The case of KBIDC Investments, LLC v. Zuru Toys Inc., No. 05-19-00159-CV, 2020 WL 5988014 (Tex. App.—Dallas Oct. 9, 2020, no pet.), involved a dispute between two inventors who each created a system for filling and sealing recreational water balloons. Ultimately, the Court determined that the plaintiff in the case, KBIDC Investments (KBIDC), presented evidence that was too indefinite and uncertain to constitute circumstantial evidence of misappropriation of a trade secret under the Texas Uniform Trade Secret Act (TUTSA).

In 2010, KBIDC’s predecessor in interest, Kendall Harter (Harter), began developing a system to improve the recreational activity of playing with water balloons and worked with the engineering company ARCO Ideas, Inc. (ARCO) towards achieving this goal. Harter eventually decided that his balloon filler needed a flow meter to ensure that the balloons were filled to a consistent level, and ARCO reached out to several companies, including Capstone Metering (Capstone), to design this flow meter. In 2013, one of the named defendants, Josh Malone (Malone), worked for Realtime Group, and in his role there, Malone did some consulting work for Capstone. Malone finished his work for Capstone in 2014.

For his part, Malone, in 2010, began toying with an idea to improve water balloons as well. After several years of development, Malone filed a patent for his system in February 2014. His system consisted of multiple narrow straw-like tubes, with a balloon fitted on each end, and an O-ring on the outside of the balloon, holding the balloon onto the tube and functioning as a sealing mechanism when filled. In July 2014, Malone started a Kickstarter for his product, called Bunch O’ Balloons, and quickly exceeded his goal. Similarly, in August 2014, Harter released a YouTube video for his self-sealing, water-balloon-filling system that he called the Zorbz Replicator (Zorbz.) Zorbz used adhesives inside the balloon and a small ball built into the neck of the balloon to hold and seal the balloons rather than an O-ring like Malone’s product.

Zorbz was less successful than Bunch O’ Balloons, and Harter’s company filed bankruptcy. KBIDC bought the company in 2016, and in 2017, KBIDC brought this suit against Malone, his company, Tinnus, and Malone’s Chinese manufactures (Zuru) for misappropriation of Harter’s trade secrets in developing Bunch O’ Balloons. The defendant’s filed a no evidence motion for summary judgment, which the trial court granted. KBIDC asserted four points of error on appeal, one of which alleged that KBIDC presented some evidence of misappropriation.

In determining whether, Malone and Zuru misappropriated Harter’s trade secrets, the Court focused on whether KBIDC presented any evidence that Malone had access to Harter’s ideas such that Malone acquired knowledge of them and misappropriated them. KBIDC alleged five factual scenarios to prove that Malone had access to Harter’s proprietary information: first, Malone’s work at Realtime Group; second, the initials “JM” on ARCO’s drawings of Harter’s product; third, an email Malone sent to Zuru alleging he had no contact with anyone who developed Zorbz; fourth, a luncheon in 2015 between Harter and Malone; and fifth Malone’s use of Zorbz Balloons in one of his demonstrations for his own product. In each instance, the Court determined that the evidence presented by KBIDC was too indefinite and uncertain to show that Malone had access to Harter’s designs. Consequently, the alleged facts did not constitute circumstantial evidence that Malone misappropriated Harter’s trade secrets. Importantly, the Court noted that the alleged facts were too vague and required too many logical leaps to show with any degree of certainty that Malone’s alleged misappropriation was reasonably probable.

Ultimately, the Court affirmed the trial court’s decision to grant summary judgement to Malone, his company, and the majority of the Zuru entities because KBIDC failed to present any facts that would constitute evidence of Malone’s alleged misappropriation.

Special thanks to Kyle Markwardt for his assistance with this blog post