                      United States Court of Appeals,

                               Fifth Circuit.

                                No. 95-10893.

               TEXAS TANKS, INC., Plaintiff-Appellant,

                                      v.

          OWENS-CORNING FIBERGLAS CORP., Defendant-Appellee.

                               Nov. 14, 1996.

Appeals from the United States District Court for the Northern
District of Texas.

Before HIGGINBOTHAM, WIENER and PARKER, Circuit Judges.

     ROBERT M. PARKER, Circuit Judge:

     Appellant, Texas Tanks, Inc. ("TTI") appeals the district

court's    judgment    for   Appellee,         Owens-Corning    Fiberglas   Corp.

("Owens-Corning")        notwithstanding          the   verdict      and    seeks

reinstatement of the jury's compensatory damage award of $2,000,000

and exemplary    damage      award   of       $3,000,000.      Finding   that   the

evidence was legally sufficient to support the jury's verdict, we

reverse.

I. PROCEDURAL BACKGROUND

     TTI brought this action against Owens-Corning in September of

1994, claiming theft of trade secrets, breach of confidentiality

agreements, fraud, and negligent misrepresentation.                TTI filed the

original action in Texas state district court. Owens-Corning later

removed the case to federal district court on the basis of complete

diversity.

     State law governs this diversity dispute.                 The parties tried

and argued this case on the assumption that Texas law applies.

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Since there are substantial Texas contacts, this Court will also

apply the law of Texas.       House of Koscot Development Corp. v.

American Line Cosmetics, Inc., 468 F.2d 64, 66 (5th Cir.1972).

     From September 11 to September 15, 1995, TTI's claims were

tried to a jury.     On September 18, 1995, the jury returned a

verdict in favor of TTI, awarding $2,000,000.00 in compensatory

damages and $3,000,000.00 in exemplary damages.              TTI moved for

entry of judgment on the jury's verdict, and Owens-Corning moved

for judgment as a matter of law notwithstanding the verdict.

     The district court granted Owens-Corning's motion for JNOV.

Specifically, the district judge found that there was no evidence

that Owens-Corning had commercially "used" TTI's trade secrets,

and, therefore, the evidence would not support the jury's verdict

on theft of trade secrets or breach of confidentiality agreements.

In addition, the district judge found that the evidence would not

support the jury's verdicts on fraud or negligent representation,

or the award of compensatory or exemplary damages.                The district

court entered judgment in favor of Owens-Corning, and TTI timely

appealed.

II. FACTUAL BACKGROUND

     TTI is a family owned company that designs and manufactures

above-ground   petroleum   storage       tanks   (referred   to    as   "AST").

Owens-Corning is a large manufacturer of fiberglass products. This

case concerns business dealings between TTI and Owens-Corning from

January through April 1994.

     In the Spring of 1993, Owens-Corning decided to sell its tank


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division, which produced under-ground petroleum storage tanks made

from fiberglass.        In 1992 and 1993, tank division sales decreased

by approximately $40 million annually.                  Owens-Corning believed it

could recapture         lost   market    share     and    thereby    make    the    tank

division more attractive to potential buyers by introducing its own

AST.    It decided to pursue the licensing of existing technology

rather than pursuing its own research and development to allow a

quicker market entry.          Owens-Corning contacted TTI for the purpose

of   licensing    AST    technology      for   a   fiberglass       lined    tank   and

negotiations ensued.           At TTI's request, each member of Owens-

Corning's    negotiating       team     executed    a    written    confidentiality

agreement.       TTI    thereafter      disclosed       the   details   of   its    AST

technology, including providing Owens-Corning a prototype tank.

       In February or March 1994, during the ongoing negotiations,

Owens-Corning began a parallel independent AST development project.

On April 1, 1994, Owens-Corning made a formal offer to license

TTI's technology, but offered a 1% royalty rather than the 8-12%

royalty that had been discussed and excluded the $2,000,000 upfront

payment that TTI had insisted on throughout the negotiations.                       TTI

did not accept this offer.

