      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                               ON MOTION FOR REHEARING



                                      NO. 03-17-00035-CV



                        Dr. Ruthie Harper and PLLG, LLC, Appellants

                                                 v.

                            Wellbeing Genomics Pty Ltd., Appellee


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT
       NO. D-1-GN-14-002452, HONORABLE KARIN CRUMP, JUDGE PRESIDING



                            MEMORANDUM OPINION


               We withdraw our opinion and judgment dated April 4, 2018 and substitute the

following opinion and judgment in their place, and we grant Dr. Ruthie Harper’s and PLLG, LLC’s

motion for rehearing.

               Appellants Dr. Ruthie Harper and PLLG, LLC, appeal the trial court’s judgment

rendered on a jury verdict finding that appellants misappropriated a trade secret of Wellbeing

Genomics Pty Ltd. and that PLLG violated a non-disclosure agreement in connection with the

distribution and marketing of a DNA test developed by Wellbeing to inform the personalized

selection of skin-care products. Appellants challenge the evidentiary sufficiency to support the

jury’s findings that (1) the DNA test was a trade secret, (2) Harper and PLLG misappropriated it, and
(3) Wellbeing suffered quantifiable damages. They also challenge the trial court’s award of lost-

profits damages against PLLG as consequential damages precluded by the non-disclosure agreement.

For the following reasons, we reverse the trial court’s judgment awarding Wellbeing damages and

attorney’s fees on its breach-of-contract claim against PLLG and render judgment that Wellbeing

take nothing against PLLG on that claim.1 We affirm the trial court’s judgment in all other respects.

                                         BACKGROUND

               Wellbeing filed this lawsuit against appellants after it became aware that Harper was

filing a patent application that allegedly disclosed some of Wellbeing’s confidential information and

that PLLG was negotiating a distribution agreement with a third party, Qivana, LLC, in the course

of which the parties were allegedly misappropriating Wellbeing’s intellectual property. Wellbeing

asserted causes of action against Harper, PLLG, Qivana, and David Urman (a consultant hired by

PLLG to help market and distribute Harper’s skin-care products)2 for trade-secret misappropriation,

breach of contract, unfair competition, and civil theft under the Texas Theft Liability Act. The

case was tried to a jury, which found in favor of Wellbeing on all of its theories and awarded

corresponding damages under each. After Wellbeing made an election of remedies, the trial court

       1
           After Harper and PLLG filed their motion for rehearing contending that this Court erred
in permitting Wellbeing to elect from its tort claims on remand, we requested that the parties submit
supplemental briefing on the issues of the evidence supporting the jury’s verdict under PLLG’s
alternative theories, the one-satisfaction rule, and the proper amount of damages to be awarded
against PLLG, if any, under an alternative theory. In its supplemental briefing, Wellbeing has
waived its claim to a new election of remedies on remand. Accordingly, we reverse the trial court’s
judgment against PLLG on Wellbeing’s breach-of-contract claim and render judgment that
Wellbeing take nothing on that claim rather than remand this cause for Wellbeing to elect a new
remedy against PLLG.
       2
        Urman was an initial appellant but has since dismissed his appeal due to a settlement with
Wellbeing. Qivana has not appealed the judgment.

                                                 2
rendered judgment awarding Wellbeing $356,712 in damages (plus pre-judgment interest) against

PLLG and Urman for breach of their respective confidentiality agreements with Wellbeing; $900,000

in damages (plus pre-judgment interest) against Harper for misappropriation of trade secrets;

$22,500 in damages (plus pre-judgment interest) against Qivana for misappropriation of trade

secrets; and over $380,000 in attorney’s fees against PLLG, Harper, and Urman.

               Evidence at trial showed that the parties’ relationship began in August 2010, when

Harper contacted Stefan Mazy, the manager and owner of Wellbeing, an Australian company. At

the time, Harper was looking for a DNA test to distinguish the skin-care products she developed

and sold (under the name SkinShift™) in her Austin, Texas, skin-care clinic and customize her

product recommendations based on an individual patient’s specific DNA. Harper had been contacting

various domestic laboratories to see if any of them had or could develop such a test for her, and

several of the laboratories recommended that she contact Wellbeing. Shortly after Harper contacted

Mazy, she emailed him: “We are excited to be partnering with you and feel the ability to quickly

access what you all have spent considerable time and money on is a real asset in us getting to

market quickly.”

               Mazy testified at trial that his experience working at a skin-care clinic in Sydney,

Australia, prompted him to begin developing a DNA test based on variations in individuals’ DNA

that his research had indicated were associated with particular skin-health categories (e.g., firmness

and elasticity, wrinkling, and sun damage and pigmentation). Mazy testified that he spent three years

of his personal time and money researching and developing his DNA test, which he ultimately

trademarked as the SkinDNA™ Genetic Test. He sold the test to spas, estheticians, healthcare



                                                  3
providers, and individual consumers and partnered with other businesses to market and distribute

the test, often rebranding it to accommodate Wellbeing’s so-called “white label” partners. One

such white-label partner was VITAGenes, which posted on its website samples of the patient reports

that Wellbeing prepared after its lab analyzed a patient’s DNA.

                Mazy testified extensively about his process developing the SkinDNA™ test and

explained the genetics terms and science behind it (as did Wellbeing’s expert witness on genetics,

Dr. Michael Lee Metzger, PhD). Dr. Metzger explained that a gene is a part of the DNA molecule

that is related to a specific trait or that encodes a particular function. Mazy testified that he first

considered about 6,000 genes and then closely analyzed about 200 of them before choosing 12 genes

for his test. He explained that his research focused on variations within genes that have been

found to occur in 1% or more of the population; such variations are known as single nucleotide

polymorphisms (SNPs). Millions of SNPs have been identified by the scientific community, each

assigned a unique reference number (an “rs number”) that essentially serves as its genetic “address.”

