Gaia Technologies Inc. v. Recycled Products Corp.

Revised May 28, 1999

UNITED STATES COURT OF APPEALS
FIFTH CIRCUIT

____________

No. 97-21014
____________

GAIA TECHNOLOGIES INCORPORATED; ET AL,

Plaintiffs,

GAIA TECHNOLOGIES INCORPORATED,

Plaintiff-Appellee,

versus

RECYCLED PRODUCTS CORPORATION; ET AL,

Defendants,

DAVID GORDON; PROGRESSIVE CAPITAL CORPORATION;
RECONVERSION TECHNOLOGIES INCORPORATED; IRA
RIMER; JOEL HOLT; RICHARD CLARK; RECONVERSION
TECHNOLOGIES OF TEXAS INCORPORATED,

Defendants-Appellants.

Appeal from the United States District Court
for the Southern District of Texas
 May 26, 1999

Before JONES, SMITH, and EMILIO M. GARZA, Circuit Judges.

EMILIO M. GARZA, Circuit Judge:

The corporate defendants Reconversion Technologies of Texas Incorporated (“Retex”),

Reconversion Technologies Incorporated (“Retek”), and Progressive Capital Corporation

(“Progressive”), and the individual defendants David Gordon, Ira Rimer, Joel Holt, and Richard

Clark, appeal the district court’s final judgment. We reverse the judgment of the district court and

render judgment in favor of the defendants.

I

This is an appeal from a judgment in favor of Gaia Technologies Incorporated (“Gaia”)

against the corporate and individual defendants. The judgment holds various defendants liable for

three state law torts—unfair competition, misappropriation of trade secrets, and tortious interference

with prospective contractual relations. Gaia’s causes of action involve intellectual property developed

initially by James Turner, and now owned by Gaia. Turner devised methods of manufacturing various

products from recycled tires. Turner’s products included (1) various “hard goods,” which included

molded boards, fence posts, railroad ties, and buckets, and (2) a flexible porous pipe, which Turner

marketed under the name “Leaky Pipe.” Turner’s invent ions resulted in four patents for the hard

goods technology, and one trademark for the name “Leaky Pipe.” To exploit these inventions,

Turner created the Entek Corporation (“Entek”), which he owned.

Turner and Entek filed for bankruptcy. During the bankruptcy proceedings, Banstar

Corporation (“Banstar”) purchased “all technologies, patents, patent rights, licenses, know-how,

trade secrets, trade secret rights, [and] proprietary information,” as well as “all trade names,

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trademarks, service marks, [and] brand names,” from Turner and Entek. Eventually, Gaia purchased

the Turner-Entek intellectual property from Banstar. The parties dispute the precise date of Gaia’s

purchase. After his bankruptcy, Turner worked for defendant Retex. Gaia alleges that Retex began

selling Leaky Pipe and using the hard goods technology.1 Gaia filed the present lawsuit on October

20, 1993, alleging that the defendants’ use of the Turner-Entek i ntellectual property amounted to

federal patent and trademark infringement and various Texas law torts.

The jury verdict found the corporate defendants liable for all of Gaia’s federal infringement

claims, awarding damages totaling $3,972,500. It also found the corporate defendants liable for three

state law claims, awarding damages of $125,000 for unfair competition, $0 for misappropriation of

trade secrets, and $4,350,000 for tortious interference with prospective contractual relations. The

jury found the individual defendants liable for one claim of federal patent infringement, awarding

damages of $1,800,000. It found that the individual defendants were not liable for any of Gaia’s state

law claims. The jury assessed each of the individual defendants punitive damages of $100,000.

The district court modified the jury verdict before entering its final judgment. In its

Supplemental Memorandum Opinion, the district court wrote:

The Court further finds, according to [certain] evidence . . . and testimony . . . that
all the defendants, jointly and severally, committed fraud by aiding and abetting James
Turner to misappropriate and conceal their use of the trade secret technology and
porous pipe. . . . From this evidence and the jury’s verdict assessing punitive damages
against each of the individual defendants, Gordon, Rimer, Holt, and Clark because the
defendants were actually aware of an extreme risk of serious injury to the plaintiff and
acted willfully and maliciously, the Court reforms the jury’s verdict under FED. R.
CIV. P. 49(a) and 58 to conform the evidence and law with the jury’s verdict and finds

1
The individual defendants in this appeal were affiliated with Retex at the time of the alleged
conduct. Turner was initially a defendant in this case, but he settled with Gaia before trial. As for
the other corporate defendants, Retek was Retex’s parent company, and Progressive was involved
with Retek’s efforts to raise money for its operations.

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 that plaintiff shall further recover from the defendants, jointly and severally, lost
capital damages of FOUR MILLION THREE HUNDRED FIFTY THOUSAND
AND NO/100 DOLLARS ($4,350,000.00), as a result of the defendants’ tortious
interference with the plaintiff’s prospective customers . . . and as a result of the
defendants’ misappropriation and concealment of the plaintiff’s trade secret
information.

