Corrosion Prevention Technologies LLC v. Hatle

□ Southern District of Texas

ENTERED

March 01, 2022

IN THE UNITED STATES DISTRICT COURT Nathan Ochsner, Clerk

FOR THE SOUTHERN DISTRICT OF TEXAS

HOUSTON DIVISION

CORROSION PREVENTION §

TECHNOLOGIES LLC, §

§

Plaintiff, §

VS. § CIVIL ACTION NO. 4:20-CV-2201

§

LOREN L. HATLE, et al, §

§

Defendants. §

ORDER

Pending before the Court are Defendants’ Loren L. Hatle, Santiago Hernandez, Timothy

Mulville, Bear Metal Technologies, LLC (“Bear Metal”), and Corrosion Exchange, LLC (“CE”)

(collectively the “Defendants” or “Counterclaim Plaintiffs”) Motions for Summary Judgment.

(Doc. Nos. 36, 38, 39, 40, 41, 43). Plaintiff Corrosion Prevention Technologies LLC’s (“CPT” or

“Plaintiff’) filed a two Responses, together addressing all six motions, (Docs. No. 55, 57), and ~

Defendants filed a Reply to each Response. (Docs. No. 60, 62). Plaintiff supplemented its

Response to Doc. No. 55, (Doc. No. 64), and Defendants subsequently filed a Reply to said

supplement. (Doc. No. 65). After considering the briefing and applicable law, the Court denies

each motion.

I. Background!

CPT manufactures, markets, and sells treatment kits for corrosion. Corrosion is a problem

in various industries, such as oil and gas, shipping trades, and others. CPT allegedly created a more

. efficient corrosion prevention technology that involves fewer steps to complete, saving time and

' The Background comes from the facts alleged in CPT’s complaint. (See Doc. No. 1). Where appropriate for analysis

of the motion, however, the facts will be recited in the light most favorable to Defendants as the non-moving party.

See Sonnier v. State Farm Mut. Auto. Ins. Co., 509 F.3d 673, 675 (Sth Cir. 2007).

energy of users. Its main product, which is allegedly trademarked, is called CorrX. Defendants

Hatle, Hernandez, and Mulville (“Individual Defendants”) are former employees of CPT.

Defendant Bear Metal Technologies was allegedly started by Defendant Hernandez when he left

CPT’s employ, and Defendant Corrosion Exchange was subsequently started by Defendant Hatle.

CPT sued all Defendants for alleged violations of the Lanham Act, the Federal Defend

Trade Secrets Act, and the Texas Uniform Trade Secrets Act (““TUTSA”), and for common law

misappropriation. It also sued the individual Defendants for breach of various confidentiality

agreements they allegedly signed and for conversion. Finally, CPT sued only Hatle for breach of

an assignment agreement (“Assignment Agreement”) under which Hatle was allegedly obligated

to transfer the rights to certain intellectual property to CPT.

Subsequently, Defendants answered and filed counterclaims against CPT for declaratory

judgment of noninfringement of two patents (US Patent No. 9,782,804 (the ““804 patent”) and US

Patent No. 9,193,943 (the “‘943 patent”)), and state-law claims of tortious interference with

potential business relationship, business disparagement, and defamation. (See Doc. No. 16). The

Court later dismissed these Counterclaims. (Doc. No. 22).

Defendants have now filed six motions for summary judgment encompassing all seven

counts alleged in the Complaint. (Doc. Nos. 36, 38, 39, 40, 41, 43), contending that the facts

demonstrate that Plaintiff lacks standing to bring a Lanham Act claim, that all claims are time-

barred by their respective statutes of limitations, and that Hatle did not breach the Assignment

Agreement.

