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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

MEGATEL HOMES, LLC, and ZACH 

IPOUR,

Plaintiffs/CounterDefendants,

v.

CRYSTAL LAGOONS U.S. CORP.,

Defendant/Counter-Plaintiff.

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Civil Action No. 3:22-CV-1715-X

MEMORANDUM OPINION AND ORDER

Crystal Lagoons U.S. Corp. (“Crystal Lagoons”) sells technology that aids in 

the construction of man-made lagoons for swimming and watersports. Megatel 

Homes, LLC—a Dallas-based developer—and its president, Zach Ipour (collectively 

“Megatel”), initially considered licensing Crystal Lagoons’s technology for use in their 

residential developments. But once negotiations failed, Megatel pursued the lagoon 

concept with another contractor. Megatel sued for declaratory relief, and Crystal 

Lagoons counterclaimed, alleging breach of contract and misappropriation of Crystal 

Lagoon’s name, image, and trademarks. Megatel now moves to dismiss that 

misappropriation claim. [Doc. 15]. For the following reasons, the Court GRANTS

that motion and DISMISSES WITHOUT PREJUDICE Crystal Lagoons’s 

misappropriation claim against Megatel.

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I. Factual Background

Megatel is a Texas homebuilder. Crystal Lagoons has developed and patented 

technologies for lagoon construction, including systems for water treatment, bottom 

cleaning, filtration, and disinfection. In July 2020, Megatel and Crystal Lagoons 

began discussing the possibility of Megatel’s licensing Crystal Lagoons’s technology 

for its developments. Megatel and Crystal Lagoons signed a non-disclosure 

agreement (“NDA”), which prohibited both parties from using “confidential 

information,” including “products of [Crystal Lagoons.]”1 The NDA also prohibited 

the use of Crystal Lagoons’s name or trademarks without the corporation’s 

authorization.

After months of negotiations, Megatel took its business elsewhere. Suspicious 

that Megatel had violated the NDA, Crystal Lagoons sought pre-suit discovery in 

state court. According to Crystal Lagoons’s state-court filings, Megatel’s new 

development would include a “crystal lagoon” that was “remarkably similar to [the 

amenities] contemplated under the NDA and which [had] the characteristics of a 

lagoon using Crystal Lagoons’[s] technology.”2 The state court partially granted that 

discovery.

Megatel then sued in this Court seeking a declaration that it had not breached 

the NDA. In response, Crystal Lagoons brought counterclaims for breach of contract 

1

 Doc. 9-1 at 2.

2

 Doc. 9-2 at 6.

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and misappropriation of its name, image, and trademarks. Megatel now moves to 

dismiss the misappropriation claim.

II. Legal Standard

Under Federal Rule of Civil Procedure 12(b)(6), the Court evaluates the 

pleadings by “accepting all well-pleaded facts as true and viewing those facts in the 

light most favorable to the plaintiff.”3 To survive a motion to dismiss, “a complaint 

must contain sufficient factual matter, accepted as true, to state a claim to relief that 

is plausible on its face.”4 A claim is facially plausible “when the plaintiff pleads 

factual content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.”5

III. Analysis

To prove common law misappropriation in Texas, a plaintiff must show “(i) the 

creation of plaintiff’s product through extensive time, labor, skill and money, (ii) the 

defendant’s use of that product in competition with the plaintiff, thereby gaining a 

special advantage in that competition (i.e., a ‘free ride’) because defendant is 

burdened with little or none of the expense incurred by the plaintiff, and 

(iii) commercial damage to the plaintiff.”6 Megatel challenges that first element.

3 See Stokes v. Gann, 498 F.3d 483, 484 (5th Cir. 2007) (per curiam).

4 Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (cleaned up).

5 Id.

6 Dresser-Rand Co. v. Virtual Automation Inc., 361 F.3d 831, 839 (5th Cir. 2004) (cleaned up).

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For that first element, Crystal Lagoons defines its allegedly misappropriated 

“product” as its “name, image, and trademarks.”7 Here’s the problem with that 

statement: Although a plaintiff may bring a common law misappropriation claim 

“when the plaintiff creates a valuable ‘thing’ that the defendant has ‘appropriated’ at 

little cost,”8 there’s a catch. “The ‘thing’ that the plaintiff seeks to protect must not 

otherwise be protected by another theory of recovery . . . such as trademark 

infringement.”9 Unsurprisingly, then, “numerous [] courts have rejected the theory 

of misappropriation of a trademark under [Texas] common law,” as well as claims for 

misappropriation of “name or likeness.”10 The Court agrees. Crystal Lagoons may 

not masquerade a trademark-infringement claim as a misappropriation claim.

Crystal Lagoons raises one primary objection. It notes the general idea that 

“Texas misappropriation law is specially designed to protect the labor—the so-called 

7

 Doc. 10 at 22.