Thus the district court held the individual defendants liable for tortious interference with prospective

contractual relations and misappropriation of trade secrets, contrary to the jury’s finding that the

individual defendants were not liable for any state law torts. The district court also overturned the

jury’s finding that the damages caused by the corporate defendants’ misappropriation of trade secrets

was $0. Based on these rulings and what remained of the jury verdict, the district court entered a

final judgment on March 17, 1995 (“1995 judgment”).2

The defendants appealed to the Federal Circuit, which reversed the 1995 judgment as to

Gaia’s federal patent and trademark infringement claims. The Federal Circuit held that in order to

have standing under the federal infringement statutes, Gaia must prove that it owned the relevant

patents and trademark when it filed suit on October 20, 1993. See Gaia Techs., Inc. v. Reconversion

Techs., Inc., 93 F.3d 774, 777 (Fed. Cir.), amended by 104 F.3d 1296 (Fed. Cir. 1996).3 Gaia argued

to the Federal Circuit that it acquired the patents and trademark from Banstar on August 4, 1991,

pursuant to a vote of Banstar’s shareholders. Gaia also cited to a written assignment, which

transferred the Turner-Entek intellectual property from Banstar to Gaia. Although undated, the

assignment stated that its “effective date” was August 4, 1991. However, Gaia did not file the

2
The district court also modified many of the jury’s findings on federal patent and trademark
infringement. These modifications are not relevant to the present appeal.
3
The Federal Circuit amended its initial opinion as to whether federal jurisdiction existed over
Gaia’s state law claims. See Gaia, 104 F.3d at 1297.

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assignment with the United States Patent and Trademark Office until October 24, 1994, over one year

after it filed the present lawsuit.

The Federal Circuit ruled that Banstar did not assign the Turner-Entek patents and trademark

to Gaia until after Gaia filed the present lawsuit. See id. at 780. It reasoned that the August 1991

shareholder vote demonstrated, at most, an intent to assign the patents and trademark, but that the

vote did not itself amount to an assignment. See id. at 779. The Federal Circuit also rejected Gaia’s

argument that the assignment filed in October 1994 could retroactively confer standing simply by

professing an “effective date” of August 1991. See id. at 779-80. Having extinguished Gaia’s federal

infringement claims, the Federal Circuit remanded the case to allow the district court to decide

whether to exercise supplemental jurisdiction over the state law claims. See id. at 781.

On remand, the district court decided to exercise jurisdiction over Gaia’s state law causes of

action. It entered final judgment on July 18, 1997 (“1997 judgment”) based on its initial state law

rulings. The district court thus held the corporate defendants liable for all three state law causes of

action, and held the individual defendants liable for misappropriation of trade secrets and tortious

interference with prospective contractual relations. It also assessed each individual defendant

$100,000 in punitive damages.

The defendants timely appealed. On appeal, the individual defendants argue that the district

court erred in ho lding them liable for Gaia’s state law claims, contrary to the jury verdict. The

individual defendants also contend that the district court erred in assessing punitive damages. The

corporate defendants argue that the evidence is insufficient to support the jury verdict holding them

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liable on the three state law claims.4

II

First, the individual defendants contend that the district court erred by “reform[ing]” the jury

verdict. They argue that Federal Rule of Civil Procedure 49(a) (“Rule 49(a)”), relied upon by the

district court, does not allow the district court to make findings contrary to the jury verdict.5 We

review de novo whether a district court is authorized to make findings under Rule 49(a). See

Askanase v. Fatjo, 130 F.3d 657, 669 (5th Cir. 1997).

Nothing in the text of Rule 49(a) authorizes a district court to reform a jury’s decision on

issues submitted to the jury. Rule 49(a) allows the district court to make its own findings only as to

issues not submitted to the jury. See FED. R. CIV. P. 49(a) (“As to an issue omitted [from the jury

instructions] . . . the court may make a finding.”). Furthermore, Rule 49(a) does not permit a district

court to make findings contrary to the jury verdict. See Askanase, 130 F.3d at 670 (“Appellant

correctly states that a Rule 49(a) finding cannot be inconsistent with the jury verdict.”); see also

