Winning a trade secret misappropriation case at the summary judgment stage is difficult. The case of C&M Oilfield Rentals, LLC v. Location Illuminator Techs., LLC, No. P:18-CV-039-DC, 2020 WL 7012008 (W.D. Tex. Sept. 30, 2020) illustrates that point. C&M Oilfield Rentals involved the alleged misappropriation of trade secrets used to construct an oil rig-mounted lighting system. Ultimately, the Court determined that it could not decide this case at the summary judgement stage because a genuine issue of material fact existed as to whether a trade secret existed and whether the defendant used an alleged trade secret.
Location Illuminator Technologies (LIT) began operation in 2015 to construct and market a lighting system for use in the oil industry. Specifically, LIT spent eight months and approximately $80,000 developing its rig-mounted Gen-1 lighting system. In the summer of 2017, LIT’s sales agent arranged for the installation of this Gen-1 system in North Dakota. The sales agent worked with C&M on this installation project. Later, in November of 2017, C&M and LIT attempted to install the Gen-1 lighting system at a well in Loving County, Texas. This installation was unsuccessful.
After the failed installation in Loving County, C&M began developing its own lighting system called the Crown Jewel system. C&M filed a patent application in March 2018 after approximately four months spent developing the Crown Jewel system.
In July 2018, C&M filed suit against LIT for alleged damages resulting from the unsuccessful installation in Loving County. LIT then asserted counterclaims for, among other things, violation of the Texas Uniform Trade Secrets Act (TUTSA) and common law misappropriation of trade secrets. C&M filed a motion for summary judgment regarding LIT’s counter claims on February 11, 2020. On August 8, 2020, the Magistrate Judge filed his Report and Recommendation (R&R), recommending that the Court deny the motion for summary judgement because there were genuine issues of material fact with respect to the existence of a trade secret. C&M filed a timely Objection to the R&R on two grounds: first, that LIT provided no evidence that it had trade secrets, and second, that C&M did not use any of LIT’s alleged trade secrets.
Regarding C&M’s first objection, the Court used the Texas Supreme Court’s common law six factor test from In re Bass, 113 S.W.3d 735, 739 (Tex. 2003), to determine whether LIT possessed a trade secret. The Court determined that some factors—like the public availability of the Gen-1 lighting system—point toward it not being a trade secret, while other factors—like LIT’s expenses in developing the system and its attempt to keep the system’s development confidential—point in the opposite direction. Consequently, because the facts pointed in both directions, the Court determined that there was a genuine issue of material fact that was better left to a jury to resolve. Therefore, the Court overruled C&M’s first objection.
Regarding C&M’s second objection, the Court relied on Fifth Circuit precedent that depending on a trade secret to accelerate research and development constitutes use of the trade secret. The summary judgement record contained evidence that C&M developed the Crown Jewel system in half the time it took LIT to develop the Gen-1 system. Further the record showed that C&M took possession of the Gen-1 system against the wishes of LIT and utilized a picture of the Gen-1 system for its website. Therefore, the Court found that there was a genuine issue of material fact as to C&M’s use of the trade secret and overruled C&M’s second objection.
Ultimately, the Court adopted the conclusions of the R&R and denied C&M’s motion for summary judgment. When arguing for summary judgment, C&M needed to show that the facts were entirely on C&M’s side. The Court rejected C&M’s motion because there were genuine issues of fact in the summary judgment evidence.
Special thanks to Kyle Markwardt for his assistance with this blog post.