ACCEPTED
03-17-00035-CV
21631643
THIRD COURT OF APPEALS
AUSTIN, TEXAS 1/5/2018 11:20 AM JEFFREY D. KYLE
CLERK
No. 03-17-00035-CV
FILED IN
IN THE THIRD COURT OF APPEALS 3rd COURT OF APPEALS AUSTIN, TEXAS
AUSTIN, TEXAS
1/5/2018 11:20:33 AM
JEFFREY D. KYLE
Clerk
DR. RUTHIE HARPER AND PLLG, LLC, Appellants,
v.
WELLBEING GENOMICS PTY LTD., Appellee.
On Appeal from the 98th Judicial District Court Travis County, Texas, Cause No. D-1-GN-14-002452
SUPPLEMENTAL BRIEF OF APPELLEE WELLBEING GENOMICS PTY LTD. FILED IN RESPONSE TO THE COURT’S REQUEST AT ORAL ARGUMENT
Robert W. Kantner State Bar No. 11093900 JONES DAY 2727 North Harwood Street Dallas, Texas 75201-1515 Telephone: (214) 969-3737 Facsimile: (214) 969-5100 rwkantner@jonesday.com
ATTORNEY FOR APPELLEE
NAI-1503303499v1
TABLE OF CONTENTS
PAGE
Record References ...................................................................................................iv Introduction ...............................................................................................................1 Factual Background ..................................................................................................1 A. Defendants’ Access to Trade Secret No. 1...........................................1 B. Defendants’ Misappropriation of Trade Secret No. 1 and PLLG’s Breach of Confidentiality Agreement ....................................4 Argument...................................................................................................................6 A. Proof of Access to Trade Secret No. 1 by Harper and PLLG .............. 6 1. Standard of Proof of Access to Trade Secrets ...........................6 2. Wellbeing’s Evidence of Access to Trade Secret No. 1 by Harper and PLLG .....................................................................13 B. Proof of Use or Disclosure of Trade Secret No. 1 by Harper and by PLLG .............................................................................................16 1. Standard of Proof of Use or Disclosure of a Trade Secret ......16 2. Wellbeing’s Evidence of Use of Trade Secret No. 1 by Harper and PLLG .....................................................................22 C. This Court Should Not Reverse the Judgment Based on Either Harper’s or PLLG’s Allegation of No Evidence or Insufficient Evidence of their Access to and Use/Disclosure of Trade Secret No. 1 ...................................................................................................25 Conclusion and Prayer ............................................................................................26 Certificate of Service ..............................................................................................28
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TABLE OF AUTHORITIES
Page
CASES
Bishop v. Miller, 412 S.W.3d 758 (Tex. App. – Houston [14th Dist.] 2013, no pet.) .......19, 20, 21
Cain v. Bain, 709 S.W.2d 175 (Tex. 1986) ..............................................................................25
Electro-Miniatures Corp. v. Wendon Co., Inc., 771 F.2d 23 (2nd Cir. 1985) .........................................................................11, 12
GlobeRanger Corp. v. Software AG United States of America, Inc., 836 F.3d 477 (5th Cir. 2016) ........................................................................17, 21
Leggett & Platt, Incorporated v. Hickory Springs Manufacturing Company, 285 F.3d 1353 (Fed. Cir. 2002) ....................................................................10, 12
Pioneer Hi-Bred Inc. v. Holden Foundation Seeds, 35 F.3d 1226 (8th Cir. 1994) ........................................................................11, 12
Sokol Crystal Products v. DSC Communications Corp., 15 F.3d 1427 (7th Cir. 1994) ........................................................................11, 12
Spear Marketing, Inc. v. Bancorpsouth Bank, 2014 WL 2608485 (N.D. Tex. June 11, 2014), aff’d. 791 F.3d 586 (5th Cir. 2015).................................................................................................8, 10
Stratienko v. Cordis Corp., 429 F.2d 592 (6th Cir. 2005) ..............................................................................10
SW Energy Production Co. v. Berry-Helfand, 491 S.W.3d 699 (Tex. 2016) ..............................................................................16
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TABLE OF AUTHORITIES
(continued)
PAGE
Transp. Ins. Co. v. Moriel, 879 S.W.2d 10 (Tex. 1994).................................................................................25
Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867 (5th Cir. 2013) ............................................... 6, 7, 8, 10, 12, 18, 21
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RECORD REFERENCES
Appellee will use the same record reference designations as it did in its Brief
of Appellee.
NAI-1503303499v1 -iv-
INTRODUCTION
At the conclusion of the two week trial of this case, the jury found that
Wellbeing Genomics Pty Ltd. (“Wellbeing”) had proven that it had a trade secret
in a grouping of DNA sequence variants (also called “SNPs”) into one or more
skin-related categories (“Trade Secret No. 1”). The jury also found that Dr. Ruthie
Harper and PLLG, LLC (“PLLG”) had misappropriated Trade Secret No. 1 and
that PLLG had breached the confidentiality provision of its Exclusive Distributor
Agreement with Wellbeing (PX019-0003-4) by misusing the information in Trade
Secret No. 1. 1CR2975, 2978-9 and 2980. Wellbeing elected to recover against
PLLG based on the contract claim. 1CR3267-8
This Supplemental Brief is provided – at the Court’s invitation – to address
questions posed by the Court during oral argument, namely what standard the
Court should use to evaluate whether there is any evidence or sufficient evidence
to support the jury’s conclusion that Harper and PLLG had access to Trade Secret
No. 1 and used or disclosed Trade Secret No. 1 without Wellbeing’s permission.