4
In addition, the corporate defendants argue that (1) the Federal Circuit’s decision is the law
of the case and therefore precludes liability for Gaia’s state law causes of action, (2) the district court
erred by finding “fraud” in its Supplemental Memorandum Opinion, (3) the evidence was insufficient
to establish liability against defendants Retek and Progressive, (4) the district court erred by entering
judgment while Chapter 11 bankruptcy proceedings were pending, (5) the district court erred in
awarding attorneys’ fees, and (6) the district court erred in calculating prejudgment interest. We need
not address these issues, however, in light of our ruling as to the corporate defendants’ other
argument.
5
Preliminarily, the individual defendants contend that we should treat the jury verdict as a
general verdict accompanied by interrogatories, governed by Rule 49(b), as opposed to a special
verdict, governed by Rule 49(a). Compare FED. R. CIV. P. 49(b) (“General Verdict Accompanied
by Answer to Interrogatories”) with FED. R. CIV. P. 49(a) (“Special Verdicts”). According to the
defendants, Rule 49(b) affords greater deference to a jury’s finding than Rule 49(a). We need not
address this contention, however, because we conclude that not even Rule 49(a) authorizes the
district court’s modification of the jury verdict. Gaia does not contend that Rule 49(b) provides an
alternative ground for upholding the district court’s reformation.

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Floyd v. Laws, 929 F.2d 1390, 1397 (9th Cir. 1991) (holding that “under Rule 49(a), the trial court

simply cannot choose to ignore a legitimate finding that is part of the special verdict”). Here, the

district court submitted the elements of Gaia’s state law claims to the jury, and the jury found that

Gaia failed to prove any of the elements as to the individual defendants. Thus Rule 49(a) does not

authorize the district court to reform the jury’s state law findings in order to hold the individual

defendants liable for Gaia’s state law causes of action.6

Indeed, Gaia does not argue on appeal that Rule 49(a) authorizes the district court’s

reformation of the jury verdict, but rather urges us to affirm on other grounds. Gaia contends that

Federal Rule of Civil Procedure 50 (“Rule 50”) justifies the district court’s action. Rule 50 allows

a court to enter judgment as a matter of law where there exists “no legally sufficient evidentiary basis

for a reasonable jury to find” as it did. FED. R. CIV. P. 50(a)(1). Gaia asserts that it presented strong

evidence that the individual defendants committed the state law torts, and that the defendants

responded with no “serious evidence” to the contrary.

The district court did not base its ruling on Rule 50. It expressly relied on Rule 49(a) and

Rule 58. The district court certainly did not apply the high standard required to enter judgment as

a matter of law contrary to a jury verdict. It did not find that the individual defendants committed

state law torts “as a matter of law,” nor did it rule that there was “no legally sufficient evidentiary

basis for a reasonable jury to find” otherwise. FED. R. CIV. P. 50(a)(1). To the contrary, the district

6
Although the district court also cites Federal Rule of Civil Procedure 58 (“Rule 58”) as a
basis for reforming the verdict, this rule does not authorize the district court’s action. Rule 58 merely
provides that a court may issue a judgment pursuant to a jury verdict. See FED. R. CIV. P. 58
(pro viding that “upon a special verdict or a general verdict accompanied by answers to
interrogatories, the court shall promptly approve the form of the judgment, and the clerk shall
thereupon enter it”). It by no means empowers a court to issue judgment contrary to a jury verdict.
Gaia does not contend that Rule 58 permits the district court’s reformation.

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court rendered an independent finding that the individual defendants were liable for two state law

torts. Thus the district court did not address whether Rule 50 authorizes its modification of the jury

verdict.

We may, however, consider alternative grounds for upholding the district court’s decision,

provided the record supports such alternative grounds. See Cox v. Sunbelt Sav. Ass’n, 896 F.2d 957,

959 n.2 (5th Cir. 1990). A court may enter judgment as a matter of law under Rule 50 only where

there exists “no legally sufficient evidentiary basis for a reasonable jury to find” otherwise. FED. R.

CIV. P. 50(a)(1). We find that there exists a legally sufficient basis for a reasonable jury to find that

the individual defendants did not commit misappropriation of trade secrets or tortious interference

with prospective contractual relations. See infra Part IV.7 Thus Rule 50 does not authorize the

district court’s modifications to the jury verdict.

For these reasons, we find that the district court erred in reforming the jury verdict. In the

alternative to upholding the district court’s judgment as to the individual defendants, Gaia urges us

to remand for a new trial. According to Gaia, the jury’s conclusion that the individual defendants are

not liable for state law torts is inconsistent with its finding that the conduct of the individual

defendants warrants punitive damages. Gaia is correct that “[i]f the jury gives inconsistent answers

to special interrogatories, the case must be remanded for a new trial.” Willard v. The John Hayward,

577 F.2d 1009, 1011 (5th Cir. 1978). However, a jury’s answers “should be considered inconsistent

. . . only if there is no way to reconcile them.” Id. (emphasis added). Thus we ask “whether the

7
There, we conclude that Gaia failed even to present sufficient evidence to uphold the jury
verdict against the corporate defendants on the state law claims. This finding necessarily forecloses
Gaia’s argument that the evidence presented was so overwhelming as to mandate judgment as a
matter of law against the individual defendants. The same shortcomings that prevent judgment
against the corporate defendants also prevent judgment against the individual defendants.

