Court Opinion

ID: 13564
Source: CourtListenerOpinion
Date Created: 2010-04-25 06:27:59+00
Date Added: 2024-06-11T13:30:13.870643
License: Public Domain

REVISED
                    UNITED STATES COURT OF APPEALS
                         For the Fifth Circuit

                               No. 96-30173

                           IRVING REINGOLD,

                                                    Plaintiff-Appellant,

                                  VERSUS

                          SWIFTSHIPS, INC.,

                                                     Defendant-Appellee.

           Appeal from the United States District Court
               for the Western District of Louisiana

                           October 16, 1997
Before KING, JOLLY, and DENNIS, Circuit Judges
DENNIS, Circuit Judge:

     Appellant, Irving Reingold, appeals from the district court’s

partial   summary   judgment    dismissing    his   actions   against   the

appellee, Swiftships, Incorporated, under the Louisiana Uniform

Trade Secrets Act and the Louisiana Unfair Trade Practices Act.          We

reverse and remand these actions to the district court.

                                    I.

     We review a district court’s grant of summary judgment de

novo, applying the same standard of review as would the district
court. See, e.g., Melton v. Teachers Ins. & Annuity Ass’n of Am.,

114 F.3d 557, 559 (5th Cir. 1997); Dawkins v. Sears Roebuck and

Co., 109 F.3d 241, 242 (5th Cir. 1997)(citing Cockerhan v. Kerr-

McGee Chem. Corp., 23 F.3d 101, 104 (5th Cir. 1995)).               Summary

judgment is proper only when it appears that there is no genuine

issue of material fact and that the moving party is entitled to

judgment as a matter of law. FED. R. CIV. P. 56(c).              On summary

judgment the inferences to be drawn from the underlying facts

contained in the affidavits, depositions, and exhibits of record

must be viewed in the light most favorable to the party opposing

the motion.     United States v. Diebold, Inc., 369 U.S. 654, 655

(1962).

                                     II.

     Construing the record on summary judgment in the light most

favorable to the nonmoving party, Reingold, we find or infer the

following facts.

     Appellant Irving Reingold purchased a 90 foot portable female

fiberglass    boat   mold   from   Thompson   Industries   of   Titusville,

Florida (“Thompson”) in 1983.        Thompson had constructed the mold

over a period of nine months at a cost of $1 million.           The mold was

cast from a plug, which is a hull turned upside down.           To make such

a mold multiple layers of fiberglass are laid on either side of a

balsa wood core over a plug and the structure is braced externally

with steel piping.      The 90 foot mold built by Thompson was the

largest structure of its kind in the United States at the time of

                                     -2-
its construction.       Thompson used the mold to build two hulls for

fiberglass boats which were sold to customers.

       Swiftships,     Incorporated       (“Swiftships”)     first    contacted

Reingold about purchasing or leasing the mold in 1986.                  At that

time, Swiftships was attempting to secure a contract with the

United States Navy to construct two fiberglass-hulled research

survey vessels (“RSVs”).        Swiftships had never built a fiberglass

hull    and    owned   no   fiberglass    mold   of   its   own.     Swiftships

negotiated the agreement to produce the RSVs between 1986 and 1990.

During that time, Swiftships continued conversations with Reingold

over the terms of a lease or a purchase of the 90 foot mold.

       In October of 1990, Swiftships entered the RSV contract with

the United States Navy.        One week later, Swiftships signed a lease

agreement with Reingold for use of the 90 foot mold.               The five-year

lease provided that Swiftships would pay Reingold $100,000 upon

signing and an additional $145,000 each for the first two vessel

hulls constructed from the mold.            Swiftships also agreed to pay

$20,000 for each additional hull made using the mold or $20,000 per

year for any year in which a hull was not made from the mold.                The

terms of the lease required Swiftships to give advance written

notice each time the mold was used to construct a hull.               At the end

of     the    lease,   Swiftships   was     obligated   to    turn    over   any

modifications of the mold and any plans for such modifications.

       The mold was delivered to Swiftships in November of 1990.

During the course of the lease, Swiftships made two hulls from the

                                      -3-
                                       3
mold and paid Reingold in accordance with the lease.         Swiftships

also used the mold to make a third hull, which Swiftships contends

was merely a thin “test liner.”     Swiftships did not give Reingold

notice or compensation for the third or “test” hull.            In the

meantime, Swiftships secured a second contract with the Government

of Egypt to produce three 110 foot coastal minehunting vessels

(“CMVs”).   Swiftships    hired   Accurate   Fiberglass,   Incorporated

(“Accurate”) to construct a 110 foot mold to be used in building

the hulls for the CMVs.    Swiftships instructed Accurate to use a

portion of the third or “test” hull made from Reingold’s 90 foot

mold in constructing the 110 foot mold.      Accurate incorporated the

first 45 feet of the 90 foot “test” hull into the front portion of

the 110 foot mold.   Reingold contends that Swiftships used his 90

foot mold, without notifying or compensating him, to make the front

40 to 45 feet of a new 110 foot mold for the Egyptian ships and

thereby misappropriated his trade secrets and committed unfair

trade practices.   Swiftships argues, however, that it used the bow

portion of the “test” hull only as construction material that it

reshaped and reformed according to independently derived design

plans to make the new 110 foot mold.         In May of 1994 Swiftships

terminated the lease and returned the 90 foot mold to Reingold.