FACTUAL BACKGROUND
A. Defendants’ Access to Trade Secret No. 1 On appeal, Harper and PLLG assert that there is no evidence or insufficient
evidence they ever received or had access to Trade Secret No. 1. For example, in
their opening brief, Harper and PLLG asserted: “The record is crystal clear that
Dr. Harper had never been provided anything like Slide 17 until trial.” App.
Br. 31. The slide 17 to which Harper and PLLG refer was one of the
demonstrative slides that Wellbeing’s technical expert, Dr. Michael Metzker,
presented to the jury to illustrate Trade Secret No. 1:
STIP00073 (Metzger Slide No. 17) (App. 2).
What is an rs number? The National Center for Biotechnology Information
(“NCBI”) assigns to each SNP that is identified a unique identifier called an rs
number. Rs stands for “reference SNP.” Basically, the rs number provides the
address of a particular SNP in the human genome. 4RR 111; 7RR 31. Therefore
the rs numbers in Metzker Slide No. 17 disclose the SNPs Wellbeing used in its
test. At a time when PLLG was selling Wellbeing’s DNA test under the tradename
SKINSHIFT (6RR11), David Urman – who worked for Harper and PLLG – wrote
to a potential new distributor as follows:
SKINSHIFT is the first company to identify 16 SNPs that are relevant to skin health categories. Additional SNPs are being discovered as we speak. The location of all of these SNPs will not be disclosed and will be treated as a trade secret.
PX 46 (Emphasis added).
In response to Harper’s and PLLG’s contention that there is no evidence that
they had access to Trade Secret No. 1, Wellbeing has cited the factual testimony of
Stefan Mazy, the founder of Wellbeing and developer of Trade Secret No. 1, and
the expert testimony of Dr. Metzker. Both Mazy and Metzker testified that the
data cards Wellbeing provided to Harper and PLLG confidentially for each of the
genes in Trade Secret No. 1 cited a small number of scientific articles (or
references) that provided the rs numbers in Trade Secret No. 1. See, e.g., citations
to articles on the data cards at PX21-006, 9, 12 and 25, articles at PX2-448 and
525-7, Mazy’s testimony at 5RR7-11 and Metzker’s testimony at 7RR21 and 42-
45.
The number of DNA variants in Wellbeing’s Trade Secret No. 1 (fifteen)
(one is used twice) is a very small percentage of the DNA variants found in
humans on average (3.5 million). 7RR32. The average number of SNPs – DNA
variants that appear in 1% or more of the population (7RR23-24) – is smaller than
3.5 million; but it is far larger than the number of SNPs in Trade Secret No. 1.
After all, Mazy testified that he considered 6,000 genes, each of which contain
500-1,000 SNPs, and closely evaluated 200 of them before selecting twelve for
Trade Secret No. 1. As a result, Mazy analyzed thousands of SNPs before
selecting fifteen (one to be used twice) for Trade Secret No. 1. PX26; 4RR83-86.
Moreover, Mazy showed the jury a huge stack of the articles he read and still had
at trial (20% of the total) that he relied upon to evaluate whether particular SNPs
were associated with the skin health categories he had chosen. PX2; 4RR117-119.
The number of articles cited on the data cards Wellbeing provided to Harper and
PLLG is a very small fraction of the articles Mazy read. PX2.
Harper and PLLG had a test panel of SNPs by April 22, 2014 (PX 112) –
about three months after Dr. Linda DiBella started work on the panel for them.
(9RR 70-71). In contrast, looking for SNPs for a panel from scratch is like looking
for proverbial needles in a haystack. That is why it took Mazy three years to
develop Trade Secret No. 1. 4RR77.
B. Defendants’ Misappropriation of Trade Secret No. 1 and PLLG’s Breach of Confidentiality Agreement. On appeal, Harper and PLLG also argue that there is no evidence or
insufficient evidence that either of them used or disclosed Wellbeing’s Trade
Secret No. 1. Harper argues that she did not use Trade Secret No. 1 to prepare
patent applications on “Methods of Skin Analysis and Uses Thereof.” PX153 and
149. PLLG argues that it developed its DNA test independently.
Wellbeing has responded to Harper’s contention by citing Dr. Metzker’s
testimony that Harper used Trade Secret No. 1 to prepare her patent applications
and that Harper’s PCT application, which was published, disclosed Trade Secret
No. 1. 7RR71, 143. Metker’s conclusions are supported by the fact that David
Urman, who worked for Harper and PLLG, sent Wellbeing data cards and
“extended” data cards to Harper’s patent attorney. PX291 and 295. Indeed, one of
the Wellbeing extended data cards that Urman sent to Harper’s patent attorney was
copied into the PCT application. PX22, 153-0065-72. Metzker’s opinions are also
supported by the facts that the PCT application disclosed eleven of the twelve
genes and eight of the fifteen SNPs in Trade Secret No. 1. 1 PX159; 7RR-51, 143
and 147. Harper did not object to Metzker’s testimony.
