The threat of jail time and further cash sanctions once again loom for California businessman Mark T. Pappas, who faced a similar threat last year for destroying emails and other electronic materials in the course of a long-running trademark spat with a Calvert County-based municipal furniture maker.
In October 2006, Victor Stanley Inc., of Dunkirk, sued Pappas and his company, Creative Pipe Inc., for downloading the company’s design schematics for benches and then having similar items manufactured in China. Pappas competed against Victor Stanley for site furnishing contracts using the pilfered designs under the trade name “Fuvista,” which Pappas later admitted was short for “FU Victor Stanley.”
The litigation in U.S. District Court in Baltimore was marked by repeated e-discovery violations, leading Magistrate Judge Paul W. Grimm to impose sanctions of more than $1 million and recommend jail time for repeated contempt in September 2010.
The sanction, sans incarceration, was upheld by Senior Judge Marvin J. Garbis, who later heard the case in a bench trial in January.
Garbis ruled in September that Creative Pipe’s actions amounted to unfair competition under state law as well as violations of the Lanham Act with false advertising and reverse palming-off. One bench design was also ruled to have infringed on Victor Stanley’s existing patent.
Garbis ordered monetary damages as well as injunctive relief on Sept. 30. The judge’s final order, issued Nov. 4, gave Creative Pipe until Dec. 1 to comply.
The injunctions called for Creative Pipe to scrub its website of all drawings and references to Fuvista and any products found to infringe on Victor Stanley’s copyrights. The company also was required to remove all claims that its products are “Made in the USA,” and to tell customers who purchased the products that they were manufactured in China.
Creative Pipe appealed on Nov. 4 and, according to Victor Stanley’s letter to Garbis on Dec. 2, had done nothing to comply with the judge’s ruling.
That sparked a no-nonsense response from Garbis on Dec. 6, warning that jail time and further sanctions were possible.
“The defendants will not be permitted to continue to refuse to comply with the Orders of the Court,” Garbis wrote. “Moreover, it will be necessary to consider civil sanctions for their past failure and the referral of the matter to the United States Attorney for possible criminal contempt proceedings.”
In addition to the permanent injunction, Creative Pipe must pay $2.45 million in compensatory, enhanced and punitive damages by Dec. 15.
That’s on top of the $1.04 million assessed against the defendants by Grimm, of which Pappas has paid $478,409.
In a response filed Friday, James Rothschild of Anderson, Coe & King, who began representing the defendants after the e-discovery problems were revealed, wrote that Pappas has assured him significant steps have been taken. These include removing Fuvista from Creative Pipe’s website and writing to procurement officers who bought the products thinking the materials had been designed by the company and built in the U.S., Rothschild wrote.
The response did not mention the damages or monetary sanctions, and Rothschild declined to comment on the status of those payments last week.