### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03
- 20
- 00564
- CV

Scientific Machine & Welding, Inc. , Appellant

v. Kevin Rose , Appellee

FROM THE 419TH DISTRICT COURT OF TRAVIS COUNTY NO. D
- 1
- GN
- 18
- 005034 , THE HONORABLE DUSTIN M. HOWELL , JUDGE P RESIDING

M E M O R A N D U M O P I N I O N
Scientific Machine & Welding, Inc. (Scientific) appeals from the trial court ’ s order granting Kevin Rose ’ s motion f or summary judgment on Sc ientific ’ s claims arising from alleged theft o f trade secrets

. F o r the following reasons, we will affirm the trial court ’ s order.

BACKGROUND Scientific d esigns and manufactures custom equipment and specialty machine parts for o t her companies. Rose is a former employee and officer of Scie ntifi c . In August 2018,
S cie n tific filed suit against Ros e, a lleging that he improperly r eleased design s and other proprietary i nformation to FlashParki ng.

Scientific alleges that , a s its employee, Ros e ’ s “ primary function was to both develop manufacturing drawings /blueprints for S cientific to manufacture the nece ssary products

an d to facilitate orders of the prod ucts from [Scientific ’ s] clients. ” O n e of Rose ’ s principal duties
was to “ se rvice ” FlashParking , for which Scientific des igned and produced “ smart stations , ” i.e.,2

k iosks for the processing of paym ents a t parking l ots

. Sc ientific alleges that in 2017, it e ntered into an agreement with FlashP arking that “ pre cluded the delivery of [S cientific ’ s] design work for the smart stations until FlashParking tende red all requi re d pay m ent s. ”

On May 1, 2018, Rose ceased empl oyment with Scientific and “ immediatel y began working for FlashParking as a se n ior officer. ” Shortly a fter , he “ imp roperly released to [ FlashParking ] design work related to the smar t stations . . . in violation of the contract bet ween the two companies. ” When he left Sc ientific, Rose “ had in his posses sion a number of the original manufac turer drawings and design work from Scientific with regards to the smart stations and other p rod ucts, as well as vendor lis ts and other pr op rietary in formation. ” Since leaving Scientific, Rose allegedly “ has used Scien tific ’ s trade secrets [ 1 ] for the purpose of manufacturing and selling smart stations and other produc ts, in competitio n with Scient ific

. ”

Scientific asserted ca u s es of ac tio n ag ainst Rose for violating the Texas Uniform Trade Secrets Act (TUTSA), see Te x. Civ. Prac. & Rem. Code § § 134 A .001

– .008 ; breach of
contract ; breach of an “ implied contract of confidentia lity ” ; and breach of fiduci ary duties. After

answe ring th e l awsuit and counterclaiming for attorney ’ s fees, Rose filed a hybrid tradition al and

no - e viden ce motion for summary judgment as to all of Scientific ’ s claims. S cientific filed a

no - evidence cross - mot ion for summary judgment as to Rose ’ s claim for att orn ey ’ s fees. After a hearing on both motio ns an d the parties ’ respective evidentiary objections , the trial court

1 The trade secr ets that S c ientific specifically identified in its live pleading are the

“ manufac turi ng drawings and de sign work ” for the smart stations

. While S cientific alleges that when he ceased employment with Scienti fic, Rose to ok with hi m “ ve nd or lists ” and “ design work ” for unspecified “ other products , ” it does not specifically allege that th ose items a re trade secre ts. Therefore, we use the ter m “ drawings ” to mean the “ manufacturing dr awings and desig n work ” for the s ma rt stat ions ( the info rmation underlying the bulk of Sc i entific ’ s allegations) ; the g eneral term “ design work ” to refer to any drawings and related work product that Sci entific p er formed for any customer ; and the term “ information at issu e ” to encompass the drawings, desig n wor

k, a nd customer and vendor lists

.3

overruled each part y ’ s evi d entiary objections , granted Scienti fic ’ s motion as to Rose ’ s attorney ’ s fees, and granted Ro se ’ s motion as to each o f S cientif ic ’ s cl aims without specifying the grounds for the summary judgment . Scie ntific perfected this appeal.