Swiftships has refused, however, to turn over to Reingold the 90

foot “test” hull or to compensate him for its use.

                                  III.

                                  -4-
                                   4
      Reingold    filed     suit     in   December     of    1994    alleging    that

Swiftships’s     actions       in    making      and   using     the    third    hull

constituted: (1) a breach of contract; (2) conversion; (3) fraud;

(4) negligent misrepresentation; (5) a violation of the Louisiana

Unfair Trade Practices and Consumer Protection Act (“LUTPA”); and

(6)   a   violation    of     the    Louisiana    Uniform      Trade   Secrets    Act

(“LUTSA”).       On   April    20,    1995,     Swiftships     moved   for   summary

judgment on the breach of contract claim, the deceptive trade

practices claim, and the trade secrets claim.                  The district court

denied the motion as premature because sufficient discovery had not

been conducted to properly rule on the motion.                      The court set a

trial date of August 28, 1995.                  At the pre-trial conference,

Swiftships moved for a continuance as it was attempting to procure

documents from the Copyright Office at the Library of Congress

which, it averred, were relevant to its defense on the trade

secrets claim, but had not yet been obtained.                       That motion was

granted.

      Swiftships filed a Supplemental Motion for Summary Judgment on

September 7, 1995. The supplemental motion sought dismissal on the

same grounds as the original summary judgment motion. The district

court granted partial summary judgment and dismissed Reingold’s

claims under the LUTPA and the LUTSA.1             The district court provided

      1
          The district court denied summary judgment as to
Reingold’s claims for breach of contract. Trial has been scheduled
for October 20, 1997.

                                          -5-
                                           5
no statement of reasons in its order.                   The district court then

directed entry of final judgment in favor of Swiftships on the

LUTPA and the LUTSA claims pursuant to Federal Rule of Civil

Procedure 54(b).       Reingold filed this appeal challenging the grant

of   partial    summary      judgment.     In    this   diversity    jurisdiction

lawsuit,   we   look    to    the    law    of   Louisiana    to    determine   the

substantive rights of the parties under both of appellant’s claims.

                                         IV.

                                           A.

      Under the Louisiana Uniform Trade Secrets Act (LUTSA), LA.

R.S. 51:1431-39, a complainant may recover damages for the actual

loss caused by the misappropriation of a trade secret. Id. § 1433.

In order to recover damages, a complainant must prove (a) the

existence of a trade secret, Pontchartrain Med. Labs. Inc. v. Roche

Biomedical Labs. Inc., 667 So. 2d 1086, 1090 (La. Ct. App. 1st Cir.

1996); Engineered Mechanical Serv., Inc. v. Langlois, 464 So. 2d
329, 333 (La. Ct. App. 1st Cir. 1984), (b) a misappropriation of

the trade secret by another, and (c) the actual loss caused by the

misappropriation. LA. R.S. 51:1431, 1433.                 The LUTSA adopts the

Uniform Trade Secrets Act (UTSA) definitions of “trade secret” and

“misappropriation,” in pertinent parts, as follows:

                                    Trade secret

      “Trade secret” means information, including a formula,
      pattern, compilation, program, device, method, technique,
      or process, that:

                                         -6-
                                          6
          (a) derives independent economic value, actual or
     potential, from not being generally known to and not
     being readily ascertainable by proper means by other
     persons who can obtain economic value from its disclosure
     or use, and
          (b) is the subject of efforts that are reasonable
     under the circumstances to maintain its secrecy. Id. §
     1431(4)(a),(b).

                         Misappropriation
     “Misappropriation” means . . . use of a trade secret of
     another without express or implied consent by a person
     who:
          (i) used improper means to acquire knowledge of the
     trade secret; or
          (ii) at the time of disclosure or use, knew or had
     reason to know that his knowledge of the trade secret
     was:
               . . .
               (bb) acquired under circumstances giving rise
          to a duty to maintain its secrecy or limit its
          use[.] Id. § 1431 (2)(b).
A complete catalogue of the means which are “improper” for a person

to acquire knowledge of the trade secret is not possible, but

Section   1431(1)   includes   a   partial   listing:   “theft,   bribery,

misrepresentation, breach, or inducement of breach of a duty to

maintain secrecy, or espionage through electronic or other means.”