Wellbeing has responded to PLLG’s argument about the development of its
SNP panel by citing the fact that Harper emailed to DiBella, whom PLLG hired to
develop the SNP panel, Wellbeing data cards (one modified to add the rs number)
and Wellbeing’s list of its SNP functions. PX83. Wellbeing also relies on Dr.
Metzker’s testimony that DiBella, who had never previously created a DNA test,
used Wellbeing’s Trade Secret No. 1 to develop PLLG’s DNA test. 7RR21-22.
Metzker cited the fact that the original test panel Harper sent to Qivana, LLC to
give to the new lab, Sorenson Genomics, had eight of Wellbeing’s fifteen SNPs
and Wellbeing had used one of those SNPs twice. PX112; 7RR64. Some of the
Wellbeing SNPs were dropped – but only because Sorenson could not quickly
obtain the reagents needed to test for those SNPs. 7RR147-148; see also PX141.
Again, no objection was made to Metzker’s testimony.
ARGUMENT
A. Proof of Access to Trade Secret No. 1 by Harper and PLLG.
1. Standard of Proof of Access to Trade Secrets. No one decision provides one specific standard for proof of access to a trade
secret; but several courts have addressed the issue of the sufficiency of the
plaintiff’s proof of a defendant’s access to trade secrets in issue under Texas law.
In Wellogix, Inc. v. Accenture, L.L.P., 716 F.3d 867 (5th Cir. 2013), Plaintiff
Wellogix, Inc. (“Wellogix”) developed software that allowed oil companies to
“plan, procure, and pay for complex services” online. The software included
“dynamic templates” that adjusted cost and supply estimates based on “intelligence
built into” the underlying source code. Id., at 873. The Court of Appeals
concluded that Wellogix had presented sufficient evidence to support the jury’s
finding that Defendant Accenture, LLP (“Accenture”) had improperly acquired
Wellogix’s trade secrets, based on the following evidence:
Wellogix showed: that it entered into six confidential agreements with Accenture; that through the marketing agreements, Accenture had access to Wellogix trade secrets; that Accenture also had access to Wellogix trade secrets uploaded to the confidential eTrans portal; and that an Accenture email referenced ‘harvesting IP from Wellogix.’
Id., at 876. The Court of Appeals rejected Accenture’s argument that the
testimony of Kendyl Roman, Wellogix’s expert, was insufficient evidence that
Wellogix’s trade secrets were available on Wellogix’s eTrans portal – to which
Accenture had access. Roman had testified that – based on his experience in the
software industry – he believed it likely that companies working together on a pilot
project – like Wellogix and Accenture – would share documents containing trade
secrets on an online portal. Roman also relied on a contractor’s deposition
testimony that information “resembling” Wellogix’s trade secrets was on the
eTrans portal. The Court of Appeals concluded that Roman’s testimony was
sufficient evidence of access:
Given that ‘an expert is permitted wide latitude to offer opinions,’ Daubert, 509 U.S. at 592, 113 S.Ct. 2786, and that, as discussed below, Roman’s testimony was sufficiently ‘reliable’ and “relevant,’ the jury was reasonable in crediting his testimony.
Id.
The Court of Appeals also rejected two other contentions by Accenture
based on the testimony of Wellogix CEO Ike Epley. First, Accenture contended
that Epley’s testimony that one of Wellogix’s pilot project partners, Trade Rangers,
“had access” to Wellogix’s source code did not support the “inferential leap” that
Accenture had such access. Second, Accenture contended that Epley’s testimony
that the code was behind a firewall showed that it was not possible for Accenture to access the trade secrets in the software. The Court of Appeals concluded that
Accenture’s involvement in the Trade Ranger pilot project as a consultant and
implementer supported the inference that Accenture could have accessed
Wellogix’s source code through the pilot project. As for the firewall, the Court of
Appeals stated that the jury could have inferred that Accenture “otherwise had
access to” the code – for example by entering into confidentiality agreements.
Finally, the Court of Appeals rejected Accenture’s reliance on the testimony
of Wellogix’s corporate representative, John Chisholm, that Wellogix never gave
Accenture access to source code, stating: “we decline to assume ‘jury functions’
by weighing Chisholm’s credibility against Epley’s.” Id., at 876-877.
In Spear Marketing, Inc. v. Bancorpsouth Bank, 2014 WL 2608485 (N.D.
Tex. June 11, 2014), aff’d. 791 F.3d 586 (5th Cir. 2015), the District Court found
sufficient evidence of access but granted summary judgment to the defendants
because there was insufficient evidence of use. Like Wellogix, Spear involved
trade secrets in software – a program called VaultWorks that Plaintiff Spear
Marketing, Inc. (“SMI”) designed to help banks reduce the amount of cash – a
nonearning asset – they hold in bank branches, ATMs and central vaults. SMI had
licensed VaultWorks to Defendant BancorpSouth Bank (“BancorpSouth”). On
April 6, 2010, SMI’s President, Bill Spear contacted co-Defendant Argo Data
Resource Corporation (“ARGO”) to see if ARGO wanted to purchase SMI or enter into a partnership with SMI. Subject to an agreement to treat SMI’s disclosure to
ARGO confidentially, SMI presented a demonstration of its technology to ARGO
via an internet-telephone conference call involving Bill Spear and Todd Robertson,
ARGO’s Vice President and other representatives of ARGO.