DISCUSSION Scientific contend s that the trial court erred in granting Rose ’ s motion for summary judgment as to eac h of Scientific ’ s claims. 2

TUTSA clai m In his summar y - judgment motion, Rose argued that he was entitled to judgment as a matter of law on Scientific ’ s TUTSA claim because (1) Scientific i s not a current “ owner ” of the drawings an d thus lacked standing , see id. § 134A. 002( 3

- a) (d e fining “ owner ” ) ; (2) the drawings are not a “ trade secret ” because they could h ave been acquired by “ pro per means ” through reverse engineering, see id. § 134A.002 (4), (6) (defining “ proper means ” and “ trade
secret , ” respectiv ely ) ; (3) Scienti fi c failed to undertake “ reasonable measures ” to keep the information at issue secret , see id. § 134A.002(6) (A) ; and (4) Scientific waived the trade

- secret status of the drawings b y producing them during discovery without designating them

“ confidential ” or o therwise see king to keep them secret under the operative protective order

. Because we conclude that traditional summary judgment on the TUTSA claim was proper under the third ground of failure to take reasonable measures to keep the information secret , we address

on ly that one. See Tex. R. Civ. P. 166a(c) ; Tex. R. App. P. 47.1

.

TUTS A defines a “ trade secret ” as

2 Because the standar d of review applying to summary judgments is we ll

- established , we do not recite it here

. See Valence O perating Co. v. Dorsett , 164 S.W.3d 656, 661 (Tex. 2005) ; see also Tex. R. Civ. P. 166a(c), (i)

.4

a ll forms and types of informa tion, including business, s cientific, technical, eco nomic, o r engin eering information, and any formula, des ig n, pr ototype, patt e r n, plan, compilation, program devic e, program, code, device, method , technique, process, proced ure, financial data, or list of a ctual or p ot ential customers or suppliers, whether t angi ble or intangible and whether or how stored, comp iled, or memorialized physically, electronical ly, graphically, photographically, or in wri ting if: (A) t he owner of the tr ade secret has t aken reasonable m easures under the circumstances to keep the informat ion secr et; and (B) t he information derives independent value, ac tual or p oten tial, fr om not being generally known to, and not being readily ascert ainable through proper means by, another person who can obtai n economic value f ro m the disclosure or use of the i nfor mati on.

Tex. Civ. Prac. & Rem . Code § 134A.002 (6). Rose argued in his summary - judgment motion that the inf

ormation at is sue do es not meet the definition of a trade secre t because d iscovery had

reve aled that Scientific made no effort s

— much less “ reasonable efforts ”

— to keep the information secret , evidenced by th e following: (1 ) the deposition of Alan Ba sta, Scien tific ’ s owner and pre sident, in which he averred that all work product related to th e company ’ s projects

was available to all of Scientific ’ s employees at all times and w as not pas sword

- protected , and his o wn work ema il account (which he used to correspond with customers) and the company ’ s vendor lists were a l so not password

- protected ; 3 (2) correspondence demonstrating that thi rd

party vendors we re provided the drawings without any restrictions , such as no n - disclosure agreements ; (3) Ro s e ’ s aff idavit st ating that after he informed B a sta he w ould be leaving Scientific ’ s empl oy to work for FlashParking, Basta allowed Rose to continue working for three days , during which time Rose had “ full a ccess ” to the desi gn work for t he smart station s , related

3 In response to depositio n question s about what effo rt s Scien tific took to keep its alleged trade secrets conf

idential, Basta respon ded t hat the company did “ the us ual stuff ” but could not articulate any spe cific measures it took, i nstead stating that he e xpected he could “ re ly on ” Rose and other employees to protec t the information.5

accessories , and “ every other product ” for any of Sc ientific ’ s clients, as well as cu stomer and vendor l ists ; and (4) despite having the opportunity under a protective order to de signate the drawing s as “ confide ntial ” during this litigation, Scientifi c failed to do so and produced them without such des ignation

. S ee Baxter & Ass ocs . , L .L.C. v. D & D Elevators, Inc. , No. 05

- 16

- 00330

- CV, 2017 WL 604043, at *10 (T ex. App.

