Here is some info and analysis from Kathy Knight on the recent injunction against Louis DeFrancesco:
Dear Investor to Investor readers:
I have finally gotten my hands on the public documents concerning Nanopierce Technologies and Louis
DiFrancesco and can now freely discuss the Preliminary Injunction that the court recently awarded to
Nanopierce Technologies. Since I was heard in testimony as an "expert witness" I was unable to comment
until now. The documents are about an inch thick so I have gone through them thoroughly and excerpted the
pertinent portions here (below). I have taken out any double spacing for the sake of brevity. All of my personal
comments are bracketed. Numbers on the left indicate where they are in the court document.
Please realize that what I am writing and documenting here is strictly based on my own opinion and the
conclusions that I have come to are based on the testimony that I heard while in court and through the court
documents which are public records. All of these documents are in my files to backup any statements that I
have made here.
Also, please note that the documents that say Particle Interconnect are referring to the sister company of
Nanopierce Technologies (NPCT). All rights to the PI Technology and the underlying patents were transferred
to Nanopierce Technologies. Both of these companies are subsidiaries of Intercell (INCE).
It is a real eye opener the damage that Louis DiFrancesco has caused, not only to NPCT but also to Intercell
as the parent company. In my opinion the obtaining of the court's Preliminary Injunction and the judge's
statements in that document point the way to receiving the Declaratory Judgement and vindicates Paul
Metzinger as to the statements that Louis DiFrancesco has recklessly put on the Internet as well as his
actions concerning the PI Technology and the licensees, etc. [Be sure to read part 2 which follows in another
email.]
[This is part of the title page of the document showing the court and particulars related to the case]
1 DISTRICT COURT, CITY AND COUNTY OF DENVER, COLORADO
2 Civil Action No. 98 CV 7827. Courtroom 7
3
4 REPORTER'S TRANSCRIPT ORIGINAL
5
6 PARTICLE INTERCONNECT CORPORATION,
7 Plaintiff,
8 vs.
9 LOUIS DiFRANCESCO,
10 Defendant.
11
12 This matter came on for Judge's Ruling,
13 commencing on Thursday, November 5, 1998, before the
14 Honorable Joseph E. Meyer, III, Judge of the
15 District Court.
[Following the opening page are several pages of opening comments related but not essential to this
commentary].
JUDGE'S FINDINGS ON THE GENERAL BACKGROUND AND HISTORY OF THE CASE [This is the
largest segment but necessary to build the history] Pages 4-10
11 First, let me make some findings in sort
12 of the general factual background area, and then I
13 will make specific findings on the six elements that
14 relate to a preliminary injunction. And much of
15 this is undisputed but just to set the context of my
16 other findings.
17 Louis DiFrancesco was the inventor of
18 technology known as particle interconnect technology
19 which, as I understand it, is a method of enhancing
20 the conductivity between materials without the use
21 of things such as solder and so on.
22 Mr. DiFrancesco held several patents on
23 the technology and had patent applications for other
24 patents pending. He had formed a corporation known
25 as Particle Interconnect Inc. by which he did
5
1 business along with others, including his brother
2 Lawrence DiFrancesco and Ms. Grahalva, whose first
3 name I have forgotten.
4 MR. YOUNG: Trisha.
5 THE COURT: Trish Grahalva.
6 In September of 1996, pursuant to a merger
7 agreement which was admitted as Exhibit 1, Particle
8 Interconnect Inc. which held the patents by
9 assignment from Mr. DiFrancesco merged into Particle
10 Interconnect Corp., which was a subsidiary, a
11 wholly-owned subsidiary formed by plaintiff
12 Intercell. Intercell is not a plaintiff. I thought
13 Intercell was a plaintiff. I will get to that in a
14 minute.
