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LLC v. Oceaneering International, Inc.

United States District Court, E.D. Louisiana

February 5, 2018

WRIGHT'S WELL CONTROL SERVICES, LLC
v.
OCEANEERING INTERNATIONAL, INC.

         SECTION “R” (3)

          ORDER AND REASONS

          SARAH S. VANCE UNITED STATES DISTRICT JUDGE.

         Defendant Oceaneering International, Inc. moves for summary judgment on several of plaintiff's state law claims.[1] For the following reasons, the motion is granted in part and denied in part.

         I. BACKGROUND

         Plaintiff Wright's Well Control Services, LLC (WWCS) and defendant Oceaneering International, Inc. (Oceaneering) both provide hydrate remediation services for the oil and gas industry. A hydrate is an ice-like solid that forms when water becomes mixed with oil and/or gas at high pressure and low temperature.[2] Hydrates can cause a pipeline to become blocked by “hydrate plugs, ” resulting in a loss of production.[3]

         A. The Parties' Initial Hydrate Remediation Efforts

         In 2008, ATP Oil and Gas Corporation contracted with Oceaneering to remove hydrates from a pipeline (Canyon Express project).[4] At the time, Oceaneering had a hydrate remediation skid designed to clear hydrate plugs in smaller tubing; Oceaneering had not yet used it on a pipeline.[5] This hydrate remediation skid featured a low-volume pump, and was fitted onto and powered by a remotely operated vehicle (ROV).[6] Oceaneering successfully cleared some, but not all, of the hydrate plugs from ATP's pipeline in early 2009.[7] Oceaneering's hydrate remediation skid also suffered various problems because of the presence of gas in the system, such as reduction in pumping capability and formation of hydrates in tubing connected to the skid.[8] Oceaneering employees began discussing potential improvements to the hydrate remediation skid as early as February 2009.[9]

         ATP then contracted with WWCS to conduct further hydrate remediation in ATP's pipeline (Kings Peak project), even though WWCS did not yet have a complete hydrate remediation system.[10] WWCS developed its hydrate remediation system specifically for high-volume, deepwater applications, like ATP's pipeline.[11] WWCS's system, later patented, used a pump with a much higher displacement rate than the pump used in Oceaneering's skid.[12] This pump included a drill motor powered by pressurized seawater. See generally U.S. Patent No. 9, 435, 185 ('185 Patent). WWCS also designed a separator to remove gas from the system and discharge it to the surface.[13]

         WWCS worked with various entities in developing its hydrate remediation system. First, Gulf Coast Manufacturing (GCM) participated in the design of the system and built most of its components.[14] Indeed, Jeffrey Dufrene, a GCM employee, is listed as a co-inventor along with WWCS's David Wright on WWCS's two patents. See U.S. Patent No. 8, 413, 725 (describing a subsea fluid separator); '185 Patent (describing a subsea technique for promoting fluid flow). Second, Bayou Land engineered and built the sealing units, and performed machine work.[15] Third, Keystone Engineering, SRC Engineers, Inc., and ATP itself provided engineering assistance.[16] Finally, Oceaneering built a methanol injection panel, various connectors, and emergency quick disconnects for the Kings Peak project.[17]WWCS also worked with Oceaneering.[18]

         B. The Nondisclosure Agreement

         On December 11, 2009, WWCS and Oceaneering allegedly executed a Reciprocal Nondisclosure of Confidential and Proprietary Information Agreement (NDA).

         The NDA's introductory section states: “It is the intention of the parties to this Agreement to exchange proprietary information. The disclosure and use of any proprietary data shall be governed in accordance with the following . . . .” Section One defines the “information” that is covered by the NDA:

For the purpose of this Agreement, confidential and proprietary information “Information” shall be defined as but not limited to, performance, sales, financial, contractual, and special marketing information, ideas, technical data, all intellectual property including inventions, patents, pending patents and all other business, technical and financial information that the Disclosing Party develops, learns or obtains during the period over which it is (or is supposed to be) providing services as contracted for between the parties that relate to Recipient Party or the business or demonstrably anticipated business of the Recipient Party, or that are received by or for Recipient Party in confidence and concepts originated by the Disclosing Party. Proprietary information is further defined as data not previously available to the Receiving Party or others without restriction, nor normally furnished to others without compensation, and which the Disclosing Party desires to protect against unrestricted disclosure or competitive use, and which is furnished pursuant to this Agreement and appropriately identified as being proprietary when furnished.

         Two provisions restrict a recipient's use of disclosed information. Section Two states: “With respect to all proprietary information disclosed hereunder, the Recipient Party agrees that for a period of three (3) years following the date of this Agreement, unless terminated sooner by either party, such party shall not . . . [u]se such information except for purposes of its business relationship with the Disclosing party.” Section Four provides: “Neither party shall divulge or use any proprietary information disclosed to it hereunder by the other party for any purpose not connected with the effort contemplated by the Agreement.”

