In an opinion first issued in June 2020 and modified in October 2020, the Fifth Court of Appeals in Texas granted summary judgment in a trade secret dispute based on plaintiff’s failure to present any facts that defendants had access or exposure to plaintiff’s claimed trade secrets.  Josh Malone designed a device that fills and seals water balloons.  Kendall Harter did the same.  Mr. Malone filed a patent.  Mr. Harter accused Mr. Malone of stealing his water balloon filling design.  According to Mr. Harter and KBIDC Investments, the company that acquired Mr. Harter’s company, Mr. Malone came up with his patented product by stealing the trade secrets belonging to Mr. Harter and then KBIDC Investments.  So, KBDIC Investments sued Mr. Malone and Zuru Toys, which acquired an interest in Mr. Malone’s “Bunch O’ Balloons” product for trade secret misappropriation.

Whether or not Mr. Malone and Zuru were liable for trade secret misappropriation turned on a simple fact for the Court: whether Mr. Malone “had some access to Harter’s trade secrets and knowledge of them.”  The Court simply found no such evidence.  While Mr. Malone and Mr. Harter worked together at the same company, the Court could not locate any evidence that Mr. Malone had access to or knowledge of Mr. Harter’s claimed trade secrets.

Likewise, the Court rejected evidence that Mr. Harter provided to the common employer a design of his water balloon filling device that was similar to Mr. Malone’s design.  According to the Court “similarity of design is not evidence of misappropriation without evidence that Malone knew of Harter’s design.”  From there, the Court rejected seriatim all evidence that essentially provided a basis for a claim that Mr. Malone may have had access to Mr. Harter’s trade secrets.  All such evidence was “too indefinite and uncertain” to show such access.

On top of this, the Court affirmed an award of $200,000 in attorneys’ fees based on the same finding: that the evidence collectively and separately did not establish the defendants’ access to or knowledge of the trade secrets at issue.  KBIDC’s petition for review is pending before the Texas Supreme Court.  It remains to be seen whether the Texas Supreme Court will grant KBIDC’s petition, but this case should serve as an important reminder for clients to gather as much evidence as they can before filing a trade secret misappropriation suit.

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Photo of Siri Rao Siri Rao

Siri Rao is an associate in Crowell & Moring’s Washington, D.C. office. She is a member of the firm’s Intellectual Property Group. She received her J.D. from The George Washington University Law School in 2017, where she was a member of the American…

Siri Rao is an associate in Crowell & Moring’s Washington, D.C. office. She is a member of the firm’s Intellectual Property Group. She received her J.D. from The George Washington University Law School in 2017, where she was a member of the American Intellectual Property Law Association Quarterly Journal. During law school, Siri interned at the International Trade Commission and the U.S. Court of Federal Claims, Office of Special Masters. She received the law school’s Pro Bono Recognition Award at graduation for contributing more than 100 hours of pro bono legal services during her time in law school. Prior to law school, Siri worked as a research assistant at the Food and Drug Administration in Silver Spring, MD. Siri earned her B.S. in biomedical engineering from The George Washington University.

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Photo of Molly A. Jones Molly A. Jones

Molly A. Jones is an Intellectual Property and Litigation counsel in Crowell & Moring’s San Francisco office. Her practice emphasizes patent, trademark, technology licensing, and other commercial disputes in a range of industries including software, biotechnology, commercial real estate, education, health care, and…

Molly A. Jones is an Intellectual Property and Litigation counsel in Crowell & Moring’s San Francisco office. Her practice emphasizes patent, trademark, technology licensing, and other commercial disputes in a range of industries including software, biotechnology, commercial real estate, education, health care, and food and beverage. She has represented clients in matters in the Northern, Eastern, and Southern Districts of California, Eastern District of Texas, and California state courts. Molly has also second-chaired a trademark infringement trial in the Western District of Texas.

Molly earned her J.D., cum laude, from the University of California, Hastings College of the Law, where she was the executive symposium editor of the Hastings Law Journal and co-authored amicus curiae briefs in two landmark patent cases at the U.S. Supreme Court. While attending law school, Molly also externed at the Northern District of California and studied abroad at Sungkyunkwan University in Seoul, South Korea.

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