Il. Legal Standard

Summary judgment is warranted “if the movant shows that there is no genuine dispute as

to any material fact and the movant-is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(a). “The movant bears the burden of identifying those portions of the record it believes

demonstrate the absence of a genuine issue of material fact.” Triple Tee Golf, Inc. v. Nike, Inc.,

485 F.3d 253, 261 (Sth Cir. 2007) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322-25 (1986)).

Once a movant submits a properly supported motion, the burden shifts to the non-movant

to show that the Court should not grant the motion. Celotex, 477 U.S. at 321-25. The non-movant

then must provide specific facts showing that there is a genuine dispute. Jd. at 324; Matsushita

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A dispute about a material fact

is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving

party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The Court must draw all

reasonable inferences in the light most favorable to the nonmoving party in deciding a summary

judgment motion. Jd. at 255. The key question on summary judgment is whether there is evidence

raising an issue of material fact upon which a hypothetical, reasonable factfinder could find in

favor of the nonmoving party. /d. at 248.

II. Analysis

Defendants have moved for summary judgment on each of the seven counts at issue in this

lawsuit. The Court will address each count individually.

A. Count : Violation of the Lanham Act (Doc. No. 35)

Defendants move for summary judgment with respect to Count I, violation of the Lanham

Act, arguing that Plaintiff lacks standing to assert this claim and that the applicable statute of

limitations bars this claim. The Court will first consider the standing argument.

1. Standing

In order to have standing under the Lanham Act, “a plaintiff must plead (and ultimately

prove) an injury to commercial interest in sales or business reputation proximately caused by the

defendant’s reputation.” Lexmark Int’l, Inc. v. Static Control Components, Inc., 572 U.S. 118, 140.

To satisfy the “proximate cause” prong of the requirement, a plaintiff “ordinarily must show

economic or reputational injury directly from the deception wrought by defendant’s advertising;

and that occurs when deception of consumer causes them to withhold trade from the plaintiff.” Jd.

at 133.

Defendants argue that Plaintiff does not have standing to bring a Lanham Act claim

because none of the alleged acts of misconduct set forth in Count I of the Complaint “involve a

registered mark of Plaintiff, nor mention the Plaintiff at all.” (Doc. No. 35 at 4~5). Instead,

Defendants contend that Plaintiff seeks to pass off what should be a copyright claim as a trademark

claim, because the alleged acts of misconduct are a disguised “species of mutant copyright law”

which do not fall under the protection of the Lanham Act. (/d.) (quoting Dastar Corp. v. Twentieth

Century Fox Film Corp., 539 U.S. 23, 34 (2003)).

Plaintiff responds, contending that it has standing to assert the claim because it is a direct

competitor with Defendants that has suffered injury as a result of false advertising. A prima facie

case of false advertising under the Lanham Act requires the plaintiff to show:

(1) A false or misleading statement of fact about a product;

(2) Such statement either deceived, or had the capacity to deceive a substantial segment of

potential consumers;

(3) The deception is material, in that it is likely to influence the consumer's purchasing

decision;

(4) The product is in interstate commerce; and

(5) The plaintiff has been or is likely to be injured as a result of the statement at issue.

Pizza Hut, Inc. v. Papa John's Int'l, Inc., 227 F.3d 489, 495 (Sth Cir. 2000); see also 15 U.S.C. §

1125. Specifically, Plaintiff argues that the metadata, attached as (Doc. No. 55-11), shows that

Hatle created a document which falsely claimed that the products that Defendants were selling

were renamed from products that belong to Plaintiff, referencing its “CorrX” trademark. (Doc. No.

55 at 13). As a result, Plaintiff contends that these false statements were designed to intentionally

confuse consumers—and to ultimately detract from the sales of Plaintiff—by deliberately

misleading consumers to believe that the product being sold by Defendant was exactly the same

as the product being sold by Plaintiff.

The Court finds that Plaintiff has standing to bring this Lanham Act claim. Plaintiff has

sufficiently pled an injury to commercial sales interest or business reputation proximately caused

by Defendants. At the very least, a genuine dispute of material fact exists as to the question of

proximate cause. Furthermore, Plaintiff has asserted, supported by Defendant Hatle’s testimony,

that it is a direct competitor with Defendants, (see Doc. No. 56-1 at 39), and thus is clearly within

the zone of interests of the Lanham Act on the facts presented. Defendants, therefore, are not

entitled to summary judgment as a matter of law with respect to standing under Count 1 □

Defendants’ Motion on this issue is denied.

