Revised May 28, 1999

UNITED STATES COURT OF APPEALS

FIFTH CIRCUIT

____________

No. 97-21014

____________

GAIA TECHNOLOGIES INCORPORATED; ET AL,

Plaint iffs,

GAIA TECHNOLOGIES INCORPORATED,

Plaintiff-Appellee,

versus

RECYCLED PRODUCTS CORPORATION; ET AL,

Defendants,

DAVID GORDON; PROGRESSIVE CAPITAL CORPORATION;

RECONVERSION TECHNOLOGIES INCORPORATED; IRA

RIMER; JOEL HOLT; RICHARD CL ARK; RECONVERSION

TECHNOLOGIES OF TEXAS INCORPORATED,

Defendants-Appellants.

Appeal from the United States District Court

for the Southern District of Texas-2- May 26, 1999

Before JONES, SMITH, and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

The corp o rat e defendants Reconversion Technologies of Texas Incorporated (“Retex”),

Reconversion Tech no lo gies Incorporated (“Retek”), and Progressive Capital Corporation

(“Progressive”), a nd t he individual defendants David Gordon, Ira Rimer, Joel Holt, and Richard

Clark, appeal the district court’s final judgment. We reverse the judgment of the district court and

render judgment in favor of the defendants.

I

This is an a ppeal from a judgment in favor of Gaia Technologies Incorporated (“Gaia”)

against the corporate and individual defendants. The judgment holds various defendants liable for

three state law torts—unfair competition, misappropriation of trade secrets, and torti ous interference

with prospective contractual relations. Gaia’s causes of action involve intellectual property developed

init ially by James Turner, and now owned by Gaia. Turner devised methods of manufacturing various

products from recycled tires. Turner’s products included (1) various “hard goods,” which included

molded boards, fence posts, railroad ties, and buckets, and (2) a flexible porous pipe, which Turner

marketed under the name “Leaky Pipe.” Turner’s invent ions resulted in four patents for the hard

goods technology, and one trademark for the name “Leaky Pipe.” To exploit these inventions,

Turner created the Entek Corporation (“Entek”), which he owned.

Turner and Entek filed fo r bankruptcy. During the bankruptcy proceedings, Banstar

Corporati on (“Banstar”) purchased “all technologies, patents, patent rights, licenses, know-how,

trade secrets, trade secret rights, [and] proprietary in fo rmat io n,” as well as “all trade names,1 The individual defendants in this appeal were affiliat ed with Retex at the time of the alleged

conduct. Turner was init ially a defendant in this case, but he settled with Gaia before trial. As for

the other corporate defendants, Retek was Retex’s parent company, and Progressive was involved

with Retek’s efforts to raise money for its operations.

-3- trademarks, service marks, [and] brand names,” from Turner and Entek. Eventually, Gaia purchased

the Turner-Entek intellectual property from Banstar. The parties dispute the precise date of Gaia’s

purchase. After his bankruptcy, Turner worked for defendant Retex. Gaia alleges that Retex began

selling Leaky Pipe and using the hard goods technology. 1 Gaia filed the present lawsuit on October

20, 1993, alleging that the defendants’ use of the T urner-Entek i ntel l ectual property am

ounted to

federal patent and trademark infringement and various Texas law torts.

The jury verdict found the corporate defendants liable for all of Gaia’s federal infringement

claims, awarding damages totaling $3,972,500. It also found the corporate defendants liable for three

state law claims, awarding damages of $125,000 for unfair competition, $0 for misappropriation of

trade secrets, and $4,350,000 for tortious interference with prospective contractual relations. The

jury found the individual defendants liable for one claim of federal patent infringement, awarding

damages of $1,800,000. It found that the individual defendants were not liable for any of Gaia’s state

law claims. The jury assessed each of the individual defendants punitive damages of $100,000.

The district court modified the jury verdict before entering its fina l judgment. In its

Supplemental Memorandum Opinion, the district court wrote:

The Court further finds, according to [certain] evidence

. . . and testimony

. . . that

all the defendants, jointly and severally, committed fraud by aiding and abetting James

Turner to mi sappropriate and conceal their use of the trade secret technology and

porous pipe.

. . . From this evidence and the jury’s verdict assessing punitive damages

against each of the individual defendants, Gordon, Rimer, Holt, and Clark because the

defendants were actually aware of an extreme risk of serious injury to the plaint iff and

acted willfully

and maliciously, the Court reforms the jury’s verdict under F E D

. R.

C IV

. P. 49(a) and 58 to conform the evidence and law with the jury’s verdict and finds2 The district court also modified many of the jury’s findings on federal patent and trademark

infringement. These modifications are not relevant to the present appeal.

3 The Federal Circuit amended its init ial opinion as to whether federal jurisdiction existed over

Gaia’s state law claims. See Gaia , 104 F.3d at 1297.