Id.; see also United Group of Nat’l Paper Distr., Inc. v. Vinson,

666 So. 2d 1338, 1345 (La. Ct. App. 2d Cir. 1996); Pontchartrain

Med. Labs, 677 So. 2d at 1091;      Sheets v. Yamaha Motors Corp., 849

                                    -7-
                                     7
F.2d 179, 183 (5th Cir. 1988);           Vault Corp. v. Quaid Software Ltd.,

655 F. Supp. 750, 763 (E.D. La. 1987), aff’d on other grounds, 847
F.2d 255 (5th Cir. 1988).

      As the moving party, appellee Swiftships has the initial

burden of demonstrating that the Rule 56(c) test--“no genuine issue

as to any material fact”--is satisfied and that it is entitled to

judgment as a matter of law.             Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986); Higginbotham v. State Farm Mutual Auto. Ins. Co.,

103 F.3d 456, 458 (5th Cir. 1997); 10A CHARLES ALAN WRIGHT & ARTHUR R.

MILLER, FEDERAL PRACTICE   AND   PROCEDURE § 2727 (2d ed. 1983 & Supp. 1997).

In support of its motion for summary judgment Swiftships sought to

show that it had not misappropriated Reingold’s 90 foot ship mold.

Specifically, Swiftships attempted to demonstrate that, contrary to

Reingold’s    allegations,         it   had    not   improperly    used   part   of

Reingold’s 90 foot mold to develop a new 110 foot mold but that it

had independently designed and built its 110 foot ship mold.

      In support of its motion, Swiftships filed the affidavit of

its executive vice president, Calvin Le Leux.                 Le Leux stated that

his company used Reingold’s 90 foot ship mold only twice to build

two RSVs for the United States Navy and paid Reingold each time

pursuant to the lease.            However, in connection with building the

RSVs, Le Leux said, a thin “test liner” had been laid inside the 90

foot mold to show the Navy that Swiftships had the capability of

properly     laying   and        removing      an    intact    fiberglass   hull.

Afterwards, the “test liner” was partly used as scrap material and

                                         -8-
                                          8
partly discarded, he said.          Under a different contract with the

Government of Egypt, Swiftships needed a 110 foot ship mold to

construct three 110 foot coastal minehunter vessel (CMV) hulls. Le

Leux stated that a new 110 foot mold was designed based on a

Swedish   Navy     hull    having     a     different      size,    shape,     and

characteristics than Reingold’s 90 foot mold.                  Le Leux conceded

that Swiftships instructed Accurate Fiberglass, Incorporated, its

subcontractor, “to use approximately 40 feet of the bow portion of

the scrap 90 ft. liner as structural material to save time in the

construction process of the new 110 ft. mold.”                He added, however,

that “in order to be used as structural material for the new 110

ft. mold, the form and shape of approximately 40 ft. of the forward

portion of the 90 ft. scrap liner had to be altered and changed.”

According to Le Leux, the remaining approximately 50 feet of the 90

foot “scrap liner” was discarded; the 110 foot mold was constructed

from June, 1992 through October, 1992; Swiftships has made three

110 foot fiberglass CMV hulls from the 110 foot mold for Egypt; the

90 foot mold was returned to Reingold after it was used to build

the two RSVs for the United States Navy.

     In opposition to Swiftships’s motion for summary judgment,

Reingold filed     the    affidavit   of     William     G.   Preston,   a    naval

architect,   and    the    deposition       of   Billy    Wayne    Sproles,    the

individual at Accurate Fiberglass, Incorporated charged with making

the 110 foot mold.

                                      -9-
                                       9
       Preston stated that he had been retained as an expert in naval

architecture       by   Reingold,       he   had    inspected      the   “90'      female

fiberglass mold, a 110' male mold, and design documents relating to

the    90'   vessel     hulls    and    110'     vessel    hulls     constructed       by

Swiftships.”       Preston concluded that “the shape and dimensions of

the first 40-45 feet of both molds are very similar and I believe

it    very likely       that    the   110'   mold    is    derived   from     or    is a

modification of the 90' mold.”               Preston further stated that “the

design document produced by Swiftships . . . is not the correct

design drawing for the 110' mold.              The bow portion depicted in the

drawing has a much more rounded shape than observed on the 110'

mold.”

       In    his   deposition,        Sproles,     the    individual     at   Accurate

Fiberglass, Incorporated charged with making the 110 foot mold,

stated that he was told by Swiftships to use the 40 to 45 forward

portion of the 90 foot plug or test liner to form the forward

section of the new 110 foot ship hull mold; that the forward

portion of the 90 foot plug “became the hundred-and-ten-foot mold”;

that the naval architects at Swiftships told him it was                            “not a

prerequisite that the finished product match the dimensions that

they had.      They said, ‘Fair it in. Make it look right;’” that in

doing so he changed a portion of the forward section of the 90 foot

plug two or three inches at the start of the keel or the forward

forefoot area; and that the bracing inside the 90 foot plug was

intended for a purpose other than a test because “it was pretty

                                         -10-
                                          10
substantial and it wasn’t something that you would look at and

consider it to be a piece of junk or something you were just going

to build and throw away.”