2. Statute of Limitations

Defendants also argue that they are entitled to summary judgment with respect to Count I

because the claim is time-barred. (Doc. No. 35 at 5). “The burden of pleading and establishing the

statute of limitations defense falls upon the defendant.” Jaso v. The Coca Cola Co., 435 F. App’x.

346, 351 (5th Cir. 2011) (citing Fed. R. Civ. P. 8(c)(1)). “The Lanham Act ‘establishes no

limitations for claims alleging unfair competition or false advertising.’” Jd. at 356 (quoting

Conopco, Inc. v. Campbell Soup Co., 95 F.3d 187, 191 (2d Cir. 1996)). The Fifth Circuit has

instructed “that the most analogous Texas statute of limitations for a Lanham Act claim is the four-

year statute of limitations applied to fraud claims under § 16.004 of the Texas Civil Practice &

Remedies Code.” Jaso, 435 F. App’x at 356 (citing Mary Kay, Inc. v. Weber, 601 F. Supp. 2d 839,

859-860 (N.D. Tex. 2009)). Other Texas courts have held similarly. See, e.g., Edmark Indus. SDN.

BHD. v. South Asia Int'l (H.K.) Ltd., 89 F. Supp. 2d 840, 846 (E.D. Tex. 2000); Derrick Mfg.

Corp. v. Southwestern Wire Cloth, Inc., 934 F. Supp. 796, 805 (S.D. Tex. 1996).

Moreover, because the Lanham Act does not contain a statute of limitations, “federal courts

have referred to analogous state statutes of limitations to determine whether a presumption of

laches should apply.” Bd. of Regents, Univ. of Texas Sys. v. KST Elec., Ltd., 550 F. Supp. 2d 657,

667 (W.D.Tex. 2008). “The time period for laches under the Lanham Act ‘begins when the plaintiff

knew or should have known of the infringement.’” Jaso, 435 F. App’x at 356 (quoting Elvis

Presley Enters., Inc. v. Capece, 141 F.3d 188, 205 (Sth Cir. 1998)). “The defense of laches requires

proof that there was (1) a ‘delay in asserting a right or claim’; (2) ‘that the delay was inexcusable’;

and (3) ‘that undue prejudice resulted from the delay.’” /d.

This lawsuit was filed on June 23, 2020. In each of their Motions, Defendants reference

three letters: (1) a letter sent by Plaintiff's lawyer Peter Johnson to Hatle in October 2014,

reminding Hatle of his obligations under the confidentiality agreement (“2014 Letter”), (2) a letter

sent by Johnson to Hatle in August 2015, expressing concern that “the property CPT has acquired

from CorrLine [“CLI”] estate is currently being utilized in an unauthorized manner” and that they

planned to investigate further (“2015 Letter”), and (3) a letter sent from Johnson to Mr. Brandon

Black on October 12, 2015, concerning Plaintiff's belief that Hatle was attempting to violate his

contractual agreements with Plaintiff. (“Third Letter’).

Defendants assert that the Third Letter “demonstrates that Plaintiff had knowledge of

Defendants’ alleged misuses of marketing materials as far back as October 2015—more than 5

years prior to this lawsuit (filed June 23, 2020).” (Doc. No. 35 at 6) (citing Doc. No. 35-8 at 4).

They contend that as a result, the facts show that Plaintiff is time-barred by the relevant statute of

limitations.

Plaintiff, in response, first argues that Defendants, by failing to allege that they suffered —

undue prejudice as a result of the delay, have failed to meet their burden in establishing the defense.

(Doc. No. 55 at 16). Furthermore, Plaintiff argues that the Third Letter is only addressed to, and

consequently only applicable to Hatle, while also contending that the letter is silent with respect

to any potential claims under the Lanham Act. (/d.). Finally, Plaintiff contends that even if the

three letters demonstrate knowledge of Defendants’ misconduct, “then the letters also put

Defendants on notice of [Plaintiff's] objections to the same, thereby ending the laches period.” (/d.)

(citing Alfa Laval Inc. v. Flowtrend, Inc., 2016 WL 2625068 at *6 (S.D. Tex. May 9, 2016)).

