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M-I L.L.C. v. Q'Max Solutions, Inc.

United States District Court, S.D. Texas, Houston Division

August 6, 2019

M-I L.L.C. d/b/a M-I SWACO, Plaintiff,
v.
Q'MAX SOLUTIONS, INC.; Q'MAX AMERICA, INC.; and SANJIT ROY; Defendants.

          MEMORANDUM OPINION AND ORDER

          SIM LAKE SENIOR UNITED STATES DISTRICT JUDGE.

         Plaintiff M-I L.L.C. ("M-I") sued defendants Q'Max Solutions, Inc.; Q'Max America, Inc. (collectively, "Q'Max"); and Sanjit Roy ("Roy") (collectively, "Defendants") alleging a number of claims, including federal and state trade secret misappropriation claims against Q'Max and Roy and a breach of contract claim against Roy. Pending before the court is Plaintiff M-I LLC's Motion for Summary Judgment as to Trade Secret Misappropriation and Breach of Contract ("M-I's Motion") (Docket Entry No. 74). For the reasons explained below, M-I's Motion will be granted in part and denied in part.

         I. Factual and Procedural Background

         M-I developed Virtual Hydraulics ("VH") and Presspro RT ("PPRT"), which are hydraulics simulation software used in oil and gas drilling. [1] Roy worked as a developer at M-I for over 20 years. [2]During his tenure at M-I Roy worked to develop VH and PPRT among other well applications software.[3] While employed at M-I, Roy signed an Employee Invention and Confidential Information Agreement, wherein he agreed as follows:

5. I shall not, during the term of my employment or thereafter, disclose to others or use any confidential technical or business information belonging either to M-I or to a customer or client of M-I except as authorized in writing, respectively, by M-I or such customer or client. "Confidential technical or other confidential business information" means any information which I learn or originate during the course of my employment, regardless of whether it is written or otherwise tangible that (a) is not generally available to the public and (b) gives one who uses it an advantage over competition.
6. Upon termination of my employment, I shall surrender to M-I any and all things such as drawings, manuals, documents, photographs and the like (including all copies thereof) that I have in my possession relating to the business of M-I or any division or subsidiary thereof.[4]

         Roy left M-I in May of 2014 and after a brief stint with Weatherford, another M-I competitor, Roy joined Q'Max in April of 2015. [5]

         M-I alleges that before his departure Roy copied and retained documents containing M-I's confidential information. M-I's forensic expert, David Cowen, concluded that Roy copied M-I files onto various drives during his employment at M-I.[6] Notably, after accepting his position at Weatherford (and two days before his departure from M-I), Roy copied a number of files to an external drive.[7] Cowen's investigation found M-I's confidential data on computers and external drives in Roy's possession, including on Roy's Q'Max computer.[8] Cowen also concluded that Roy kept a full backup of his M-I computer that contained a number of confidential documents, including the source code for various versions of VH and PPRT. [9]

         After Roy started at Q'Max he began developing MAXSITE Hydraulics ("MAXSITE"), a software program with the same models as VH that could compete with VH.[10] In this action M-I claims that Roy used confidential documents he retained from his time at M-I to develop MAXSITE.11 M-I's Complaint includes claims for copyright infringement in violation of 17 U.S.C. § 501, et seq.; violation of the Federal Defend Trade Secrets Act, 18 u.s.c. § 1836, et seq.; violation of the Texas Uniform Trade Secrets Act, Tex. Civ. Prac. & Rem. Code§ 134A.001, et seq., against all Defendants; and breach of contract against Roy.[12] M-I's Motion only addresses its federal and state trade secret misappropriation claims and its breach of contract claim against Roy.[13] Defendants responded to M-I's Motion on May 2, 2019.[14] M-I replied to Defendants' Response on May 9, 2019 .[15] M-I filed briefing supplementing its Motion with new evidence on June 28, 2019, [16] to which Defendants responded on July 17, 2019.[17]

         II. Standard of Review

         Summary judgment is appropriate if the movant establishes that there is no genuine dispute about any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). Disputes about material facts are genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510 (1986).