       We conclude that Swiftships’s summary judgment evidence does

not demonstrate an absence of genuine dispute as to the material

fact   of   whether    Swiftships        improperly     used   and   substantially

incorporated Reingold’s 90 foot mold as the front end of its new

110 foot ship mold.            On the contrary, Le Leux admitted that

Swiftships used approximately 40 feet of the bow portion of the 90

foot plug taken from Reingold’s 90 foot mold in the new 110 foot

mold, although he contended that the bow section’s shape and form

were altered in the process.               Preston presented evidence that

tended to show that, contrary to Swiftships’s assertion,                     the 110

foot   mold   had     not    been    independently      developed     from   design

drawings, but had been derived from or was a modification of the

hull or plug taken from the 90 foot mold.                  Sproles’s deposition

indicated that Swiftships had never intended to scrap the 90 foot

plug pulled from Reingold’s 90 foot mold, and that, after minor

repairs and slight changes, the front 40 to 45 feet of the plug

pulled from Reingold’s 90 foot mold became the bow portion of the

new 110 foot mold.

       Reading   the   record       in   the    light   most   favorable     to   the

nonmoving     party,    we    conclude      that    Reingold    established       the

essential elements of his trade secret claim, viz., the existence

                                         -11-
                                          11
of a trade secret; the misappropriation of it by Swiftships; and

the actual loss to Reingold caused by the misappropriation.

     For purposes of testing the summary judgment motion, the

record shows that Reingold’s ship mold was a trade secret.    First,

it was a “device” that incorporated a “pattern, . . . method,

technique, or process” for the construction of ship hulls.       LA.

R.S. 51:1431(4).   The ship mold is a 90 foot fiberglass frame

containing a cavity within which glass in fibrous form can be

shaped into a ship hull.     Previously, the mold had been used

successfully and effectively to build two vessel hulls, one for a

yacht and the other for a fishing vessel.   Thus, the ship mold was

a proven device that united in one matrix a fully developed and

tested pattern, method, technique, and process for constructing a

particular kind of ship hull.

     Second, the ship mold “derive[d] independent economic value .

. . from not being generally known to and not being readily

ascertainable by proper means by other persons who can obtain

economic value from its disclosure or use[.]” Id. § 1431(4)(a).

Originally, it had cost $1 million and had taken nine months to

construct the 90 foot ship mold.   Consequently, it would have been

extremely expensive and time consuming for anyone to duplicate the

mold through independent designing, planning, and construction or

by reverse engineering. Swiftships’s agreement to pay $145,000 per

vessel for using the mold in building two initial vessels, and

$20,000 for its use in building each subsequent vessel, cogently

                                -12-
                                 12
indicates that the mold derived independent economic value from not

being generally known to and not being readily ascertainable by

proper means by other persons.

     Finally, the summary judgment evidence indicates that Reingold

exerted efforts that were “reasonable under the circumstances to

maintain its secrecy.”          Id. § 1431(4)(b). The LUTSA requires a

party     to    take   reasonable   measures   to   maintain       relative,   not

absolute, secrecy. Id.; Sheets, 849 F.2d at 183; see also RESTATEMENT

(THIRD)   OF   UNFAIR COMPETITION § 39 (1995) (evidence probative of secrecy

includes “[p]recautions taken by the claimant to preserve secrecy,

the willingness of licensees to pay for disclosure of the secret,

unsuccessful attempts by the defendant or others to duplicate the

information by proper means, and resort by a defendant to improper

means     of    acquisition.”).      Reasonable     use   of   a    trade   secret

including controlled disclosure to employees and licensees is

consistent with the requirement of relative secrecy. LA. R.S.

51:1431 comment (f).

     According to the summary judgment record, during his ownership

of the mold Reingold maintained exclusive control and did not

disclose it to or allow its use by anyone prior to leasing it to

Swiftships.         Before allowing its use by Swiftships, Reingold

entered a written lease with the company providing that the mold

would be used exclusively by Swiftships, any movement of the mold

from lessee’s shipyard would be contingent upon Reingold’s prior

approval, the lessee would give advance written notice to lessor

                                      -13-
                                       13
before using the mold in the construction of each vessel hull, the

lessee would have exclusive and non-transferrable use of the mold,

the lessee would not assign or transfer any interest in the mold,

and the lessee, at the conclusion of the lease, would turn over all

copies of the design data for any modifications made to the mold.

      It reasonably can be inferred that Swiftships misappropriated

Reingold’s trade secret by acquiring and using it, through improper

means, for a purpose to which Reingold did not expressly or

impliedly consent. Id. § 1431(b)(i),(ii).               Swiftships entered a

contract with the Egyptian government to construct three 110 foot

coastal minehunting vessels (“CMVs”).             A reasonable trier of fact

could      find    that,   Swiftships,     without    notifying     Reingold    or

obtaining his express or implied consent, improperly used the male

hull or plug made from the 90 foot mold to fashion a 110 foot male

ship mold to make hulls for the Egyptian vessels.                     Swiftships

admits that it has constructed three CMV hulls using the 110 foot

mold.      Swiftships also admits that it made use of the front 40 to

45 feet of the male hull or plug in forming the bow portion of the

110 foot mold.       Swiftships did not compensate Reingold for the use

of   his    ship    mold   in   making    the   110   foot   ship   mold   or   in

constructing any of the 110 foot CMV hulls for the Egyptians.