8 Jim S. Adler, P.C. v. Angel L. Reyes & Assocs. PC, No. 3:19-CV-2027-K-BN, 2020 WL 5099596, 

at *12 (N.D. Tex. Aug. 7, 2020) (Horan, M.J.), report and recommendation adopted, No. 3:19-CV-2027-

K-BN, 2020 WL 5094678 (N.D. Tex. Aug. 29, 2020) (Kinkeade, J.).

9 Id. (emphasis added).

10 Id.; accord Buc-ee’s, Ltd. v. Shepherd Retail, Inc, No. 15-CV-3704, 2017 WL 6387799, at *12 

(S.D. Tex. July 21, 2017) (“The leading treatise on trademark and unfair competition law cautions 

against finding a cause of action for misappropriation based on alleged trademark violations.”), report 

and recommendation adopted in part, rejected in part on other grounds sub nom. Buc-ee’s, Ltd. v. 

Panjwani, No. 4:15-CV-03704, 2017 WL 4221461 (S.D. Tex. Sept. 21, 2017); Pennell v. Triton Media, 

LLC, No. A-12-CA-706-SS, 2013 WL 12131202, at *3 (W.D. Tex. Jan. 10, 2013) (dismissing a common 

law misappropriation claim for not alleging an “independent misappropriation cause of action” from 

“a claim for unfair competition under trademark law”); Opportune LLP v. Oportun, Inc., No. H-18-7, 

2018 WL 8755511, at *3 (S.D. Tex. Apr. 24, 2018) (“Plaintiff cites no authority at variance with the 

broad consensus that the mere misuse of a trademark is insufficient to state a claim for 

misappropriation. Because Plaintiff does not allege that Defendants misappropriated any product 

other than Plaintiff’s trademarks, Defendants are entitled to dismissal of Plaintiff’s misappropriation 

claim.”); Festive Farm Co. v. BE Creations and Designs, Inc., 6:22-CV-0994-ADA-JCM, 2023 WL 

3662661, at *4 (W.D. Tex. May 9, 2023) (“Because Plaintiff’s claim of common law misappropriation 

more closely resembles a claim for trademark misappropriation, Defendant’s motion to Dismiss . . . 

should be granted.”), report and recommendation adopted, 2023 WL 3656943 (W.D. Tex. May 24, 2023).

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‘sweat equity’—that goes into creating a work.”11 Because of “the work that Crystal 

Lagoons expended to develop the innovative technology for its lagoon amenities,” 

Crystal Lagoons contends that it has sufficiently alleged a product under Texas law.12 

There are two problems with that theory.

First, it’s a non-sequitur. The amount of sweat equity Crystal Lagoons put into 

its technology is neither here nor there. That does nothing to rebut the fact that 

Crystal Lagoons alleges misappropriation of trademark, and courts have refused to 

recognize such a cause of action. Tellingly, Crystal Lagoons can’t point to any Fifth 

Circuit or Texas precedent recognizing a claim for common law trademark 

misappropriation.13 Without any such authority, the Court must follow the wellreasoned opinions declining to find such a claim.

Second, Crystal Lagoons plays a shell game. For instance, in defining the 

product at issue, Crystal Lagoons’s briefing refers to the “technology” that it has 

“developed . . . over several years.”14 Although that product might not constitute a 

trademark, Crystal Lagoons’s complaint doesn’t appear to allege a misappropriation 

claim over that product. Instead, Crystal Lagoons’s complaint describes the product

that Megatel allegedly misappropriated as its “name, image, and trademarks.”15 The 

11 Dresser-Rand, 361 F.3d at 839 (cleaned up).

12 Doc. 19 at 6.

13 Cf. Avanti Sales Intern., Inc. v. Pycosa Chemicals, Inc., No. 01-04-00983-CV, 2005 WL 

2670740, at *7 (Tex. App.—Houston [1st Dist.] Oct. 20, 2005, no pet.) (“Avanti pled unfair competition 

based on trademark infringement and misappropriation. However, the instruction supporting Avanti's 

proposed jury question for unfair competition included only trademark infringement as a basis for 

liability.”).

14 Doc. 19 at 6.

15 Doc. 10 at 22.

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shell game won’t hornswoggle the Court. If Crystal Lagoons wishes to base its 

misappropriation claim on its technology, it may attempt to do so. But it may not 

make a misappropriation claim based on its trademark.

IV. Conclusion

For the foregoing reasons, the Court DISMISSES WITHOUT PREJUDICE

Crystal Lagoons’s common law misappropriation claim against Megatel. Crystal 

Lagoons may file an amended complaint within 28 days defining an allegedly 

misappropriated “product” that is not a trademark.

IT IS SO ORDERED this 10th day of August, 2023.

___________________________________

BRANTLEY STARR

UNITED STATES DISTRICT JUDGE

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