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jury’s answers can be said to represent a logical and probable decision on the relevant issues as

submitted.” Id. (quotations and citations omitted).

Gaia argues that the jury could not logically have found the individual defendants’ conduct

so “shocking and offensive” as to deserve punitive damages without also finding the individual

defendants liable for the state law causes of action. We disagree. The instruction on punitive

damages was located at the end of the jury charge. It began, “If you have found that any of the

defendants are liable for the plaintiff’s injuries, you may also award punitive damages . . . .” The

instruction did not specify that the jury must find the defendants liable under state law in order to

award punitive damages. The jury reasonably could have viewed the punitive damages instruction

as applying to both the state law and federal law causes of action. While the jury did not find the

individual defendants liable for Gaia’s state law claims, it did hold them liable for federal law patent

infringement.8 Thus the jury, under a logical reading of the instruction, could have based its award

of punitive damages on the conduct it found to constitute federal law patent infringement. It could

logically have found such co nduct by the individual defendants to be “shocking and offensive,”

without also finding liability under state law.

By reading the jury’s punitive damages award as stemming from the federal law claims, we

are able to reconcile any inconsistencies alleged by Gaia. Therefore, the jury’s award of punitive

damages is not inconsistent with its finding that the individual defendants were not liable for any state

law causes of action. Accordingly, we reject Gaia’s request for a new trial.

III

8
The jury’s finding that the individual defendants were liable for patent infringement was, as
discussed above, reversed by the Federal Circuit because Gaia lacked standing to sue. See Gaia, 93
F.3d at 780.

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 The individual defendants also challenge the district court’s award of punitive damages. They

argue that a defendant may not be assessed punitive damages without a valid finding that he or she

is liable for an underlying substantive cause of action. After the jury issued its verdict, of course, the

Federal Circuit ruled that the individual defendants were not liable for any federal law causes of

action. We have now held that the individual defendants are not liable for any state law causes of

action. Thus the individual defendants are co rrect that there is no finding of liability upon which

punitive damages may be based.

Gaia insists that state law provides a basis for punitive damages. Whether substantive liability

is a necessary predicate to an award of punitive damages is a question of Texas state law, which we

review de novo. See Hadley v. VAM P T S, 44 F.3d 372, 374-75 (5th Cir. 1995). The Texas

Supreme Court has made clear that “‘recovery of punit ive damages requires a finding of an

independent tort with accompanying actual damages.’” Schlueter v. Schlueter, 975 S.W.2d 584, 589

(Tex. 1998) (quoting Twin City Fire Ins. Co. v. Davis, 904 S.W.2d 663, 665 (Tex. 1995); see also

Hadley, 44 F.3d at 375 (“Texas law is uniform and clear that a finding of actual damages is a

prerequisite to receipt of punitive damages.”). Therefore, “[w]ithout a finding of tort damages, [a

plaintiff] is not entitled to any award of punitive damages.” Federal Express Corp. v. Dutschmann,

846 S.W.2d 282, 284 (Tex. 1993). Because we have reinstated the jury’s finding that the individual

defendants are not liable for any state law causes of action, there is no basis for awarding punitive

damages. We therefore reverse the district court’s award of punitive damages.

IV

The corporate defendants argue that the evidence presented at trial was insufficient to support

the jury verdict against them on Gaia’s state law causes of action. They therefore contend that the

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district court erred in denying their various Rule 50 motions for judgment as a matter of law. The

district court may enter judgment as a matter of law under Rule 50 where “there is no legally

sufficient evidentiary basis for a reasonable jury” to find otherwise. FED. R. CIV. P. 50.

A

Preliminarily, the parties dispute the proper standard of review. When a party contests a jury

verdict on the grounds that the evidence is legally insufficient, we ordinarily apply de novo review,

making the same inquiry required of the district court. See Nero v. Industrial Molding Corp., 167

F.3d 921, 925 (5th Cir. 1999). However, the standard of review changes if the appellant failed to

contest the sufficiency of the evidence to the district court through timely motions under Rule 50.

See Polanco v. City of Austin, 78 F.3d 968, 974 (5th Cir. 1996). Failure to request Rule 50 relief

from the dist rict court “may result in a waiver of the right to challenge the sufficiency of the

evidence.” Scottish Heritable Trust, PLC v. Peat Marwick Main & Co., 81 F.3d 606, 610 (5th Cir.

1996). When a party waives the issue of evidentiary sufficiency, we review the jury verdict only for

“plain error.” Polanco, 78 F.3d at 974. Gaia contends that we must apply plain error review,

because the corporate defendants never filed a Rule 50 motion following the 1997 judgment.