Metzker explained: “If you have the rs number, you can type it into the database and it pulls out the

SNP” as well as the population data associated with that SNP. Mazy testified that he analyzed

hundreds of SNPs before selecting 15 for his test and showed the jury spreadsheets that reflected

his detailed analysis of genes and SNPs. He testified that the SNPs he chose for his test are found

in 20-30% of the global population, which was important because he wanted a test that all ethnicities

could find useful. He also showed the jury a stack of articles that he read (which reflected only about

20% of all the articles that he read) to evaluate whether the presence of particular SNPs was associated

with particular skin categories affecting skin health and aging. He additionally showed the jury his



                                                   4
clinical outcomes, validation study, and extensive research notes. The DNA test that Mazy ultimately

developed identified a panel of 15 specific SNPs (each identified by its unique rs number) and

grouped them into five particular skin-health categories.3 This particular DNA panel of SNPs and

category grouping was asserted by Wellbeing at trial as its alleged “Trade Secret No. 1.”4

                Shortly after her first conversation with Mazy, Harper—as “President” of R.A.

Harper, L.P.—entered into a “Stockist Agreement” with Wellbeing, which authorized Harper to

exclusively market the SkinDNA™ test in Texas and rebrand it under the SkinShift™ label.

Wellbeing agreed to provide the test kits, process the tests, and provide Harper the test results.

About a year and a half later, and in connection with Harper’s desire to expand her territory to all

of the Unites States, she—as “President/Manager” of PLLG—and Wellbeing entered into an

“Exclusive Distributor Agreement.” Pursuant to that agreement, Wellbeing authorized PLLG to

sell Wellbeing’s SkinDNA™ test throughout the United States. PLLG agreed to arrange wide

publicity for Wellbeing’s SkinDNA™ test in the United States, and both parties agreed to “treat as

confidential” and safeguard all “information, reports and records pertaining to their relationship

that are marked as confidential or proprietary or that are, under the circumstances, reasonable to

assume should be confidentially treated.” The parties further agreed not to use such information for

any purpose other than to perform their obligations under the agreement.



       3
           One SNP was used twice, once in each of two categories.
       4
          The jury charge defined “Alleged Trade Secret No. 1” as: “Specific grouping of sequence
variants (also called ‘SNPs’) into one or more skin-related categories.” The jury answered “yes” to
question number 7 in the charge, asking whether “Alleged Trade Secret No. 1” constituted a trade
secret of Wellbeing, and answered “no” to another claimed trade secret, Alleged Trade Secret No.
2, which was defined as “Genotype scoring into risk categories for product recommendations.”

                                                 5
               To facilitate nationwide distribution of her skin-care products, Harper began

discussions with potential distributors, including Qivana, a multi-level marketing company. Harper

engaged David Urman5 to assist with this effort. Because some of the potential distributors had

questions about the science supporting the DNA test, Harper and Urman requested that Wellbeing

provide them with “scientific back-up.” Urman wrote to Mazy in November 2012: “An overinclusive

brain dump would get me in a position to collaborate with you more effectively. Nothing goes to

third parties without your consent.” Urman further assured Mazy that Wellbeing’s intellectual property

was not at risk in this endeavor: “[W]e are 100% focused on showing the efficacy of the DNA

test and that is where the Ferndale [a potential distributor] deal currently hinges. We have stringent

NDAs [non-disclosure agreements] in place to protect our mutual IP [intellectual property].”

               Wellbeing provided Harper and Urman their requested scientific back-up, including

so-called “data cards” for the genes used in the SkinDNA™ test and supporting scientific articles.

Mazy authorized Harper and Urman to disclose three data cards to potential distributors and others

with which they sought to do business using the test, and Mazy assisted Harper with an interview

she gave to a reporter from the L.A. Times in an effort to publicize their business. Upon Harper’s

request for further scientific back-up, Mazy provided her the additional12 data cards he had prepared

for the SkinDNA™ test. Mazy testified that these 12 data cards, combined with the first three that

he provided (for a total of 15) contained his intellectual property in the form of his trade secret.

Mazy further testified that he did not provide all 15 of the data cards to any party outside of

Wellbeing except Harper and the lab that performed the tests.


       5
         Urman signed a separate non-disclosure agreement with Wellbeing, which the jury found
he breached.

                                                  6
               In March 2013, Harper filed a provisional application for a U.S. patent on “Methods

of Skin Analysis and Uses Thereof.” To assist in the preparation of the application, Urman sent to

Harper’s patent counsel various Wellbeing documents, including the data cards for three genes, one

of which was copied nearly verbatim into the application. Later that year, Urman contacted Justin

Banner, a founder and officer of Qivana, about the possibility of Qivana distributing Harper’s skin-

care products personalized with a DNA test. Urman sent to Banner a copy of the provisional patent

application, a “white paper” originating from Wellbeing explaining SkinShift™’s use of Wellbeing’s

DNA test (without attributing it to Wellbeing) to personalize patients’ skin-care-product selections,

and one of Wellbeing’s data cards (slightly edited).

