U.S. Sporting Products, Inc. v. Johnny Stewart Game Calls, Inc.

• Decision Date: 29 September 1993
• Docket Number: No. 10-92-219-CV,10-92-219-CV
• Parties: UNITED STATES SPORTING PRODUCTS, INC., et al., Appellants, v. JOHNNY STEWART GAME CALLS, INC., Appellee.
• Court: Texas Court of Appeals

Page 214

865 S.W.2d 214

UNITED STATES SPORTING PRODUCTS, INC., et al., Appellants, v. JOHNNY STEWART GAME CALLS, INC., Appellee.

No. 10-92-219-CV.

Court of Appeals of Texas,

Waco.

Sept. 29, 1993.

Bob E. Shannon, Joseph R. Knight, Baker & Botts, L.L.P., Austin, for appellants.

P.M. Johnston, Minor L. Helm, Jr., Sleeper, Johnston, Helm & Fontaine, P.C., Waco, for appellee.

Before THOMAS, C.J., and CUMMINGS and VANCE, JJ.

OPINION

VANCE, Justice.

Johnny Stewart started his business, Johnny Stewart Game Calls, Inc. (Game Calls), by venturing into the wild and either recording animal sounds in the animals' natural habitats or capturing the animals to record their sounds in a more conducive setting. The recording process itself was long and labor intensive. Stewart travelled extensively to gather a variety of sounds. To get a satisfactory sample, he would record an animal on several occasions, attempting to eliminate unwanted background noise such as an airplane overhead or a passing automobile. Even then, the resulting animal sounds might not be adequate on any given occasion. To overcome these problems, the sample of several seconds would be edited and "looped" repetitiously to occupy a full-length cassette tape. Hunters and photographers purchased Stewart's tapes and used them to draw animals into close range.

United States Sporting Products, Inc. (Sporting Products) allegedly copied sounds from nineteen of Stewart's tapes and marketed them in competition with Game Calls. Gerald Stewart, Johnny Stewart's son and president of Game Calls, confronted John Bowling (Bowling), Sporting Product's president, on several occasions asking that Bowling cease his practices. Bowling insisted that he was doing nothing improper and that he was purchasing his sounds in good faith from a third party. Game Calls brought this suit. After finding that Sporting Products and Bowling misappropriated recordings of various animal sounds gathered and marketed by Game Calls, a jury assessed $209,000 in actual damages and $482,125 in exemplary damages. The court entered judgment against Sporting Goods and Bowling for actual damages, exemplary damages, attorney's fees for defending a counterclaim, and permanent injunctive relief requiring them to stop selling the tapes and to recall tapes from distributors and dealers they could identify.

POINTS ON APPEAL

Sporting Products and Bowling bring six points of error:

1. The court erred in rendering judgment for Game Calls because it had no cause of action against Bowling and Sporting Products for the claimed misappropriation.

2. The court committed reversible error by commenting on the weight of the evidence.

3. The court erred in rendering judgment against Bowling because there was no jury finding that he knowingly participated in the claimed tortious conduct.

4. The court erred by failing to require specific findings of both liability and damages against both Bowling and Sporting Products.

5. The court erred in rendering judgment for exemplary damages because there was no jury finding that Appellants acted with "actual malice."

6. The court erred by not ordering a remittitur of exemplary damages.

We will overrule all the points and affirm the judgment.

MISAPPROPRIATION

In their first point, Appellants contend that Game Calls failed to state a claim for misappropriation as it is recognized in Texas. They make three arguments in support of this point. First, they cite Loeb v. Turner, 257 S.W.2d 800, 803 (Tex.Civ.App.--Dallas 1953, no writ), for the proposition that, once Game Calls published the uncopyrighted sounds, they were available for public use. Second, Appellants argue that, to the extent misappropriation may be recognized, it is limited only to matters of "time value." See Synercom Technology, Inc. v. University Computing Co., 474 F.Supp. 37, 44 (N.D.Tex.1979). Finally, they argue that Game Calls is entitled only to the equitable relief that was granted--not monetary relief. We find that injunctive relief is not Game Calls' sole remedy for misappropriation.