The corporate defendants filed Rule 50 motions for judgment as a matter of law at several

stages in the proceedings. They moved for judgment as a matter of law at the close of Gaia’s

evidence. They also moved for judgment as a matter of law at the close of all the evidence. Finally,

they filed a renewed motion for judgment as a matter of law after the district court issued its 1995

judgment. In each motion, the corporate defendants argued that the evidence presented was

insufficient to hold them liable for Texas law unfair competition, misappropriation of trade secrets,

or tortious interference with prospective contractual relations. However, the corporate defendants

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never requested Rule 50 relief following the district court’s 1997 judgment, the one presently before

us. This failure, Gaia argues, constitutes a waiver of the corporate defendants’ right to challenge the

sufficiency of the evidence.

As support, Gaia cites Daigle v. Liberty Life Insurance Co., 70 F.3d 394, 397 n.2 (5th Cir.

1995), which states in dicta: “When an insufficiency of evidence issue is not raised before the district

court through Rule 50(a) and Rule 50(b) motions, the standard of review on appeal is plain error.”

Gaia argues that Daigle’s reference to Rule 50(b) mandates that, in order to contest the sufficiency

of the evidence on appeal, an appellant must have sought Rule 50 relief after the trial court issued the

judgment being appealed. Daigle’s words, however, do not sustain such a reading. Rule 50(b)

allows a party to renew its motion for judgment as a matter of law, provided that it timely filed an

initial motion for judgment as a matter of law under Rule 50(a). See Fed. R. Civ. P. 50(b). Although

Rule 50(b) permits a party to renew its motion as late as ten days after the judgment is entered, it

does not proscribe filing a renewed motion before judgment is entered. See id. (“The movant may

renew its request for judgment as a matter of law no later than 10 days after the entry of judgment

. . . .”). We therefore see no reason to read Daigle as requiring the corporate defendants to have filed

a Rule 50(b) motion after t he district court entered its 1997 judgment. Applying Daigle’s dicta

literally, the corporate defendants preserved their right to contest the sufficiency of the evidence on

appeal, because they challenged the sufficiency of the evidence “through Rule 50(a) and Rule 50(b)

motions.” Daigle, 70 F.3d at 397 n.2. The defendants’ motion at the close of Gaia’s evidence was

brought under Rule 50(a), and their motion following the 1995 judgment was brought under Rule

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50(b).9

Thus we find that the defendants have not waived their right to challenge the sufficiency of

the evidence. We will review the district court’s denial of their motions for judgment as a matter of

law de novo. See Polanco, 78 F.3d at 974.

B

Having established the standard of review, we now turn to whether the record in this case

provides a “legally sufficient evidentiary basis for a reasonable jury to find” the corporate defendants

liable for unfair competition, misappropriation of trade secrets, and tortious interference with

prospective contractual relations. FED. R. CIV. P. 50(a)(1). We examine the sufficiency of the

evidence under the standard of Boeing Co. v. Shipman, 411 F.2d 365 (5th Cir. 1969) (en banc). See

9
Moreover, we feel that Daigle’s dicta mischaracterizes our Rule 50 precedent. We have
never required a party to file a Rule 50(b) motion in order to preserve its right to claim insufficiency
of the evidence on appeal, so long as it has filed a Rule 50(a) motion at the close of all the evidence.
To date, our cases have held only that a party may waive its right to appeal when it “fail[s] to move
for judgment as a matter of law at the conclusion of all the evidence.” Polanco, 78 F.3d at 974
(emphasis added); see also Scottish Heritable Trust, 81 F.3d at 610 (holding that “failure to move
for judgment as a matter of law at the co nclusion of all the evidence may result in a waiver of the
right to challenge the sufficiency of the evidence”). But see Varda, Inc. v. Insurance Co. of N. Am.,
45 F.3d 634, 638 (2d Cir. 1995) (“To preserve for appeal a challenge to the denial of a pre-verdict
motion for judgment as a matter of law, a movant must renew that motion after the verdict.”). Rule
50 motions at the close of all the evidence arise under Rule 50(a). See United States ex rel. Wallace
v. Flintco, 143 F.3d 955, 960 (5th Cir. 1998) (describing motions for judgment as a matter of law at
the conclusion of all the evidence as arising under Rule 50(a)); compare Fed. R. Civ. P. 50(a)(2)
(“Motions for judgment as a matter of law may be made at any time before submission of the case
to the jury.”) with Fed. R. Civ. P. 50(b) (allowing a renewed motion for judgment as a matter of law
“[i]f, for any reason the court does not grant a motion for judgment as a matter of law made at the
close of all the evidence”). Indeed, the case on which Daigle relies, Purcell v. Seguin State Bank &
Trust Co., 999 F.2d 950, 956-57 (5th Cir. 1993), addresses solely whether a party is required to move
for judgment as a matter of law at the close of all the evidence. See id. at 956. In the present case
it is undisputed that the defendants filed a Rule 50 motion at the close of the evidence.