               Around the same time, Harper hired Dr. Linda DiBella, PhD, to help her create

a DNA test for a U.S. lab to run for her skin-care line. Since 2012, PLLG had been searching for

a U.S. lab to run its DNA tests and had attempted to find other labs, including one identified in

the record as Genemarkers, to develop a DNA test of PLLG’s own. The evidence showed that in

January 2013, Urman sent an email to Harper attaching information to be provided to Genemarkers’

president in advance of a conference call about the development of a test; the information included

several of Wellbeing’s data cards. The evidence showed that PLLG did not end up working with

Genemarkers on the development of a test. Rather, DiBella and Harper pursued development of a

DNA test for PLLG’s use on their own. DiBella testified that she spent about 100 hours over the

course of six months to develop a DNA test “from scratch,” pursuant to Harper’s mandate. Harper

testified that she collaborated with DiBella in the test development and was responsible for making

the “final decision” regarding the 32 SNPs that PLLG selected for its DNA test. An email sent from



                                                 7
Harper to DiBella during this time frame demonstrates that DiBella had access to all 15 of Wellbeing’s

data cards while developing PLLG’s test.

               Contemporaneously, Qivana and PLLG were negotiating the details of an agreement

to distribute PLLG’s SkinShift™ products, combined with a DNA test, and both parties were also

in communication with another U.S. lab, Sorensen, to engage it in the processing of PLLG’s test.

Qivana and PLLG signed a “Memorandum of Understanding” in March 2014 outlining their mutual

intent to enter into an exclusive distributor agreement whereby Qivana would market and distribute

the SkinShift™ products, and PLLG would lend Harper’s name and brand to Qivana for such

purpose. The parties executed an “Exclusive Distribution Agreement” in September 2014, in which

Qivana agreed to pay PLLG initial payments totaling $450,000 as well as royalties equal to 8% of

gross product sales, with a right to minimum royalties of $400,000 the first year and $600,000 each

year thereafter (for the five-year contract term). During this time period, Urman sent Banner an

email containing a “confidential” list of rs numbers—including eight of the 15 used on Wellbeing’s

test—to share with Sorensen. DiBella testified that PLLG’s 32-SNP test was completed in July 2014;

within ten days, Qivana and Sorensen entered into a contract whereby Sorensen agreed to process

DNA tests for Qivana using PLLG’s 32-SNP panel after first performing “assay development” and

validation of the test. Wellbeing filed this lawsuit shortly thereafter.


                                           DISCUSSION

               Harper and PLLG challenge the sufficiency of the evidence supporting the jury’s

findings that (1) Trade Secret No. 1 was secret and (2) appellants misappropriated the secret, which

directly and proximately caused Wellbeing damages. They also contend that Wellbeing’s expert

                                                  8
testimony on damages amounted to no evidence because it was based on “sheer speculation,” and

was, therefore, insufficient to support the expert’s “reasonable royalty” calculation of damages.

See Southwestern Energy Prod. Co. v. Berry-Helfand, 491 S.W.3d 699, 722 (Tex. 2016) (listing

factors that factfinder may consider in determining “reasonable royalty” damages for trade-secret

misappropriation). Finally, appellants assert that the trial court erred in awarding Wellbeing lost-

profit damages against PLLG for breach of contract because the contract expressly precludes indirect

and consequential damages.6

               When conducting a legal-sufficiency review, we must view the evidence in the

light most favorable to the jury’s findings, “crediting favorable evidence if reasonable jurors could,

and disregarding contrary evidence unless reasonable jurors could not.” City of Keller v. Wilson,

168 S.W.3d 802, 807 (Tex. 2005). Moreover, we must indulge every reasonable inference that

would support the jury’s findings. Id. at 822. The ultimate test for legal sufficiency is whether the

evidence at trial would enable reasonable and fair-minded people to reach the verdict under review.

See id. at 827. When reviewing the factual sufficiency of the evidence, we consider and weigh all

of the evidence in the record, and we should set aside the finding only if the evidence supporting the

finding is so weak as to be clearly wrong and manifestly unjust. See Cain v. Bain, 709 S.W.2d 175,

176 (Tex. 1986) (per curiam). We must not merely substitute our judgment for that of the factfinder.

Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757, 761 (Tex. 2003). We review a trial court’s

interpretation of an unambiguous contract de novo, Kachina Pipeline Co. v. Lillis, 471 S.W.3d 445,




       6
         Alternatively, appellants argue that Wellbeing’s contract claim against PLLG is preempted
by federal copyright law.

                                                  9
449 (Tex. 2015), as we do a trial court’s determination of whether damages awarded in a case constitute

direct or consequential damages, Powell Elec. Sys., Inc. v. Hewlett Packard Co., 356 S.W.3d 113,

117 (Tex. App.—Houston [1st Dist.] 2011, no pet.).


Was Trade Secret No. 1 actually secret?

                   In their third issue, appellants contend that “there is legally and factually insufficient

proof that Wellbeing’s ‘Alleged Trade Secret No. 1’ was in fact secret.” The jury charge defined a

trade secret as:

        a process, formula, pattern, device, or compilation of information which is used in
        one’s business and which gives the business an actual or potential economic
        advantage over competitors who do not know or use it.
        Information that is publicly available, or becomes publicly available by means other
        than breach of a contractual duty of confidentiality, cannot be a trade secret. Likewise,
        information that is generally known in the industry, or that is independently
        developed, or that is readily ascertainable by independent investigation or by reverse
        engineering, cannot be a trade secret. “Reverse engineering” means the process of
        studying, analyzing, or disassembling a product or device to discover its design,
        structure, construction, or source code provided that the product or device was
        acquired lawfully or from a person having the legal right to convey it.