Defendants BancorpSouth and ARGO moved for summary judgment. They
contended that there was no evidence that they had used SMI’s trade secrets in
connection with ARGO’s development of a competing program referred to as CIO.
SMI responded by arguing that the motion should be denied because there was
evidence of defendants’ access to VaultWorks and because there were similarities
between CIO and VaultWorks. The District Court found there was a genuine issue
of material fact as to access. The evidence the District Court cited may be
summarized as follows:
1. Defendants’ implementation of ARGO’s CIO at BancorpSouth, including: a. Emails between Defendants with VaultWorks’ screen-shots displaying cash data from certain BancorpSouth branches;
b. ARGO’s Project Status Reports detailing the progress of CIO’s implementation at BancorpSouth; and
c. An agenda for the CIO Kick-Off Meeting with slide containing screen-shots of VaultWorks.
2. Discussions between Bill Spear and Todd Robertson:
a. Robertson’s internal email summarizing what he learned from Spear’s demonstration on April 6, 2010; and
b. Spear’s declaration about information conveyed to Robertson.
Id., at 8.
Based on this evidence, the District Court decided that SMI had raised a
genuine dispute regarding whether Defendants accessed “at least some” of SMI’s
trade secrets:
A reasonable juror could find that ARGO had access to certain trade secrets connected to VaultWorks through BancorpSouth’s somewhat detailed demonstration at the CIO Kickoff Meeting and Spear’s declaration concerning his unrecorded demonstration of VaultWorks. The VaultWorks screen-shots also arguably gave ARGO access to certain trade secrets identified by SMI. Admittedly, the evidence of Defendants’ access to SMI’s specific trade secrets is hardly clear or concrete. But it seems sufficient at this point, given the somewhat relaxed evidentiary standard courts employ when analyzing the access element of this test.
Id.
Courts applying the trade secret law of other states agree with Wellogix and
Spear Marketing that circumstantial proof of access to trade secrets is sufficient.
See, e.g. Stratienko v. Cordis Corp., 429 F.2d 592, 601 (6th Cir. 2005). (“In the
case at bar, we assume that Dr. Stratienko produced sufficient evidence of access:
Cordis’ declarations demonstrate that Cordis, the entity that developed the Vista
Brite 1G Catheter, had access to the information.”); Leggett & Platt, Incorporated v. Hickory Springs Manufacturing Company, 285 F.3d 1353, 1361 (Fed. Cir. 2002)
(“L&P’s evidence indicates that Hickory too had access to L&P’s trade secrets
through L&P’s former employee Robert Hagemeister . . . . Hagemeister is a
veritable repository of information on L&P products and designs. When hired by
Hickory to design directly competing products, Hagemeister would be hard pressed
to avoid disclosing such information.”); Sokol Crystal Products v. DSC
Communications Corp., 15 F.3d 1427, 1430 (7th Cir. 1994). (“ . . . [T]he simple
fact that Sokol shipped its product to DSC would likely be sufficient evidence to
sustain the jury’s verdict” [that DSC had access to Sokol’s trade secret]); Pioneer
Hi-Bred Inc. v. Holden Foundation Seeds, 35 F.3d 1226, 1233 (8th Cir. 1994)
(“Pioneer presented no direct evidence regarding how Holden obtained
H3H/H43527. However, ‘direct evidence of industrial espionage are rarely
available and not required.”); and Electro-Miniatures Corp. v. Wendon Co., Inc.,
771 F.2d 23, 26 (2nd Cir. 1985) (“It is true, as [Defendant] Wendon emphasizes,
that [Plaintiff] EMC failed to establish the precise nature of the drawings Wendon
acquired…. However, from the evidence, the jury might reasonably have inferred
that Wendon had access to other drawings besides those it admitted receiving or to
other sources of information about EMC’s trade secrets.”)
The cases cited above support at least the following standards for evaluation
of the sufficiency of evidence of a defendant’s access to trade secrets:
1. The plaintiff does not have to provide direct evidence that it delivered or made available all of the elements of a combination trade secret to the defendant in one document. See Wellogix, Speer and Pioneer Hi-Bred.
2. A finding of access may be based on circumstantial evidence such as the defendant’s inability to develop the technology in question without access to plaintiff’s trade secret(s) and/or a defendant’s development of the technology in question after gaining access to the plaintiff’s trade secrets. See Speer Marketing.
3. It is sufficient that the plaintiff proves the defendant likely had access to some of the trade secret information by virtue of the parties working together on a project. See Wellogix, Speer and Electro-Miniatures.
4. A defendant’s use of data and documents generated by or relating to the trade secret(s) while working on a similar, competitive product will support a finding that the defendant had access to the trade secret(s). See Speer Marketing.
5. Indeed, a defendant’s hiring of a former employee of the plaintiff who knows the trade secret(s) is sufficient. See Leggett & Platt.
6. Or the defendant’s receipt of the plaintiff’s product may be sufficient. See Sokol.
7. The court should not assume the jury’s function of weighing the credibility of witnesses. See Wellogix.
8. An expert who has reviewed the file and whose opinion is deemed reliable should be given great latitude to testify about access. See Wellogix.