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Burger v. Central Apartment Management, Inc., 168 F.3d 875, 877 (5th Cir. 1999).10

Under Boeing, there must be a conflict in substantial evidence to create a jury
question. Substantial evidence is defined as evidence of such quality and weight that
reasonable and fair-minded men in the exercise of impartial judgment might reach
different conclusions. Consequently, a mere scintilla of evidence is insufficient to
present a question for the jury. Even if the evidence is more than a scintilla, Boeing
assumes that some evidence may exist to support a position which is yet so
overwhelmed by contrary proof as to yield to a [motion for judgment as a matter of
law].

Rhodes v. Guiberson Oil Tools, 75 F.3d 989, 993 (5th Cir. 1996) (en banc) (quotations and citations

omitted). Applying this standard, we address each of Gaia’s state law causes of action.11

C

The corporate defendants argue that the evidence is legally insufficient to support the jury

verdict holding them liable for unfair competition under Texas law. “To prevail on an unfair

competition claim, a plaintiff must establish two elements: (1) the plaintiff’s trade name has acquired

a secondary meaning through usage; and (2) the similarity of the name used by the defendant would

be likely to confuse the public.” Associated Tel. Directory Publishers, Inc. v. Five D’s Publ’g Co.,

849 S.W.2d 894, 898 (Tex. App.—Austin 1993, no writ). Thus under Texas law, a plaintiff must

prove that the trade name wrongfully used by the defendant is in fact “the plaintiff’s trade name.” Id.

10
Although we have since overruled Boeing on other grounds, see Gautreaux v. Scurlock
Marine, Inc., 107 F.3d 331 (5th Cir. 1997) (en banc), Boeing remains the standard by which we
evaluate motions for judgment as a matter of law. See Burger, 168 F.3d at 877.
11
To determine the substantive law governing Gaia’s state law claims, we look to final
decisions of the state’s highest court. See Transcontinental Gas Pipe Line Corp. v. Transportation
Ins. Co., 953 F.2d 985, 988 (5th Cir. 1992). “When there is no ruling by the state’s highest court,
it is the duty of the federal court to determine as best it can, what the highest court of the state would
decide.” Id. It is proper to look to decisions of lower state courts when making an “Erie-guess” as
to how a state’s highest court would decide an issue. See Shanks v. AlliedSignal, 169 F.3d 988, 993
n.7 (5th Cir. 1999).

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Gaia contends that evidence in the record demonstrated that it owned the “Leaky Pipe” trade name

when it filed the present lawsuit in October 1993.12

First, Gaia cites to the minutes of a Banstar shareholder meeting that took place on August

4, 1991. At that meeting, the shareholders “voted to sell 100% of the outstanding stock of the

Corporation to Gaia Technologies, Inc.” The minutes provided: “This sale will include all assets and

liabilities of the Corporation and any interest in the contracts dealing with the purchase of the assets

of Entek Corporation or James Turner . . . .” At most, the shareholder vote indicates Banstar’s intent

to assign the Entek-Turner assets. However, it cannot by itself assign anything at all to Gaia. See

Safeway Managing Gen. Agency v. Cooper, 952 S.W.2d 861, 867 (Tex. App.—Amarillo 1997, no

writ) (“[O]ne party may not unilaterally create a binding contract.”); DeMello v. NBC Bank-Perrin

Beitel, 762 S.W.2d 379, 382 (Tex. App.—San Antonio 1988, no writ) (holding that one party’s

indication that a sale has been executed does not prove a contract).13 Even if the shareholder vote

is sufficient to raise an inference that the assignment was performed shortly thereafter, we find any

such inference “so overwhelmed by contrary proof” as to warrant judgment as a matter of law.

Rhodes, 75 F.3d at 993. In August 1993, two years after the alleged assignment occurred, Banstar

represented to the bankruptcy court that it still held title to the patents it had acquired from the

12
Although our analysis focuses on whether Gaia owned the “Leaky Pipe” trade name, we
do not mean to suggest that under Texas law, a plaintiff must actually own a trade name in order to
make out a cause of action for unfair competition. We need not predict whether Texas courts would
permit unfair competition suits by plaintiffs with less than an ownership interest in a trade name. In
this case, the only interest Gaia claims to have had in the “Leaky Pipe” trade name is ownership of
the name pursuant to Banstar’s asset transfer.
13
We note that the Federal Circuit reached the same conclusion in assessing whether the
Banstar shareholder vote effected an assignment of the federal patents and trademark under federal
law. See Gaia, 93 F.3d at 779.