The charge further provided factors that the jury was permitted to consider in determining whether

Alleged Trade Secret No. 1 was a trade secret: (1) the extent to which the information is known

outside Wellbeing’s business; (2) the extent to which the information is known by Wellbeing’s

employees and others involved in its business; (3) the extent of the measures taken by Wellbeing to

guard the secrecy of the information; (4) the value of the information to Wellbeing and its competitors;

(5) the amount of effort or money expended by Wellbeing in developing the information; and (6) the

ease or difficulty with which the information could be properly acquired or duplicated by others.


                                                      10
               To support their argument on this issue, appellants rely on the testimony of their

expert witness on genetics, Dr. Carlos Bustamante, PhD, who testified about his attempts during the

discovery process to duplicate Wellbeing’s DNA panel using publicly available materials on the

internet and two previously published patent applications. Bustamante testified that the two patents,

identified in the record as the “Giampapa” and “DeFilippo” patents, plus a third source—a peer-

reviewed scientific article identified in the record as the “Sulem paper”—together revealed all 15 of

the SNPs and genes that Wellbeing included in its DNA panel. Bustamante summed up his opinion

about “how secret” Wellbeing’s panel was: “Not very secret at all. You could reconstruct it with

two patents and a paper.”

               Using a slideshow exhibit, Bustamante further demonstrated for the jury how he had

conducted internet searches (using the Google search engine and the website SNPedia) using terms

revealed in sample patient reports published on Wellbeing’s own website (as well as that of one of

its white-label partners, VITAGenes). According to Bustamante’s testimony, using only certain

terms—relating to genes, chromosomes, skin categories, and skin characteristics—appearing on the

publicly available patient reports, he was able to identify all but one of the SNPs on Wellbeing’s

panel, and the remaining SNP he was able to narrow down to one of two possible SNPs. In

conclusion, Bustamante opined that it would be “easy peasy” for someone to replicate Wellbeing’s

SNP panel using only publicly available information from Wellbeing’s and VITAGenes’s websites.

Bustamante admitted on cross-examination that he knew which SNPs were on Wellbeing’s DNA

panel before he began to duplicate the panel from publicly available information and that the

Giampapa patent contained several genes and numerous SNPs in addition to those 15 selected by



                                                 11
Mazy for his DNA panel. As with any testimony, the jury was free to disbelieve or disregard any

or all of Bustamante’s testimony. See Bay Rock Operating Co. v. St. Paul Surplus Lines Ins. Co.,

298 S.W.3d 216, 229–30 (Tex. App.—San Antonio 2009, pet. denied).

               In support of the jury’s finding on this issue and of the factors listed in the jury

charge, Wellbeing cites the testimony of Mazy and Metzger. As summarized in the background

section above, Mazy testified extensively about his three-year process developing Wellbeing’s

DNA panel. He testified that he considered “Alleged Trade Secret No. 1” to be a trade secret, and

that he did not disclose the complete secret to any outside party except the lab that conducted his

DNA tests and Harper, pursuant to her request for all 15 of the data cards, from which she could

have determined his chosen rs numbers and skin-category groupings. Mazy testified that he ensured

that confidentiality agreements were in place before disclosing Wellbeing’s confidential information

to third parties, and that he only provided the same three data cards, each of which disclosed only

one SNP, to each of Wellbeing’s distributors around the world, with the exception of providing all

15 of the data cards to Harper.

               Mazy explained that the reports Wellbeing and its white-label partners provided

to patients did not reveal Wellbeing’s confidential information. For instance, they did not reveal

which specific genes were tested, partly to prevent the “competition” from knowing Wellbeing’s

SNP panel, and partly to make them easier to understand by the patient. In response to an emailed

query from Harper in September 2012 asking how—in light of the information (i.e., gene location)

provided on the patient reports—Wellbeing nonetheless protected its intellectual property (IP),

Mazy replied: “Basically the gene location on the report is a small piece of the puzzle—that location



                                                 12
can contain up to 10 other genes—within each gene there would be anywhere between 500 and

1000 SNPs[.] its [sic] knowing the right SNP to test is where the IP lies. The IP also lies in the

combination of SNP’s and the links we have associated with the ageing traits—something no other

lab can associate that link.” His email continued: “To this day no one has been able to imitate the

test, we’re even talking about the big firms such as P&G [Proctor & Gamble] who have been trying

to find the exact SNP’s—the results, though detailed do not provide the things the competitors

need.” Mazy explained to the jury that he could have pursued a patent for Wellbeing’s SkinDNA™

test but that such publication would have disclosed his IP; rather, he chose to rely on the common-

law protections afforded to trade secrets to protect his IP.

               In response to a potential new distributor’s concern about protection of the IP at

issue, Urman replied in an August 2012 email: “SKINSHIFT [sic] is the first company to identify

16 SNPs that are relevant to skin health categories. Additional SNPs are being discovered as we

speak. The location of all of these SNPs will not be disclosed and will be treated as a trade secret.”

He further wrote that the development of the DNA test used by SkinShift™ had “taken over four

years,” been researched and developed to “maximize predictive value,” and given SkinShift™ a

“multiple year head start.”

               Metzger, Wellbeing’s genetics expert, testified that he reviewed more than 40,000

documents produced in this lawsuit, as well as the deposition transcripts. He opined that it would

have taken a “reasonable investigator”—someone with a graduate degree in a relevant field, such as

genetics or molecular biology, or with a couple years’ experience in a lab or the cosmeceutical

field—about 33 months, plus “a little bit of luck,” to develop a test “from scratch” equivalent to

Wellbeing’s without using Wellbeing’s confidential information. He outlined the various phases of

                                                 13
such development, from the initial background research phase, to the honing down and selection of

SNPs from among the millions available in the public database, to the reading of relevant scholarly

articles, to the laboratory testing, to the designing of reagents to be used in the test, and finally to the

validation studies confirming that the test is reliable.