2. Wellbeing’s Evidence of Access to Trade Secret No. 1 by Harper and PLLG
Wellbeing presented evidence of access to Trade Secret No. 1 by Harper and
PLLG, including the following.
1. Mazy provided data cards for each of the genes in Trade Secret No. 1 to Harper and PLLG. Each of the twelve data cards cited a small number of references that provided the rs numbers in Trade Secret No. 1. Indeed, one reference cited two rs numbers in its title. PX21; 5RR7-11. The rs numbers identify particular SNPs. 7RR31
2. PLLG included eight of Wellbeing’s SNPs in the SNP panel if sent to Qivana to give to its lab, Sorenson. PX 112. The title of the first reference on Wellbeing’s data card for the GPX1 gene was “The Mn-superoxide dismutase single nuecleotide polymorphism rs 4880 and the glutathione peroxidase 1 single nucleotide polymorphism rs 1050450 are associated with aging and longevity in the oldest old.” PX21-0006. (App. 4) Wellbeing uses the SNP represented by rs 1050450 with regard to the GPX1 gene in two skin health categories: Firmness and Elasticity and Free Radical Damage. Wellbeing uses the SNP represented by rs4880 with regard to the SOD2 gene. Therefore, the article was also listed by Wellbeing as a reference on Wellbeing’s data card for the SOD2 gene. PX-0025 Both of these SNPs were included in the panel of SNPs PLLG submitted to Qivana to give to Sorenson. PX112 The SNP represented by rs 1050450 was eliminated from Harper’s “new” test, but only because Sorenson could not find a reagent needed to test for it. PX141 3. Mazy also cited references in Wellbeing’s data cards that did not state the rs number in question in the title but did provide the rs number in the body of the article. For example, Mazy cited an article titled: “Leptin-Receptor Polymorphisms Relate to Obesity through Blunted
Leptin-Mediated Sympathetic Nerve Activation in a Caucasian Male Population.” PX 2-0448; 5RR8; App. 5 This article is a reference in the data card for the LEPR gene. PX 21-00009 The article refers to three SNPs – represented by rs 1137100, rs 115701 and rs 179183. PX2-0450 The first SNP is used by Wellbeing. STIP00073 The second SNP was included in PLLG’s “new” test. PX112
4. Another article Mazy cited was titled: “Two newly identified genetic determinants of pigmentation in Europeans.” PX2-0505-7 (App. 6) It is a reference cited on Wellbeing’s data card for the ASIP gene. PX2-0012 The article is only two and a half pages long. In a table on page 2, the article cites two and only two SNPs with respect to the ASIP gene – SNPs represented by rs 1015362 and rs 4911414. PX2-0506 These are the two SNPs Wellbeing uses with respect to the ASIP gene. PLLG included both SNPs in the SNP panel it sent to Qivana to give to Sorenson. PX112
5. Mazy cited additional examples of disclosures in the references of rs numbers for SNPs used in Wellbeing SkinDNA™ Test (5RR9-11) and further examples can be found in other articles. PX 2.
6. In at least one instance, there is direct evidence Harper or DiBella obtained an rs number for a Wellbeing SNP from a data card provided by Wellbeing. Plaintiff’s Exhibit 178 was a screen shot of SNP information for the MMP-1 gene taken from the NCBI database that Mazy provided to Harper. It highlighted rs 1799750, a SNP Wellbeing used in its test. When Harper sent the extended data card for the MMP-1 to DiBella, who prepared a SNP panel for PLLG, Harper added this rs number to it. PX83
7. Moreover, Harper asked for Mazy’s scientific references.
On November 7, 2012, Harper wrote to Urman: “When we get the info from Stefan on SNPs, we want to complete journal articles so we are more informed about them than anyone else . . . .” PX73 Urman understood that Harper was referring to the articles cited in Wellbeing’s data cards. 6RR20 One day later, Urman wrote to Mazy: “Good morning! Can you get us the article for all of the SNPs that support the data cards?” PX99
8. On average a human has 3.5 million DNA variants.
SNPs are DNA variants that occur in 1% or more of the population. 7RR23-24. Each gene has between 500 and 1,000 SNPs. PX26. Mazy testified that he considered 6,000 genes and closely evaluated 200 of them before choosing twelve genes for Trade Secret No. 1. 4RR83- 86. Therefore, Mazy considered thousands of SNPs. Moreover, Mazy showed the jury a huge stack of articles he read and still had at trial (20% of the total he read) that he relied upon to evaluate whether particular SNPs were associated with the skin health categories he had chosen. PX2; 4RR 117-119.
9. The number of articles cited in the data cards was far smaller than the number of articles Mazy had read to develop his test. PX2; 4RR117-119. Moreover the data cards grouped the articles by gene. PX21 The fact that the DNA panel PLLG sent to Qivana contained eight of Wellbeing’s SNPs is not a coincidence.
10. Harper and DiBella prepared a test panel of SNPs in three months. 9RR70-71. It took Mazy three years to develop Trade Secret No. 1. 4RR77
Dr. Metzker testified that Harper misappropriated Trade Secret No. 1 –
based not only on the above-cited evidence (7RR21, 49-52, 57-61, 64-65, and 70-
72), but also his opinions that neither Harper nor DiBella was qualified to develop
a DNA test and certainly would not have been able to develop a DNA test in three months without Trade Secret No. 1. 7RR53-57 and 65-69. Harper and PLLG did
not object to the admission of Metzker’s opinions at trial.