Swiftships terminated its lease of Reingold’s 90 foot ship mold,

but Swiftships has not turned over the 110 foot mold, which it

reasonably may be inferred is a modification or a derivative of the

90 foot mold. Drawing reasonable inferences from the record in the

                                         -14-
                                          14
light most favorable to the nonmovant, Reingold, we conclude that

Swiftships misappropriated the trade secret, viz., Reingold’s 90

foot   ship   mold    together    with       its    inherent    pattern,     method,

technique, and process.

       As we noted above, Swiftships’s evidence that it changed the

shape and pattern of the bow portion of the 90 foot hull or plug

before using it to form the bow portion of the 110 foot mold merely

creates   a   disputed   issue        of    fact.     Moreover,      “‘the   user   of

another’s     trade   secret     is    liable       even   if   he   uses    it   with

modifications or improvements upon it effected by his own efforts,

so long as the substance of the process used by the actor is

derived from the other’s secret.’”                  Mangren Research & Dev. v.

National Chem. Co., 87 F.3d 937, 944 (7th Cir. 1996) (quoting In

re Innovative Constr. Sys., Inc., 793 F.2d 875, 887 (7th Cir.

1986)).     “[I]f the trade secret law were not flexible enough to

encompass modified or even new products that are substantially

derived from the trade secret of another, the protections that the

law provides would be hollow indeed.” Id. (citing Innovative

Constr., 793 F.2d at 887; American Can Co. v. Mansukhani, 742 F.2d
314, 329 (7th Cir. 1984)).                 As the Supreme Court remarked in

dealing with the analogous problem of patent equivalents, “Outright

and forth right duplication is a dull and very rare type of

infringement.”    Graver Tank & Mfg., Co. v. Linde Air Products, Co.,

339 U.S. 605, 607 (1950).        These precepts are evident in the LUTSA

and have been derived by courts interpreting and applying virtually

                                           -15-
                                            15
identical uniform trade secrets statutes. Although Louisiana cases

have not yet precisely articulated these principles, we think the

Louisiana courts would adopt them in keeping with the legislative

mandate that courts apply and construe the LUTSA to effectuate its

general purpose to make uniform the law with respect to trade

secrets among the states enacting the Uniform Trade Secrets Act.

LA. R.S. 51:1438.

     Under the LUTSA, a party proving trade secret misappropriation

is   entitled   to     recover    the     “actual     loss    caused   by    [the]

misappropriation,” as well as any “unjust enrichment . . . not

taken into account in computing damages for actual loss.” Id. §

1433.    It reasonably may be inferred that Reingold has suffered

actual loss and that Swiftships has been unjustly enriched because

of the misappropriation.          Swiftships has used the 110 foot ship

mold to build three fiberglass hulls for CMVs.                  Swiftships has

refused to compensate Reingold for these uses.                    Therefore, a

reasonable trier of fact could easily conclude that Reingold has

lost not only the substantial compensation to which he is entitled

under the lease but also that he will suffer an indeterminate

amount   of   future    damages     because      of   Swiftships’s     continued

exploitation of the misappropriated mold.

     Finally, Swiftships contends that Reingold’s mold cannot be a

trade secret, arguing as follows:

     Under    Louisiana    law,    the    complained     of   activity      is   not

     prohibited, because the hulls made from Reingold’s mold were

                                        -16-16
     in the public domain and under the Louisiana Uniform Trade

     Secrets Act, the requirement of a secrecy is therefore not

     met.        Swiftships, or anyone else, could have and still can

     take one of the five known 90' hulls made from the mold and,

     using the direct molding process described in Bonito Boats

     case, create another mold to make additional hulls. As stated

     by the United States Supreme Court, this is a perfectly

     legitimate method of competition, and therefore, necessarily

     is legitimate under the Louisiana Uniform Trade Secrets Act.

     Any suggestion that it is not legitimate is in conflict with

     Louisiana Uniform Trade Secrets Act, and is in conflict with

     federal patent law.

(Appellee’s Brief p. 29-30).

     There are several flaws in Swiftships’s argument.                 First,

Swiftships assumes as a premise for its reasoning that hulls made

from Reingold’s mold are in the public domain, but there is no

basis in the record for that proposition.          Public domain is a legal

concept.        Mine Safety Appliances Co. v. Electric Storage Battery

Co., 405 F.2d 901, 902 n.2 (C.C.P.A. 1969).               Matter is in the

public domain only if no intellectual property law, such as patent,

copyright, or trade secrets, protects it.           Id.; 1 J. THOMAS MCCARTHY,

MCCARTHY   ON   TRADEMARKS   AND   UNFAIR COMPETITION § 1:2 (4th ed. 1997).