                A jury may believe one witness and disbelieve others, may resolve inconsistencies

in the testimony of any witness, and may accept lay testimony over that of experts. McGalliard v.

Kuhlmann, 722 S.W.2d 694, 697 (Tex. 1986). While Bustamante’s testimony constituted some

evidence tending to disprove the actual “secrecy” of Alleged Trade Secret No. 1, there was ample

contrary evidence in support of the jury’s finding, as summarized above, that Trade Secret No. 1 was

a secret, and our review of the record leads us to conclude that the evidence supporting the finding

is not so weak as to be clearly wrong and manifestly unjust, see Cain, 709 S.W.2d at 176, and that

reasonable and fair-minded people could have made the finding that the jury made, see City of

Keller, 168 S.W.3d at 807. Accordingly, we overrule appellants’ third issue.


Did Harper and PLLG misappropriate Trade Secret No. 1?

                In their first and second issues, appellants challenge the sufficiency of the evidence

supporting the jury’s finding that appellants misappropriated Trade Secret No. 1. On this question,

the jury charge read:


        In order to find that [defendants] misappropriated a trade secret, you must find that:

        1. Defendant(s) used or disclosed the trade secret in breach of a duty of confidentiality
        without Wellbeing’[s] authorization; and




                                                    14
        2. The use of the trade secret was the direct and proximate cause of damage to
        Wellbeing[.]

        For a person to have misappropriated a trade secret, the person must have known or
        had reason to know that the information was a trade secret. “Use” means a commercial
        use by which a person seeks to profit from the trade secret. Merely receiving trade
        secret information does not constitute “use” of a trade secret. Misappropriation does
        not require that the person use the trade secret in exactly the form in which the person
        received it; however, it must be substantially derived therefrom. There is no
        misappropriation when the contribution of the trade secret is slight and the person’s
        process can be said to have been derived from other sources.


Appellants assert that the misappropriation verdict cannot stand because the evidence is insufficient

to show that (1) Wellbeing provided7 the secret to them and (2) they disclosed the secret to

unauthorized parties. Appellants’ argument focuses on whether the evidence shows that they

“disclosed” the trade secret rather than whether they “used” it “in breach of a duty of confidentiality,”

as outlined in the jury charge. Based on the jury charge, and as correctly stated in Wellbeing’s brief

and applicable caselaw, see, e.g., Southwestern Energy, 491 S.W.3d at 722 (stating that “use” of

trade secret means “commercial use by which the offending party seeks to profit from the use of the

trade secret”), sufficient evidence of either disclosure or unauthorized use will support the jury’s

misappropriation finding, and our review of the record leads us to conclude that there is legally and

factually sufficient evidence to support the finding.




        7
          The jury charge did not require the jury to find that Wellbeing “provided” the secret to
appellants, nor do we conclude that such requirement was implied in the charge. Nonetheless, we
conclude that the record contains sufficient evidence to support an implied finding, if necessary, that
Wellbeing “provided” appellants its trade secret, as will be outlined in this section summarizing the
evidence supporting the jury’s misappropriation finding, especially in the form of Metzger’s testimony.

                                                   15
                As summarized above, Wellbeing provided all 15 of its data cards to Harper. While

the data cards did not visually display the information the same way that the slide presented to the

jury depicting “Trade Secret No. 1” did, Metzger testified that the data cards contained all of the

information comprising claimed Trade Secret No. 1 and that it would be “straightforward” for a person

to glean Wellbeing’s chosen rs numbers (SNPs) and their respective skin-health categories from the

information disclosed in the data cards. Mazy similarly testified that an educated, “investigative

type” of person could easily figure out Wellbeing’s SNPs based on the information in the confidential

data cards, using the combination of the gene names, chromosome locations, and reference articles

cited. He testified that the relatively few reference articles cited in the data cards are very specific,

each listing a few SNPs, that some of the SNPs he chose were listed in the title of the articles, and

that the articles identifying his chosen SNPs also identify the gene. Metzger opined that appellants

misappropriated Trade Secret No. 1 by publishing the provisional patent application and using the

secret to get a “head start” on development of their own DNA panel. Appellants did not object to

Metzger’s expert qualifications or testimony.

                Wellbeing further presented evidence showing that Harper used Trade Secret No. 1

to prepare her patent applications. For instance, Urman—on behalf of Harper—sent the data cards to

her patent-prosecution counsel, and one of the cards was inserted nearly verbatim into her provisional

patent application. The patent application disclosed 11 of the 12 genes in Trade Secret No. 1 and

12 of the 15 SNPs in the trade secret, grouped into the same skin-health categories used by Wellbeing.

Metzger testified that Harper’s provisional patent application contained the majority of Trade Secret

No. 1, enough to disclose and destroy it.



                                                   16
               Wellbeing also presented evidence showing that PLLG used Trade Secret No. 1 to

develop an SNP panel for its own DNA test. PLLG hired DiBella, to whom Harper sent Wellbeing’s

data cards, to help develop the test. DiBella had no prior experience developing a DNA test, and

spent only about 100 hours on developing it (compared to Mazy’s three years). Metzger opined that

neither Harper nor DiBella had the capability to develop such a DNA test, and that it would take a

reasonable investigator 33 months to develop one. Harper, PLLG, and DiBella did not produce

detailed work papers as Mazy did. Metzger testified that the SNP panel that PLLG sent to Qivana

to give to Sorensen included seven of the 15 SNPs in Trade Secret No. 1. He explained that the

original SNP list provided to Sorensen contained several more of Wellbeing’s SNPs but that they

were ultimately removed from PLLG’s final DNA panel only because Sorensen could not find

easily available reagents to test for those SNPs.

