OPINION
Opinion by
Appellant Global Water Group, Ine.’s motion for rehearing is denied. On the Court’s own motion, we withdraw our earlier opinion of January 9, 2008 and vacate our judgment of that date. This is now the opinion of the court.
Global Water Group, Inc. appeals a take-nothing judgment notwithstanding the verdict (j.n.o.v.) for Robert Atchley and Aspen Water, Inc. on Global’s claims for misappropriation of trade secrets and conspiracy. It also appeals a partial summary
Background
In the 1990s, Global Water Technologies, Inc. 1 (GWT) created the first successful mobile self-powered, self-contained water purification system. It is undisputed that GWT treated this system and associated products as trade secrets and required all employees to sign confidentiality agreements. Robert Atchley was GWT’s president and was familiar with its product line and had access to all of the claimed trade secrets. Atchley resigned from GWT in 1994.
In 1995, all of GWT’s assets, including its trade secrets, were acquired by Global, who was then known as AMW. GWT and Global remained legally separate entities, but GWT retained no assets and ceased operating. Four years later, in 1999, Atchley began manufacturing portable self-sustained water purification systems through his company Aspen Water Inc. Global sued Aspen and Atchley claiming conspiracy and misappropriation of trade secrets.
Following a jury trial, the jury found Atchley and Aspen had misappropriated Global’s trade secrets and that Global suffered one million dollars in damages based on lost profits. The particular trade secrets found to exist were (1) a formula used in a “mixed media pod” which is a device used to remove contaminates from water, and (2) the “sequence of the process” Global used for water purification. Following the jury’s verdict, Atchley and Aspen filed a motion for judgment notwithstanding the verdict (j.n.o.v.), asserting that Global failed to prove (1) it had a trade secret in its mixed media formula or the sequence of the process or (2) Atchley or Aspen used any such alleged secrets. The trial court granted Atchley and Aspen’s motion and entered judgment that Global take nothing on its claims. This appeal followed.
Standard of Review
A trial court’s decision to grant a judgment notwithstanding the verdict should be affirmed if the evidence is legally insufficient to support one or more of the jury findings on issues necessary to liability.
Wal-Mart Stores, Inc. v. Miller,
TRADE SECRET PROTECTION
A trade secret is any formula, pattern, device or compilation of information which is used in one’s business and presents an opportunity to obtain an advantage over competitors who do not know or use it.
In re Bass,
To determine whether information constitutes a trade secret, a court considers the following six factors: (1) the extent to which the information is known outside the claimant’s business; (2) the extent to which the information is known by employees and others involved in the claimant’s business; (3) the extent of the measures taken by the claimant to guard the secrecy of the information; (4) the value of the information to the claimant and to its competitors; (5) the amount of effort or money expended by the claimant in developing the information; and (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.
Bass,
The mere fact that knowledge of a product or process may be acquired through inspection, experimentation, and analysis does not preclude protection from those who would secure that knowledge by unfair means.
K & G Oil Tool & Serv. Co. v. G & G Fishing Tool Serv.,
Discussion
Aspen and Atchley moved for a j.n.o.v. based on their contentions (1) there was no evidence Global had a trade secret and (2) there was no evidence Atchley or Aspen used any alleged trade secret. To determine whether the trial court properly granted Global’s j.n.o.v, it is necessary to briefly describe the water purification process at issue and what Global claims are its trade secrets.
Proper water purification requires three steps. First, large particles are removed by filtration, then the water is treated with a compound to remove chemicals (absorption), finally, iodine or UV treatment kills viruses or bacteria in the water (disinfection). It is not disputed that these three steps are commonly and generally known and are required for any proper water purification. What Global contends are its trade secrets are (1) the formula of the compound it used in a mixed media pod in the second “absorption” step and (2) the “sequence of the process” it used to purify water.
We first consider whether there is any evidence Global had a formula that constituted a trade secret. In the absorp
The status of the information claimed as a trade secret must be determined through a comparative evaluation of all the relevant factors, including the value, secrecy, and definiteness of the information as well as the nature of the defendant’s misconduct.
Bass,
We begin by noting the nature of the misconduct in this case was not particularly egregious. As discussed below, Atchley was not subject to any type of noncompetition agreement. Thus, under the facts of this case, there was no misconduct unless there was in fact a trade secret. We thus turn to the other relevant factors. To prove its formula was a trade secret, Global focuses almost exclusively on evidence that both it and (five years previously) GWT treated the formula as a trade secret. Specifically, Global presented evidence that it guarded its formula, limited access, and required employees to sign confidentiality clauses. There is no evidence however regarding whether or not Global’s efforts were successful — specifically whether or not its formula was nevertheless known outside its business.
