Global Water Group v. Atchley
| Decision Date | 09 January 2008 |
| Docket Number | No. 05-06-00709-CV.,05-06-00709-CV. |
| Parties | GLOBAL WATER GROUP, INC., Appellant, v. Robert ATCHLEY and Aspen Water, Inc., Appellee. |
| Court | Texas Court of Appeals |
Scott Hayes, Vincent Moye, P.C., James A. McCorquodale, Vial Hamilton Koch & Knox, Dallas, for appellant.
Jackson D. Wilson, II, Christopher M. Mcdowell, Gordon & Rees LLP, Dallas, for appellee.
Before Justices MOSELEY, O'NEILL, and LANG.
Global Water Group, Inc. appeals a take-nothing judgment notwithstanding, the verdict (j.n.o.v.) for Robert Atchley and Aspen Water, Inc. on Global's claims for misappropriation of trade secrets and conspiracy. It also appeals a partial summary judgment for Atchley on Global's claims for breach of a shareholder agreement. In six issues, Global argues the trial court erred in (1) granting a j.n.o.v. because there is sufficient evidence to support the jury's verdict, and (2) granting a partial summary judgment because fact issues exist regarding the shareholder agreement. For the following reasons, we affirm the trial court's judgment.
In the 1990s, Global Water Technologies, Inc.1 (GWT) created the first successful mobile self-powered, self-contained water purification system. It is undisputed that GWT treated this system and associated products as trade secrets and required all employees to sign confidentiality agreements. Robert Atchley was GWT's president and was familiar with its product line and had access to all of the claimed trade secrets. Atchley resigned from GWT in 1994.
In 1995, all of GWT's assets, including its trade secrets, were acquired by Global, who was then known as AMW. GWT and Global remained legally separate entities, but GWT retained no assets and ceased operating. Four years later, in 1999, Atchley began manufacturing portable self-sustained water purification systems through his company Aspen Water Inc. Global sued Aspen and Atchley claiming conspiracy and misappropriation of trade secrets.
Following a jury trial, the jury found Atchley and Aspen had misappropriated Global's trade secrets and that Global suffered one million dollars in damages based on lost profits. The particular trade secrets found to exist were (1) a formula used in a "mixed media pod" which is a device used to remove contaminates from water, and (2) the "sequence of the process" Global used for water purification. Following the jury's verdict, Atchley and Aspen filed a motion for judgment, notwithstanding the verdict (j.n.o.v.), asserting that Global failed to prove (1) it had a trade secret in its mixed media formula or the sequence of the process or (2) Atchley or Aspen used any such alleged secrets. The trial court granted Atchley and Aspen's motion and entered judgment that Global take nothing on its claims. This appeal followed.
A trial court's decision to grant a judgment notwithstanding the verdict should be affirmed if the evidence is legally insufficient to support one or more of the jury findings on issues necessary to liability. Wal-Mart Stores, Inc. v. Miller, 102 S.W.3d 706, 709 (Tex.2003) (per curiam); Mancorp, Inc. v. Culpepper, 802 S.W.2d 226, 227 (Tex.1990). Evidence is legally insufficient where (1) there is a complete lack of evidence of a vital fact; (2) the court is barred by rules of law or of evidence, from giving weight to the only evidence offered to prove a vital fact; (3) the evidence offered to prove a vital fact is no more than a scintilla; or (4) the evidence conclusively establishes the opposite of a vital fact. Lochinvar Corp. v. Meyers, 930 S.W.2d 182, 188 (Tex.App.-Dallas 1996, no writ). In a legal sufficiency review, we consider the evidence in the light most favorable to the verdict and indulge every reasonable inference that would support it. City of Keller v. Wilson, 168 S.W.3d 802, 822 (Tex.2005). The ultimate test of legal sufficiency is whether the evidence would enable reasonable and fair-minded people to reach the verdict under review, crediting favorable evidence if reasonable jurors could and disregarding contrary evidence unless reasonable jurors could not. Id. at 827; Deere v. Ingram, 198 S.W.3d 96, 100 (Tex.App.-Dallas 2006, pet. granted).
A trade secret is any formula, pattern, device or compilation of information which is used in one's business and presents an opportunity to obtain an advantage over competitors who do not know or use it. In re Bass, 113 S.W.3d 735, 739 (Tex. 2003); Sharma v. Vinmar Intern., Ltd., 231 S.W.3d 405, 424 (Tex.App.-Hous. (14 Dist.) 2007, no pet.). Customer lists, pricing information, client information, customer preferences, buyer contacts, blueprints, market strategies, and drawings have all been recognized as trade secrets. T-N-T Motorsports v. Hennessey Motorsports, 965 S.W.2d 18, 22 (Tex.App.-Houston [1st Dist.] 1998, pet. dism'd).
