Gillig v. Nike, Inc.

United States Court of Appeals for the Federal Circuit
2009-1415

JOHN P. GILLIG and TRIPLE TEE GOLF, INC.,

Plaintiffs-Appellants,

v.

NIKE, INC.,

Defendant-Appellee.

Melvin K. Silverman, M.K. Silverman & Associates, P.C., of Newark, New Jersey,
argued for plaintiffs-appellants. Of counsel on the brief was Joseph F. Cleveland, Jr.,
Brackett & Ellis, P.C., of Fort Worth, Texas.

Christopher J. Renk, Banner & Witcoff, Ltd., of Chicago, Illinois, argued for
defendant-appellee. With him on the brief were J. Pieter van Es and Michael J. Harris.
Of counsel on the brief was Michael H. Martin, Cotten Schmidt & Abbott, L.L.P., of Fort
Worth, Texas.

Appealed from: United States District Court for the Northern District of Texas

Judge John H. McBryde
 United States Court of Appeals for the Federal Circuit

2009-1415

JOHN P. GILLIG and TRIPLE TEE GOLF, INC.,

Plaintiffs-Appellants,

v.

NIKE, INC.,

Defendant-Appellee.

Appeal from the United States District Court for the Northern District of Texas in case
no. 08-CV-743, Judge John H. McBryde.

___________________________

DECIDED: April 20, 2010
___________________________

Before LINN, PLAGER, and DYK, Circuit Judges.

DYK, Circuit Judge.

John P. Gillig (“Gillig”) and Triple Tee Golf, Inc. (“Triple Tee”) appeal from a final

judgment of the United States District Court for the Northern District of Texas. The

district court dismissed Gillig and Triple Tee’s complaint for failure to state a claim upon

which relief could be granted. The court found that the plaintiffs’ trade secrets claim

was barred by the statute of limitations and res judicata, and that their inventorship

claims were barred by res judicata. We affirm the dismissal of the trade secrets claim.

We reverse and remand for further proceedings as to the inventorship claims, with one

exception.
 BACKGROUND

In January 2004, Triple Tee initiated its first lawsuit against Nike, Inc. (“Nike”),

claiming that Nike had misappropriated Triple Tee’s trade secrets involving golf club

technology. We refer to this lawsuit as the “first action” or “Triple Tee I.” Triple Tee

alleged that on or about September 25, 2000, Gillig—Triple Tee’s principal—met with

John Thomas Stites III (“Stites”) to discuss Gillig’s unique designs for golf clubs. Gillig

considered these designs a trade secret because they were novel over what was then

available in the marketplace. As a condition of the meeting, Stites agreed to maintain

all of Gillig’s disclosed trade secret designs in the strictest confidence. Stites

subsequently joined Nike, where Gillig’s trade secrets were allegedly improperly used to

develop a new type of golf club. Triple Tee alleged that Gillig assigned all of his rights

in the trade secrets to Triple Tee on October 13, 2000, thereby making Triple Tee the

proper plaintiff rather than Gillig.

On summary judgment, the district court found that an essential element of Triple

Tee’s trade secret cause of action was the ownership of the trade secret rights. See

Triple Tee Golf, Inc. v. Nike, Inc., No. 4:04-CV-302-A, 2007 WL 4260489, at *14 (N.D.

Tex. Aug. 10, 2007) (“Triple Tee I”). The court then held that there was no evidence

that Triple Tee acquired any of those rights in 2000. Id. The district court dismissed the

action both based on lack of standing and on the merits, stating:

The dismissal is appropriate by reason of plaintiff’s failure to establish
standing as well as because of the failure of the summary judgment record
to raise a genuine issue of fact as to an essential element of plaintiff’s
claim—that Gillig assigned to plaintiff whatever rights Gillig acquired from
his dealings with Stites in September 2000.

2009-1415 2
Id. at *28. 1 The court also denied Triple Tee’s suggestion to substitute Gillig as the

plaintiff, id. at *24, and held that a purported assignment from Gillig to Triple Tee in

2005 could not cure the defect in standing, id. at *22. The Fifth Circuit affirmed. Triple

Tee Golf, Inc. v. Nike, Inc., 281 F. App’x 368 (5th Cir. 2008).