Further, Global directs us to no evidence of the value of its formula to its business. Global suggests the formula was necessarily valuable because Global had developed the first successful self-contained water purification unit. However, there is no evidence the formula itself was related to the success of the unit. Specifically, Global directs us to no evidence the formula was in any way related to the mobility of the unit or other supposedly novel features of the unit. Weiss did testify that Global’s formula removed more contaminates and performed better than anyone else’s. This testimony was however largely conclusory and Weiss did not attempt to articulate or explain how Global’s formula created better water or how its particular blend gave it a competitive advantage. Nor did he explain how the Global product performed differently than any other product on the market. Indeed, when asked about products that could remove contaminants from water, Weiss responded that he was not an engineer, scientist, or biochemist. Further, there is no expert testimony that the quality of Global’s water was superior or that Global’s process was cheaper or more efficient. Global has thus failed to point to any evidence to show its formula was valuable. Likewise, Global has not shown the formula gave it a competitive advantage.
Moreover, Global directs us to no evidence of the effort or money it took to create the formula.
Compare Water Ser
Finally, the imprecise nature of the information weighs heavily against it being a trade secret. There is no discrete secret formula at issue, but only an approximate mix of two well-known substances commonly used together. Given the imprecise nature of formula, we question what information Atchley and Aspen should be prohibited from using. For example, should they be prohibited from using a 20:80 ratio, 30:70, 40:60? It thus becomes apparent, it would be difficult to protect such a “formula,” without prohibiting fair competition.
That no discrete formula is claimed also raises a problem in determining whether Aspen or Atchley actually used the trade secret. Actual use or disclosure of the trade secret is a required element of the tort. Use of the trade secret means commercial use by which the offending party seeks to profit from the use of the secret.
See Metallurgical Indus. Inc. v. Fourtek, Inc.,
Global does not contend that Aspen used the same formula, but only that its formula was similar. While two products need not be identical for an inference of use to arise, we nevertheless conclude that similarity under these circumstances is not sufficient to raise such an inference. The similarity lie in the ratio of only two of the components of the mixed media pod, KDF and carbon. As noted above, it is not disputed that others in the industry used canisters with KDF and carbon. Aspen allegedly “used” Global’s trade secret because its product, like Global’s, used much more carbon than KDF. While the two products were similar in this regard, there were also differences in the contents of the mixed media pods. For example, Aspen’s product contained “separator pads” that kept the KDF and carbon separate. Global’s product on the other hand used another purifying substance, PM 1000, as well as gravel. In light of these differences, and the fact that the similarity lie only in the percentages of two commonly used ingredients, no inference of use arises. We conclude there is legally insufficient evidence to show misappropriation of the formula of Global’s mixed media pod.
Paetial Summary Judgment
In 1991, Atchley entered into a shareholder agreement with the other shareholders of GWT. As part of that agreement, Atchley and the other GWT shareholders agreed not to engage in any business that competed with GWT for a period of three years after terminating their association with GWT. Neither GWT or Global was a party to this agreement. Nevertheless Global sued Atchley for violating the shareholder agreement. Atchley moved for summary judgment on the shareholder agreement claim because (1) the covenant not to compete was unreasonable and thus enforceable, (2) Atchley fully performed his obligations under the agreement, and (3) Global had no standing because it was not a party to the agreement.
The standard of review for a traditional summary judgment is well known.
See Nixon v. Mr. Prop. Mgmt. Co.,
After reviewing the agreement under the undisputed facts, we conclude the trial court properly granted Atchley’s motion for summary judgment. Global sued Atch-ley because it contends the shareholder agreement prohibits Atchley from competing against Global. However, the clear terms of the shareholder agreement only prohibited Atchley from competing against GWT. GWT and Global are distinct corporate entities. Global acquired GWT’s assets, but the two corporations were not merged and remained legally distinct.
Further, the undisputed summary judgement evidence established that Atch-ley did not reenter the water purification business until more than five years after resigning from GWT and more than four years after GWT sold all of its assets and ceased doing business. Global nevertheless asserts the covenant not compete remains in effect, despite its three year limitation, because Atchley still owns stock in the defunct GWT. According to Global’s position, the noncompete will run indefinitely if Atchley is unable to divest himself of the valueless stock. In essence, Global seeks to stand in GWT’s shoes for purposes of the benefits under the agreement, but not for purposes of starting the three year clock. Global cannot have it both ways. Atchley’s relationship with GWT effectively terminated when GWT sold all of its assets and ceased doing business. Because Atchley waited more than three years after this date, he did not violate the noncompetition clause of the shareholder agreement. We conclude Global has not shown the trial court erred in granting Atchley’s motion for summary judgment on that claim.
We affirm the trial court’s judgment.