— Dallas Feb. 15, 2017, no pet.) (mem. op. ) ( conclu ding that evi dence was legally in sufficient to show t hat information was “ the subject o f any efforts to maintain its secre cy ” where employer failed to have employees sign no n - comp ete agreements, did not label information as “ confidential ” or “ proprietary , ” and did n ot protect information through passwords or encryption)

.

In its response , Scientifi c identified the following as evid ence of the “ reasonable

mea sures ” it took to keep the information at issue secret: (1) an “ Employee Traini ng Attendance
Reco rd ” that Rose an d othe r employees signed acknowledgin g their attendance at a tra ining

s ession , to which was appended a two

- pag e memo entitled “ Compliance With the Qu ality Management System ” ; (2) a statemen t in Bast a ’ s affidavit that he ha d instructed then

- employee
Rose “ n ot to remove any schematics/blue prin ts and instructions ” from Scientif ic ’ s site , that Rose had “ agr eed ” not to remove them or disclose them to others, and that Basta informed Rose that “ such do cuments were confidential ” ; a nd (3) a letter o f intent (LOI) t hat Ro se signed on behalf of Scientif

ic , which gave FlashParking the “ e xclusive ” right to the drawi ngs after its purchase of 500 s mart s t a tions but purportedly “ precluded ” transfer of the drawings until afte r that purchase

. As to the train ing

- attendance r ecord and attached memo, nothing therein creates a genuine i ssue of material fact as to any measures that S cientific took to keep any information
secret

— it does not me ntion confidentia lity, sec r ecy, privacy, or proprietary information and d oes6

no t address any procedures for safeguarding Scientific ’ s information

. 4 Rather, the memo ad dresses quality

- con trol is sues . As for the L OI, the mere provision therein to which S c ientific points

— that “ all design work p erformed by ” Scientific “ will becom e the exclusive property of [FlashParking] after an agreed upon number of unit s have been purchase d ”

— d oes not create a
genu ine issue of material fact about any reasonable measures that Scientific took to safeguard the secre cy of the drawings

.

Finally, t h e state ments in Basta ’ s affidavit that h e i nformed Rose that

“ schematics/blue prints a nd instructions for any co mponents ” of products for all cus tomers were

“ confidential ” and that he was not to remove them from Scientific ’ s site do not create a genuine is sue of material fact about whether Scientific took reasonabl e measures to keep any inf ormation
secret , in light o f Basta ’ s testimony that the i nformation at issue w as av ailable to any employee at any time and w as not password

- protected

. Furthermore , in hi s affid avit Bast a averred that he
i nstructed Rose th at “ when there was a need to send design work ” to vendors , h e should se nd it via email or by hard copy , albeit with “ as limited included information as needed

. ” Permitting
Rose to send design work to thir d parti es withou t requiring those parties to keep the information

con fidential is not consi stent with taking r ea sonable measures to safeguard alleged trade se crets. And Sc ien tific cites no evidence of enforceable non - disclos ure agreements it entered into with any party, i ncluding Ros e , and has identified no internal documents designatin g the information at issue a s confid ential. On this record, and viewing the evidence in the light most favorable to
Sc ientific, no reasonable factfinder could conclude that Sci entific took “ reasonable measures

4 The memorandum does state that Scie n tific will e ndeavor to “ saf eguard ” any “ Customer property ”

— that is, protect it from loss or da mage and the like

— but such policy is not re l evant to whether S cientif

ic took measures to safegua rd its ow n trade

- secret or confi dential and proprietary in formation from di s closure t o others

.7

under the circumstances ” to keep the inf ormat ion at issue secret. See Tex. Civ. Prac. & Rem