               Based on this summary as well as other evidence in the record, we conclude that the

evidence supporting the jury’s misappropriation findings—including the finding that appellants

“used or disclosed” Wellbeing’s trade secret—is not so weak as to be clearly wrong and manifestly

unjust, see Cain, 709 S.W.2d at 176, and that reasonable and fair-minded people could have made

the findings that the jury made, see City of Keller, 168 S.W.3d at 807. We overrule appellants’ first

and second issues.


Is there sufficient evidence supporting the jury’s award of damages?

               In their fifth issue, appellants contend that the reasonable-royalty calculation of

damages testified to by Wellbeing’s damages expert, Christopher Bakewell, was based on “sheer

speculation,” see Southwestern Energy, 491 S.W.3d at 712 (“Damage estimates . . . cannot be based


                                                    17
on sheer speculation.”) and, therefore, amounts to “no evidence” of damages, see Merrell Dow

Pharms., Inc. v. Havner, 953 S.W.2d 706, 711 (Tex. 1997) (noting that no-evidence point will be

sustained when evidence offered to prove vital fact amounts to no more than mere scintilla).

Specifically, they take issue with Bakewell’s reliance on a particular “Marketing Plan Outline” that

was, they claim, merely a “pie in the sky” projection of revenue generated to entice Harper to enter

into an exclusive distributorship agreement with Qivana, rather than a realistic projection of sales.

               At trial, appellants did not object to Bakewell’s qualifications as an expert or to his

expert testimony. “An expert opinion admitted into evidence without objection ‘may be considered

probative evidence even if the basis for the opinion is unreliable.’” Id. at 717 (quoting City of

San Antonio v. Pollock, 284 S.W.3d 809, 818 (Tex. 2009)). Absent an objection, an expert’s

opinion may nonetheless be deemed unreliable and will not be considered probative evidence if it

lacks a factual basis. Id. Accordingly, we consider whether the record contains any factual bases

for Bakewell’s opinion or whether—as appellants contend—his opinion was based on no factual

bases but, rather, mere speculation. See id. at 712, 717.

               Initially, we note that the marketing outline about which appellants complain was

not the sole piece of information that Bakewell considered in making his calculations. He testified

that he also considered evidence of the prior experience of Qivana’s management (who had “taken”

their previous company, Xango, to “$1 billion in sales”), the Memorandum of Understanding

signed by PLLG and Qivana (which recited, “based on prior experience, international expansion

and adoption curves, Qivana anticipates royalty payment to Dr. Ruthie Harper to exceed $7,500,000”

in the five years following the launch), Urman’s deposition testimony (in which he testified that he



                                                 18
considered the Qivana projections to be reasonable based on his investigation and consultation with

third parties), and the minimum payments that Qivana committed to make to preserve its exclusivity

in the exclusive distributor agreement between PLLG and Qivana. Bakewell testified that he

considered other factors that might have caused Qivana to make less revenue in reality than what

was projected—including adverse patient reactions potentially due to Harper’s changes to her test

or to the fragrance added to her skin-care products. Bakewell testified that—in light of such

post-misappropriation events—measuring the value of the trade secret by considering Qivana’s

actual revenue was not appropriate, explaining his opinion by using a “taco truck” analogy.8 Finally,

Bakewell testified that he had considered PLLG’s negotiations with an earlier potential, unrelated

distributor—identified in the records as Neways—in making his reasonable-royalty calculation.

Bakewell cited an email from Urman to Harper in which Neways had projected similar types of

revenues to those later projected by Qivana in the marketing outline. Bakewell summed up: “[A]ll

this information fits together. It triangulates . . . and is consistent with [a reasonable projection] of

7 million dollars in royalties over five years.”

                Moreover, whether the Marketing Plan Outline referenced by Bakewell and challenged

by appellants is “speculative” and amounts, therefore, to “no evidence” is merely appellants’

characterization of that document; such characterization does not render the document so. The

Marketing Plan Outline was admitted into evidence and, indeed, constitutes a “factual basis”—one




        8
            He analogized valuing Trade Secret No. 1 to valuing a popular and successful taco truck
that, if it were stolen and then crashed, resulting in damage to the truck and loss of the business’s
recipes, the business would have far less value—due to these post-misappropriation events—than
before the truck was stolen, through no fault of the taco truck’s owners.

                                                   19
among others—upon which Bakewell relied in arriving at his expert opinion. Whether the document’s

projections represented wishful thinking or reasonable profit projections (i.e., whether it was

credible) was a question within the jury’s province.9 An answer to that question unfavorable to

Wellbeing does not render Bakewell’s opinion unreliable; the fact remains that the document was

one of the factual bases on which he relied, and it constitutes more than a scintilla.

               In addition to Bakewell’s testimony, the record contains evidence concerning various

of the factors that courts have held may be considered in a reasonable-royalty calculation for trade-

secret misappropriation. See Southwestern Energy, 491 S.W.3d at 712–13 (listing factors). The

jury was charged with determining a reasonable royalty, defined as “the amount of money a reasonably

prudent investor would have paid for the trade secret at the time of misappropriation as a fair price

for licensing to put the trade secret to the use intended.” The jury was instructed that it could

consider the following factors:


       (1) The resulting and foreseeable changes in the parties’ competitive positions;
       (2) Prices paid by licensees in the past;
       (3) The total value of the trade secrets to Wellbeing [], including to Wellbeing[’]s
       development costs and the importance of the secret to Wellbeing[’]s business;
       (4) The nature and extent of the use of PLLG, Harper and/or Urman’s intended [use]
       for the trade secrets; and
       (5) Other factors, such as whether an alternative process exists.