-4- that plaint iff shall further rec o ver from the defendants, jointly and severally, lost

capital damages o f FOUR MILLION THREE HUNDRED FIFTY THOUSAND

AND NO/100 DOLL ARS ($4,350,000.00), as a result of the defendants’ tortious

interference with the plaint iff’s prospective cust omers . . . and as a resul t of the

defendants’ misappropriation and concealment o f the plaintiff’s trade secret

information.

Thus the district court held the individual defendants liable for torti ous interference with prospective

contractual relations and misappropriation of trade secrets, contrary to the j ury’s finding that the

individual defendants were not liable for any state law torts. The district court also overturned the

jury’s finding that the damages caused by the corporate defendants’ misappropriation of trade secrets

was $0. Based on these rulings and what remained of the jury verdict, the district court entered a

final judgment on March 17, 1995 (“1995 judgment”). 2

The defendants appealed to the Federal Circuit, which reversed the 1995 judgment as to

Gaia’s federal patent and trademark infringement claims. The Federal Circuit held that in order to

have standing under the federal infringement statutes, Gaia must prove that it owned the relevant

patents and trademark when it filed suit on October 20, 1993. S ee Gaia Techs., Inc. v. Reconversion

Techs., Inc.

, 93 F.3d 774, 777 (Fed. Cir.), amended by 104 F.3d 1296 (Fed. Cir. 1996). 3 Gaia argued

to the Federal Circuit that it acquired the patents and trademark from Banstar on August 4, 1991,

pursuant to a vote of Banstar’s shareholders. Gaia also cit ed to a written assignment, which

transferred the Turner-Entek int ellectual property from Banstar to Gaia. Although undated, the

assignment stated that its “effective date” was Augu st 4, 1991. However, Gaia did not file the-5-

assignment with the United States Patent and Trademark Office until October 24, 1994, over one year

after it filed the present lawsuit.

The Federal Circuit ruled that Banstar did not assign the Turner-Entek patents and trademark

to Gaia until after Gaia filed the present lawsuit. See id. at 780. It reasoned that the August 1991

shareholder vote demonstrated, at most, an intent to assign the patents and trademark, but that the

vote did not itself amount to an assignment. S ee id. at 779. The Federal Circuit also rejected Gaia’s

argument th at the assignment filed in October 1994 could retroactively confer standing simply by

professing an “effective date” of August 1991. S ee id. at 779-80. Having extinguished Gaia’s federal

infringement claims, the Federal Circuit remanded the c ase t o allow the district court to decide

whether to exercise supplemental jurisdiction over the state law claims. See id. at 781.

On remand, the district court decided to exercise jurisdiction over Gaia’s state law causes of

action. It entered final judgment on July 18, 1997 (“1997 judgment”) based on its initial state law

rulings. The district court thus held the corporate defendants liable for all three state law causes of

action, and held the individual defendants liable for misappropriation of trade s ecrets and torti ous

int erference with prospective contractual relations. It also assessed each individual defendant

$100,000 in punitive damages.

The defendants t imely appealed. On appeal, the individual defendants argue that the district

court e rred in ho lding them liable for Gaia’s state law claims, contrary to the jury verdict. The

individual defendants also contend that the district court erred in assessing punitive damages. The

corporate defendants argue that the evidence is insufficient to support the jury verdict holding them4 In addition, the corporate defendants argue that (1) the Federal Circuit’s decision is the law

of the case and therefore precludes liabilit y for Gaia’s state law causes of action, (2) the district court

erred by finding “fraud” in its Supplemental Memorandum Opinion, (3) the evidence was insufficient

to establish liabilit

y against defendants Retek and Progressive, (4) the district court erred by entering

judgment while Chapter 11 bankruptcy proceedings were pending, (5) the district court erred in

awarding attorneys’ fees, and (6) the district court erred in calculating prejudgment interest. We need

not address these issues, however , in light of our ruling as to the corporate defendants’ other

argument.

5 Preliminarily, the individual defendants contend that we should tre at t he jury verdict as a

general verdict accompanied by interrogatories, governed by Rule 49(b), as opposed to a special

verdict, governed by Rule 49(a). C ompare F ED

. R. C IV

. P. 49(b) (“General Verdict Accompanied

by Answer to Interrogatories”) wi th F E D

. R. C IV

. P. 49(a) (“Special Verdicts”). According to the

defendants, Rule 49(b) affords greater deference to a jury’s finding than Rule 49(a). We need not

address this contention, however, because we conclude that not even Rule 49(a) author izes the

district court’s modification of the jury verdict. Gaia does not contend that Rule 49(b) provides an

alternative ground for upholding the district court’s reformation.

-6- liable on the three state law claims. 4

II

First, the individual defendants contend that the district court erred by “reform[ing]” the jury

verdict. They argue that Federal Rule of Civil Procedure 49(a) (“Rule 49(a)”), relied upon by the

district co urt , does not allow the district court to make findings contrary to the jury verdict. 5 We

review de novo whether a dis t rict co urt is authorized to make findings under Rule 49(a). S ee

Askanase v. Fatjo , 130 F.3d 657, 669 (5th Cir. 1997).