In October 2008, Triple Tee initiated the present action against Nike, this time

with Gillig as co-plaintiff. In addition to the trade secret claim asserted in Triple Tee I,

their complaint asserted correction of inventorship claims under 35 U.S.C. § 256,

alleging that Gillig was the true sole inventor or co-inventor of various patents relating to

golf clubs owned by Nike. These inventorship claims had not been considered in the

first action. 2 The complaint was unclear as to whether Triple Tee or Gillig was alleged

to be the owner of the trade secrets or was asserting the inventorship claims. Nike

brought a motion to dismiss under Fed. R. Civ. P. 12(b)(6) for failure to state a claim,

which the district court granted. Triple Tee Golf, Inc. v. Nike, Inc., 618 F. Supp. 2d 586,

587 (N.D. Tex. 2009) (“Triple Tee II”). The district court held that in the original action it

“had jurisdiction to dismiss Triple Tee I on the merits, and did so.” Id. at 596. It

concluded that the trade secret claim was barred by the statute of limitations and res

judicata, id. at 591, 599, and that the inventorship claims were also barred by res

judicata because they arose from the same nucleus of operative facts as the trade

1
Nike contends that the district court dismissed the first action based on the
lack of a confidential relationship between Stites and Gillig, as well as on grounds of
lack of ownership. We do not read the court’s dismissal as based on anything except
ownership of the trade secret rights.
2
In April 2005, during the Triple Tee I proceedings, Triple Tee asked the
district court for leave to amend its complaint to add an inventorship correction claim
over several recently issued golf club patents owned by Nike. The court subsequently
denied the motion.

2009-1415 3
secret claims asserted in the first action, id. at 599. The court barred both Triple Tee

and Gillig from asserting the claims, because it held that Gillig was in privity with Triple

Tee. Id. at 592.

Gillig and Triple Tee timely appealed. We have jurisdiction over this appeal

pursuant to 28 U.S.C. § 1295(a)(1).

DISCUSSION

We review a district court’s Rule 12(b)(6) dismissal for failure to state a claim de

novo. Cambridge v. United States, 558 F.3d 1331, 1335 (Fed. Cir. 2009); United States

ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 379 (5th Cir. 2003).

We review whether a statute of limitations has run de novo. Newby v. Enron Corp., 542

F.3d 463, 468 (5th Cir. 2008). We also review the res judicata effect of a prior judgment

de novo. In re Bose Corp., 476 F.3d 1331, 1334 (Fed. Cir. 2007).

I Trade Secret Statute of Limitations

Plaintiffs primarily argue that the statute of limitations was tolled as to Gillig (if he

is the owner of the trade secrets) during the time in which Triple Tee I was pending.

The misappropriation of trade secrets is a matter of state law. Leggett & Platt, Inc. v.

Hickory Springs Mfg. Co., 285 F.3d 1353, 1360 (Fed. Cir. 2002). The parties agree that

Texas law is applicable. Under Texas law, “[a] person must bring suit for

misappropriation of trade secrets not later than three years after the misappropriation is

discovered or by the exercise of reasonable diligence should have been discovered.”

Tex. Civ. Prac. & Rem. Code Ann. § 16.010(a) (emphasis added). Gillig’s complaint in

the present action was filed on October 8, 2008. He alleges that he first discovered

Nike’s misappropriation on or about February 1, 2003. There was thus a span of five

2009-1415 4
years and eight months between the discovery of the misappropriation and the filing of

this suit, well exceeding the three-year limitations period. Gillig asserts that his trade

secret claim is not barred, however, because the limitations period tolled during the

Triple Tee I proceedings. As the district court noted, none of the cases cited by Gillig

supports tolling under the circumstances of this case.

Under Texas law, a statute of limitations may be tolled for a second cause of

action where the first action is a predicate action, in which the second cause of action is

contingent on the first action’s determination of rights. See, e.g., McDonald v. Ayres,

269 S.W. 1105, 1107 (Tex. Civ. App.-Galveston 1925) (holding that the limitations

period did not run on a suit for interest on a note because the suit could not have been

brought until the ownership of the note was resolved in another proceeding); Cavitt v.