Court finds that, when drawing all inferences in favor of Plaintiff as the non-moving

party, a genuine dispute of material fact is present with respect to when Plaintiff knew or should

have known of Defendants’ misconduct. The question of whether Plaintiff knew or should have

known at the time it sent the Third Letter is a question of fact that must be resolved by the finder

of fact rather than this Court, and as a result, Defendants’ Motion is denied on this issue.

B. Counts II and III: Violation of the Federal Defend Trade Secrets Act and the Texas

Uniform Trade Secrets Act (Doc. No. 36)

Defendants further argue they are entitled summary judgment with respect to Count II and

III because the claims are time-barred. (See Doc. No. 36 at 3). A civil action alleging

misappropriation of a trade secret “may not be commenced later than 3 years after the date on

which the misappropriation with respect to which the action would relate is discovered or by

exercise of reasonable diligence should have been discovered.” 18 U.S.C. § 1836(d). Similarly, an

action under the Texas Uniform Trade Secrets Act is also governed by a three-year statute of

limitations, with the limitations period beginning when the misappropriation is discovered or

should have been discovered. Tex. Civ. Prac. & Rem Code § 16.010(a); see also Seatrax, Inc. v.

Sonbeck Int’l., Inc., 200 F.3d 358, 365 (Sth Cir. 2000) (“[T]Jhe discovery rule exception, which is

expressly incorporated in the revised three-year statute of limitations, defers accrual of a cause of

action until the plaintiff knew or, exercising reasonable diligence, should have known of the facts

giving rise to a cause of action.”). This lawsuit was filed on June 23, 2020. Therefore, in order to

prevail on summary judgment, Defendants must demonstrate that the limitations period to run

began before June 23, 2017.

Defendants again point to the Third Letter to support their argument that “Plaintiff had

knowledge of Defendants’ alleged misuses of marketing materials as far back as October 2015—

more than 5 years prior to this lawsuit (filed June 23, 2020).” (Doc. No. 36 at 4) (citing Doc. No.

36-3 at 3-4). They contend that as a result, the facts show that Plaintiffs Count II and Count III

claims are time-barred by the relevant statute of limitations.

Plaintiff, in response, argues first that the question of Plaintiff knew or should have known

of its injuries is a question of fact that is not appropriate to be decided on summary judgment.

Furthermore, Plaintiff argues that it is improper to treat all Defendants as on for the purposes of

the statute of limitations analysis, because there may be multiple dates of accrual. (Doc. No. 55 at

18). Therefore, Plaintiff addresses each Defendant individually.

1. Hatle

With respect to Defendant Hatle, Plaintiff argues that the letters cited by Defendants “are

insufficient to show CPT had knowledge of its injury as they amount to nothing more than “mere

surmise, suspicion, and accusation.’” (Doc. No. 55 at 19) (quoting Sw. Energy Prod. Co. v. Berry-

Helfand, 491 S.W.3d 699, 724 (Tex. 2016)). Plaintiff points to Hatle’s testimony, in which Hatle

stated that the Third Letter did not allege misappropriation of trade secrets or confidential

information. (Doc. No. 56-1 at 44-45). Plaintiff also argues that Defendants have failed to show

that any further inquiry would have led to the discovery or any injury. (Doc. No. 55 at 20). Hatle

testified that neither he nor Clean Metal Technologies (“CMT”), the company he worked for from

December 2014 to April 2016, sold or manufactured any product; instead, they merely developed

“concepts” or “methods.” (Doc. No. 56-1). After receiving letters from Plaintiff, Hatle’s business

partner at Clean Metal ceased operations. (/d.). Thus, Plaintiff argues it was not possible even upon

further inquiry for anything to make it aware of Hatle’s breach, because he ceased operations after

receiving the letters.

In the Third Letter, Plaintiff states that the letter’s purpose is to provide information

“regarding what TGS believes is an attempt by Mr. Hatle to violate both his contractual agreements

regarding confidentiality and his further attempt to wrongfully invade the intellectual property

rights owned by TGS.” (Doc. No. 36-3). It further states that it was “evident that Hatle was

ignoring the rights of TGS in . . . the Confidentiality Agreement, on October 27, 2014” and,

referencing Bear Metal and Clean Metal, “both companies appear to be marketing a product and

technology that has the same characteristics and uses as the proprietary technology owned by

CorrLine and subsequently acquired by TGS.” (/d.).