       Owens-Corning eventually sold its tank division to Fluid

Containment, Inc. Owens-Corning never marketed or sold an AST. At

the time of trial, Fluid Containment, Inc. had not developed,

marketed or sold the type of AST at issue in this case.

III. SUFFICIENCY OF THE EVIDENCE

a. Standard of review.


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        The primary issue presented for our review is whether the

district court erred in concluding that the evidence was not

legally sufficient to support the jury's verdict.            This Court

reviews a judgment as a matter of law de novo, applying the same

standard as the district court. Great Western Directories, Inc. v.

Southwestern Bell Telephone Co., 63 F.3d 1378, 1384 (5th Cir.1995).

The district court, in entertaining a motion for directed verdict

or JNOV, must view the evidence in the light most favorable to the

party against whom the motion is made.     Id.    On appeal, this Court

must consider the evidence in the same way, giving the non-moving

party the advantage of all reasonable inferences the evidence

justifies.     A judgment notwithstanding the verdict should be

granted only when the facts and inferences point so strongly and

overwhelmingly in favor of the moving party that a reasonable juror

could not arrive at a contrary verdict.     Id.

     Since this case comes to us on a judgment notwithstanding the

verdict, we will review the evidence in the light most favorable to

the non-movant, TTI, and thus in the light most favorable to the

jury's verdicts.     There was conflicting evidence on many points,

but the evidence was sufficient for the jury to draw the following

conclusions.

b. The evidence.

     TTI's owner, William A. Hall and his sons developed the first

AST to receive an Underwriter's Laboratories ("UL") approval.       The

Halls were instrumental in securing changes in the relevant fire

codes    and   UL   testing   procedures   that    allowed   widespread


                                   4
introduction of ASTs into the storage tank market in 1993.

      Owens-Corning is an international manufacturer and seller of

fiberglass related products. Owens-Corning's tank division was the

largest manufacturer and seller of underground petroleum storage

tanks in the world.     The tank division's significant net losses in

1992-93 resulted, in part, from the introduction of ASTs into the

market.

      During the course of the licensing negotiations, TTI explained

design specifications and production methods and provided drawings

of critical design elements.         TTI indicated early on in the

discussions that it would not be willing to license its technology,

sell production equipment and release its sales force, (all terms

that were discussed) without an up-front payment of $2,000,000.00.

This was the amount the Halls estimated it would take to reimburse

the expenses and debt incurred in the research and development of

the   AST.   At   the   time   Owens-Corning   contacted   TTI,   TTI   was

exploring the availability of investment capital with financial

advisors and potential investors.       TTI broke off those discussions

when Owens-Corning indicated that it was committed to pursuing a

business relationship.

      During negotiations, Owens-Corning requested information on

the patents TTI had applied for and obtained the rights to.             The

Halls testified that the only concern Owens-Corning expressed

regarding patents was that it needed to avoid infringing on anyone

else's patents when it marketed its own AST.         Owens-Corning also

expressed concern regarding UL approval of an AST with a fiberglass


                                    5
inner tank.    TTI assured Owens-Corning that it could obtain that

approval.   TTI had already passed UL tests with a fiberglass clad,

steel inner tank, and did in fact receive UL approval on an AST

with a fiberglass inner tank after the negotiations had come to a

stand-still.

     Because Owens-Corning was planning to sell its tank division,

Owens-Corning chief negotiator Mike Messmer had been told he did

not have the authority to enter into an agreement that required an

up-front payment.   Therefore, he knew when he began negotiations

with the Halls that their insistence on a $2 million dollar

up-front payment would be a problem.    Nevertheless, Messmer never

told the Halls that he did not have that authority.         Instead,

Messmer indicated that he could put the up-front payment in the

contract as guaranteed profit on initial purchases of inventory.

     During the negotiations, the parties discussed a royalty on

ASTs sold by Owens-Corning in the amount of 12, 10, and 8 percent,

decreasing over time.