Amsler, 242 S.W. 246, 249 (Tex. Civ. App.-Austin 1922) (holding that the limitations

period for a suit for stock dividends tolled while the suit to determine ownership of the

stock was pending). The Texas courts have reasoned that “[w]here ‘a person is

prevented from exercising his legal remedy by the pendency of legal proceedings, the

time during which he is thus prevented should not be counted against him in

determining whether limitations have barred his right.’” Hughes v. Mahaney & Higgins,

821 S.W.2d 154, 157 (Tex. 1991) (quoting Walker v. Hanes, 570 S.W.2d 534, 540 (Tex.

Civ. App.-Corpus Christi 1978). This is not such a predicate case.3

3
This case also does not present the situation where a legal impediment,
such as a court order, prevents a plaintiff from bringing a second suit. See, e.g., Rice v.
Louis A. Williams & Assocs., Inc., 86 S.W.3d 329, 341–42 (Tex. App.-Texarkana 2002)
(noting that injunction against filing suit will toll statute of limitations); Walker, 570
S.W.2d at 540 (holding that appeal of court’s refusal to admit competing will to probate
tolled limitations period for obtaining service of process on parties).

2009-1415 5
 Rather, Gillig argues that tolling applies because he could not have brought this

second action during the pendency of Triple Tee I. This is so, he claims, because as in

Hughes v. Mahaney & Higgins, 821 S.W.2d 154, he would have had to adopt

inconsistent positions in the two cases regarding the ownership of rights relating to the

trade secrets. In Hughes, the Texas Supreme Court applied tolling to the limitations

period of attorney malpractice claims pending the completion of the underlying litigation

that gave rise to the malpractice suit. The court held that tolling was appropriate

because the client would have to adopt fundamentally inconsistent positions in the

malpractice suit and the underlying litigation regarding the existence of a legal injury.

Id. at 156–57. However, the Texas Supreme Court has explicitly limited Hughes:

“Hughes does not hold that limitations is tolled whenever a litigant might be forced to

take inconsistent positions. Such an exception to limitations would be far too broad.

We expressly limited the rule in Hughes to attorney malpractice . . . .” Murphy v.

Campbell, 964 S.W.2d 265, 272 (Tex. 1997). When faced with inconsistent positions in

other cases, according to the court, the solution is to bring the second suit and request

that it be abated pending the resolution of the first proceeding. Id. The limited tolling

rule of Hughes is inapplicable to Gillig’s trade secret claim.

Gillig also argues that because Nike was placed on notice of Gillig’s trade secret

claims within the limitations period and was not misled or placed at a disadvantage in

obtaining evidence to defend the suit, the statute of limitations should be equitably

tolled. As a general rule, the mere fact that a defendant has notice of a claim does not

toll the limitations period. See Bailey v. Gardner, 154 S.W.3d 917, 920 (Tex. App.-

Dallas 2005); Diamond v. Eighth Ave. 92, L.C., 105 S.W.3d 691, 695 (Tex. App.-Fort

2009-1415 6
Worth 2003). However, equitable tolling applies in exceptional situations “where a

claimant actively pursued his judicial remedies but filed a defective pleading during the

statutory period, or where a complainant was induced or tricked by his adversary’s

misconduct into allowing filing deadlines to pass.” Bailey, 154 S.W.3d at 920 (emphasis

added). Texas recognizes that where the proper defendant is named in the complaint

but the plaintiff is misidentified, and the defendant is not prejudiced by the error, the

limitations period may be tolled. See Ealey v. Ins. Co. of N. Am., 660 S.W.2d 50, 52–53

(Tex. 1983); Maher v. Herrman, 69 S.W.3d 332, 339 (Tex. App.-Fort Worth 2002).

However, “a litigant seeking equitable tolling bears the burden of establishing . . . that

he has been pursuing his rights diligently.” Pace v. DiGuglielmo, 544 U.S. 408, 418

(2005); see Baldwin County Welcome Ctr. v. Brown, 466 U.S. 147, 151 (1984) (“One

who fails to act diligently cannot invoke equitable principles to excuse that lack of

diligence.”); City of Murphy v. City of Parker, 932 S.W.2d 479, 481–82 (Tex. 1996)

(“[L]imitations rest on a legislative policy judgment that requires the diligent pursuit of

one’s legal rights at the risk of losing them if they are not timely asserted.”); cf. Ashley v.