. Code § 134A.002 (6) ; Baxter & Ass ocs . , 2017 WL 6 04043, at *10 ; see also Buck v. Palmer , 381 S. W.3d 525, 527 (Tex. 2012) ( “ Und ispu ted evidence may be co nclusive of the absence of a material fact issue , but only if reas onable people cou ld not differ in their conclusions as to that evi dence. ” ) ; cf. Snowhite Text ile & Furnishings , Inc. v. Innvision Hospitality, Inc. , No. 05

- 18

- 01447 , 20 20 WL 7332677 , at * 7 (Tex. App.

— Dallas D e c. 14, 2020, no pet.) (mem. op.) ( determining t hat company ’ s req uir ing employees to sign non - disclosure agreements and limiting employee s ’ access to password

- protected software that ran on internal network and w as l oaded only on internal computers constituted legally suff icient evidence of reasonable m easures to keep
i nformation secret )

. We overrule S cientific ’ s first issue.

Breach
- of

- fidu ciary
- duty claim
As to Scientific ’s breach

- of

- fiduciar y - duty claim, Ro se a sserted that h e was entitled to summary judgment as a matter of law because the claim is pree mpted by TUTSA ,

see T ex. Civ. Prac . & Rem. Code § 1 34 A.007 , and that, in any event, Scientific produced no evidence of any of the el ements of its claim , s ee T e x. R. Civ. P. 166a (i) ; see also Fi rst United
P entecostal Church of Beaumont v. Parker , 514 S.W.3d 214, 2 20 (Tex. 2017) (l isti ng el ements of claim for b reac h of fiduciary duty). We will address Rose ’ s no - evidence cha llenge first. See Ford Motor C o. v. Ridgway , 135 S

. W.3d 5 98, 600 (Tex . 2004).

To support its claim, Sc ientific identifies evidence of the following act ionable conduct of Ro se: (1) he released the drawin gs to FlashParking , (2) he solicited vendors of Scientific both while an employee and afterward s , and (3) he removed cust omer an d vendor
li sts from Scientific

. However, as to each of these alleged acts, w e co nclude that no - evidence8

s ummary judgment was proper because Scientific did not come fort h wit h legally sufficien t evidence of any damages proxim atel y caused by such con duct

. See Tex. R. Civ. P. 166a (i);
M erriman v. XTO Energy, Inc. , 407 S.W.3d 244, 248 (T ex. 201 3). The only ev idence Scientific

o ffered in support of damages is that it spent time and r esources on the smart

- station design w ork for Flas hParking , that the v alue of such work was o ver $100,000 , and that Rose testified that the
cost to reverse engineer th e de sign work would be $4,225. 5 W e first conclude that such evidence is not relev ant to Rose ’ s alleged solicitation of vendors and a ppropr i at ion o f customer a nd vendor lists and does not, therefore, constitute legally sufficient ev idence to support damage s as to such conduct

.

As to Ro se ’ s alleged disclosure of the drawings to F lashParking , Scient ific ’ s business records attached to its re sp onse to Rose ’ s summa ry - judgment motion show that FlashParking ultimate ly purchase d the requisite 500 units (within a few months of Rose leaving Scientific ’ s employ) and, therefore

— pu rsuant to the LOI

— the drawings became F lashParking ’ s exclusive property. Because Scientific a nd FlashParking agreed that the drawings would bec ome Fl ashParking ’ s exclusive propert y upon a condition that did, in fact, occur, Scientific ’ s citation
to the am ount it spent on the desig n work , without more, does not constitute le gall y suffic ient evidenc e of any damages it incurred because such costs we re necessarily co ntemplated by the LOI and the parties ’ ne gotiation thereof

. In other words, Scientific incurre d those costs

5 I n his af

fid avit, Rose averred that Scientific ’ s design work for the smart stations it produced for FlashPa rking began with Flash Parking prov iding Sc ie ntifi c a “ life size ” m odel of the kiosk “ made out of plywood and par ticle board ”