Each side has presented evidence to support their assertions, and as a result, a genuine

dispute of material fact exists as to the precise moment that the statute of limitations was tolled

with respect to Hatle’s alleged misappropriation. This is a question of fact that is best resolved by

the finder of fact. Defendants Motion with respect to Defendant Hatle on Counts IJ and III is

denied.

2. Corrosion Exchange

With respect to Defendant CE, Plaintiff argues that “the letters do not show that CPT had

any suspicions of misappropriation by CE, much less knowledge, because none reference CE.”

(Doc. No. 55 at 22). Plaintiff buffers this argument by pointing out that CE did not exist until

December 2017. (Doc. No. 55-7). It follows, per Plaintiff, that the limitations period could not

have begun before December 2017 at it relates to CE, and therefore, Defendant is not entitled to

summary judgment.

Therefore, the Court denies the motion as to CE.

3. Bear Metal

With respect to Defendant Bear Metal, Plaintiff, pointing to the Third Letter, argues that

the reference to Bear Metal was made in passing, and only suggests that Plaintiff was suspicious

of Bear Metal’s activities, not knowledge of a violation. (See Doc. No. 36-3 at 4). Furthermore,

Plaintiff contends that Defendants have failed to show that further inquiry would have led Plaintiff

to discover any injury because at the time the letter was written, Plaintiff incorrectly believed that

Hatle was involved in the formation of Bear Metal along with Defendant Hernandez. (/d).

Plaintiffs argument on this point appears incomplete, though one may infer that once it recognized

that Hatle was not involved with Bear Metal, Plaintiff had no reason to pursue further inquiries at

that time. Finally, Plaintiff argues that Defendants have produced no evidence that Plaintiff knew

or should have known about Bear Metals sales of corrosion prevention products before June 23,

2017, because Bear Metal’s website only advertised services as late as August 5, 2019. (Compare

Doc. No. 55-18 with Doc. No. 55-19). Therefore, Plaintiff argues that there is no evidence that it

knew or should have known about Bear Metal’s sales of corrosion prevention technology as early

as June 2017.

Defendants, in response, argue that Defendant Hernandez signed the same confidentiality

agreement as Hatle, and therefore, Plaintiffs mistaken belief about Hatle’s involvement in the

formation of Bear Metal has no bearing on the fact that it should have known that Hernandez, .

through Bear Metal, was allegedly violating the agreement. (See Doc. No. 36-3 at 3).

The Court finds that a question of fact exists as to when Plaintiff knew or should have

known about Bear Metal’s alleged violations that is best resolved by the finder of fact. Defendants’

motion with respect to Defendant Bear Metal on Counts II and III is denied.

4, Hernandez

With respect to Defendant Hernandez, Plaintiff argues that the letters are exclusively

focused on Hatle’s actions, and that the only reference to Hernandez was the result of a “mistaken

belief that Hatle was affiliated with Hernandez and Bear Metal, not because CPT has any

independent suspicions that Hernandez independently misappropriated CPT’s trade secrets.” (Doc.

No. 55 at 24). Upon realizing the Hatle and Hernandez never formed a business with one another,

Plaintiff had no reason to inquire further into Hernandez. As a result, Plaintiff argues that the claim

should not be time-barred with respect to Hernandez.

Defendants, in response, present the same arguments here as they presented for Bear Metal.

Defendant Hernandez signed the same confidentiality agreement as Hatle, and therefore, Plaintiff's

mistake belief about Hatle’s involvement in the formation of Bear Metal has no bearing on the fact

that it should have known that Hernandez, through Bear Metal, was allegedly violating the

agreement. (See Doc. No. 36-3 at 3). □□ □□

The Court finds that there is a genuine dispute of material fact as to when Plaintiff knew

or should have known about Hernandez’s misappropriation, and therefore, Defendants’ motion

with respect to Defendant Hemandez.on Counts II and III is denied.