Swiftships apparently relies on the fact that one or two vessels

were made from the mold and were sold to third parties.            This fact

                                        -17-
                                         17
alone,   however,   does   not   demonstrate   that   Reingold   had   no

protectable intellectual property right in the 90 foot mold.

     Second, assuming arguendo that the pre-existing hulls were in

the public domain, the mold itself may still be a trade secret.

See Phillips v. Frey, 20 F.3d 623, 629 (5th Cir. 1994)(applying

Texas law and holding that a process for manufacturing a product

can be a trade secret even if the product is not).       To be a trade

secret a thing need only derive independent economic value from not

being generally known or readily available to others who can obtain

economic value from its disclosure or use.     LA. R.S. 51:1431(4)(a).

As established above, it reasonably may be inferred that the 90

foot mold has requisite secrecy to be a trade secret.2

     Finally, Swiftships’s contention, even if true, that it could

have reverse engineered a mold from an existing hull is beside the

     2
          Swiftships’s arguments based on Bonito Boats v. Thunder
Craft Boats are inapposite. The Supreme Court in Bonito Boats v.
Thunder Craft Boats reaffirmed its holding in Kewanee Oil Co. v.
Bicron Corp., 416 U.S. 470 (1974), which made it clear that federal
patent law does not preempt state trade secret law. 489 U.S. 141,
165-66 (1989). Specifically, the Court stated that:
     In Kewanee, we found that state protection of trade secrets,
     as applied to both patentable and unpatentable subject matter,
     did not conflict with the federal patent laws.        In both
     situations, state protection was not aimed exclusively at the
     promotion of invention itself, and the state restrictions on
     the use of unpatented ideas were limited to those necessary to
     promote goals outside the contemplation of the federal patent
     scheme. Both the law of unfair competition and state trade
     secret law have coexisted harmoniously with federal patent
     protection for almost 200 years, and Congress has given no
     indication that their operation is inconsistent with the
     operation of the federal patent laws.
Id.

                                  -18-
                                   18
point. While state trade secret law cannot bar reverse engineering

or independent discovery,           Kewanee Oil Co. v. Bicron Corp., 416
U.S. 470, 489-90 (1974), protection will be accorded to a trade

secret holder against disclosure or unauthorized use gained by

improper means, even if others might have discovered the trade

secret   by   legitimate        means.   See     LA.   R.S.   51:1431   comment

(a)(2)(“The acquisition of the known product must of course, also

be by fair and honest means, such as purchase of the item on the

open market for reverse engineering to be lawful.”); see also

RESTATEMENT (THIRD)   OF   UNFAIR COMPETITION at § 39 comment f.

                                         B.

     Reingold also asserts a cause of action under the Louisiana

Unfair Trade Practices Act (LUTPA), La. R.S. 51:1401-1418.                That

statute declares unlawful “[u]nfair methods of competition and

unfair or deceptive acts or practices in the conduct of any trade

or commerce[].” Id. § 1405(A).            The LUTPA further provides that

“[a]ny person who suffers any ascertainable loss of money or

movable property, corporeal or incorporeal, as a result of the use

or employment by another person of an unfair or deceptive method,

act or practice declared unlawful by R.S. 51:1405, may bring an

action individually but not in a representative capacity to recover

actual damages.” Id. § 1409(A).               “The real thrust of the LUTPA,

modeled after the Federal Trade Commission Act, 15 U.S.C. § 45, is

to deter injury to competition.” Omnitech Int’l, Inc. v. Clorox

                                       -19-
                                        19
Co., 11 F.3d 1316 (5th Cir. 1944)(citing Federal Trade Comm’n v.

Raladam, Co., 283 U.S. 643 (1931)).

     The LUTPA leaves particular determinations of what is an

“unfair or deceptive method, act or practice” largely to the courts

to decide on a case-by-case basis.           Marshall v. Citicorp Mortgage,

Inc.,   601 So. 2d   669,   670   (La.     Ct.   App.   5th   Cir.   1992);

Roustabouts, Inc. v. Hamer, 447 So. 2d 543, 548 (La. Ct. App. 1st

Cir. 1984); Omnitech, 11 F.3d at 1332;               Turner v. Purina Mills,

Inc., 989 F.2d 1419, 1422 (5th Cir. 1993).              The Louisiana courts

have interpreted these terms to include “‘a practice that is

unethical, oppressive, unscrupulous, or substantially injurious,’”

Bolanos v. Madary, 609 So. 2d 972, 977 (La. Ct. App. 4th Cir. 1992)

