Bohnsack v. Varco L.P.
668 F.3d 262
| 5th Cir. | 2012Background
- Clyde Bohnsack, a drilling fluids engineer, invented the Pit Bull to reduce tank solids and speed up cleanup of drilling mud.
- Vareo initially engaged with Bohnsack to manufacture the Pit Bull but later withdrew from negotiations while retaining some rights.
- Bohnsack and Vareo executed mutual secrecy agreements and began prototype development with Vareo employees.
- A patent application for the Pit Bull was filed by Vareo’s outside counsel, naming McClung as an inventor; Bohnsack’s signature followed after concerns were raised.
- Vareo later assigned its rights to Bohnsack, and efforts to patent stalled due to patentability concerns and timing.
- At trial, the jury found Vareo liable for fraud and misappropriation of trade secrets, awarding compensatory damages and punitive damages, which this court partially reversed on appeal.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether common law fraud supports the damages. | Bohnsack contends misrepresentations caused two years of development profits. | Vareo argues lack of justification, causation, and proper damages under common law fraud. | Common law fraud damages not supported; fraudulent inducement damages not proven; take-nothing on fraud. |
| Whether Vareo is vicariously liable for McClung’s statements. | Vareo’s liability extends to statements by its agent in patent matter. | McClung acted independently; Vareo not liable. | Vareo vicariously liable for McClung’s actions; sufficient control and scope shown. |
| Whether the misappropriation of trade secrets claim is supported by evidence of use and damages. | Vareo used and profited from the Pit Bull by pursuing patent rights and competing products. | Lacks proof of use and resulting damages. | Evidence supports use and damages; misappropriation verdict affirmed. |
| Whether punitive damages were proper given the fraud finding. | Punitive damages supported by fraud claim. | Fraud claim damaged; punitive damages cannot stand without compensable fraud. | Punitive damages reversed due to lack of compensable fraud. |
Key Cases Cited
- Sears, Roebuck & Co. v. Meadows, 877 S.W.2d 281 (Tex. 1994) (fraud elements require misrepresentation, reliance, and injury)
- Formosa Plastics Corp. USA v. Presidio Eng. & Contractors, 960 S.W.2d 41 (Tex. 1998) (damages for fraud; own context of contract affects measure)
- Haase v. Glazner, 62 S.W.3d 795 (Tex. 2001) (caution against using benefit-of-the-bargain damages for common law fraud)
- University Computing Co. v. Lykes-Youngstown Corp., 504 F.2d 531 (5th Cir. 1974) (flexible approach to damages in misappropriations; reasonable royalty/dividends)
- Gen. Universal Sys. v. HAL, Inc., 500 F.3d 444 (5th Cir. 2007) (Restatement test for misappropriation and use of trade secrets)