15 Anyway, Particle Interconnect Corp. was
16 formed as a subsidiary by Intercell which is a
17 publicly held company. By the terms of that merger
18 all the assets of Particle Interconnect Inc.,
19 Mr. DiFrancesco's company, became the property of
20 Particle Interconnect Corporation and that included
21 all the patents, the patent applications, the
22 trademark of the name "Particle Interconnect." as
23 well as all other assets, real and intangible, owned
24 by Particle Interconnect Inc.
25 In return Mr. DiFrancesco received stock
6
1 in Intercell, the parent company of Particle
2 Interconnect Corp. The merger contemplated
3 employment agreements for Mr. Di Francesco, his
4 brother and Ms. Grahalva with Particle Interconnect
5 Corporation. The others did sign employment
6 agreements and went to work for Particle
7 Interconnect Corporation. The testimony was that
8 Particle Interconnect Corporation was unsuccessful
9 in working out an employment agreement with
10 Mr. DiFrancesco. but ultimately did enter into a
11 consulting agreement with Mr. DiFrancesco which was
12 admitted into evidence as Exhibit 4.
13 In the consulting agreement there were
14 several clauses that received a lot of testimony,
15 but by virtue of plaintiff's withdrawal of its
16 request for a preliminary injunction on the question
17 of who's entitled to royalties from existing
18 licensees, the one clause that is still in contention
19 in this hearing is paragraph 24 which provided that
20 Mr. DiFrancesco was intending to establish a
21 corporation entitled Particle Interconnect Research
22 and Development, or some similar name. By that
23 clause the company acknowledged Mr. DiFrancesco's
24 intent to do that and agreed that he may perform his
25 consultant's duty under the consulting agreement
7
1 through that entity.
2 That clause, the testimony is, was drafted
3 by Kurt English who was the attorney in California
4 representing Mr. DiFrancesco in connection with both
5 the merger agreement and the negotiation of this
6 consulting agreement,
7 The relationship between Lawrence
8 DiFrancesco and Ms. Grahalva and Particle
9 Interconnect Corporation soured and was severed by
10 settlement agreements which were entered into
11 sometime in the spring or summer of 1997.
12 It was stipulated further that the
13 consulting agreement between Particle Interconnect
14 Corporation and Mr. DiFrancesco, Louis DiFrancesco,
15 expired by its terms effective October 31, 1997, not
16 having been renewed in accordance with the
17 provisions for renewal.
18 Particle Interconnect Corporation
19 transferred the technology to the plaintiff
20 Nanopierce Technologies Inc. which is, in effect, a
21 sister corporation, being a public company majority
22 owned by Intercell, parent of Particle Interconnect
23 Corporation.
24 And there are numerous disputes, it is
25 apparent, between Mr. DiFrancesco and the management
8
1 of Nanopierce concerning the development, marketing,
2 financing of the particle interconnect technology.
3 But the subject of the motion for preliminary
4 injunction is particularly statements made by
5 Mr. DiFrancesco concerning ownership of the patents,
6 Concerning his connection to Particle Interconnect
7 Corporation and the technology, and his continuing
8 use of the name Particle Interconnect Research and
9 Development.
10 With regard to those statements, I find
11 that -- and I don't think it is really disputed -- I
12 find that Mr. DiFrancesco has in fact made
13 statements on bulletin boards, I guess they're
14 called on the internet, on the Yahoo and the Raging
15 Bull web Site in particular. Those are in evidence
16 as Exhibit 13. But also elsewhere to investors,
17 potential investors, licensees, potential sources of
18 licensing, potential customers of the plaintiffs.
19 And in those statements Mr. DiFrancesco has either
20 asserted or implied that he still owns the patents
21 and the technology. And that he still in some way
22 controls the technology or has some relationship
23 with the plaintiffs.
24 It is clear that Mr. DiFrancesco has
25 continued to use the name Particle Interconnect
9
1 Research and Developmen~ Corporation. Further, it
2 is clear that Mr. DiFrancesco has been and
3 acknowledges making an effort to compete with the
4 Plaintiffs in and around the issues of the use of
5 this technology.