       9
          There is evidence in the record demonstrating that other players in the transaction at issue
considered the numbers in the projection reasonable. For example, Urman testified in his deposition
that he considered the marketing projections to be realistic, even communicating to a friend of his
that the Qivana deal was worth $7 million to SkinShift™ (its portion of a total of $84 million in
sales) over the next five years. Similarly, Banner—who had been a part of the management team
that had been so successful with Xango—sent a copy of the projection to all three of the other
principals of Qivana, which he presumably would not have done were the projection unreasonable.

                                                 20
Evidence of all the factors is not required. Id.

               Regarding changes in the parties’ competitive positions (the first factor), the evidence

showed that although PLLG agreed to keep Wellbeing’s proprietary information confidential and

use it only to meet its obligations under the agreement, it nonetheless used Trade Secret No. 1 to

prepare a patent application, pursue an exclusive distributorship agreement with Qivana, and develop

its own test to be run by a third-party lab (Sorensen), rendering Wellbeing’s test unnecessary.

               While there was no direct evidence of the second factor (prices paid by past

purchasers or licensees), Bakewell testified about the independent negotiations that PLLG had

conducted with Neways and that company’s revenue projection that was similar to that of Qivana.

Furthermore, the jury could have viewed the executed distributorship agreement between Qivana

and PLLG as some evidence of how much Qivana (presumably a “reasonably prudent investor”)

was willing to pay to license the DNA test as part of its right to distribute the unique, customized-

by-DNA-test skin-care line. With respect to the third factor, Mazy testified extensively about his

three years’ development of the SkinDNA™ test, including investing in building a lab to process the

tests. Because Wellbeing provided no other service than the SkinDNA™ test, the test essentially

constituted the entirety of Wellbeing’s value, and destruction of its trade secret would have

amounted to the near-total loss of the value. Evidence pertaining to the fourth factor—the use or

intended use by PLLG of the trade secret—has already been addressed supra, including PLLG’s

use of the secret to prepare a patent application, obtain a distribution agreement with Qivana, and

quickly develop a “new” test.




                                                   21
               Finally, we note that the jury did not award damages in the full amount testified to

by Bakewell. Besides that amount, the jury heard the damages testimony of PLLG’s expert, Thomas

Glass, who calculated a reasonable royalty of between $143,000 and $373,000, depending on when

the jury concluded that the misappropriation occurred. Additionally, the executed Qivana–PLLG

exclusive distributorship agreement was admitted into evidence, in which Qivana agreed to pay

PLLG a total of $450,000 for its exclusive right to distribute the SkinShift™ products as well as

minimum royalties of $400,000 the first year and $600,000 for each of the next four years. The jury

generally has discretion to award damages within the range of evidence presented at trial. Gulf

States Utils. Co. v. Low, 79 S.W.3d 561, 566 (Tex. 2002). Based on our review of the entire record,

we conclude that the evidence was legally and factually sufficient to support the jury’s damage

award, and we overrule appellants’ fifth issue.



Is the award of lost profits precluded by the contract’s disclaimer of consequential damages?

               In its sixth issue, PLLG contends that the contract-damages award against it was

precluded by the parties’ agreement. The jury found that PLLG “fail[ed] to comply with the Exclusive

Distributor Agreement between PLLG and Wellbeing” and awarded Wellbeing total past and future

damages of $356,712 for such breach. The trial court rendered its final judgment in accordance with

this verdict (and Wellbeing’s election of remedies against PLLG). PLLG contends that this award

was based on Wellbeing’s expert’s testimony calculating benefit-of-the-bargain damages as the

profits that Wellbeing “lost” due to PLLG’s breach and being “cut out of the picture” in the Qivana




                                                  22
deal, and that it categorically constitutes indirect or consequential damages, which are expressly

precluded by the agreement.

               The parties’ agreement stated, in relevant part:


       LIMITATION OF LIABILITY. IN NO EVENT WILL EITHER PARTY BE
       LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL,
       SPECIAL, CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING
       (WITHOUT LIMITATION) LOSS OF PROFIT, INCOME OR SAVINGS, EVEN
       IF ADVISED OF THE POSSIBILITY THEREOF.


By its plain language, the agreement limits both parties’ liability by precluding “indirect” and

“consequential” damages. Because the agreement does not define the terms “indirect” and

“consequential” damages, we presume that the parties intended their ordinary meanings. See

DaimlerChrysler Motors Co., LLC v. Manuel, 362 S.W.3d 160, 179 (Tex. App.—Fort Worth 2012,

no pet.). Direct damages are defined as “the necessary and usual result of the defendant’s wrongful

act; they flow naturally and necessarily from the wrong.” Arthur Andersen & Co. v. Perry Equip.

Corp., 945 S.W.2d 812, 816 (Tex. 1997). They compensate the plaintiff for the loss that is

conclusively presumed to have been foreseen by the defendant from his wrongful act. Id.

Consequential (or indirect) damages, on the other hand, result naturally, but not necessarily, from

the defendant’s wrongful acts. See id.; Manuel, 362 S.W.3d at 180 (noting that consequential

damages require existence of some other fact beyond relationship of parties and are, thus,

“contingent”). Consequential damages need not be the usual result of the wrong, but they must be

foreseeable. Arthur Andersen, 945 S.W.2d at 816.

               While appellants argue that the agreement also precludes “lost profits” damages,

we conclude that the cited provision does not create a blanket prohibition of damages measured

                                                23
by the loss of profits unless those lost profits are indirect, incidental, special, or consequential.