         The party moving for summary judgment must show the absence of a genuine issue of material fact. Exxon Corp. v. Oxxf ord Clothes, Inc., 109 F.3d 1070, 1074 (5th Cir. 1997). "If the moving party fails to meet this initial burden, the motion must be denied, regardless of the nonmovant' s response." Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en bane) (per curiam) (citing Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986)). If the moving party meets this burden, Rule 56(c) requires the nonmovant to go beyond the pleadings and show by affidavits, depositions, answers to interrogatories, admissions on file, or other admissible evidence that specific facts exist over which there is a genuine issue for trial. Id. The nonmovant "must do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Electric Industrial Co., Ltd. v. Zenith Radio Corp., 106 S.Ct. 1348, 1356 (1986).

         In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Products, Inc., 120 S.Ct. 2097, 2110 (2000). The court resolves factual controversies in favor of the nonmovant, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little, 37 F.3d at 1075.

         III. Aalysis

         M-I moves for summary judgment on its state and federal trade secret misappropriation claims against Defendants and its breach of contract claim against Roy. Defendants argue that genuine issues of fact remain as to M-I's trade secret misappropriation claims. Defendants also argue that summary judgment is not appropriate on M-I's breach of contract claim against Roy because Roy has raised fact issues as to his affirmative defenses of waiver and laches.

         A. Trade Secret Misappropriation Against Defendants

         In its Complaint M-I alleges that documents retained by Roy after he left M-I contain trade secrets under both the Defend Trade Secrets Act ("DTSA") and the Texas Uniform Trade Secrets Act ("TUTSA").[18] M-I argues that it is entitled to summary judgment on its misappropriation claims because no genuine dispute of material fact remains as to whether Roy and Q' Max misappropriated M-I' s trade secrets through wrongful acquisition, disclosure, and use.[19]Defendants disagree, arguing that disputes of material fact remain as to (1) whether the documents relied on by M-I in its Motion contain trade secrets and (2) whether Q'Max or Roy "used" M-I's alleged trade secrets.[20] Because M-I's TUTSA and DTSA claims will require proof of the same elements in this case, the court will consider M-I' s federal and state trade secret misappropriation claims together. [21]

         1. Trade Secret Misappropriation Under TUTSA and the DTSA

         Both TUTSA and the DTSA permit recovery of damages for trade secret misappropriation. Tex. Civ. Prac. & Rem. Code§ 134A.004; 18 § 1836(b)(1) (permitting recovery for trade secret u.s.c. misappropriation if a trade secret is "related to a product or service used in, or intended for use in, interstate or foreign commerce"). "To prevail on a misappropriation of trade secrets claim, a plaintiff must show that (1) a trade secret existed, (2) the trade secret was acquired through breach of a confidential relationship or discovered by improper means, and (3) the defendant used the trade secret without authorization from the plaintiff." GE Betz. Inc. v. Moffitt-Johnston, 885 F.3d 318, 325 (5th Cir. 2018) (internal quotation marks omitted) (emphasis in original). "Improper means" includes, but is not limited to, a breach of a duty to maintain the secrecy of a trade secret. Tex. Civ. Prac. & Rem. Code§ 134A.002(2); 18 U.S.C. § 1839(6). TUTSA defines "trade secret" as:

[A] 11 forms and types of information, including business, scientific, technical, economic, or engineering information, and any formula, design, prototype, pattern, plan, compilation, program device, program, code, device, method, technique, process, procedure, financial data, or list of actual or potential customers or suppliers, whether tangible or intangible and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if:
(A) the owner of the trade secret has taken reasonable measures under the circumstances to keep the information secret; and
(B) the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.

Id. at § 134A.002(6).[22] "Whether a trade secret exists is a question of fact." GlobeRanger Corporation v. Software AG United States of America. Incorporated, 836 F.3d 477, 492 (5th Cir. 2016).

         Texas courts weigh six factors to determine whether a trade secret exists:

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

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