B. Proof of Use or Disclosure of Trade Secret No. 1 by Harper and by PLLG.
1. Standard of Proof of Use or Disclosure of a Trade Secret. The District Court charged the jury on “use” of a trade secret as follows:
“Use” means a commercial use by which a person seeks to profit from the trade secret. Merely receiving trade secret information does not constitute “use” of a trade secret. Misappropriation does not require that the person use the trade secret in exactly the form in which the person received it; however, it must be substantially derived therefrom. There is no misappropriation when the contribution of the trade secret is slight and the person’s process can be said to have been derived from other sources.
(ICR2980)
This instruction was correct – and is not challenged on appeal by Harper or
PLLG. In SW Energy Production Co. v. Berry-Helfand, 491 S.W.3d 699 (Tex.
2016), the Supreme Court stated that “use” of a trade secret means “’commercial
use by which the offending party seeks to profit from the use of the trade secret.’”
Id., at 722 (quoting Global Water One, Inc. v. Atchley, 244 S.W.3d 924, 930 (Tex.
App. – Dallas 2008, pet. denied). The Supreme Court added that “use” of a trade
secret includes relying on the trade secret “’to assist or accelerate research or
development.’” Id. (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 40
comt. c)
In GlobeRanger Corp. v. Software AG United States of America, Inc., 836
F.3d 477 (5th Cir. 2016) (applying Texas law), the Court of Appeals commented on
the above statements by the Texas Supreme Court in Southwestern Energy as
follows:
Southwestern Energy thus removes any doubt that Texas follows this principle of “traditional trade secret law,” which recognizes that if the concept of use “were not flexible enough to encompass modified or even new products that are substantially derived from the trade secret of another, the protections the law provides would be hollow indeed.”
Id., at 498-499.
In GlobeRanger, the Court of Appeals held that GlobeRanger Corp.
(“GlobeRanger”) had provided sufficient evidence to show that Software AG US
of America, Inc. (“Software AG”) had used GlobeRanger’s Navy Solution, a radio
frequency identification (“RFID”) technology, to develop its own product. The
Court of Appeals cited the following evidence:
Software AG accessed implementations of the Navy Solution; received confidential system keys under the pretense of maintenance; acknowledged trying to replicate GlobeRanger’s functionality and obtained confidential source code from a former GlobeRanger employee in order to figure out how the technology worked, all while it was in the process of making its own product to perform similar functions.
Id., at 499. In short, the Court of Appeals accepted evidence of defendant’s access
to plaintiff’s trade secrets while developing a competing product to perform similar functions. It did not require evidence that defendant’s product was the same as or
even substantially similar to plaintiff’s product.
Moreover, in GlobeRanger, the Court of Appeals cited its prior decision on
this point in Wellogix, Inc. v. Accenture, L.L.P., supra (applying Texas law).
Wellogix presented evidence that Accenture and its partner, SAP, had been able to
access Wellogix’s dynamic templates source code that had been uploaded to a
confidential eTrans portal. The Court of Appeals cited that evidence and an
Accenture document stating that its software had to have similar or better
technology than Wellogix and other Accenture documents referencing Wellogix’s
templates as supporting the jury’s conclusion that Accenture used Wellogix’s trade
secrets. Id., at 877.
In Wellogix, the Court of Appeals also addressed Accenture’s arguments
that: (1) its templates lacked “dynamic” features and therefore were “nothing like
Wellogix’s;” and (2) “Wellogix doesn’t own the concept of templates.” Similarly,
PLLG has argued that its DNA test looks different than Wellbeing’s DNA test,
which utilizes Trade Secret No. 1, and that Wellbeing does not own the concept of
DNA testing to determine skin treatments. In Wellogix, the Court of Appeals
rejected these arguments:
However, the standard for finding “use” is not whether Accenture’s templates contained Wellogix trade secrets, but whether Accenture “rel[ied] on the trade secret[s] to assist or accelerate research or development of its templates. HAL, 500
F.3d at 451 (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION § 40). A jury could “legitimate[ly] infer[,]” Reeves, 530 U.S. at 150, 120 S.Ct. 2097, on the basis of, for example, the Accenture email suggesting that the company should “[u]se Wellogix for content,” that Accenture “rel[ied]” on Wellogix’s templates to develop its own. See HAL, 500 F.3d at 451.
Id., at 877-8.
A Texas Court of Appeals has also considered this sufficiency of evidence
of use of a trade secret question. In Bishop v. Miller, 412 S.W.3d 758 (Tex. App. –
Houston [14th Dist.] 2013, no pet.), Plaintiffs William Bishop and Pinnacle Potash
International, Ltd. (“Pinnacle”) asserted that thirteen pieces of information on a list
of Bishop’s technical plans for mining for potassium in a region of Utah known as
The Ten Mile Area were trade secrets. Bishop and Pinnacle further asserted that a
compilation of one or more of those items was also a trade secret. The jury found
that three of the items and a compilation of them were trade secrets and that those
trade secrets were misappropriated by Defendants E. Barger Miller and Reunion
Potash Company (“Reunion”).