5. Mulville

With respect to Defendant Mulville, Plaintiff argues that none of the letters make any

reference to Mulville. (Doc. No. 55 at 24) (citing Docs. No. 36-1, 36-2, 36-3). Defendants contend

that this lack of reference, coupled with Mulville’s testimony that he has had “no relationship

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whatsoever” with Hatle since 2014, makes Mulville’s alleged misappropriation independent of

Hatle’s. (See Doc. No. 56-3 at 9). Furthermore, Plaintiff argues that Defendants have failed to

explain how the letters demonstrate that it had any knowledge of Mulville’s misappropriation.

The Court denies Defendants’ Motion on Counts II and III as it relates to Mulville.

C. Count IV: Common Law Misappropriation (Doc. No. 38)

Defendants argue that they are entitled to summary judgment with respect to Count IV,

concerning common law misappropriation—also known as unfair competition—because the claim

is time-barred. See Vertex Servs., LLC v. Oceanwide Houston, Inc., 583 S.W.3d 841, 849 (Tex.

App.—Houston [1st Dist.] 2019, no pet.). “Every action for which there is no express limitations

period, except for the recovery of real property, must be brought not later than four years after the

day the cause of action accrues.” Tex. Civ. Prac. & Rem. Code § 16.051. The Court finds no case

or statute setting forth an express statute of limitations with respect to common □□□

misappropriation in Texas. As a result, it is presumed that the statute of limitations is four years.

Defendants argue that the claim is time-barred because the Third Letter “undisputedly

demonstrates that Plaintiff had knowledge of Defendants’ alleged misappropriations of

confidential information . . . as far back as October 2014—more than 5 years prior to this lawsuit.”

(Doc. No. 38) (citing Doc. No. 38-3 at 3-4).

In response, Plaintiff argues that the discovery rule “defers accrual of the cause of action

until the plaintiff knew, or should have known through the exercise of reasonable diligence, of the

facts giving rise to the cause of action.” WesternGeco v. Ion Geophysical Corp., 2009 WL

3497123, at *4 (S.D. Tex. Oct. 28, 2009). Relying on the arguments asserted in response to Counts

II and III, Plaintiff contends that a fact question exists with respect to when Plaintiff knew or

should have known of Defendants’ misappropriation. The Court agrees. A genuine dispute of fact

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exists as to when Plaintiff became aware, or should have become aware, of Defendants’

misappropriation. Defendants’ Motion is on this issue is denied.

D. Count V: Breach of Contract (Confidentiality Agreement) (Doc. No. 39)

Defendants similarly argue they are entitled to summary judgment with respect to Count

V because the claim is time-barred. Count V concerns a breach of contract claim against the

Individual Defendants for breaching their confidentiality agreements with CLI when they used

CLI’s confidential information regarding CorrX products to one or more of CMT, Bear Metal, or

CE. (Doc. No. 1 at 26).

“As a general rule, the statute of limitations for a breach of contract action is four years

from the day the cause of action accrues. A breach of contract claim accrues when the contract is

breached.” Capstone Healthcare Equip. Servs., Inc. ex rel. Health Sys. Grp., L.L.C. v. Quality

Home Health Care, Inc., 295 S.W.3d 696, 699 (Tex. App.—Dallas 2009, pet. denied) (cleaned

up); see also Smith v. Ferguson, 160 S.W.3d 115, 123 (Tex. App.—Dallas 2005, pet. denied) (“An

action for breach of contract is governed by a four-year statute of limitations.”). As the lawsuit

was filed June 23, 2020, the action for breach of contract must have been brought before June 23,

2016, to avoid being time-barred,

Defendant points to the 2014 letter (Doc. 39-1) and the Third Letter (Doc. 39-3) to

demonstrate that Plaintiff had knowledge of Individual Defendants’ alleged breach as early as

October 2014, and as a result, they are entitled to summary judgment.