Hawkins, 293 S.W.3d 175, 179 (Tex. 2009) (“If a party files its petition within the

limitations period, service outside the limitations period may still be valid if the plaintiff

exercises diligence in procuring service on the defendant.”); Kerlin v. Sauceda, 263

S.W.3d 920, 925 (Tex. 2008) (“Fraudulent concealment [by a defendant] will not,

however, bar limitations when the plaintiff discovers the wrong or could have discovered

it through the exercise of reasonable diligence.”).

In this case, Gillig was not diligent in the pursuit of his rights. The district court in

Triple Tee I found that Gillig “had known for more than three years that [Nike was]

2009-1415 7
contesting [Triple Tee]’s standing to bring [the] action before [Triple Tee] first made the

suggestion . . . that a substitution of Gillig for [Triple Tee] under Rule 17(a) might be an

appropriate alternative to dismissal.” 2007 WL 4260489, at *26. Indeed, the court

found “that, for whatever reason, [Triple Tee] made a calculated decision to pursue this

action in its own name with knowledge that it had not received from Gillig an assignment

of whatever rights Gillig acquired through his dealings with Stites in September 2000.”

Id.

While Gillig contends that he was diligent in that he subjectively believed that

Triple Tee owned the rights in the trade secrets, he has failed to substantiate that

contention with any credible evidence. See id. at *15–19 (detailing inconsistent

positions put forward by Triple Tee regarding the date and circumstances of Gillig’s

purported 2000 assignment). This is not a case where the party without the legal right

was named as a result of a good faith but mistaken belief that it was the party in interest

and proceeded diligently to correct the error. Cf. Pierson v. SMS Financial II, L.L.C.,

959 S.W.2d 343 (Tex. App.-Texarkana 1998) (applying equitable tolling to allow the real

party in interest to substitute itself as plaintiff when request was made four months after

naming the wrong plaintiff). Gillig here “cannot invoke equitable principles to excuse

that lack of diligence.” Baldwin County Welcome Ctr., 466 U.S. at 151. Equitable tolling

thus has no application here. We therefore affirm the holding of the district court that

Gillig’s trade secret claims are barred by the statute of limitations. 4

4
To the extent that the trade secrets claim is asserted by Triple Tee, it can
only assert whatever rights Gillig had and no more. Thus, Triple Tee cannot benefit
from the tolling theories, except to the extent that it received a post-2000 assignment
from Gillig. Since we hold that the statute of limitations has run as to Gillig, it has also
accordingly run as to Triple Tee.

2009-1415 8
 II Res Judicata

The district court also held that the trade secret and inventorship claims against

Nike were barred by res judicata. Since we have held that the trade secret claims are

barred by the statute of limitations, we need only decide whether the inventorship claims

are barred by res judicata. However, in that connection we must also consider the trade

secret claims because Nike’s theory is that Triple Tee’s trade secret claims are barred

by res judicata and that, accordingly, its inventorship claims are barred as well because

they arise from a common nucleus of operative facts. Gillig, in turn, is said to be also

barred because he was in privity with Triple Tee. Plaintiffs argue on appeal that the

district court erred because not all of the required elements for claim preclusion relating

to Triple Tee I were satisfied. We agree that res judicata in general does not bar the

inventorship claims. Therefore, we reverse the district court’s dismissal of the

inventorship claims, with one exception.

“Under res judicata, a final judgment on the merits of an action precludes the

parties or their privies from relitigating issues that were or could have been raised in that

action.” Allen v. McCurry, 449 U.S. 90, 94 (1980). Four elements must exist for a claim

to be barred by res judicata: “(1) the parties [in both actions] are identical or in privity;

(2) the judgment in the prior action was rendered by a court of competent jurisdiction;

(3) the prior action was concluded by a final judgment on the merits; and (4) the same

claim or cause of action was involved in both actions.” Test Masters Educ. Servs., Inc.

v. Singh, 428 F.3d 559, 571 (5th Cir. 2005). The district court found that all four

elements were present in this case. Triple Tee II, 618 F. Supp. 2d at 592–99.

