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Coe/Newnes/McGehee v. U.S. Natural Resources

April 14, 2005

COE/NEWNES/MCGEHEE, ET AL., PLAINTIFFS,
v.
U.S. NATURAL RESOURCES, INC, DEFENDANTS.



The opinion of the court was delivered by: James Larson United States Magistrate Judge

ORDER DENYING MOTION TO QUASH A SUBPOENA AND INSTRUCTING PARTIES TO ABIDE BY THE PROTECTIVE ORDER ISSUED BY JUDGE WARD (E.D. TEXAS)

INTRODUCTION

Ron McGehee's ("McGehee") motion to quash a subpoena issued to him by Defendant U.S. Natural Resources, Inc. ("USNR") came on for hearing on March 9, 2005. At the hearing, USNR also raised a new issue regarding the protective order entered by Judge Ward in the Eastern District of Texas. Howard Slavitt appeared for Mr. McGehee and David Gabianelli appeared for USNR. The court considered the papers submitted by both parties as well as oral argument of counsel. Ron McGehee's motion to quash a subpoena issued to him is hereby denied. Because neither party has retained him as an expert, Mr. McGehee should provide deposition testimony but only as a percipient witness. Furthermore, all parties must comply with the protective order entered by Judge Ward in the Eastern District of Texas.

FACTUAL BACKGROUND

Coe/Newnes/McGehee ("CNM") and USNR are cutting-edge sawmill machinery manufacturers. Most commercial timber is not straight, and the recent development of high-speed computer controlled equipment has significantly improved the efficiency of the milling process. The equipment laser scans incoming logs and computes an optimal cutting solution that maximizes the volume of lumber sawn from the timber. Coordinated positioners then cut the curved timber along designated paths.

Over the past two decades, Mr. McGehee has played an influential role in the development of this technology. In 1989, he designed an innovative curve saw while employed by Harvey Engineering and Manufacturing Co ("Hemco"). Later called the "wiggle box," his apparatus mounted circular saws around horizontal and vertical axis points to cut the curved timber along designated paths. In 1991 Hemco offered to sell this design to Weyerhaeuser Co., however it declined the offer.

Mr. McGehee then left Hemco to form the McGehee Equipment Company where he continued to refine his invention. In 1995, the McGehee Equipment Company collaborated with Hi-Tech Engineering, Inc. to successfully install the first "curve sawing versa gang" for the Pollard Lumber Company in Appling, Georgia.

In March 1996, the industry's leading sawmill equipment manufacturers (including USNR, McGehee Equipment Co., and Newnes Machine Ltd.) attended a trade show in Portland, Oregon. At that time, Newnes Machine Ltd. and McGehee Equipment Co. announced a partnership to jointly develop and sell optimized curve sawing edger and gang systems. McGehee Equipment Co. manufactured the edgers and gangsaws while Newnes Machine Ltd. supplied the optimization and controls. Over the next several months, the partnership provided quotes and received purchase orders for their curve sawing systems. They eventually captured over 70% of the curve sawing market in North America.

In 1998, a Canadian company called CAE, Inc. ("CAE") purchased and consolidated Newnes Machine Ltd. and McGehee Equipment Co. In 2002, CAE resold the assets to a group of investors that formed CNM to operate the business. Mr. McGehee worked for CAE, Inc. and then for CNM on an executive and consulting basis through the year 2003.

CNM now owns the following patents associated with the curve sawing system:

1) U.S Patent No. 5,722,474 ("474 patent")

2) U.S. Patent No. 5,761,979 ("979 patent")

3) U.S. Patent No. 5,884,682 ("682 patent")

4) U.S. Patent No. 5,946,995 ...


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