Plaintiff argues that Defendants cite the same three letters to demonstrate knowledge on

this claim as they cited for the trade secret misappropriation claims. (Doc. No. 55 at 25). As such,

with respect to Defendants Hernandez and Mulville, Plaintiff reasserts the arguments set forth in

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response to Counts II and III, arguing that the same accrual period applied for Counts II and III

must apply for Count 'V, and therefore, the claim is not time-barred,

As to Defendant Hatle, Plaintiff argues that the letters are not sufficient to establish

knowledge, but even if they were, they would only apply as to breaches occurring before the

limitation period. (Doc. No. 55 at 25) (citing Gimme The Best, L.L.C. v. Sungard Vericenter, Inc.,

2010 WL 1388993, at *6 (S.D. Tex. Apr. 1, 2010)). Plaintiff contends that at worst, it has some

viable claims against Hatle, and thus, summary judgment is inappropriate.

The Court finds that Plaintiff has sufficiently raised a genuine dispute of material fact as to

when it first’ learned, or should have learned, of Defendants’ breach. Moreover, the Court finds

that any alleged breach of the confidentiality agreement occurring on or after June 23, 2016—

within four years of the commencement of this lawsuit—is not time-barred.”

E. Count VI: Breach of Contract (Assignment Agreement) (Doc. No. 43)

Defendant Hatle argues that he is entitled to summary judgment with respect to Count VI

because the undisputed facts demonstrate that he fully performed the terms of the Assignment

Agreement, and therefore no breach has occurred. “The elements of a breach of contract claim are

(1) a valid contract; (2) the plaintiff performed or tendered performance; (3) the defendant

breached the contract; and (4) the plaintiff was damaged as a result of the breach.” Brooks v.

Excellence Mortg., Ltd., 486 S.W.3d 29, 36 (Tex. App.—San Antonio 2015, pet denied).

Count VI concerns a breach of contract claim against Defendant Hatle with respect to the

Assignment Agreement between CLI and Hatle. Hatle argues that the Assignment Agreement

“required the assignment of a single patent application — the Assigned Patent.” (Doc. No. 43 at 4).

? Furthermore, to the extent that any of the Defendants’ activities constitute a violation of the confidentiality

agreement, that document has continuing obligations that may or may not defeat the statute of limitations claims. (See,

e.g., Doc. No. 1-1 at § 2).

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The “Assigned Patent” refers to the ‘943 Patent. (/d.) Hatle argues that the Assigned Patent is

currently assigned to Plaintiff, and therefore, he has materially performed under the Assignment

Agreement. Hatle argues that the other patents he filed, the ‘310 Patent, the ‘489 Patent, and the

‘361 Patent (“Later-Filed Patents”), are not subject to the Assignment Agreement because they are

unrelated to the ‘943 Patent, claim no priority to any part of the ‘943 Patent, do not share the same

inventorship or titles of the ‘943 Patent, and are different inventions than the ‘943 Patent. (/d.).

Therefore, Hatle contends there has been no breach of the Assignment Agreement and that he is

entitled to summary judgment as a matter of law.

Plaintiff responds by presenting two arguments. First, Plaintiff contends that Hatle’s Later-

Filed Patents are covered by the Assignment Agreement. (Doc. No. 57 at 12-14). Plaintiff points

to the specific language of the Assignment agreement, which, in pertinent part, states that Hatle

will assign “the entire right, title, and interest in and to the Inventions in the United States and

foreign countries and the Patents and Patent Applications, including but not limited to all reissues,

divisions, continuations and extensions of the Patents” to Plaintiff. (Doc. No. 1-4). Focusing on ~

the “Inventions” language, Plaintiff argues that Hatle has not provided any evidence that the

written description of the ‘943 patent fails to “reasonably [convey] to those skilled in the art, the

invention claim” in the later-filed patents, and therefore, there is a question of fact as to whether

the later-filed patents are subj ect to the Assignment Agreement. MHL TEK, LLC y. Nissan Motor

Co., 655 F.3d 1266, 1276 (Fed. Cir. 201 1); see also Matter of Dallas Roadster, Ltd., 846 F.3d 112,

127 (Sth Cir. 2017) (What constitutes a breach of contract is a question of law, but whether the

breaching conduct occurred is a question of fact.”). Plaintiff additionally points to Hatle’s

testimony, in which he stated that each Later-Filed Patent evolved from the ‘943 patent, but with

fewer ingredients. (Doc. 58 at 31-33).