— a “ sim pl e , wooden box with holes for the at tachment of component pieces

. ” Then, “ [t ] o pro duce the fabrication and ass emb ly drawing s, ” Scientific ’ s staff (oversee n by Rose) “ made v isual obs ervations and took measurements ” of the wooden prototype and entered the mea surements into a compute r - aided design

- and

- drafting (CADD) program. S cient ific did n ot controvert this evidence of the or igin of the smart

- stat ion design

.9

because of the LOI and FlashParking ’ s purcha se of smart

- stat ion uni ts, not beca use of Rose ’ s alleged acts. Acco rdingly, th e trial court prop e rly granted no - evidence summary judgment on Scientific ’ s cl aim for breach of f iduc iary duty

.

B reach
- of

- contract claim
I n his summary -

jud gment motion, Rose asserted that Scientifi c could prod uce no evidence of any of the four ele ments o f i ts breach

- of

- c ontract claim. See USAA Tex. Lloy ds Co. v. Menchaca , 545 S.W.3d 479, 502 n. 21 (Tex. 2018) ( list ing elements )

. We agree that there is no evidence of the first element (the existen ce of a valid contract) and therefore address only
t hat one . As evidence of a valid contract, Scientific cites the follo wing items attached t o its
summary - judgment r esponse : (1 ) the “ E mployee Trainin g Attendance Record , ” which Scienti fic calls a n “ Employ me nt Agreement ” ; (2) Basta ’ s affidavit , allegedly confir ming an oral con tr act between Rose and Scientific regarding the treatment of proprietary information ; and (3) the LOI

. However, these items do not constitute legally sufficient evidence of a valid contr act be tween Rose and Scie ntific.

The training attendance record is merely an a ck nowledgment that Rose signed confirming he had atten ded the qual ity

- control company train ing

. The memo a ppended thereto explains Scientific ’ s commitment to a “ Q u ality Manage ment System ” and expectation that
emp loyees a dhere to it , but it does not contain any mutual promises ex changed between Rose and Scientifi c , not to mention any promise by Rose that he w ould k eep any drawings or other company information secret from people outside the company . C f. Federal S ig n v. Texas S.
Uni v. , 951 S.W.2d 401, 408

– 09 (Tex. 1997) ( explaining that consideratio n, or “ a bargained for10

exchange of promi ses, ” is necessary elem ent of valid contract and that “ [a] co ntract that lacks

con sideration, lacks mutual i ty of oblig ation and is un e nforceable ” ) , superseded by statute as stated in Nazari v. State , 561 S.W.3d 455 (Tex. 2018)

. Acco rdingly, the t raining attend ance record con stitutes no evidence of a v alid contract to support Scienti f ic ’ s claim.
We con clud e similarly as to the cited portions of Basta ’ s affidav it , i n which Basta avers th a t, while Rose was a S cienti f ic employee, Basta “ instructe d ” Rose not to “ remove any

s ch ematics/blue prin ts and instructions ” related to customer p roje cts , and Rose “ agre ed that he

wou ld neither remove ” such info rmation “ nor disc lose any such documents ” to others. We disagree wit h Sc ien tific that such testimony e vidence s an enforceable “ oral contract ” betw een Rose and Sc ientific regarding the treatm ent of prop rietar y info rmation for the same reason

we d etermined th e training atte ndance record does not

— the alleged oral con tract lacks consideration. See id. Takin g Basta ’ s averment as true that Rose orally promised not to disclose Scientific ’ s proprietary information , Basta did not promise anything to Rose in exchange.

Finally, t he LOI does not constitute evidence of a valid contract be tween Rose and Scientific f

or the simple rea son tha t it is not a contract between Rose and Scien tific ;

moreove r, it does not contain any mu tual promises or obligations between the two parties. Rath er, to the extent that it c onstitutes an enforceable agreement , the ag reement is be tw een Scientific and KleverLogi c (Flas h Parking ’ s predecessor) , which Rose and Basta signed in the ir

re presen tative capacities for Scientific. The L OI , therefor e, does not c onstitu te any evidence of a valid contract b etween Rose and Scientific to support t he first elemen t of Scientific ’ s claim for breach of contra ct.