N o t hing in t he text of Rule 49(a) authorizes a district court to reform a jury’s decision on

issues submitted to the jury. Rule 49(a) allows the district court to make its own findings only as to

issues not submitted to the jury. See F ED

. R. C IV

. P. 49(a) (“As to an issue omitted [from the jury

instructions]

. . . the court may make a finding.”). Furthermore, Rule 49(a) does not permit a district

court to make findings contrary to the jury v erdict. See Askanase , 130 F.3d at 670 (“Appellant

correctly states that a Rule 49(a) finding cannot be inconsiste nt with the jury verdict.”); s ee also6 Although the district court also cites Federal Rule of Civil Procedure 58 (“Rule 58”) as a

basis for reforming the verdict, this rule does not authorize the district court’s action. Rule 58 merely

provides that a court may iss ue a judgment pursuant to a jury verdict. S ee F ED

. R. C IV

. P. 58

(pro viding that “upon a special verdict or a general verdict accompanied by answers t o

interrogatories, the co urt shall promptly approve the form of the judgment, and the clerk shall

thereupon enter it”). I t by no means empowers a court to issue judgment contrary to a jury verdict.

Gaia does not contend that Rule 58 permits the district court’s reformation.

-7- Floyd v. Laws

, 929 F.2d 1390, 1397 (9th Cir. 1991) (holding that “under Rule 49(a), the trial court

simply cannot choose to ignore a legitimate finding that i s part of the special verdict”). Here, the

district court submitted the elements of Gaia’s state law claims to the jury, and the jury found that

Gaia failed to prove any of the elements as to the individual defendants. Thus Rule 49(a) does not

authorize the distr ict co urt t o reform the jury’s state law findings in order to hold the individual

defendants liable for Gaia’s state law causes of action. 6

Indeed, Gaia does not argue on appeal that Rule 49(a) authorizes the district court ’s

reformation of the jury verdict, but rather urges us to affirm on other grounds. Gaia contends that

Federal Rule of Civil Procedure 50 (“Rule 50”) justifies the district court’s action. Rule 50 allows

a court to enter judgment as a matter of law where there exists “no legally sufficient evidentiary basis

for a reasonable jury to find” as it did. F E D

. R. C IV

. P. 50(a)(1). Gaia asserts that it presented strong

evidence that the individual defendants committed the state law torts, and that the defendants

responded with no “serious evidence” to the contrary.

The district court did not base its ruling o n Rule 50. It expressly relied on Rule 49(a) and

Rule 58. The district court certainly did not apply the high standard required to enter judgment as

a matter of law contrary to a jury verdict. It did not find that the individual defendants committed

state law torts “as a matter of law,” nor did it rule that ther e was “no legally sufficient evidentiary

basis for a reasonable jury to find” otherwise. F E D

. R. C IV

. P. 50(a)(1). To the contrary, the district7 There, we conclude that Gaia failed even to present sufficient evidence to uphold the jury

verdict against the corporate defendants on the state law claims. This finding necessarily forecloses

Gaia’s argument that the evidence presented was so overwhe lming as t o mandate judgment as a

matter of law against the individual defendants. The same shortcomings that prevent judgment

against the corporate defendants also prevent judgment against the individual defendants.

-8- court rendered an independent finding that the individual d efendant s were liable for two state law

torts. Thus the district court did not address whether Rule 50 authorizes its modification of the jury

verdict.

We may, however, consider alternative grounds for upholding the district court’s decision,

provided the record supports such alternative grounds. S ee Cox v. Sunbelt Sav. Ass’n

, 896 F.2d 957,

959 n.2 (5th Cir. 1990). A court may enter judgment as a matter of law under Rule 50 only where

there exists “no legally sufficient evidentiary basis for a reasonable jury to find” otherwise. F E D

. R.

C IV

. P. 50(a)(1). We find that there exists a legally sufficient basis for a reasonable jury to find that

the individual defendants did not commit misappropriation of trade secrets or torti ous interference

with prospective contractual relations. S ee infra Part IV. 7 Thus Rule 50 does not authorize the

district court’s modifications to the jury verdict.

For these reasons, we find that the district court erred in reforming the jury verdict. In the

alternative to upholding the district court’s judgment as to the individual defendants, Gaia urges us

to remand for a new trial. According to Gaia, the jury’s conclusion that the individual defendants are

not liable for state law torts is inconsisten t wit h its finding that the conduct of the individual

defendants warrants punitive damages. Gaia is correct that “[i]f the jury gives inconsistent answers

to special interrogatories, the case must be remanded for a new trial.” W illard v. The John Hayward

,

577 F.2d 1009, 1011 (5th Cir. 1978). However, a jury’s answers “should be considered inconsistent

. . . only if there is no w ay to reconcile them.” I d. (emphasis added). Thus we ask “whether the8 The jury’s finding that the individual defendants were liable for patent infringement was, as

discussed above, reversed by the Federal Circuit because Gaia lacked standing to sue. S ee Gaia

, 93

F.3d at 780.