RECOGNITION OF CAUSE OF ACTION

We first note the difference between unfair competition as a general area of law and the specific causes of action that it subsumes. "The law of unfair competition is the umbrella for all statutory and nonstatutory causes of action arising out of business conduct which is contrary to honest practice in industrial or commercial matters." American Heritage Life Ins. Co. v. Heritage Life Ins. Co., 494 F.2d 3, 14 (5th Cir.1974). Within the broad scope of unfair competition are the independent causes of action such as trade-secret law, "palming off" or passing off, and misappropriation, to name only a few. See W. PAGE KEETON ET AL., PROSSER AND KEETON ON THE LAW OF TORTS § 130 at 1013-30 (5th ed. 1984); see also Universal City Studios v. Kamar Industries, 217 U.S.P.Q. 1162, 1982 WL 1278 (S.D.Tex.1982) (stating, "The doctrine of misappropriation is a branch of the tort of unfair competition which involves the appropriation and use by the defendant, in competition with the plaintiff, of a unique pecuniary interest created by the plaintiff through the expenditure of labor, skill and money. [cites omitted] It is recognized under Texas law.") (approved in Conan Properties, Inc. v. Conan's Pizza, Inc., 752 F.2d 145, 156 (5th Cir.1985)).

The tort of misappropriation takes root in federal common law. The Supreme Court first espoused a guideline for misappropriation in International News Service v. Associated Press, 248 U.S. 215, 39 S.Ct. 68, 63 L.Ed. 211 (1918). After the International News Service took news items gathered by Associated Press and sold them competitively, the Court recognized a claim, saying:

[T]his defendant ... admits that it is taking material that has been acquired by complainant as the result of organization and the expenditure of labor, skill, and money, and which is saleable by complainant for money, and that defendant in appropriating it and selling it as its own is endeavoring to reap where it has not sown ... with special advantage to defendant in the competition because of the fact that it is not burdened with any part of the expense of gathering the news. The transaction speaks for itself and a court of equity ought not to hesitate long in characterizing it as unfair competition in business.

Id. at 239, 39 S.Ct. at 72-73. The court further recognized that, because of the great expense of acquiring and transmitting it, the news carries "all the attributes of property necessary for determining that a misappropriation of it by a competitor is unfair competition...." Id. at 240, 39 S.Ct. at 73.

The Supreme Court's reasoning was later adopted by a Texas court in Gilmore v. Sammons, 269 S.W. 861, 863 (Tex.Civ.App.--Dallas 1925, writ ref'd). Gilmore was factually similar to International News Service in that Gilmore sought to protect his property interest in news items from Sammons' appropriating the items, republishing them as his own, and selling his publication in competition with Gilmore. The court recognized Gilmore's misappropriation claim. Id.

In support of their proposition that the misappropriation doctrine has not been expressly embraced in Texas, Appellants cite Schuchart & Assoc. v. Solo Serve Corp., 540 F.Supp. 928, 944 (W.D.Tex.1982) (stating that Texas courts have not expressly embraced a cause of action for misappropriation). However, we believe the Schuchart court misapplied Texas unfair-competition law. The court cited three cases in support of its proposition, but two of them are trade-secret cases rather than misappropriation cases. Id. at 944 n. 11. The trade-secret cases are Wissman v. Boucher, 150 Tex. 326, 240 S.W.2d 278 (1951) and Furr's Inc. v. United Specialty Advertising Co., 338 S.W.2d 762 (Tex.Civ.App.--El Paso 1960, writ ref'd n.r.e.). The misappropriation case is Loeb.

In Wissman, the issues before the court were whether the defendants "misappropriated" plaintiff's ideas in violation of trade-secret law and whether the defendants "misappropriated" the ideas for the purposes of palming off. The court held that there could be no trade secret in an idea of general knowledge in an industry; thus, there could be no wrongful taking. Wissman, 240 S.W.2d at 280. The court also found that no evidence supported the contention of a wrongful taking for the purposes of palming off. Id. at 281. Contrary to the Schuchart court's assertion that Wissman assumed an action for misappropriation, the Wissman court did not address "misappropriation" as an independent cause of action. Wissman only addressed the term as it is commonly understood in ordinary language to mean a wrongful taking or an appropriation intrusive to another's interests, be it by violations of trade secret, palming off, or otherwise. Id. at 280-81.

The Schuchart court similarly misconstrued Furr's Inc. In characterizing the holding in Furr's, the Schuchart court stated, "[T]he Court suggested that the misappropriation must be of a trade secret or in violation of a confidence." Schuchart, 540 F.Supp. at 944 n. 11. However, we interpret Furr's as holding that one may state a claim under unfair competition for violation of trade-secret law by showing a breach of confidence. See Furr's, 338 S.W.2d at 764. Again, the Schuchart court confused a "misappropriation" of a trade secret by breach of confidence with "misappropriation" as a cause of action.

Finally, although the Schuchart court correctly characterized the holding in Loeb as denying a property interest in news items, Loeb was mistaken in another facet of its analysis. Loeb correctly stated that the news itself cannot become the subject of a property right belonging exclusively to any one person but failed to distinguish between newsworthy events as they exist in the public domain and the news as it is reported as the product of one's efforts. Loeb, 257 S.W.2d at 803; see also International News Service, 248 U.S. at 234, 39 S.Ct. at...