees" because there is no individual jurisdiction over the employees. This argument, however, ignores the plain language of Rule 65(d), which permits a court to grant an injunctive order binding "employees," regardless of individual jurisdiction over the employees. See Fed. R. Civ. P. 65(d).

 As to "related companies," Nu-Tek asserts that the term is unclear which companies fall within this term, thus making it vague and overbroad. "Related companies," however, is more definite and clear than Nu-Tek contends. Specifically, there was testimony concerning two other companies, Outlander and Digitech, operated by Nu-Tek principal David Abboud. They acted in concert with Nu-Tek: Outlander managed Nu-Tek's sales operations, and Digitech produced circuit boards used by Nu-Tek for manufacturing its cable theft devices. (See generally Tr. Oral Argument, 4/7/97 at 50-51.) To the extent that Outlander and Digitech, or any other company, ...


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