-9- jury’s answers can be said to represent a logical and probable de cisio n on the relevant issues as

submitted.” Id. (quotations and citations omitted).

Gaia argues that the jury could not logically have found the individual defendants’ conduct

so “shocking and offensive” as to deserve punitive damages wi t hout also finding the individual

defendants liable for the state law causes of action. We disagree. The instruction on punitive

damages was located at the end of the jury charge. It began, “If you have found that any of the

defendants are liable for the plaint iff’s injuries, you may also award punitive damages . . . .” The

instruction did not specify that the jury must find the def endant s liable under state law in order to

award punitive damages. The jury reasonably could have viewed the punitive damages instruction

as applyi ng t o bo t h the state law and federal law causes of action. While the jury did not find the

individual defendants liable for Gaia’s state law claims, it did hold them liable for federal law patent

infringement. 8 Thus the jury, under a logical reading of the instruction, could have based its award

of punitive damages on the conduct it found to constitute federal law patent infringement. It could

logically have foun d such co nduct by the individual defendants to be “shocking and offensive,”

without also finding liability under state law.

By reading the jury’s punitive damages award as stemming from the federal law claims, we

are able to reconcile any inconsistencies alleged by Gaia. Therefore, the jury’s award of punitive

damages is not inconsistent with its finding that the individual defendants were not liable for any state

law causes of action. Accordingly, we reject Gaia’s request for a new trial.

III-10-

The individual defendants also challenge the district court’s award of punitive damages. They

argue that a defendant may not be assessed punitive damages without a valid finding that he or she

is liable for an underlying substantive cause of action. After the jury issued its verdict, of course, the

Federal Circuit ruled that the individual defendants were not liable for any federal law causes of

action. We have now held that t he individual defendants are not liable for any state law causes of

action. Thus the individual defendant s are co rrect that there is no finding of liability upon which

punitive damages may be based.

Gaia insists that state law provides a basis for punitive damages. Whether substantive liability

is a necessary predicate to an award of punitive damages is a question of Texas state law, which we

review de novo

. See Hadley v. VAM P T S , 44 F.3d 372, 374-75 (5th Cir. 1995). The Texas

Supreme Court has made clear that “‘recovery of punit ive damages requires a finding of an

independent tort with accompanying actual damages.’” S chlueter v. Schlueter

, 975 S.W.2d 584, 589

(Tex. 1998) (quoting Tw in City Fire Ins. Co. v. Davis

, 904 S.W.2d 663, 665 (Tex. 1995); see also

Hadley

, 44 F.3d at 375 (“Texas law is unif o rm and clear that a finding of actual damages is a

prerequisite to receipt of punitive damages.”). Therefore, “[w]ithout a finding of tort damages, [a

plaint iff] is not entitled to any award of punitive damages.” F ederal Express Corp. v. Dutschmann

,

846 S.W.2d 282, 284 (Tex. 1993). Because we have reinstated the jury’s finding that the individual

defendants are not liable for any state law causes of action, there is no basis for awarding punitive

damages. We therefore reverse the district court’s award of punitive damages.

IV

The corporate defendants argue that the evidence presented at trial was insufficient to support

the jury verdict against them on Gaia’s state law causes of action. They therefore contend that the-11-

district court erred in denying their various Rule 50 motions for judgment as a matter of law. The

district court may en t er judgment as a matter of law under Rule 50 where “there is no legally

sufficient evidentiary basis for a reasonable jury” to find otherwise. F ED . R. C IV . P. 50.

A

Preliminarily, the parties dispute the proper standard of review. When a party contests a jury

verdict on the grounds that the evidence is legally insufficient, we ordinarily apply de novo review,

making the same inquiry required of the district court. See Nero v. Industrial Molding Corp. , 167

F.3d 921, 925 (5th Cir. 1999). However, the standard of review changes if the appellant failed to

contest t he sufficiency of the evidence to the district court through timely motions under Rule 50.

See Polanco v. City of Austin

, 78 F.3d 968, 974 (5th Cir. 1996). Failure to request Rule 50 relief

fro m t he dist rict court “may result in a waiver of the right to challenge the sufficiency of the

evidence.” S cottish Heritable Trust, PLC v. Peat Marwick Main & Co.

, 81 F.3d 606, 610 (5th Cir.

1996). When a party waives the issue of evidentiary sufficiency, we review the jury verdict only for

“plain error.” P ol anco , 78 F.3d at 974. Gaia contends that we must apply plain error review,

because the corporate defendants never filed a Rule 50 motion following the 1997 judgment.