Regarding use, the Court of Appeals found there was evidence that Reunion
had “used” Bishop’s trade secrets in two ways. First, Miller used the trade secrets
to attempt to entice a third party into investing money in Reunion to develop the
subject mining leases. Second, Reunion used the trade secrets to develop an
Operating Plan for the development of the one acre. The Court of Appeals’
comments on the latter finding are most relevant to Wellbeing’s case.
Bishop conceded that Reunion’s Operating Plan did not copy his plan, which
was based on his trade secrets, “in toto”; but Bishop asserted that Reunion’s
Operating Plan was “very similar” to his and used “major pieces of his plan.” Id.,
at 773. Bishop’s technical expert witness, Kenneth Mills, broke Bishop’s plan into
twenty-one component parts and concluded that Reunion’s Operating Plan
incorporated fifteen of those components, and either modified or discarded the
remaining six components. Mills further testified that without the “Bishop Plan”
Reunion’s modifications would never have been done. Id., at 774.
Regarding Bishop’s testimony, the Court of Appeals observed that the
unauthorized use of a trade secret “need not extend to every aspect or feature of the
trade secret; use of any substantial portion of the secret is sufficient to subject the
actor to liability.” Id. (quoting RESTATEMENT (THIRD) OF UNFAIR COMPETITION
§ 40 comt. c) Regarding Mills’ testimony, the Court of Appeals stated:
(“[T]he actor need not use the trade secret in its original form. Thus, an actor is liable for using the trade secret with independently created improvements or modifications if the result is substantially derived from the trade secret.”).
Id. (again quoting comment c.)
The Court of Appeals noted that the three trade secrets found by the jury
were among the components of the Bishop Plan that Reunion had modified, but the
Court cited Mills’ testimony that the modifications in Reunion’s Operating Plan
would never have been made if not for Reunion’s use of Bishop’s trade secrets as
supporting the jury’s finding of misappropriation. Id., n. 20.
In the end, the Court of Appeals concluded that the similarities between
Bishop’s and Reunion’s plans and Mills’ testimony regarding Reunion’s
modifications was sufficient evidence to support the jury’s finding of
misappropriation stating: “The evidence was such that reasonable and fair minded
people could reach the verdict the jury reached in this case.” Id., at 775.
In conclusion, with regard to evaluating a defendant’s alleged use of a trade
secret GlobeRanger, Wellogix, and Bishop offer the following standards:
1. “Use” of a trade secret means any commercial use by which a person seeks to profit from the trade secret. See GlobeRanger. See also Southwestern.
2. A plaintiff need not introduce direct evidence of a defendant’s use of a trade secret. Evidence, even circumstantial evidence, of a defendant’s access to the alleged trade secret and intention to develop similar technology will suffice. See GlobeRanger.
3. A defendant’s product need not contain the trade secret.
If the defendant relied upon the trade secret to assist or accelerate its research, that is a use that supports a finding of misappropriation. See Wellogix.
4. Unauthorized use need not extend to every aspect, feature or component of a trade secret. It is sufficient if the defendant’s technology or product is substantially derived from the plaintiff’s trade secret(s). See Miller.
The District Court’s charge to the jury on the definition of “use” of a trade
secret conforms to these standards.
2. Wellbeing’s Evidence of Use of Trade Secret No. 1 by Harper and PLLG.
a. Evidence of Use of Trade Secret No. 1 by Harper Wellbeing presented evidence Harper used Trade Secret No. 1 to prepare her
patent applications, including the following:
1. Harper had access to Trade Secret No. 1. See above. 2. David Urman, who worked for Harper and PLLG, sent Wellbeing data cards and “extended” data cards to Harper’s patent prosecution counsel. PX291 and 295.
3. Wellbeing’s “extended” data card for the MMP-1 gene was inserted into Harper’s provisional patent application and Harper’s PCT application (minus Mazy’s citations to scientific articles.) PX22 and 153-0065-72, 159-0041.
4. Harper’s PCT patent application disclosed eleven of the twelve genes in Trade Secret No. 1 PX159; 7RR51.
5. Harper’s PCT application disclosed twelve of the fifteen SNPs in Trade Secret No. 1. 7RR143. Table 2 alone disclosed eight of the SNPs in Wellbeing’s test.
6. Harper’s PCT application disclosed the Wellbeing SNPs it disclosed in the same skin health categories as Trade Secret No. 1. 7RR146. There were many other skin health categories that Wellbeing or Harper and PLLG could have used. 4RR109; 7 RR 33-34.
Based upon these facts and his review of all of the documents produced in
the case and all of the testimony in the case, Dr. Metzker testified that Harper’s
patent applications contained and disclosed Wellbeing’s Trade Secret No. 1 and that the publication of Harper’s PCT application destroyed Trade Secret No. 1.
7RR71, 143. Harper and PLLG did not object to the admission of this testimony
by Metzker.
Moreover Harper and PLLG used Harper’s provisional patent application to
obtain an Exclusive Distribution Agreement with Qivana. At the outset of the
parties’ negotiations, Urman sent Harper’s provisional patent application to
Qivana. PX57; 8RR127. Justin Banner, a founder of and key decision-maker for
Qivana testified he was looking for a unique skin care product for Qivana to
distribute. Banner further testified that in order to obtain a patent one has to have
something that is unique. Therefore, Banner concluded that PLLG likely had a
unique skin care product line – exactly what Qivana was looking for. 8RR127.
