Iac, Ltd. v. Bell Helicopter Textron, Inc.

Decision Date03 March 2005
Docket NumberNo. 2-04-142-CV.,2-04-142-CV.
Citation160 S.W.3d 191
PartiesIAC, LTD., Bonded Structures, Ltd., Van Horn Aviation, L.L.C., and Parts Manufacturing Associates, Appellants, v. BELL HELICOPTER TEXTRON, INC., Appellee.
CourtTexas Supreme Court

Whitaker, Chalk, Swindle & Sawyer, L.L.P., David R. Childress, Richard L. Schwartz, Mack Ed Swindle and Thomas F. Harkins, Jr., Fort Worth, TX, for Appellants.

Smith & Moore, LLP, Charles H. Smith, David V. Denny and Andrew M. Gilbert, Dallas, TX, for Appellee.

PANEL A: CAYCE, C.J.; DAUPHINOT and GARDNER, JJ.

OPINION

JOHN CAYCE, Chief Justice.

In this interlocutory appeal,1 appellants2 appeal the trial court's order enjoining them from using trade secrets relating to Bell Helicopter Textron, Inc.'s 206B and OH-58 helicopter blades. In eight issues, appellants contend that the trial court erred in granting the temporary injunction, excluding the testimony of an absent witness, and setting the amount of the bond, and that the temporary injunction is defective on its face. We will affirm.

In an appeal from an order granting or denying a temporary injunction, the scope of review is restricted to the validity of the order granting or denying relief. Walling v. Metcalfe, 863 S.W.2d 56, 58 (Tex.1993); Fox v. Tropical Warehouses, Inc., 121 S.W.3d 853, 857 (Tex.App.-Fort Worth 2003, no pet.). Whether to grant or deny a request for a temporary injunction is within the trial court's discretion, and we will not reverse its decision absent an abuse of discretion. Butnaru v. Ford Motor Co., 84 S.W.3d 198, 204 (Tex.2002); Fox, 121 S.W.3d at 857. Accordingly, when reviewing such a decision, we must view the evidence in the light most favorable to the trial court's order, indulging every reasonable inference in its favor, and determine whether the order was so arbitrary that it exceeds the bounds of reasonable discretion. Fox, 121 S.W.3d at 857; Univ. Health Svcs. v. Thompson, 24 S.W.3d 570, 576 (Tex.App.-Austin 2000, no pet.). A trial court does not abuse its discretion if it bases its decision on conflicting evidence and evidence in the record reasonably supports the trial court's decision. Davis v. Huey, 571 S.W.2d 859, 862 (Tex.1978); Fox, 121 S.W.3d at 857. An abuse of discretion does not occur as long as there is some evidence to support the trial court's decision. Int'l Fid. Ins. Co. v. Wise County Bail Bd., 83 S.W.3d 257, 260 (Tex.App.-Fort Worth 2002, no pet.).

Appellants are trying to compete with Bell in the helicopter replacement blade market. They have spent approximately one million dollars to design and prepare for the manufacture of a replacement blade for Bell's 206B helicopter, which would be priced slightly lower than Bell's blade. In 2001, Jim Van Horn formed Van Horn Aviation, L.L.C. to develop the 206B replacement blade. Randy Stevens, principal of IAC, Ltd., agreed to manufacture and market the replacement blade.3 At the time, IAC, Ltd. was a Customer Service Facility ("CSF") for Bell. As a CSF, IAC, Ltd. received proprietary data relating to the Bell 206B rotor blade. Stevens agreed to use the data disclosed by Bell to IAC, Ltd. solely for the purpose of repairing Bell helicopters.

Van Horn planned to use public domain documents, reverse engineering, and his original design to design the replacement blade. Knowing that Bell's OH-58 blade was similar to its 206B blade, for which he was unable to obtain public documents, Van Horn purchased the Depot Maintenance Work Report ("DMWR") for Bell's OH-58 helicopter from Newport Aeronautical Sales. Using the information in the DMWR, he then performed tests on a 206B blade to determine the degree of similarity between it and the OH-58 blade. His tests showed that the contour and twist data for the two blades were identical. Van Horn used the OH-58/206B contour and twist data for the replacement blade as well as some of the same sealants and adhesives that Bell uses for the 206B blade.

When Bell learned that appellants were marketing their replacement blade, it sued them for misappropriation of trade secrets, unfair competition, theft of trade secrets, breach of contract, and breach of fiduciary duty. On March 16, 2004, Bell applied for and received a temporary restraining order. On May 6, 2004, after a hearing, the trial court signed an order granting Bell a temporary injunction.