The corporate defendants filed Rule 50 motions for judgment as a matter of law at several

stages in the proceeding s. They moved for judgment as a matter of law at the close of Gaia’s

evidence. They also moved for judgment as a matter of law at the close of all the evidence. Finally,

they filed a renewed motion for judgment as a matter of law after the district court issued its 1995

judgment. In each motion, the corporate defendants argued that the evidence presented was

insufficient to hold them liable for Texas law unfair competition, misappropriation of trade secrets,

or torti ous interference with prospective contractual relations. However, the corporate defendants-12-

never requested Rule 50 relief following the district court’s 1997 judgment, the one presently before

us. This failure, Gaia argues, constitutes a waiver of the corporate defendants’ right to challenge the

sufficiency of the evidence.

As support, Gaia cites Daigle v. Liberty Life Insurance Co.

, 70 F.3d 394, 397 n.2 (5th Cir.

1995), which states in dicta : “When an insufficiency of evidence issue is not raised before the district

court through Rule 50(a) and Rule 50(b) motions, the standard of review on appeal is plain error.”

Gaia argues that Daigle ’s reference to Rule 50(b) mandates that, in order to contest the sufficiency

of the evidence on appeal, an appellant must have sought Rule 50 relief after the trial court issued the

judgment being appealed. D aigle ’s words, however, do not sustain such a reading. Rule 50(b)

allows a party to renew its motion for judgment as a matter of law, provided that it timely filed an

init ial motion for judgment as a matter of law under Rule 50(a). S ee Fed. R. Civ. P. 50(b). Although

Rule 50(b) permits a party to renew its motio n as late as ten days after the judgment is entered, it

does not proscribe filing a renewed motion before judgment is entered. See id. (“The movant may

renew its request for judgment as a matter of law no later than 10 days after the entry of judgment

. . . .”). We therefore see no reason to read Daigle as requiring the corporate defendants to have filed

a Rule 50(b) moti o n aft er t he district court entered its 1997 judgment. Applying D aigle ’s dicta

lit erally, the corporate defendants preserved their right to contest the sufficiency of the evidence on

appeal, because they challenged the sufficiency of the evidence “through Rule 50(a) and Rule 50(b)

motions.” D aigle

, 70 F.3d at 397 n.2. The defendants’ motion at the close of Gaia’s evidence was

brough t under Rule 50(a), and their motion following the 1995 judgment was brought under Rule9 Moreover, we feel that Daigle ’s dicta mischaracterizes our Rule 50 precedent. We have

never required a party to file a Rule 50(b) motion in order to preserve its right to claim insufficiency

of the evidence on appeal, so long as it has filed a Rule 50(a) motion at the close of all the evidence.

To date, our cases have held only that a party may waive its right to appeal when it “fail[s] to move

f or judgment as a matter of law at the conclusion of all the evidence .” P olanco

, 78 F .3d at 974

(emphasis added); see also Scottish Heritable Trust , 81 F.3d at 610 (holding that “failure to move

for judgment as a matter of law at t he co nclusion of all the evidence may result in a waiver of the

right to challenge the sufficiency of the evidence”). B ut see Varda, Inc. v. Insurance Co. of N. Am.

, 45 F.3d 634, 638 (2d Cir. 1995) (“To preserve for appeal a challenge to the denial of a pre-verdict

motion for judgment as a matter of law, a movant must renew that motion after the verdict.”). Rule

50 motions at the close of all the evidence arise under Rule 50(a). S ee United States ex rel. Wallace

v. Flintco

, 143 F.3d 955, 960 (5th Cir. 1998) (describing motions for judgment as a matter of law at

the conclusion of all the evidence as arising unde r Rule 50(a)); compare Fed. R. Civ. P. 50(a)(2)

(“Motions for judgment as a matter of law may be made at any time before submission of the case

to the jury.”) with Fed. R. Civ. P. 50(b) (allowing a renewed motion for judgment as a matter of law

“[i]f, for any reason the court does not grant a motion for judgment as a matter of law made at the

close of all the evidence”). Indeed, the case on which D aigle relies, Purcell v. Seguin State Bank &

Trust Co.

, 999 F.2d 950, 956-57 (5th Cir. 1993), addresses solely whether a party is required to move

for judgment as a matter of law at the close of all the evidence. See id. at 956. In the present case

it is undisputed that the defendants filed a Rule 50 motion at the close of the evidence.

-13- 50(b). 9

Thus we find that the defendants have not waived their right to challenge the sufficiency of

the evidence. We will review the district court’s denial of their motions for judgment as a matter of

law de novo

. See Polanco , 78 F.3d at 974.

B

Having established the standard of review, we now turn to whether the record in this case

provides a “legally sufficient evidentiary basis for a reasonable jury to find” the corporate defendants

liable for unfair competition, mi sappropriation of trade secrets, and tortious interference with

prospective contractual relations. F E D

. R. C IV

. P. 50( a)(1). We examine the sufficiency of the

evidence under the standard of Boeing Co. v. Shipman

, 411 F.2d 365 (5th Cir. 1969) (en banc). See10 Although we hav e since overruled B oeing on other grounds, see Gautreaux v. Scurlock

Marine, Inc.