6 Plaintiffs have demanded that
7 Mr. DiFrancesco stop making the offending statements
8 and he has refused. And the question here is are
9 the plaintiffs entitled to the preliminary
10 injunction they seek which, as tendered today, is a
11 rather limited preliminary injunction simply
12 restricting Mr. DiFrancesco, his agent, servants,
13 employees, et cetera, from making statements on
14 certain topics to specified customers, licensees,
15 investors of plaintiffs.
16 There are six elements that I'm required
17 to look at in determining whether a preliminary
18 injunction should issue. The first, and usually the
19 most controversial, is whether or not the plaintiffs
20 have a reasonable probability of succeeding on the
21 merits in the lawsuit.
22 Here what the plaintiffs seek in this
23 lawsuit is declaratory judgment. What they seek,
24 among other things, is declaratory judgment that
25 they are the owners of the patents and the
10
1 technology. That the consulting agreement with
2 Mr. DiFrancesco is expired, and that they are
3 entitled to exclusive use of the Particle
4 Interconnect trademark.
5 I find the plaintiffs do have a *reasonable
6 probability of succeeding on those claims. There's
7 really no dispute that I heard in the evidence that
8 Nanopierce now is the owner of the patents and the
9 technology. It was stipulated that the consulting
10 agreement has expired. Of the three areas of the
11 injunction that the plaintiffs seek, the only one
12 about which there is significant controversy is use
13 of the trademark "Particle Interconnect."
14 Now, with regard to the first two,
15 Mr. DiFrancesco does assert, as I understand it,
16 that he has a right to rescind the merger agreement
17 based upon fraud, failure of consideration, and
18 alleged breaches of fiduciary duty by Paul
19 Metzsinger, but I find that Mr. DiFrancesco has not
20 asserted any such claim in any pending litigation.
21 He hasn't asserted any such claim in this lawsuit.
22 He hasn't filed any pleadings in this lawsuit. He
23 has filed a lawsuit in California against certain of
24 the licensees of this technology, but it is
25 undisputed that there's no claim for rescission
11
1 against the plaintiffs asserted in that lawsuit. He
2 seems to think that by having served Mr. Metzsinger
3 as a Doe defendant in that lawsuit, somehow he's
4 making claims against the plaintiffs here in the
5 California lawsuit and I find that not to be the
6 case. As far as I can tell the service of a Doe
7 defendant in the factual context of this case, where
8 he clearly knows who the plaintiffs here are and
9 could have named them if he wanted to, is
10 meaningless.
[So much for the case that Louis filed against the company, it is "meaningless"]
[Page 12 covers the expiration of Louis' right to use the name of Particle Interconnect, which he no longer
has]
13 So on that third point, I conclude that
14 the plaintiffs do have a probability of succeeding
15 in showing that Mr. Di Francesco‘s use of the
16 Particle Interconnect Research and Development name,
17 his right to use that name expired with the
18 expiration of the consulting agreement.
{Judge's finding on the confusion caused by Louis DiFrancesco's statements and the detrimental effect of
those statements] parts of pages 13 & 14
2 I find from the evidence
3 that Mr. DiFrancesco's statements, particularly in
4 the limited areas which plaintiffs seek to enjoin,
5 have created confusion, especially his statements
6 stating or implying that he still owns the patents,
7 that those statements have created confusion among
8 the investor or potential investor population, at
9 least those who follow the discussions on the
10 internet, on the bulletin boards. And that if such
11 statements are continued, they are likely to
12 continue to create confusion and likely to impede
13 plaintiff's efforts to exploit the technology that
14 was purchased in the merger agreement, especially by
15 the necessary activity of raising financing, whether
16 in the form of loans or equity investment from
17 investors who may be interested in the technology.
