569 F. App'x 259
5th Cir.2014Background
- Aspen (software maker) sued former employee Kunt for breach of a one-year noncompete; later added Kunt’s new employer M3 for trade-secret misappropriation, copyright infringement, and tortious interference. Kunt settled; claims against M3 proceeded to trial.
- Evidence showed M3 personnel (many ex-Aspen employees) possessed Aspen materials: source code, manuals, pricing calculators, customer lists, and product roadmaps; several M3 employees deleted or concealed files and invoked the Fifth Amendment.
- Jury found M3 liable: misappropriated eight Aspen trade secrets, infringed all asserted copyrights, and tortiously interfered with Aspen’s contract with Kunt; awarded approximately $11.7 million (later adjusted by court to $11.346M).
- District court entered a permanent injunction barring M3 from selling present or future derivative products that use information substantially derived from Aspen’s protected materials.
- On appeal, the Fifth Circuit affirmed liability and the injunction, held the evidence supported tolling/fraudulent concealment and the infringement findings, but vacated the award of attorney’s fees for tortious interference and remanded to subtract that amount from the judgment.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Statute of limitations for misappropriation/infringement | Claims tolled by fraudulent concealment and not discoverable until after suit against Kunt | Claims time‑barred; Aspen should have discovered injury earlier | Jury had sufficient evidence of concealment and delayed discovery; limitations defense denied |
| Trade‑secret misappropriation (8 items) | Possession, close timing, code similarities, and adverse inferences support acquisition and use | Similarities reflect common practices or independent development; no proof of use | Sufficient evidence of existence, improper acquisition, and use for all eight items; verdict upheld |
| Copyright infringement (ownership & substantial similarity) | Registered derivative works permit claims to underlying preexisting material; expert used abstraction‑filtration‑comparison to show nonliteral similarity | Registrations do not cover preexisting versions; similarities not protectable or dictated by industry practice | Registration of derivative works suffices; expert testimony and jury findings supported actionable copying; verdict upheld |
| Damages, attorney’s fees, and injunction scope | Expert damages tied infringing portions to product value; equitable recovery of attorney’s fees for tortious interference; injunction necessary to prevent irreparable harm | Damages duplicative or unsupported; fees not recoverable under Texas law here; injunction overbroad/unsupported | Damages evidence legally sufficient though court must reduce judgment by vacated attorney’s fees; injunction appropriate and not overbroad |
Key Cases Cited
- Rubinstein v. Adm’rs of Tulane Educ. Fund, 218 F.3d 392 (5th Cir.) (standard for reviewing JMOL)
- Seatrax, Inc. v. Sonbeck Int’l, Inc., 200 F.3d 358 (5th Cir.) (accrual and discovery rule principles)
- Gen. Universal Sys., Inc. v. HAL, Inc., 500 F.3d 444 (5th Cir.) (Restatement guidance on what constitutes ‘use’ of a trade secret)
- Gen. Universal Sys., Inc. v. Lee, 379 F.3d 131 (5th Cir.) (copyright ownership and Altai framework endorsement)
- Computer Associates Int’l, Inc. v. Altai, Inc., 982 F.2d 693 (2d Cir.) (abstraction‑filtration‑comparison test)
- MGE UPS Sys., Inc. v. GE Consumer and Indus., Inc., 622 F.3d 361 (5th Cir.) (copyright damages and remedies overview)
- Brown & Brown of Tex., Inc. v. Omni Metals, Inc., 317 S.W.3d 361 (Tex. App.) (limits on recovery of attorney’s fees for prior litigation as equitable relief)
- eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388 (U.S.) (standards for permanent injunction relief)