Accord ingly, the trial court did not err in gra nting Rose no - evidence summary judgment on S cienti fic ’ s bre ach

- of

- contract claim

.11

Br eac h
- of

- implied
- c ont ract - of
- confid ential ity claim
In his summar y -

judgment motio n, Rose argued that a caus e of action for “ b reach

o f an implied contract of confidenti ality ” does not exist under Texas law because , to the exten t th a t there is a duty to keep an employer ’ s i nformation con fidential , such duty is fiduciary r at her than contr actual in nature. See Mab rey v. SandStrea m, I n c. , 124 S.W.3d 302, 316 (T ex. App.

— Fort Worth 2003, no pet.) ( “ Even apart from any written contrac t, a fiduciary relationship arise s from an employment relationship forbidding an employee from us ing tr ad e secr ets o r confidential or proprietary informati on in a manner a dvers e t o the employer. ” ) ; see also Hy de Corp. v. Huffines , 314 S.W.2d 763, 770 (Tex. 195 8) ( noting that “ in the area of confidential relatio nships, ” party who discloses an other pa rt y ’ s trade secr et or confidential information may be subject to to rt liability apart from breach of a ny express a greement for which party may be
li able )

. Ros e f

urther argued that Scientific wa s attempting to recas t i t s cause of action for breach of fiduc ia r y dut y as a contractu al claim

— dubbing it a claim for breach of an “ im pli ed contract of confidentia l it y ”

— to avoi d preempt ion under TUTSA. Although we did not need to reach the
preem ption issu e in our dis cussion of Scientific ’ s claim for breach of fiduci ar y duty , we agree with Rose that Sci entific may not maintain its cause of action for “ breach of an im plied contra ct of confidentiality ” because Scientific has n ot cited any Texas cases recogn iz ing such cause of action , and we have found non e . 6 Our preced en t dicta tes that this Court should not recognize a

6 Scientific cites Lamons Metal Gasket Co mpany v. Traylo r , 361 S.W.2d 211, 212

– 13 (Tex. App.

— Ho uston 1962 writ ref ’ d n.r.e.) , as support for its content ion that such caus e of action exists, but t h e c ause of action at issue in that case was wrongful interf er ence with contract rights. While in dic ta that court stated, T he law will imply as part of the contract of employment an agreement not to disclose information which th e employee receive s as an incident of his12

new cause of action “ in the first instance. ” Ande rson v. Arch er , 490 S.W.3d 175, 177 (Tex. App.

— Austin 2016) , aff ’ d , 556 S.W.3d 228 (Tex. 201 8). In the absence of reco gniti on by the Supreme Court of Texa s or the legislature, we conclude that a common

- law cause of action for

“ breach of an implied contrac t of confiden tiality ” does n ot exist in Texas. See Hampton v. Equity Tr. Co. , 607 S.W.3d 1, 5 (Tex. App.

— A ustin 2020, pet. denied ) (declining to recognize

n ew comm on - law cause of action for aiding and abet ting fraud ) ; Anderson , 490 S.W.3d at
177 ( declini ng to recognize new cause of action for inter feren ce with in heritance rights)

. Accordingly, the trial court did not er r in granting Rose summary judgment on Sc ie nt ific ’ s claim for breach of an implied co ntract o f confidentia lity.

CO NC L USION We affirm the trial court ’ s summ ary - judgment order

.

____________________ ______________________ Thomas J. Baker , Justice Before Justices B aker, Triana, and Smit h Affirmed Filed: March 23, 2022

employment , if the employ ee knows that his emp loyer desires such information kept secret, or if, under the circumstances, he should have reali zed that secre cy was desir ed, it did not hold that such a cause exists o r base its holding on such statement. Moreover, Sc i entific has no t identif

ied any valid employment contract between it and Rose.