In appellants' first, second, third, and sixth issues, they contend that the trial court abused its discretion in granting the temporary injunction because Bell failed to establish the existence of a trade secret and show irreparable harm.

To be entitled to a temporary injunction, the applicant must plead a cause of action and show a probable right to recover on that cause of action and a probable, imminent, and irreparable injury in the interim. Butnaru, 84 S.W.3d at 204. A probable right of recovery is shown by alleging a cause of action and presenting evidence tending to sustain it. Fox, 121 S.W.3d at 857; Miller Paper Co. v. Roberts Paper Co., 901 S.W.2d 593, 597 (Tex.App.-Amarillo 1995, no writ). An injury is irreparable if the injured party cannot be adequately compensated in damages or if the damages cannot be measured by any certain pecuniary standard. Butnaru, 84 S.W.3d at 204; Fox, 121 S.W.3d at 857.

One of the causes of action upon which Bell based its request for a temporary injunction was its trade secret misappropriation claim. Under Texas law, trade secret misappropriation is established by showing that a trade secret existed, the trade secret was acquired through a breach of a confidential relationship or was discovered by improper means, and the defendant used the trade secret without the plaintiff's authorization. Avera v. Clark Moulding, 791 S.W.2d 144, 145 (Tex. App.-Dallas 1990, no writ); Alcatel USA, Inc. v. DGI Tech., 166 F.3d 772, 784 (5th Cir.1999). In determining whether to grant a trade secret protection by a temporary injunction, a trial court does not determine whether the information sought to be protected is, in law and fact, a trade secret; rather, the trial court determines whether the applicant has established that the information is entitled to trade secret protection until the trial on the merits. Mabrey v. SandStream, Inc., 124 S.W.3d 302, 311 (Tex.App.-Fort Worth 2003, no pet.); Ctr. for Econ. Justice v. Am. Ins. Ass'n, 39 S.W.3d 337, 343 (Tex.App.-Austin 2001, no pet.). That an order is issued granting trade secret protection does not mean the protected information is a trade secret. Ctr. for Econ. Justice, 39 S.W.3d at 343.

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) (quoting Computer Assocs. Int'l, Inc. v. Altai, Inc., 918 S.W.2d 453, 455 (Tex.1996)). The supreme court has identified six nonexclusive criteria a court should consider in determining whether information is entitled to trade secret protection:

(1) the extent to which the information is known outside the holder's business; (2) the extent to which it is known by employees and others involved in the holder's business; (3) the extent of the measures taken by the holder to guard the secrecy of the information; (4) the value of the information to the holder and its competitors; (5) the amount of effort or money expended by the holder in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.

Id. Information generally known and readily available is not protectable, but the fact that information is discoverable by lawful means does not deprive its owner of protection from one acquiring it by unfair means. In re Bass, 113 S.W.3d at 739; Fox, 121 S.W.3d at 858.

When Bell's evidence is viewed in light of the Bass factors, it supports the trial court's finding that the 206B data Bell disclosed to IAC, Ltd. and the DMWR obtained by Van Horn are entitled to trade secret protection until trial on the merits in the underlying case.

With respect to the 206B data, Bell produced evidence showing the measures it takes to guard the secrecy of the data, the amount of effort Bell expended in developing the data, the data's value, and the difficulty with which the data could be duplicated by others. Bell showed that it guards the secrecy of its data by storing the originals of its drawings and specifications in a vault, posting security guards at its plants, requiring persons entering the plant to identify themselves and wear identification badges, checking material going in and out of the plant, limiting access to data on its internal computer system to persons with appropriate system identification and passwords, and using confidentiality agreements with its vendors to whom it supplies proprietary data. A Bell engineer testified that thirty to forty thousand hours were required to develop the design of the blade and another thirty to forty thousand hours were needed to develop techniques for its production. An employee in Bell's marketing and sales department estimated that the replacement blade market was worth approximately twelve million dollars a year. Further testimony showed that it would not be possible to duplicate the specifications for the blade with the necessary degree of precision through reverse engineering.

With respect to the DMWR, Bell produced evidence of the measures it takes to protect the secrecy of the data contained in the DMWR and the extent to which the information is known outside of Bell's business. Bell showed that the DMWR was created using Bell drawings that would have been marked "confidential to Bell" and that the DMWR states on its face that it is not available through Attorney General publication centers.4 Additional evidence revealed that the...

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