SEA's motion seeking a contempt citation against PKWare and Phil Katz

 This is the text of the order denying SEA's motion seeking a contempt

citation against PKWare and Phil Katz.

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF WISCONSIN

_____________________________________________________

SYSTEM ENHANCEMENT

ASSOCIATES, INC.,

                                Plaintiff,

        V.                                              Case No. 88-C-447

PKWARE, INC. and

PHILLIP W. KATZ,

                                Defendants

_____________________________________________________

                       DECISION AND ORDER

        The parties are each in the business of creating computer

software that maximizes the storage of information.  The

plaintiff's is called "ARC," which is an abbreviation of the word

archive; plaintiff asserts that ARC is its trademark.  After the

defendant created its own software program that utilized the

letters ARC in its name and throughout the program, the

plaintiff, April 25, 1988, initiated a lawsuit alleging copyright

infringement, trademark infringement, and unfair competition.

        On August 1, 1988, the parties submitted for the court's

approval a document entitled, "Judgment for Plaintiff on Con-

sent"; attached and incorporated by reference was a second

document entitled, "Confidential Cross-License Agreement."  The

terms of the settlement agreement are set forth in these two

documents.  Upon request of the parties, these terms were

incorporated a judgment signed by me on August 2, 1988 and

entered by the clerk on the same day.

        Currently before the court is plaintiff's motion for an

order holding the defendants in contempt for violating the

court's August 2, 1988 order.  The plaintiff complains that the

defendants have violated and continue to violate the settlement

agreement by promoting a new version of its software program.

Specifically, the plaintiff points to instances in that program

where the defendant uses the letter combination ARC in its

filename extensions and its user's manual.  After considering the

parties' briefs and their oral arguments, I find that the defen-

dants' actions do not violate the order of the court.

          "[A] party may incur a legal duty by entering

          into a settlement and agreement, and a court

          may, pursuant to that agreement, incorporate

          the terms of the party's obligation in its

          judgment; but to furnish support for a con-

          tempt order the judgment must set forth in

          specific detail an unequivocal command."

H.K. Porter Co. Inc., v. National Friction Products, 569 F.2d 24,

27 (7th Cir. 1977).

In order to prevail, the plaintiff must prove, by clear and

convincing evidence, that the defendants violated a directive of

the court.  Hayden v. Oak Terrace Apartments, 808 F.2d 1269, 1270

(7th Cir. 1987).

        The judgment of the court in pertinent part, states:

          "It is hereby ordered and decreed that:

          "(1)  Defendants and each of them, jointly

          and severally, and any of their agents,

          servants any in active concert or participa-

          tion with any of them, be and hereby are

          enjoined permanently from infringing Plain-

          tiff's copyrights in any manner, and from

          publishing, licensing, selling, distributing

          or marketing or otherwise disposing of any

          copies of Defendants' works PKARC and PKXARC,

          except as expressly provided for otherwise in

          the Agreement between the parties effective

          as of August 1, 1988; and from infringing in

          any manner Plaintiff's trademark ARC."

        The agreement provides in part as follows:

          "4.   Termination of PK's License.  After

          January 31, 1989, PK agrees not distribute or

          offer for license any program that: (1) cre-

          ates ARC compatible archive files; (2) by

          default adds a filename extension of ".ARC";

          or (3) processes ARC format files.

                 "5.    No Trademark License.  AFter the effec-

          tive date of this Agreement, PK agrees not to

          distribute or offer for license any program

          that carries a trademark, tradename or

          filename the letter combination "ARC" or any

          other trademark, tradename or filename the

          use of which may be confusingly similar to

          any of SEA's trademarks, or the use of which

          may be likely to cause confusion or mistake

          or to deceive with respect to SEA's

          programs."

        Plaintiff alleges that defendants' use of the letters ARC as

a filename extension violates paragraph 1 of the judgment which

prohibits the use of ARC in any manner except as otherwise ex-

pressly provided in the cross licensing agreement.  Defendants

counter by asserting that paragraph 4 impliedly gave them

permission to use such extensions until January 31, 1989.  I

agree with defendants' interpretation and am persuaded that the

defendants' use of ARC as a filename extension does not violate a

court directive.

        Plaintiff also objects to defendant's use of the letters ARC

as a root word in defendants' user's manual. (e.g. arcing, unarc-

ing, arced, unarced.)  Defendants assert that it uses the letters

ARC in a descriptive sense and in reference to the plaintiff's

program so that defendants' customers can compare the two

programs. Further, the defendants assert that it never antici-

pated that the use of ARC in the descriptive sense would be in

violation of the agreement because the parties had never dis-

cussed prohibiting the use of the letters in such a sense during

the extensive settlement negotiations.  Since I can not point to

a proscription on the use of ARC in the descriptive sense and

also because I deem Mr. Katz's testimony on the issue to be

credible, I find that defendants have not violated a court com-

mand.

        Therefore, IT IS ORDERED that plaintiff's motion for an

order adjudging defendants to be in contempt be and hereby is

denied.  Defendants are entitled to costs on this motion in the

amount of $500.

        Dated at Milwaukee, Wisconsin, this 31st day of October,

1988.

                        s/  Myron L. Gordon,

                                Senior U.S. District Judge