, 107 F.3d 331 (5th Cir. 1997) (en banc), Boeing remains the standard by which we

evaluate motions for judgment as a matter of law. See Burger , 168 F.3d at 877.

11 To determine the substantive law governing Gaia’s state law claims, we look to final

decisions of the state’s highest court. S ee Transcontinental Gas Pipe Line Corp. v. Transportation

Ins. Co. , 953 F.2d 985, 988 (5th Cir. 1992). “When there is no ruling by the state’s highest court,

it is the duty of the federal court to determine as best it can, what the highest court of the state would

decide.” I

d. It is proper to look to decisions of lower state courts when making an “ E rie -guess” as

to how a state’s highest court would decide an issue. S ee Shanks v. AlliedSignal

, 169 F.3d 988, 993

n.7 (5th Cir. 1999).

-14- Burger v. Central Apartment Management, Inc. , 168 F.3d 875, 877 (5th Cir. 1999). 10

Under Boeing

, there must be a conflict in subs t ant ial evidence to create a jury

question. Substantial evidence is defined as evidence of such quality and weight that

reasonable and fair-minded men in the exercise of impartial judgment migh t reach

different conclusions. Consequently, a mere scintilla of evidence is insufficient to

present a question for the jury. Even if the evidence is more than a scintilla, B oeing

assumes that some evidence may exist to support a position which is yet so

overwhelmed by contrary proof as to yield to a [motion for judgment as a m atter of

law].

Rhodes v. Guiberson Oil Tools

, 75 F.3d 989, 993 (5th Cir. 1996) (en banc) (quotati ons and citations

omitted). Applying this standard, we address each of Gaia’s state law causes of action. 11

C

The corporate defendants argue that the evidence is legally insufficient to support the jury

verdict holding them liable for unfair competition under Texas law. “To prevail o n an unfair

competition claim, a plaint iff must establish two elements: (1) the plaint iff’s trade name has acquired

a secondary meaning through usage; and (2) the similarit y of the name used by the defendant would

be likely to confuse the public.” A ssociated Tel. Directory Publishers, Inc. v. Five D’s Publ’g Co.

,

849 S.W.2d 894, 898 (Tex. App.—Austin 1993, no writ). Thus under Texas law, a plaintiff must

prove that the trade name wrongfully used by the defendant is in fact “the plaint iff’s trade name.” I d.12 Although our analysis focuses on whether Gaia owned the “Leaky Pipe” trade name, we

do not mean to suggest that under Texas law, a plaint iff must actually own a trade name in order to

make out a cause of action for unfair competition. We need not predict whether Texas courts would

permit unfair competition suits by plaint iffs with less than an ownership interest in a trade name. In

this case, the only interest Gaia claims to have had in the “Leaky Pipe” trade name is ownership of

the name pursuant to Banstar’s asset transfer.

13 We note that the Federal Circuit reached the same conclusion in as sessing whether the

Banstar shareholder vote effected an assignment of the federal patents and trademark under federal

law. See Gaia , 93 F.3d at 779.

-15- Gaia contends that evidence in the record demonstrated that it owned the “Leaky Pipe” trade name

when it filed the present lawsuit in October 1993. 12

First, Gaia cites to the minutes of a Banstar shareholder meeting that took place on August

4, 1991. At that meeting, the shareholders “voted t o sell 100% of the outstanding stock of the

Corporati on to Gaia Technologies, Inc.” The minutes provided: “This sale will include all assets and

liabilit ies of the Corporati on and any interest in the contracts dealing with the purchase of the assets

of Entek Corporati on or James Turner

. . . .” At most, the shareholder vote indicates Banstar’s intent

to assign the Entek-Turner assets. However, it cannot by itself assign anything at all to Gaia. S ee

Safew ay Managing Gen. Agency v. Cooper

, 952 S.W.2d 861, 867 (Tex. App.—Amarillo 1997, no

writ) (“[O]ne party may not unilaterally create a binding contract.”); DeMello v. NBC Bank-Perrin

Beitel

, 762 S.W.2d 379, 382 (Tex. App.—San Antonio 1988, no writ) (holding that one party’s

indication that a sale has been executed does not prove a contract). 13 Even if the shareholder vote

is sufficient to raise an inference that the assignment was performed shortly thereafter, we find any

such inference “so overwhelmed by contrary proof” as to warrant j udgment as a m atter of l aw.

Rhodes

, 75 F.3d at 993. In August 1993, two years after the alleged assignment occurred, Banstar

represented to th e bankruptcy court that it still held title to the patents it had acquired from the14 Gaia also argues that portions of Raymond Kerr’s trial testimony proves that Gaia acquired

the Turner-Entek intellectual property on August 4, 1991. The portion cited by Gaia contains no

testimony relevant to this fact.