Ultimately, Qivana licensed Harper’s patent-pending technology as part of its
agreement with PLLG. PX128-002 and 3-5.
b. Evidence of Use of Trade Secret No. 1 by PLLG.
Wellbeing presented evidence of PLLG’s use of Trade Secret No. 1 to
develop its SNP panel for a DNA test, including the following:
1. PLLG had access to Trade Secret No. 1. See above. 2. PLLG hired Dr. Linda DiBella to help develop a SNP panel for its DNA test. 10RR25. Harper sent Wellbeing data cards and a list of each gene in Trade Secret No. 1 and its function to DiBella. PX83.
3. DiBella had no prior experience developing a DNA test.
9RR70.
4. DiBella started work on an SNP panel on January 18, 2014. 9RR70-71. By April 22, 2014, DiBella had prepared a SNP panel. PX112.
5. PLLG sent the SNP panel DiBella prepared to Qivana to give to the new testing laboratory run by Sorenson Genomics, LLC. PX112.
6. The SNP panel that PLLG sent to Qivana to give to Sorenson included eight of the fifteen SNPs in Trade Secret No. 1. STIP00073; PX112.
7. The reason some of those SNPs did not end up in the SNP panel Sorenson used is that Sorenson found many of the reagents it needed to use to identify the SNPs were not readily available. 7RR147-148. For example, in one email Lars Mouritsen, the Chief Scientific Officer of Sorenson, sent to Harper and Urman shortly after receiving PLLG’s proposed SNP panel, Mouritsen listed three Wellbeing SNPs for which reagents were not immediately available. PX141.
8. In total, DiBella spent about 100 hours on PLLG’s SNP panel. 9RR71. In contrast, Mazy spent thousands of hours over three years to develop Wellbeing’s SNP panel which is Trade Secret No. 1. 4RR77-78.
9. Harper, PLLG and DiBella did not produce detailed work papers like Mazy did. PX1, 2, 4 and 7.
Based on this evidence, Dr. Metzker testified that PLLG had used Trade
Secret No. 1 to develop its SNP panel. Specifically, Metzker testified that PLLG
used Trade Secret No. 1 as the “starting point” to develop its test panel. 7RR149.
PLLG did not object to this testimony by Metzker.
C. This Court Should Not Reverse the Judgment Based on Either Harper’s or PLLG’s Allegation of No Evidence or Insufficient Evidence of their Access to and Use/Disclosure of Trade Secret No. 1. Per the standards established by the above-cited cases, there is plenty of
evidence to support the jury’s findings that Harper and PLLG misappropriated
Wellbeing’s Trade Secret No. 1. The evidence summarized above, including the
opinion testimony of Wellbeing’s technical expert, Dr. Metzker, was admitted
without objection by Harper and PLLG. The evidence is far more than the
proverbial scintilla of evidence because it was sufficient to enable reasonable and
fair minded people to conclude Harper and PLLG misappropriated Trade Secret
No. 1. Transp. Ins. Co. v. Moriel, 879 S.W.2d 10, 25 (Tex. 1994). During oral
argument, Harper’s and PLLG’s counsel argued that in addition to their no
evidence contentions they also asserted that the evidence was insufficient. As this
Court well knows, it “must consider and weigh all the evidence, and should set
aside the verdict only if it is so contrary to the overwhelming weight of the
evidence as to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176
(Tex. 1986). That is not the case here. Indeed, while Harper’s and PLLG’s expert,
Dr. Carlos Bustamante, contested Wellbeing’s contention that Trade Secret No. 1
was in fact a trade secret, he did not contest Wellbeing’s contentions that Harper
and PLLG had access to and used and disclosed Trade Secret No. 1.
CONCLUSION AND PRAYER
For the above reasons, and for the reasons stated in Wellbeing’s Brief of
Appellee, this Court should affirm the Judgment of the District Court.
Respectfully submitted,
/s/ Robert W. Kantner State Bar No. 11093900 rwkantner@jonesday.com JONES DAY 2727 North Harwood Street Dallas, Texas 75201-1515 Telephone: (214) 220-3737 Facsimile: (214) 969-5100
ATTORNEY FOR APPELLEE WELLBEING GENOMICS PTY LTD.
CERTIFICATE OF SERVICE
On January 5, 2018, I electronically filed this brief with the Clerk of the
Court using the eFile.TXCourts.gov electronic filing system which will send
notification of such filing to the following (unless otherwise noted below).
Marcy Hogan Greer William T. (“Tommy”) Jacks State Bar No. 08417650 State Bar No. 10452000 mgreer@adjtlaw.com jacks@fr.com ALEXANDER DUBOSE JEFFERSON & David S. Morris TOWNSEND LLP State Bar No. 24032877 515 Congress Avenue, Suite 2350 dmorris@fr.com Austin, Texas 78701-3562 FISH & RICHARDSON P.C. Telephone: (512) 482-9300 111 Congress Avenue, Suite 810 Facsimile: (512) 482-9303 Austin, Texas 78701 Telephone: (512) 472-5070 Facsimile: (512) 320-8935
Attorneys for Appellants
/s/ Robert W. Kantner Robert W. Kantner