The phrase “loss of profit” in the cited provision comes after the word “including,” which means

that the agreement excludes only indirect, special, or consequential lost-profit claims, not direct

lost-profit claims. See Tennessee Gas Pipeline Co. v. Technip USA Corp., No. 01-06-00535-CV,

2008 WL 3876141, at *7, 11 (Tex. App.—Houston [1st Dist.] Aug. 21, 2008, pet. denied) (mem.

op.) (interpreting contract with similar clause as precluding only consequential lost profits but not

direct lost profits and upholding trial court’s determination that particular lost profits at issue were

consequential and, thus, properly excluded). We must, therefore, determine whether the lost profits

at issue constitute direct or consequential damages. See id.; see also Manuel, 362 S.W.3d at 181

(noting that lost profits may be either direct or consequential damages, depending on their nature);

Continental Holdings, Ltd. v. Leahy, 132 S.W.3d 471, 475 (Tex. App.—Eastland 2003, no pet.) (same).

                Profits lost on the breached contract itself, such as the amount that a party would

have received on the contract but for the breach (i.e., lost profits that represent the benefit-of-the-

bargain measure of damages required to restore the plaintiff to the economic position he would

have enjoyed if the contract had been performed) are classified as “direct” damages; profits lost on

other contracts or relationships resulting from the breach (such as resale of property to a third party)

are classified as indirect or consequential damages. Manuel, 362 S.W.3d at 181; see Tennessee Gas

Pipeline, 2008 WL 3876141, at *11.

                Bakewell testified that he calculated Wellbeing’s breach-of-contract damages by

determining the number of DNA test kits that Qivana and PLLG projected would be sold under

the parties’ exclusive distributorship agreement. He then multiplied that number by the profit that



                                                  24
Wellbeing would have received on each DNA test kit based on those projected sales. Using such

a calculation, he testified that the total amount Wellbeing “lost” due to PLLG’s breach and being

cut out of the Qivana deal was $4.1 million. In contrast, Glass used the actual profits (rather than

projected profits) that Qivana and PLLG made on sales of DNA kits to calculate the amount of

damages that Wellbeing suffered from PLLG’s breach. Glass’s total “lost profits” calculation

amounted to $85,985. The jury awarded an amount between the two experts’ calculations.

               To determine whether the lost profits awarded were direct or consequential

damages, we must consider how they relate to the nature of the breaches that were alleged and

proved at trial—i.e., did the damages flow “necessarily” from the breach, or only “naturally”? See

Arthur Andersen, 945 S.W.2d at 816. The evidence supported findings that PLLG breached the

confidentiality provisions of the agreement by (1) disclosing Wellbeing’s confidential information

to third parties (e.g., Qivana and Sorensen) and the public, without authorization; and (2) using

Wellbeing’s confidential information for purposes other than to perform its obligations under the

agreement (e.g., as a “starting point” to develop its own DNA test). While the profits that Wellbeing

“lost” naturally flowed from PLLG’s unauthorized disclosure and use of its confidential information

to develop its own DNA test, they are not the type of damages that would necessarily flow from

such breaches. For example, had PLLG unlawfully developed its own DNA test using Wellbeing’s

confidential information but chosen to nonetheless continue to use Wellbeing’s test (or chosen to

legally use the DNA test of a third party), Wellbeing would not have suffered its claimed lost profits,

even with consummation of the Qivana deal. Similarly, Wellbeing would not have suffered its claimed

lost profits if, despite PLLG’s breach, PLLG was for some reason unable to close the Qivana



                                                  25
deal. Because the lost profits at issue were caused by a relationship resulting from the breach and

were incidental to the breach, rather than caused by the breach itself, they are categorically indirect

and consequential rather than direct. See Tennessee Gas Pipeline, 2008 WL 3876141, at *11 (“If

a party’s expectation of profit is incidental to the performance of the contract, the loss of that

expectancy is consequential.”). Accordingly, the breach-of-contract damages asserted and proven

here are expressly precluded by the parties’ agreement, and the trial court erred in awarding them.

We sustain appellants’ sixth issue and reverse the award of damages against PLLG.10 Additionally,

because we hold that Wellbeing is not entitled to damages for PLLG’s breach of contract, we must

also reverse the award of attorney’s fees to Wellbeing on that claim. See Paradigm Oil, Inc. v.

Retamco Operating, Inc., 242 S.W.3d 67, 75–76 (Tex. App.—San Antonio 2007, pet. denied); see also

Mustang Pipeline Co. v. Driver Pipeline Co., 134 S.W.3d 195, 201 (Tex. 2004) (per curiam) (holding

that to recover attorney’s fees in breach-of-contract action, claimant must recover actual damages).


                                          CONCLUSION

               For the foregoing reasons, we reverse the trial court’s judgment awarding Wellbeing

damages and attorney’s fees on its breach-of-contract claim against PLLG and render judgment that

Wellbeing take nothing on that claim. We affirm the judgment of the trial court in all other respects.




       10
           Because of our disposition on this issue, we need not reach appellants’ alternative argument,
asserted in the same issue, regarding preemption. Likewise, we need not address appellants’ fourth
issue, in which they contend that there is no “causal link” between the jury’s award of “lost profits”
damages and the misappropriation, or reach the portion of their fifth issue challenging the sufficiency
of the evidence supporting the breach-of-contract damages.

                                                  26
                                               __________________________________________

                                               David Puryear, Justice

Before Justices Puryear, Field, and Bourland

Affirmed in Part; Reversed and Rendered in Part on Motion for Rehearing

Filed: December 4, 2018




                                                 27