     During the negotiations, Owens-Corning began to develop its

own AST.    Although Owens-Corning contends that Dave Bartlow, an

Owens-Corning engineer, developed an AST design relying entirely on

intuition, general engineering knowledge, and the advice of expert

suppliers, there is ample evidence that Bartlow participated in

detailed    discussions   with   Owens-Corning's   negotiating   team

regarding TTI tank design and production techniques. In the middle

of March, these Owens-Corning representatives created invention

records, a preliminary step in the patent application process, for


                                  6
their own AST design.   Bill Hall, Sr. testified that the drawings

attached to Owens-Corning's invention records were virtual copies

of the drawings TTI had provided during negotiations.        Owens-

Corning secretly produced its own AST prototype for testing and

actively pursued potential buyers for its tank division, using the

prospect of an AST that was in development.

     On April 1, 1994, Owens-Corning sent the Halls an offer that

included no up-front payment and a royalty of 1%.   It is undisputed

that this proposal did not reflect the terms negotiated by the

parties. Owens-Corning representatives admitted that the Halls had

consistently demanded the up-front payment and that they knew there

was no chance TTI would accept the proposal.   Owens-Corning claims

that the reason for the drastic change in the proposal was the

determination that the Halls' patents were worthless because they

were so narrow that they would not be effective as offensive tools

to keep other companies from producing competing ASTs.    The Halls

testified that this had never been an expressed concern.

c. Analysis.

1. Theft of trade secrets.

      The district court instructed the jury that

     to establish a trade secret violation, plaintiffs have the
     burden of proving by a preponderance of the evidence that

          First, trade secrets existed;

          Second, the defendant acquired those secrets as a result
     of a confidential relationship;

          Third, that the defendant used the secret information
     (without authorization of the plaintiff).

          Only wrongful use of secret information disclosed in

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     confidence gives rise to liability. To find defendant liable
     for misappropriation of trade secrets, you must find by the
     preponderance of the evidence that plaintiff had specific,
     identifiable trade secrets which were acquired by the
     defendant as a result of a confidential relationship and that
     defendant used these secrets in developing or making its
     product.

This instruction is consistent with Texas law on theft of trade

secrets, see Sikes v. McGraw-Edison Co., 665 F.2d 731, 733 (5th

Cir.1982);     Hurst v. Hughes Tool Co., 634 F.2d 895, 896 (5th

Cir.1981), and the parties do not argue that it was an inaccurate

instruction.

     In its motion for JNOV Owens-Corning argued that the evidence

fails to support the jury's conclusion that Owens-Corning used

TTI's trade secrets. Likewise, the district court's order granting

JNOV focused on the "use" requirement, holding:

     There is no evidence that the Defendant used the Plaintiff's
     technology.   The Defendant has never marketed or sold an
     aboveground storage tank. There is furthermore no evidence
     that the Defendant provided to Fluid Containment, Inc., the
     purchaser of Defendant's tank division, any of the Plaintiff's
     proprietary information.     The evidence shows that Fluid
     Containment, Inc. has not marketed or sold an aboveground
     storage tank containing a fiberglass inner tank. No evidence
     was offered which showed that Fluid Containment, Inc. had
     intentions or plans to develop, market, or sell the type of
     aboveground storage tank at issue in this case.       Thus, no
     evidence supports the jury's findings on breach of contract or
     theft of trade secrets.

     Therefore, our review of the jury's trade secrets verdict will

be limited to determining whether the evidence supports the finding

that Owens-Corning "used" TTI's trade secrets.

     TTI presented evidence that the same individuals at Owens-

Corning who had access to their proprietary information were

leading Owen-Corning's effort to develop its own AST and that the


                                8
drawings Owens-Corning included in its invention records were

virtual copies of TTI's drawings.            Also, Owens-Corning "used" the

development of the AST to enhance the value and attractiveness of

the tank division to potential buyers.           Owens-Corning argues that

these actions do not, as a matter of law, constitute the commercial

use necessary to support a theft of trade secrets verdict.                 Owens-

Corning takes too narrow a view of "use".