-16- E ntek-Turner bankruptcy. If the assignment suggested by the shareholder minutes had actually

occurred, then Banstar could not have made such a representation truthfully. More importantly, in

November 1993, weeks after Gaia filed the present lawsuit, Banstar and Gaia entered into a crosslicensing agreement that listed Banstar as the owner of the Turner-Entek patents. This evidence also

negates any inference that Banstar assigned the Turner-Entek intellectual property to Gaia pursuant

to the August 1991 shareholder vote.

Secon d, Gaia cit es to a written assignment of assets that was filed with the United States

Patent and Trademark Office on October 24, 1994, over a year after Gaia filed the present lawsuit.

Although the assignment itself was undated, it provided that “[t]he effective date of this Assignment

is August 4, 1991.” Gaia points to no evidence indicating when this written assignment was actually

executed. Thus there is no evidence supporting Gaia’s claim that this assignment was executed prior

to Gaia filing this lawsuit. Nor does the written assignment’s August 1991 effective date raise an

inference that Banstar and Gaia had at least re ached an oral agreement in 1991. For the reasons

stated above, we find any such inference overwhelmed by Banstar’s August 1993 representation to

the bankruptcy court and the Banstar-Gaia cross-licensing agreement in November 1993. 14

We therefore conclude that no reasonable jury could have concluded that “Leaky Pipe” was

Gaia’s trade name for purposes of Texas law unfair competition. Accordingly, we find that t he

evidence failed to su ppo rt t he jury verdict holding the corporate defendants liable for unfair

competition.

D-17-

The corporate defendants also argue that Gaia failed to produce sufficient evidence of trade

secret misappropriati o n under Texas law. Gaia responds by citing evidence that the corporate

defendants assembled a promotional brochure, which adve rt ised the same technology ultimately

a cquired by Gaia. To establish misappropriation of a trade secret, a plaintiff must show that (1) a

trade secret existed, (2) the trade secret was acquired through a breach of a confidential relationship

or discovered by improper means, and (3) the defendant used the trade secret without authorization

from the plaintiff. See Phillips v. Frey , 20 F.3d 623, 627 (5th Cir. 1994).

“A trade secret is any formula, pattern, device or compilation of information use d in a

business, which gives the owner an opportuni ty to obtain an advantage over his competitors who do

not know or use it.” I

d. at 628 (emphasis added). As discussed above in the context of the “Leaky

Pipe” trade name, Gaia has produced insufficient evidence that it acquired any intellectual property

from Banstar before it filed the present lawsuit. Thus Gaia has failed to prove that it owned any of

the trade secrets underlying its misappropriation claim.

Furthermore, Gaia fails to cite any evidence that the corporate defendants “misappropriated”

t hat technology from Gaia, that is, discovered the trade secrets by breaching a confidential

relationship or by other improper means. S ee id. at 627. Rather, Gaia simply cites evidence that the

technology advertised by the corporate defendants w as similar to the Turner-Entek technology

eventually acquired by Gaia. On this point, we find the case of G eoChem Tech Corp. v. Verseckes

,

929 S.W.2d 85 (Tex. App.—Eastland, 1996), rev’d on other grounds

, 962 S.W.2d 541 (Tex. 1998),

instructive. The plaint iff in Verseckes purchased certain trade secrets from a company called HGS.

See id. at 91. The defendant, a former employee of HGS, allegedly made use of that technology in

violation of a confidentiality agreement he had signed with HGS. S ee id. The court ruled that such15 We note additionally that, t o t he ext ent that any of the trade secrets underlying Gaia’s

misappropriation claim are co vered by the four patents, they are no longer “trade secrets” under

Texas law. S ee Luccous v. J.C. Kinley Co.

, 376 S.W.2 d 336, 340 (Tex. 1964); s ee also Frey

, 20

F.3d at 629 (citing Luccous for the proposition tha t a “pat ent grant automatically constitutes full

disclosure of a patented process and cannot be protected as a trade secret”).

-18- facts could not make out a claim for misappropriation of trade secrets. It reasoned: “While a

confi dential relationship might have existed between [the defendant] and . . . HGS, the summary

judgment evidence shows that no relationship, confidential or otherwise, existed between [the plaint iff

and defendant].” Id. Likewise, Gaia presents no evidence of a confidential relationship between it

and the corporate defendants that would support a claim for misappropriation of trade secrets. Gaia

fails to prove that the corporate defendants breached any confidential relationship w it h Gaia in

acquiring the alleged trade secrets, or that the corporate defendants improperly discovered the trade

secrets from Gaia. 15

E

Finally, the corporate defendants argue that Gaia presented insufficient evidence of torti ous

int erference with prospective contractual relations. The elements of tortious interference with

prospective contractual relations are: (1) there was a reasonable probability that the plaint iff would

have entered into a contractual relationship, (2) the defendant committed a malicious and intentional

act that prevented the relationship from occurring, with the purpose of harming the plaint iff, (3) the

defendant lacked privilege or justification to do the act, and (4) actual harm or damage resulted from

the defendant’s interference. See Thrift v. Hubbard

, 44 F.3d 348, 356-57 (5th Cir. 1995) (citing

Exxon Corp. v. Allsup , 808 S.W.2d 648, 659 (Tex. App.—Corpus Christi 1991, writ denied).