2009-1415 9
 To the extent that the dismissal in the original action was for lack of standing,

there is no res judicata bar to a second action by a party with proper standing, but only

a bar to another action by the same party alleging the same basis for standing (here,

Triple Tee’s claim of standing based on the purported 2000 assignment). See, e.g.,

Whitmore v. Arkansas, 495 U.S. 149, 154 (1990) (“[B]efore a federal court can consider

the merits of a legal claim, the person seeking to invoke jurisdiction of the court must

establish the requisite standing to sue.”); Univ. of Pittsburgh v. Varian Med. Sys., Inc.,

569 F.3d 1328, 1332 (Fed. Cir. 2009) (concluding that dismissal for lack of standing due

to failure to join co-owner of patent should not have been with prejudice, in order to

allow second action to be brought with proper parties); Media Techs. Licensing, LLC v.

Upper Deck Co., 334 F.3d 1366, 1370 (Fed. Cir. 2003) (“[T]he district court erred in

giving preclusive effect to the [earlier] judgment because its dismissal of [the earlier]

complaint for lack of standing was not a final adjudication of the merits”); Restatement

(Second) of Judgments § 20(1) (1982) (“A personal judgment for the defendant,

although valid and final, does not bar another action by the plaintiff on the same claims:

(a) When the judgment is one of dismissal for lack of jurisdiction . . . .”).

But the district court purportedly also dismissed the original action on the merits,

finding that Triple Tee’s ownership of the trade secrets was an element of the trade

secret cause of action, and that there was no evidence that Gillig assigned his trade

secrets to Triple Tee in October 2000. Triple Tee I, 2007 WL 4260489, at *14; id. at

*28. We need not decide whether the dismissal was on the merits or for lack of

standing or both, as a dismissal here on the merits has the same effect as a dismissal

for lack of standing.

2009-1415 10
 We first consider whether an inventorship claim by Gillig would be barred by res

judicata if an inventorship claim by Triple Tee would be barred. We conclude that

Gillig’s claims are not barred. In general, a “[d]ismissal on the ground that the plaintiff is

not the real party in interest should not preclude a later action by the real party in

interest.” 18A Charles Alan Wright et al., Federal Practice and Procedure § 4438 (2d

ed. 2002). However, Nike argues that this case is an exception, because Gillig and

Triple Tee are in privity, and Gillig’s failure to properly assert his rights in Triple Tee I

precludes a “second bite at the apple.” The district court found that Gillig was in privity

with Triple Tee because “Gillig was an officer and the principal owner of Triple Tee.”

Triple Tee II, 618 F. Supp. 2d at 592. However, control of a party to the litigation

through stock ownership or corporate officership is not enough to create privity, absent

a showing that the corporate form has been ignored (which is not the case here). See

Dudley v. Smith, 504 F.2d 979, 982 (5th Cir. 1974); see also In re Teltronics Servs.,

Inc., 762 F.2d 185, 191 (2d Cir. 1985); Am. Range Lines, Inc. v. Comm’r, 200 F.2d 844,

845 (2d Cir. 1952).

Instead, Nike relies on a “control of litigation” exception to establish privity. For

that exception to apply, it is necessary to establish that the stockholder/officer controlled

the litigation and that his interests were represented by the party in the suit. See Taylor

v. Sturgell, 128 S. Ct. 2161, 2173 (2008) (“[A] nonparty is bound by a judgment if she

‘assume[d] control’ over the litigation in which that judgment was rendered.” (quoting

Montana v. United States, 440 U.S. 147, 154 (1979))); Southmark Props. v. Charles

House Corp., 742 F.2d 862, 870 (5th Cir. 1984); Drier v. Tarpon Oil Co., 522 F.2d 199,

200 (5th Cir. 1975). We are doubtful that such a showing has been made in this case.

2009-1415 11
The fact that Gillig may have been the ultimate decision maker for Triple Tee’s business

is not sufficient to establish that he controlled the litigation.