(quoting Moore v. Goodyear Tire and Rubber Co., 364 So. 2d 630, 634

(La. Ct. App. 2d Cir. 1978)); fraud, misrepresentation, deception,

but not mere negligence, Marshall, 601 So. 2d at 670-71;                  acts

offensive to established public policy and immoral, unethical,

oppressive, unscrupulous, or substantially injurious to consumers,

Monroe Med. Clinic, Inc. v. Hospital Corp. of Am., 622 So. 2d 760,

781 (La. Ct. App. 2d Cir. 1993); and acts having some element of

fraud, misrepresentation, deception or other unethical conduct,

Dufau v. Creole Eng’g, Inc., 465 So. 2d 752, 758 (La. Ct. App. 5th

Cir. 1985).    On the other hand, “the statute does not provide an

alternate remedy for simple breaches of contract,” Turner, 989 F.2d

at 1422 (citing State v. Orkin Exterminating Co., 528 So. 2d 198,

202 (La. Ct. App. 4th Cir. 1988)); or “prohibit sound business

                                      -20-
                                       20
practices,     the    exercise     of   permissible    business    judgment,   or

appropriate free enterprise transactions.”             Id.; Omnitech, 11 F.3d

at 1332.      Significantly, however, under the LUTPA the Louisiana

courts    appear     to    zealously    guard   against    allowing   managers,

employees, and persons in a special position of trust to profit

from their wrongdoing. Turner, 989 F.2d at 1422 (citing as an

example National Oil Serv. of Louisiana v. Brown, 381 So. 2d 1269

(La. Ct. App. 4th Cir. 1980));            see also Roustabouts, 447 So. 2d
543;     Dufau,      465 So. 2d 752; Potvin v. Wright’s Sound Gallery,

Inc., 568 So. 2d 623 (La. Ct. App. 2d Cir. 1990).

       From the pleadings, depositions, affidavits and other evidence

of record, we conclude that a reasonable trier of fact could find

or   infer    that    Swiftships    intentionally      defrauded    Reingold   by

surreptitiously using his 90 foot mold to construct a third 90 foot

hull     or   plug,       which   Swiftships    used      by   modification    or

incorporation to create a new 110 foot mold; that the 110 foot mold

was in substance derived from Reingold’s 90 foot mold without his

knowledge or consent;         that Swiftships used the new 110 foot mold,

without Reingold’s knowledge or consent, to build 110 foot vessels

for profit under contract with the Government of Egypt; that

Swiftships has contracted with third persons to build additional

vessels with the 110 foot mold;                 that Swiftships refuses to

compensate Reingold for its surreptitious uses of the 90 foot mold

and the 110 foot mold; that Swiftships terminated the lease and

refused to turn over to Reingold the 110 foot mold; that this

                                        -21-
                                         21
constituted a intentional conversion of the 110 foot mold because

that device was in substance a modification of the 90 foot mold;

that Swiftships was obliged to turn over all such modifications

both under the lease and by virtue of its relationship of trust as

a licensee of Reingold; that Swiftships denies its fraud and

concealment and intends to continue producing vessels with the 110

foot    mold   that   it   derived   from   the   90   foot    mold   without

compensating Reingold.       Reingold specifically alleges that these

deliberate acts of fraud and misappropriation constitute unfair

trade practices under the LUTPA.        We agree.

       Drawing inferences from the underlying facts contained in the

materials in the light most favorable to the party opposing the

motion for summary judgment, we conclude that Swiftships’s acts

were far more reprehensible than a mere breach of contract or a

sound business judgment.       Cast in this light, Swiftships’s conduct

amounted to intentional deception, fraud, misrepresentation, and

unethical conduct.     As Reingold’s licensee, Swiftships was placed

in a special position of trust with regard to Reingold’s trade

secret and should not be permitted to profit from its wrongdoing in

misappropriating it and in refusing to turn over all molds and

hulls   derived   therefrom.      Swiftships’s    intentional     course   of

conduct in misappropriating and converting Reingold’s trade secret

constituted a pattern of unfair trade practices and wrongfully put

Reingold at a severe competitive disadvantage.                Swiftships, by

wrongfully misappropriating the substance of Reingold’s ship hull

                                     -22-
                                      22
mold,    deprived Reingold of his trade secret, eliminated itself as

a potential customer of Reingold, and set itself up as Reingold’s

formidable competitor in the ship mold market.                   The loss to

Reingold and the unjust enrichment to Swiftships are enhanced by

the fact that Reingold’s mold and the derivatives of it apparently

have proved very valuable devices in the building of military ships

for the United States and Egyptian navies.

      Swiftships argues, however, that Reingold’s LUTPA action is

prescribed because Section 1409(E) provides that such an action

“shall be prescribed by one year running from the time of the

transaction or act which gave rise to this right of action.”                LA.