To determine whether information constitutes a trade secret, a court considers the following six factors: (1) the extent to which the information is known outside the claimant's business; (2) the extent to which the information is, known by employees and others involved in the claimant's business; (3) the extent of the measures taken by the claimant to guard the secrecy of the information; (4) the value of the information to the claimant and to its competitors; (5) the amount of effort or money expended by the claimant in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others. Bass, 113 S.W.3d at 739. The party claiming a trade secret need not satisfy all six factors because trade secrets do not fit neatly into each factor every time. Id. at 740.
The mere fact that knowledge of a product or process may be acquired through inspection, experimentation, and analysis does not preclude protection from those who would secure that knowledge by unfair means. K & G Oil Tool & Serv. Co. v. G & G Fishing Tool Serv., 158 Tex. 594, 314 S.W.2d 782, 788 (1958). A trade secret must nevertheless be a secret. "Secrecy" in this sense is not limited solely to confidentiality, but also requires that the information "is not generally known or readily ascertainable by independent investigation." Trilogy Software, Inc. v. Callidus Software, Inc., 143 S.W.3d 452, 467 (Tex. App.-Austin 2004, pet.denied).
Aspen and Atchley moved for a j.n.o.v. based on their contentions (1) there was no evidence Global had a trade secret and (2) there was no evidence Atchley or Aspen used any alleged trade secret. To determine whether the trial court properly granted Global's j.n.o.v, it is necessary to briefly describe the water purification process at issue and what Global claims are its trade secrets.
Proper water purification requires three steps. First, large particles are removed by filtration. Then, the water is treated with a compound to remove chemicals (absorption). Finally, iodine or UV treatment kills viruses or bacteria in the water (disinfection). It is not disputed that these three steps are commonly and generally known and are required for any proper water purification. What Global contends are its trade secrets are (1) the formula of the compound it used in a mixed media pod in the second "absorption" step and (2) the "sequence of the process" it used to purify water,
We first consider whether there is any evidence Global had a formula that constituted a trade secret. In the absorption stage of water purification, Global used a "mixed media pod," a canister containing certain substances that remove chemicals from water. Global used KDF2 and carbon in its pod. It is undisputed that other manufacturers of water purification systems used "pods" with both carbon and KDF and there was nothing secret about either the pod or these ingredients. It is the particular ratio of KDF to carbon that Global used that it asserts is a trade secret. Global however claims no secret in any discrete formula, but rather an approximate 10:90 ratio of KDF to carbon. Global asserts this approximate formula is entitled to trade secret protection because it was different from what others in the industry were using. To show others in the industry used different ratios, Global relies on the testimony of its president Alan Weiss. According to Weiss, the manufacturer of KDF recommended using much more KDF than carbon and others in the industry used ratios "nowhere close" to the ratio Global used.
The status of the information claimed as a trade secret must be determined through a comparative evaluation of all the relevant factors, including the value, secrecy, and definiteness of the information as well as the nature of the defendant's misconduct. Bass, 113 S.W.3d at 739 (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 39 cmt. d (1995)).
We begin by noting the nature of the misconduct in this case was not particularly egregious. As discussed below, Atchley was not subject to any type of noncompetition agreement. Thus, under the facts of this case, there was no misconduct unless there was in fact a trade secret. We thus turn to the other relevant factors. To prove its formula was a trade secret, Global focuses almost exclusively on evidence that both it and (five years previously) GWT treated the formula as a trade secret. Specifically, Global presented evidence that it guarded its formula, limited access, and required employees to sign confidentiality clauses. There is no evidence however regarding whether or not Global's efforts were successful—specifically whether or not its formula was nevertheless known outside its business.
Further, Global directs us to no evidence of the value of its formula to its business. Global suggests the formula was necessarily valuable because Global had developed the first successful self-contained water purification unit. However, there is no evidence the formula itself was...
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...- after accounting for the inefficiency of the appropriation - was more than trivial). See also Global Water Group, Inc. v. Atchley, 244 S.W.3d 584 (Tex.App. 2008) (JMOL granted to set aside plaintiff jury verdict when plaintiff offered insufficient evidence to show that its claimed secret ......