15

Relying on the same testimony from Hatle, Plaintiff contends that even if “Inventions”

does not cover the later-filed patents, Hatle breached the Assignment Agreement because it

required him to assign all “continuations” of the Patents. (See Doc. 1-4). Plaintiff argues that the

Later-Filed Patents qualify as “Continuation-In-Part applications” (“CIP application”), which

contain “subject matter from a prior application and may also contain additional matter not

disclosed in the prior application.” Augustine Med., Inc. v. Gaymar Indus., Inc., 181 F.3d □□□□□

1302 (Fed. Cir. 1999). Whether an application qualifies as a CIP application is a question of fact.

Id. at 1303. Plaintiff argues that Hatle’s testimony suggests that the later-filed patents contain

subject matter recited in the ‘943 patent, and therefore, the jury must decide whether the Later-

Filed Patents qualify as CIP applications.

The Court finds that Plaintiff has sufficiently raised a genuine dispute of material fact with

respect to the terms of the Assignment Agreement and whether Hatle’s conduct constitutes a

breach. Questions of fact remain about whether the Later-Filed Patents were covered by the

Assignment Agreement. As such, the Court denies Defendants’ Motion for Summary Judgment

with respect to the breach of contract claim.

F, Count VII: Conversion (Doc. No. 40)

Finally, Individual Defendants argue that they are entitled to summary judgment with

respect to Count VII because the claim is time-barred. “The limitations period for conversion is

two years, and beings to run at the time of the unlawful taking.” Jn re Estate of Mechior, 365

S.W.3d 794, 798 (Tex. App.—San Antonio 2012, pet. denied). If, however, the initial possession

was lawful, “the limitations period does not begin to run until the return of the property has been

demanded or refused, or until the person in possession has unequivocally exercised acts of

dominion over the property inconsistent with the claims of the owner or the person entitled to

16

possession.” Wells Fargo Bank Nw., N.A. v. RPK Capital XVI, L.L.C., 360 S.W.3d 691, 700 (Tex.

App.—Dallas 2012, no pet.).

Again, Defendants identify the 2015 letter, (Doc. 40-2), and the Third Letter, (Doc. No.

40-3), to demonstrate that Plaintiff had knowledge of the Individual Defendants’ alleged

conversion of confidential information as early as October 2014. (Doc. No. 40). As such,

Defendants contend that the claim is untimely, and they are entitled to summary judgment as a

matter of law.

Plaintiff, in response, argues that the Individual Defendants “lawfully possessed CPT’s

property during their employment,” and as a result, the conversion claim did not accrue until

Plaintiff knew or should have known about the unlawful taking. (Doc. No. 55 at 26). First, Plaintiff

contends that Defendants Mulville and/or Hernandez retained one of its promotional videos to

create a similar video for Bear Metal, but that Plaintiff had no way of knowing about this unlawful

taking until the video was released in February 2020. (Doc. No. 55-8). Second, Plaintiff contends

that Defendant Hatle retained its SEM studies and marketing materials upon his resignation, (Doc.

No. 55-3), and that none of the letters proffered by Individual Defendants demonstrate anything

beyond ““‘mere surmise, suspicion, and accusation’ as to Hatle alone, ‘not facts that in the exercise

of reasonable diligence would lead to the discovery of a wrongful act’ as to any Individual

Defendant.” (Doc. No. 55 at 26) (quoting Sw. Energy Prod., 491 S.W.3d at 724). Plaintiff argues,

therefore, that the statute of limitations defense ought not apply because the limitations period

began within two years of the lawsuit being filed.

The Court finds that a genuine dispute of material fact exists with respect to when the

statute of limitations tolled for the conversion claim. There does not appear to be any debate that

the Defendants’ initial possession of Plaintiff's promotional materials was lawful. As such, a

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question of fact exists with respect to when the possession allegedly amounted to conversion.

Therefore, Defendants’ Motion is denied on the conversion claim.

IV. Conclusion

For the foregoing reasons, the Court denies Defendants’ Motions for Summary Judgment.

(Docs. No. 36, 38, 39, 40, 41, 43).

Signed at Houston, Texas, this Ist day of March, 2022. Lo

Andrew 8. Hanen

United States District Judge

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