In any event, we need not decide whether in this case Gillig controlled the

litigation in Triple Tee I, because the “control of litigation” exception does not apply to

claim preclusion but only to issue preclusion or collateral estoppel. Montana, 440 U.S.

at 154 (“Preclusion of such nonparties falls under the rubric of collateral estoppel rather

than res judicata because the latter doctrine presupposes identity between causes of

action. And the cause of action which a nonparty has vicariously asserted differs by

definition from that which he subsequently seeks to litigate in his own right.”);

Restatement (Second) of Judgments § 39 cmt. b (explaining that the effect of controlling

litigation “applies to issue preclusion, and not to claim preclusion, because the person

controlling the litigation, as a non-party, is by definition asserting or defending a claim

other than one he himself may have”). Here, the only issue determined in the earlier

lawsuit was that there was no assignment from Gillig to Triple Tee of any trade secret

rights in the year 2000. That determination has no bearing on Gillig’s inventorship

interests. Thus, neither collateral estoppel nor res judicata bars Gillig from pursuing his

inventorship claims.

Even Triple Tee is not entirely barred from pursuing the inventorship claims. The

parties appear to agree that the inventorship claims arose from the same nucleus of

operative facts as the trade secret claims. Claims arising from the same nucleus of

operative facts are barred by res judicata. See Restatement (Second) of Judgments

§ 24 & cmt. b; see also In re Howe, 913 F.2d 1138, 1144 (5th Cir. 1990). To the extent

that Triple Tee is asserting an inventorship correction claim based on a purported 2000

2009-1415 12
assignment, that claim is, of course, barred, since the district court already found that

there was no assignment of rights in 2000. However, to the extent that Triple Tee is

asserting an inventorship correction claim based on a later 2005 assignment, there is no

bar. The first lawsuit did not address Triple Tee’s claims based on the 2005

assignment. The district court held that any 2005 assignment could not retroactively

resolve the standing issue of Triple Tee I. 2007 WL 4260489, at *22. Indeed, the court

stated that in light of the events occurring after the filing of the first action, “the court

would be at a loss as to what parties have ownership interests in the intellectual

property involved in this litigation.” Id. at *28.

“The res judicata doctrine does not apply to new rights acquired during the action

which might have been, but which were not, litigated.” Computer Assocs. Int’l, Inc. v.

Altai, Inc., 126 F.3d 365, 370 (2d Cir. 1997). A plaintiff may seek leave to file a

supplemental pleading to assert those claims, but “the doctrine of res judicata does not

punish a plaintiff for exercising the option not to supplement the pleadings with an after-

acquired claim.” Fla. Power & Light Co. v. United States, 198 F.3d 1358, 1360 (Fed.

Cir. 1999) (quoting Pleming v. Universal-Rundle Corp., 142 F.3d 1354, 1357 (11th Cir.

1998)) (quotation marks omitted); see also Baker Group, L.C. v. Burlington N. & Santa

Fe Ry. Co., 228 F.3d 883, 886 (8th Cir. 2000); L.A. Branch NAACP v. L.A. Unified Sch.

Dist., 750 F.2d 731, 739–40 (9th Cir. 1984). Nike’s effort to distinguish these cases as

involving claims arising from different nuclei of operative facts is unavailing. That was

not the basis for those decisions. Because any claim by Triple Tee based on a 2005

2009-1415 13
assignment did not accrue until after Triple Tee I was filed and was not decided in that

first action, the doctrine of res judicata does not apply. 5

CONCLUSION

For the aforementioned reasons, we affirm the district court’s judgment that the

trade secret claims are barred by the statute of limitations. We reverse the court’s

judgment that the inventorship claims are barred by res judicata (except as to Triple

Tee’s claims based on the alleged 2000 assignment), and remand for further

proceedings on those claims.

AFFIRMED IN PART, REVERSED IN PART, and REMANDED

COSTS

No costs.

5
We also note that most of the inventorship claims could not have been
brought until after Triple Tee I was filed. Of the eight patents listed by Gillig in his 2008
complaint in the present action, only one had issued prior to the 2004 filing of Triple
Tee I. We recently held that there is no cause of action to correct inventorship until a
patent has issued. See HIF Bio, Inc. v. Yung Shin Pharms. Indus. Co., No. 2006-1522,
slip op. at 9–10 (Fed. Cir. Mar. 31, 2010).

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