          Discussing this issue in a similar context, a Texas court of

appeals has stated that using trade secrets to complete the design

for   a     competing    device,   consulting    a   patent     attorney    about

protecting its design, and seeking financing from investors for the

development of its product constituted a commercial use even though

the defendant      had    not    commenced   production   and    sales     of   its

product.      Garth v. Staktek Corp., 876 S.W.2d 545 (Tex.App.—Austin

1994).      "Any misappropriation of trade secrets, followed by an

exercise of control and domination, is considered a commercial

use."       Id. at 548.         Viewing the evidence in the light most

favorable to the verdict, there was sufficient evidence in this

case to allow the jury to conclude that Owens-Corning made use of

TTI's trade secrets.

      Because we find sufficient evidence to support the jury's

verdict on theft of trade secrets, and the damages awarded may all

be attributed to a single claim, we need not address plaintiff's

other causes of action.1

        1
      The question of damages was submitted to the jury, without
objection, as follows:


                                        9
2. Compensatory damages.

     The district court held that the jury's award of compensatory

damages is not supported by sufficient evidence because TTI's

evidence of damages is too speculative.   There was uncontroverted

evidence that TTI's demand for an up-front payment of $2 million

was reasonably based on its cost of research and development.

     In University Computing Co. v. Lykes-Youngstown Corp., 504

F.2d 518 (5th Cir.1974), this Court developed a flexible standard

for measuring damages in a theft of trade secret case.2      While

noting that a plaintiff's costs of development would frequently be

inadequate to sufficiently compensate the plaintiff, we held that

this was one possible, and allowable, component in the calculation

of damages.   Id. at 538.   Using this measure of damages, rather

that some computation of lost profits, we find that the evidence

was more than sufficient to support the jury's award of $2 million

in compensatory damages.

3. Exemplary damages.

      The jury was allowed to award exemplary damages if it found


                If you have answered "Yes" to Question 1, 2, 3, or
           4, [plaintiff's individual claims] then answer the
           following question....

                What sum of money, if any, if paid now in cash,
           would fairly and reasonably compensate Texas Tanks, Inc.
           for its damages, if any, that were proximately caused by
           the conduct, if any, of Owens-Corning Fiberglas
           Corporation?
       2
        Although University Computing was a decision under the
Georgia law of trade secrets, Georgia, like Texas, bases its law of
trade secrets on the Restatement of Torts § 757 (1939). Further,
the Austin, Texas Court of Appeals in Garth relies on University
Computing. Garth, 876 S.W.2d at 549.

                                10
that Owens-Corning acted with malice or conscious indifference

towards the rights of TTI.      "Malicious" was defined for the jury as

"done willfully and purposely, to the injury of another."                 TTI

relies on evidence that Owens-Corning began development of their

own AST design one week after they received delivery of TTI's

prototype;   Owens-Corning had its own secret prototype ready for

testing within six weeks after they began work on the project,

rather than the two years they originally estimated such a project

would require; and that Owens-Corning included copies of TTI trade

secrets in its AST invention record.        Owens-Corning's conflicting

evidence notwithstanding, the jury's award of exemplary damages was

supported by sufficient evidence.

IV. ATTORNEYS FEES

      TTI    appeals    the   district   court's   failure   to   award   its

attorney's fees.       Since no cause of action alleged by TTI would

allow the award of exemplary damages and attorneys fees, this Court

may affirm the award that would allow the largest recovery—in this

case, exemplary damages.       See Star Houston, Inc. v. Shevack, 886

S.W.2d 414, 422 (Tex.App.—Houston (1st) 1994).         Therefore, we find

TTI's argument for award of attorney's fees without merit.

V. CONCLUSION

     For the foregoing reasons, we reverse the district court's

JNOV and remand for entry of judgment in favor of TTI pursuant to

the jury's verdict.

     REVERSED AND REMANDED.




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