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Entek-Turner bankruptcy. If the assignment suggested by the shareholder minutes had actually

occurred, then Banstar could not have made such a representation truthfully. More importantly, in

November 1993, weeks after Gaia filed the present lawsuit, Banstar and Gaia entered into a cross-

licensing agreement that listed Banstar as the owner of the Turner-Entek patents. This evidence also

negates any inference that Banstar assigned the Turner-Entek intellectual property to Gaia pursuant

to the August 1991 shareholder vote.

Second, Gaia cit es to a written assignment of assets that was filed with the United States

Patent and Trademark Office on October 24, 1994, over a year after Gaia filed the present lawsuit.

Although the assignment itself was undated, it provided that “[t]he effective date of this Assignment

is August 4, 1991.” Gaia points to no evidence indicating when this written assignment was actually

executed. Thus there is no evidence supporting Gaia’s claim that this assignment was executed prior

to Gaia filing this lawsuit. Nor does the written assignment’s August 1991 effective date raise an

inference that Banstar and Gaia had at least reached an oral agreement in 1991. For the reasons

stated above, we find any such inference overwhelmed by Banstar’s August 1993 representation to

the bankruptcy court and the Banstar-Gaia cross-licensing agreement in November 1993.14

We therefore conclude that no reasonable jury could have concluded that “Leaky Pipe” was

Gaia’s trade name for purposes of Texas law unfair competition. Accordingly, we find that the

evidence failed to support the jury verdict holding the corporate defendants liable for unfair

competition.

D

14
Gaia also argues that portions of Raymond Kerr’s trial testimony proves that Gaia acquired
the Turner-Entek intellectual property on August 4, 1991. The portion cited by Gaia contains no
testimony relevant to this fact.

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 The corporate defendants also argue that Gaia failed to produce sufficient evidence of trade

secret misappropriation under Texas law. Gaia responds by citing evidence that the corporate

defendants assembled a promotional brochure, which advertised the same technology ultimately

acquired by Gaia. To establish misappropriation of a trade secret, a plaintiff must show that (1) a

trade secret existed, (2) the trade secret was acquired through a breach of a confidential relationship

or discovered by improper means, and (3) the defendant used the trade secret without authorization

from the plaintiff. See Phillips v. Frey, 20 F.3d 623, 627 (5th Cir. 1994).

“A trade secret is any formula, pattern, device or compilation of information used in a

business, which gives the owner an opportunity to obtain an advantage over his competitors who do

not know or use it.” Id. at 628 (emphasis added). As discussed above in the context of the “Leaky

Pipe” trade name, Gaia has produced insufficient evidence that it acquired any intellectual property

from Banstar before it filed the present lawsuit. Thus Gaia has failed to prove that it owned any of

the trade secrets underlying its misappropriation claim.

Furthermore, Gaia fails to cite any evidence that the corporate defendants “misappropriated”

that technology from Gaia, that is, discovered the trade secrets by breaching a confidential

relationship or by other improper means. See id. at 627. Rather, Gaia simply cites evidence that the

technology advertised by the corporate defendants was similar to the Turner-Entek technology

eventually acquired by Gaia. On this point, we find the case of GeoChem Tech Corp. v. Verseckes,

929 S.W.2d 85 (Tex. App.—Eastland, 1996), rev’d on other grounds, 962 S.W.2d 541 (Tex. 1998),

instructive. The plaintiff in Verseckes purchased certain trade secrets from a company called HGS.

See id. at 91. The defendant, a former employee of HGS, allegedly made use of that technology in

violation of a confidentiality agreement he had signed with HGS. See id. The court ruled that such

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facts could not make out a claim for misappropriation of trade secrets. It reasoned: “While a

confidential relationship might have existed between [the defendant] and . . . HGS, the summary

judgment evidence shows that no relationship, confidential or otherwise, existed between [the plaintiff

and defendant].” Id. Likewise, Gaia presents no evidence of a confidential relationship between it

and the corporate defendants that would support a claim for misappropriation of trade secrets. Gaia

fails to prove that the corporate defendants breached any confidential relationship with Gaia in

acquiring the alleged trade secrets, or that the corporate defendants improperly discovered the trade

secrets from Gaia.15

E

Finally, the corporate defendants argue that Gaia presented insufficient evidence of tortious

interference with prospective contractual relations. The elements of tortious interference with

prospective contractual relations are: (1) there was a reasonable probability that the plaintiff would

have entered into a contractual relationship, (2) the defendant committed a malicious and intentional

act that prevented the relationship from occurring, with the purpose of harming the plaintiff, (3) the

defendant lacked privilege or justification to do the act, and (4) actual harm or damage resulted from

the defendant’s interference. See Thrift v. Hubbard, 44 F.3d 348, 356-57 (5th Cir. 1995) (citing

Exxon Corp. v. Allsup, 808 S.W.2d 648, 659 (Tex. App.—Corpus Christi 1991, writ denied).