R.S. 51:1409(E).      It reasonably may be inferred, however, that at

least one of Swiftships’s violations of the statute occurred within

the period of limitations.          In May of 1994, shortly before the

filing   of    this   action   in   December    of   that    year,   Swiftships

terminated the lease and converted the 110 foot mold that in

substance had been derived from Reingold’s 90 foot mold; Swiftships

intentionally persists in the deception that its 110 foot mold was

derived from independent plans rather than from Reingold’s trade

secret; and Swiftships fully intends to continue to unjustly enrich

itself to the competitive disadvantage of Reingold.              For purposes

of   summary    judgment   review,    this     course   of   intentional    and

fraudulent conduct was clearly a violation of the LUTPA.                We need

not decide on the sparse record before us whether this is a type of

case in which (1) “the original violation occurred outside the

                                     -23-
                                      23
statute of limitations, but is closely related to other violations

that are not time-barred,” so that recovery may be had for all

violations; or (2) “one in which an initial violation, outside the

statute of limitations, is repeated later;    in [which] case, each

violation begins the limitations period anew, and recovery may be

had for at least those violations that occurred within the period

of limitations.” Hendrix v. City of Yazoo City, Miss., 911 F.2d
1102, 1103 (5th Cir. 1990).     If necessary, the legal decision of

whether the case fits in either of these categories, or perhaps in

an entirely different class, may be decided best with the benefit

of a full record.   In any event, Reingold’s LUTPA claim should not

have been dismissed on summary judgment.

     Because this matter is before us following a grant of summary

judgment, however, we make no intimations regarding the correctness

vel non of either party’s factual assertions or the final outcome

after a trial on the merits.     Rankin v. Klevenhagen, 5 F.3d 103,

108 (5th Cir. 1993).

     For the reasons assigned, the District Court’s judgment is

REVERSED and the actions are REMANDED for further proceedings

consistent with this opinion.

E. GRADY JOLLY, Circuit Judge, concurring in part and dissenting in

part:

                                 -24-
                                  24
       I join in the court's opinion with respect to parts I, II,

III, and IV.A.      Because I am convinced that Reingold's LUTPA claim

is     prescribed    by    the     statute    of     limitations,   however,     I

respectfully dissent from part IV.B.

       The statute provides that any claim under the LUTPA "shall be

prescribed by one year running from the time of the transaction or

act which gave rise to th[e] right of action."               La. Rev. Stat. Ann.

§ 51:1409(E) (emphasis added).             Here, the wrongful act that gave

rise to the LUTPA claim was when Swiftships misused a portion of

the 90' plug to create the 110' mold.                Because the 110' mold was

completed more than two years prior to Reingold’s bringing his

suit, the LUTPA claim is barred under the clear terms of the

statute.    The termination of the lease on the 90' mold one and a

half years later, itself a perfectly valid exercise of contractual

rights, is entirely irrelevant to the LUTPA claim.

       The majority says that the termination of the lease was itself

a wrongful act, inasmuch as it amounted to a "conversion" of the

110'    mold.       It    argues    that     the    entire   110'   mold   was   a

"modification" of the 90' mold under the lease between Reingold and

Swiftships, and that Swiftships was required to turn it over to

Reingold upon terminating the lease.               Because Swiftships failed to

do this, it in effect "converted" the mold to its own use, and this

act gave rise to a cause of action under the LUTPA.                  Because the

termination occurred within the prescription period, the majority

concludes that the LUTPA claim is not barred.

                                       -25-
                                        25
     This   holding3   is    plainly   mistaken,   as   it    depends     on   a

distorted reading of the lease agreement that its words simply will

not bear.   With regard to modifications, the sole clause in the

lease was the following:

     Lessee may modify the Mold as it desires in order to meet
     the design requirements of its contracts but at the
     conclusion of this Agreement, Lessee shall promptly turn
     over to Lessor copies of the design data for any
     modifications made to the Mold and Lessor shall have the
     right to use the mold as modified.

Looking closely at the plain language of this provision, and noting

in particular the phrases "modifications made to the Mold" and

"right to use the mold as modified," it seems quite clear that this

clause speaks only of minor modifications made to the physical

substance of the 90' mold itself, not derivations of the 90' mold's

design.     My   impression    accords    with   Webster's,     who     defines

modification as "the making of a limited change in something."

Webster's   Seventh    New    Collegiate    Dictionary       (Merriam     1963)

(emphasis added).      The making of the 110' mold was neither a

limited change nor a change "in" the 90' mold.           As such, the 110'

mold was not a modification of the 90' mold, and there was no

contractual duty with regard to it upon termination of the lease.

The termination was therefore in no way a wrongful act which could

give rise to a cause of action under the LUTPA, and consequently it

     3
      We should not be misled by the majority's phrasing of the
issue as something a reasonable trier of fact could find. This is
a simple matter of contract interpretation, and entirely within the
province of this court to decide as a matter of law.

                                   -26-
                                    26
is   irrelevant   for   purposes   of     considering   the   statute   of

limitations.

     I therefore respectfully dissent from the majority’s holding

that the LUTPA claim is not barred by the statute of limitations.

                                   -27-
                                    27