Gaia argues that the defendants’ torti ous conduct consisted of (1) the corporate defendants’

marketing and use of the disputed technology, and (2) the corporate defendants’ filing of a lawsuit-19-

in Oklahoma. However, Gaia fails to cite any evidence that the corporate defendants acted

malicio usly, as is required by the second element of torti ous interference with prospective contractual

relations. Indeed, Gaia does not even address the issue of malice in its appellate brief. It contends,

mistakenly, that it need only establish that the defendants’ interference was “willful and intentional.”

Although this argument is correct for tortious interference with existing contracts, it is not correct

f o r tortious interference with prospective contracts, which is the basis for the jury’s finding in this

case. S ee Thrift

, 44 F.3d at 357 (“The se t wo t o rts differ primarily in that interference with

prospective relations requires the plaint iffs to prove both t hat they had a reasonable probability of

obtaining a contract and that the defendant acted with malice.”) (footnote omitted).

The evidence that Gaia cites is insufficient to establish malice for purposes of tortious

interference with pros pect ive co ntractual relations. An act is deemed malicious if it is “done

intentionally without just cause or excuse.” Allsup , 808 S.W.2d at 659; see also RRR Farms, Ltd.

v. American Horse Protection Ass’n , 957 S.W.2d 121, 131 n.6 (Tex. App.—Houston [14th Dist.]

1997, writ denied). To establish that a defendant acted intentionally, the plaintiff must prove, at the

very least, that the defendant “had knowledge of the prospective contractual relationship he was

accused of blocking.” V

erkin v. Melroy

, 699 F.2d 729, 732 (5th Cir. 1983). As to Gaia’s allegation

that the corporate defendants’ use of the technology interfered with its prospective contracts, there

is no evidence that the defendants were even aware of any prospective contracts involving Gaia at

the time Gaia filed its lawsuit. Gaia argues that the corporate defendants’ contact with Gaia’s

prospective customers proves that the corporate def endants knew about Gaia’s potential

relationships. Assuming that the evidence establishes such contact, the record contains no evidence

that the corporate defendants thereby learned of Gaia’s potential contractual relationshi ps.16 Retek was also a plaintiff in the Oklahoma lawsuit.

-20- Furthermore, there is no evidence that the corporate defendants used the disputed technology with

the intent of thwarting Gaia’s prospective contracts.

As to the Oklahoma lawsuit, Gaia provides no evidence that the defendants acted with malice

towards Gaia. Retex 1 6 filed the Oklahoma lawsuit many months after Gaia filed the present lawsuit.

Retex did not sue Gaia, nor does Retex’s complaint mention Gaia or Banstar. Retex did, however,

sue certain individuals and corporati ons (“Oklahoma defendants”), who were either involved with or

were allegedly negotiating with Gaia. In the Oklahoma lawsuit, Retex alleged that various Oklahoma

defendants had breached confidentiality agreements with Retex invo lving Retex’s technology. Retex

also alleg ed that the Oklahoma defendants had defamed Retex by stating falsely that Retex had

misappropriated certain technology and that Retex was infringing on a patent owned by some of the

Oklahoma defendants.

Gaia has failed even to argue that the Oklahoma lawsuit was filed “without just cause or

excuse,” as is required for a finding of malice. R RR Farms

, 957 S.W .2d at 131 n.6; Allsup

, 808

S.W.2d at 659. Gaia merely states in its brief, without citation to the evidence, that “the Appellants’

lawsuit was calculated to interfere and succe eded in doing so.” This conclusory allegation is not

competent evidence. S ee Douglass v. United Servs. Auto. Ass’n

, 79 F.3d 1415, 1429 (5th Cir. 1996)

(en banc). Even if it were, it would fail to establish that the corporate defendants acted without cause

or excuse.

Indeed, Gaia cites no evidence in the record sufficient to support a finding that Retex filed the

Oklahoma lawsuit malicio usly. The record contains no evidence that the confidentiality agreements

on which the Oklahoma lawsuit was based were invalid or otherwise unenforceable. As to Retex’s-21-

defamation claims in the Oklahoma lawsuit, Gaia presents no evidence that Retex made such claims

witho ut cause o r excuse. Gaia does not assert, for example, that the Oklahoma defendants never

made the defamatory statements alleged by Retex. In sum, Gaia presents insufficient evidence that

Retex acted with malice towards Gaia in filing the Oklahoma lawsuit.

V

Accordingly, we reverse the judgment of the district court and render judgment in favor of

the defendants.

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April 28, 2004 (1:37pm)