Gaia argues that the defendants’ tortious conduct consisted of (1) the corporate defendants’

marketing and use of the disputed technology, and (2) the corporate defendants’ filing of a lawsuit

15
We note additionally that, to the extent that any of the trade secrets underlying Gaia’s
misappropriation claim are covered by the four patents, they are no longer “trade secrets” under
Texas law. See Luccous v. J.C. Kinley Co., 376 S.W.2d 336, 340 (Tex. 1964); see also Frey, 20
F.3d at 629 (citing Luccous for the proposition that a “pat ent grant automatically constitutes full
disclosure of a patented process and cannot be protected as a trade secret”).

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in Oklahoma. However, Gaia fails to cite any evidence that the corporate defendants acted

maliciously, as is required by the second element of tortious interference with prospective contractual

relations. Indeed, Gaia does not even address the issue of malice in its appellate brief. It contends,

mistakenly, that it need only establish that the defendants’ interference was “willful and intentional.”

Although this argument is correct for tortious interference with existing contracts, it is not correct

for tortious interference with prospective contracts, which is the basis for the jury’s finding in this

case. See Thrift, 44 F.3d at 357 (“These two torts differ primarily in that interference with

prospective relations requires the plaintiffs to prove both that they had a reasonable probability of

obtaining a contract and that the defendant acted with malice.”) (footnote omitted).

The evidence that Gaia cites is insufficient to establish malice for purposes of tortious

interference with prospect ive contractual relations. An act is deemed malicious if it is “done

intentionally without just cause or excuse.” Allsup, 808 S.W.2d at 659; see also RRR Farms, Ltd.

v. American Horse Protection Ass’n, 957 S.W.2d 121, 131 n.6 (Tex. App.—Houston [14th Dist.]

1997, writ denied). To establish that a defendant acted intentionally, the plaintiff must prove, at the

very least, that the defendant “had knowledge of the prospective contractual relationship he was

accused of blocking.” Verkin v. Melroy, 699 F.2d 729, 732 (5th Cir. 1983). As to Gaia’s allegation

that the corporate defendants’ use of the technology interfered with its prospective contracts, there

is no evidence that the defendants were even aware of any prospective contracts involving Gaia at

the time Gaia filed its lawsuit. Gaia argues that the corporate defendants’ contact with Gaia’s

prospective customers proves that the corporate defendants knew about Gaia’s potential

relationships. Assuming that the evidence establishes such contact, the record contains no evidence

that the corporate defendants thereby learned of Gaia’s potential contractual relationships.

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Furthermore, there is no evidence that the corporate defendants used the disputed technology with

the intent of thwarting Gaia’s prospective contracts.

As to the Oklahoma lawsuit, Gaia provides no evidence that the defendants acted with malice

towards Gaia. Retex16 filed the Oklahoma lawsuit many months after Gaia filed the present lawsuit.

Retex did not sue Gaia, nor does Retex’s complaint mention Gaia or Banstar. Retex did, however,

sue certain individuals and corporations (“Oklahoma defendants”), who were either involved with or

were allegedly negotiating with Gaia. In the Oklahoma lawsuit, Retex alleged that various Oklahoma

defendants had breached confidentiality agreements with Retex involving Retex’s technology. Retex

also alleged that the Oklahoma defendants had defamed Retex by stating falsely that Retex had

misappropriated certain technology and that Retex was infringing on a patent owned by some of the

Oklahoma defendants.

Gaia has failed even to argue that the Oklahoma lawsuit was filed “without just cause or

excuse,” as is required for a finding of malice. RRR Farms, 957 S.W.2d at 131 n.6; Allsup, 808

S.W.2d at 659. Gaia merely states in its brief, without citation to the evidence, that “the Appellants’

lawsuit was calculated to interfere and succeeded in doing so.” This conclusory allegation is not

competent evidence. See Douglass v. United Servs. Auto. Ass’n, 79 F.3d 1415, 1429 (5th Cir. 1996)

(en banc). Even if it were, it would fail to establish that the corporate defendants acted without cause

or excuse.

Indeed, Gaia cites no evidence in the record sufficient to support a finding that Retex filed the

Oklahoma lawsuit maliciously. The record contains no evidence that the confidentiality agreements

on which the Oklahoma lawsuit was based were invalid or otherwise unenforceable. As to Retex’s

16
Retek was also a plaintiff in the Oklahoma lawsuit.

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defamation claims in the Oklahoma lawsuit, Gaia presents no evidence that Retex made such claims

without cause o r excuse. Gaia does not assert, for example, that the Oklahoma defendants never

made the defamatory statements alleged by Retex. In sum, Gaia presents insufficient evidence that

Retex acted with malice towards Gaia in filing the Oklahoma lawsuit.

V

Accordingly, we reverse the judgment of the district court and render judgment in favor of

the defendants.

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April 28, 2004 (1:37pm)

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