18 The evidence was really unrefuted that the
19 confusion created by Mr. DiFrancesco's statements
20 has already impeded efforts that the plaintiffs have
21 made to raise money. And while I'm not making any
22 specific findings about effects of those statements
23 on stock prices or particular financing deals, I
24 think it's clear that the continued statements that
25 someone other than the plaintiff owns the technology
14
1 that they are trying to develop is likely to expose
2 the plaintiffs to irreparable harm. And that harm
3 is, I think, appropriate to remedy by injunctive
4 relief, because it would be difficult, if not
5 impossible, to measure by a later damage award what
6 losses plaintiffs have suffered as a result of
7 investors choosing to put their money elsewhere,
8 customers going elsewhere, suppliers going
9 elsewhere, licensees losing heart whatever else
10 might happen.
[Louis argued the First Amendment and then the Judge gave a breakdown of First Amendment Law followed
by his comments in regard to Louis' statements and claims] Page 16
9 And just running through that four-part
10 analysis quickly, the first question is, is the
11 commercial speech concerning lawful activity, and is
12 it not misleading? Here, certainly
13 Mr. DiFrancesco's speech concerned lawful activity,
14 but I have found that his statements regarding
15 ownership of the patents and his connection with the
16 plaintiffs to be misleading
Page 17 [Plaintiff's interest in stopping Louis from making claims to ownership of the patents]
10 So as to the other two factors in the
11 four-part analysis, I think the plaintiff's
12 interest, there is no governmental interest to
13 measure, but the plaintiff's interest is substantial
14 in preventing misleading speech that effectively
15 prevents the plaintiffs from exploiting the
16 technology that they have made a bargain to
17 purchase. And I further find that the preliminary
18 injunction sought would serve that substantial
19 interest.
Page 18 [Balance of equities favors Nanopierce against Louis DiFrancesco]
5 The fifth factor on a preliminary
6 iniunction is a balancing of equities between the
7 parties here. I find that the balance of equities
a favors the plaintiffs. As I said, I think the
9 plaintiffs are faced with a threat of irreparable
10 harm and significant harm if Mr. DiFrancesco is
11 allowed to continue to create the impression that he
12 somehow still controls this technology.
Page 19 [Preservation of the status quo and as to the ownership of the name Particle Interconnect]
9 The bottom line is Mr. DiFrancesco sold
10 that name to the plaintiffs or their predecessors,
11 and so prohibiting him from continuing to use it is
12 not a significant harm to him. It is not hard for
13 him to simply change the name of his corporation if
14 he wants to use the same corporation, or form a new
15 corporation in order to pursue whatever his
16 interests might be.
17 And finally, it's clear under the Colorado
18 case law and federal case law that injunctive relief
19 to protect against trademark infringement is
20 commonly granted, both preliminary and permanent
21 injunctions, if such injunctive relief were not
22 available including in this kind of a context, where
23 one party has sold technology to another then
24 trademarks wouldn't be worth much.
25 The final factor is the question of
20
1 whether the preliminary injunction will preserve the
2 status quo. Here I find that the -- this
3 preliminary injunction, particularly because it's so
4 narrowly drawn will preserve the legal status quo
5 which is plaintiff's ownership of the technology and
6 the rights to exploit the technology and will
7 prevent defendants interference with that, at least
8 by the statements.
[Preliminary Injunction is granted]
9 For all those reasons I will grant
10 plaintiff's motion for preliminary injunction, and I
11 find that *the language of the preliminary injunction
12 submitted by plaintiffs this morning is
13 appropriately tailored to the proof and the findings
14 and conclusions that I have made.
Signed by Honorable Joseph E. Meyer 11/16/98
Kathy Knight-McConnell
Investor to Investor
imall.com
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NOTE:
1) I am in receipt of a certificate for 24,500 restricted (and as yet unregistered) shares of NPCT stock as
payment for an "introductory fee" to certain parties in Switzerland.
2) I have recently been retained by DCH Technologies, Inc. to write their press releases on a per release
payment schedule. No shares have been offered or received.
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