         Section Six places limits on a recipient's duty to protect and handle information. It provides, in relevant part:

The obligation with respect to the protection and handling of proprietary information, as set forth in this Agreement, is not applicable to the following:
a) Information which is or becomes lawfully known or available to the receiving party without restriction from a source other than the Disclosing Party.
b) Information which is or later falls within, the public domain without breach of this Agreement by the recipient.
c) Information disclosed by the Disclosing Party to others on a nonrestrictive basis.[19]

         C. WWCS's Patents

         David Wright, who founded WWCS, and Jeffrey Dufrene filed Provisional Application No. 61/290, 168 for their hydrate remediation system in December 2009, shortly after signing the NDA with Oceaneering.[20]This application specifically included the subsea separator.[21] Wright and Dufrene filed non-provisional Patent Application No. 12/978, 486 for the separator on December 24, 2010.[22] These patent applications were published on June 30, 2011. Wright and Dufrene later assigned their interests in the patents to WWCS.[23] The '725 Patent for the separator issued on April 9, 2013, and U.S. Patent No. 9, 435, 185 ('185 Patent) for the hydrate remediation system issued on September 6, 2016.

         The principal independent claim of the '185 Patent is a method of recovering a pipeline fluid from a source located in a subsea environment by connecting a fluid-powered motor and a pump to the source of the fluid. '185 Patent at 19:58-20:18. A drawing of a simplified embodiment of the system 10 is reproduced below. See Id. fig. 9. Figure 1 labels the fluid source (a subsea pipeline) as 12; the separator as 20; the pump as 18; the drill motor as 16; and the emergency quick disconnects as 80. Lines 21A and 21B convey pressurized seawater from the vessel to the motor; gas from the separator rises to the surface through line 23, while liquid from the separator is directed to the vessel through line 22; and methane may be introduced into the system through line 92.

         (Image Omitted)

         A simplified embodiment of the separator is reproduced below. '725 Patent fig. 1. Figure 2 labels the housing as 10; the outer wall o housing as 22 and the inner wall as 24; the inlet as 14; the non-gas outlet as 20; the gas outlet as 18; the baffle type members as 16; a perforated tube (part of a ball valve assembly) as 30.

         (Image Omitted)

         D. The Parties' Working Relationship and Oceaneering's Alleged Misuse of WWCS's Confidential Information

         The parties worked together on the Kings Peak project for ATP in late 2009 and early 2010. While WWCS designed the hydrate remediation system itself and provided most of its components, Oceaneering provided support and project management.[24] WWCS's system successfully cleared the remaining hydrates in ATP's pipeline by March 2010.[25]

         The parties worked together on several additional jobs using WWCS's system. Shortly after completing the Kings Peak project, WWCS and Oceaneering performed hydrate remediation for Williams Field Services Gulf Coast Company, L.P. (Williams job).[26] The parties later performed hydrate remediation for Marubeni Oil & Gas (Marubeni job)[27] and worked on another project for ATP.[28] Because of Oceaneering's working relationship with WWCS, Oceaneering had access to designs of WWCS's system and numerous operational details.[29]

         While the parties were working together on these jobs using WWCS's hydrate remediation system, Oceaneering was developing its own Flowline Remediation System (FRS). Oceaneering completed a draft functional specification of the FRS in January 2010.[30] Like WWCS's hydrate remediation system, Oceaneering's FRS was designed to pump high volumes of fluid through a separator.[31] Oceaneering has performed hydrate remediation using the FRS on multiple jobs since 2012.[32]

         WWCS asserts that Oceaneering developed the FRS using confidential information disclosed under the NDA.[33] According to WWCS, Oceaneering's FRS and separator rely on the technologies described in the '725 and '185 Patents.[34] WWCS further contends that Oceaneering benefitted from information about how WWCS's hydrate remediation system operates in practice.[35]

         Additionally, WWCS alleges that Oceaneering made false and misleading statements about WWCS to a potential client.[36] WWCS and Oceaneering both bid for a hydrate remediation job on a BP pipeline (Thunder Horse Restriction project).[37] According to WWCS, BP awarded the project to Oceaneering in July 2013 after Oceaneering used WWCS's designs without permission and maligned WWCS's safety record.[38]

         E. Procedural History

         On May 21, 2015, WWCS filed its initial complaint against Oceaneering, pleading patent infringement as well as various claims under Texas and Louisiana state law.[39] On November 16, 2015, the Court dismissed WWCS's breach of contract claim with prejudice to the extent that it rested on information in WWCS's patent applications or on conduct that occurred after December 11, 2012, and dismissed plaintiff's statutory trade secret misappropriation claim under the Texas Uniform Trade Secrets Act.[40] After plaintiff filed a second and third amended complaint, Oceaneering moved to dismiss plaintiff's patent infringement claims. On February 13, 2017, the Court dismissed WWCS's patent claims, but without prejudice and with leave to amend.[41]

         On February 27, 2017, WWCS filed its fourth amended complaint, which is the operative complaint.[42] The complaint asserts patent infringement claims, as well as claims for Texas common law misappropriation, Texas common law misappropriation of trade secrets, Louisiana statutory misappropriation of trade secrets under the Louisiana Uniform Trade Secrets Act (LUTSA), and Texas common law breach of contract, breach of confidential relationship, tortious interference with prospective business relations, fraudulent inducement, business disparagement, and unfair competition.[43] On August 23, 2017, the Court dismissed WWCS's LUTSA claim and its claims for Texas common law misappropriation, Texas common law misappropriation of trade secrets, breach of confidential relationship, and business disparagement as untimely.[44] The Court also dismissed WWCS's claim for unfair competition to the extent the claim is based on misappropriation.[45] Additionally, on August 28, 2017, the Court dismissed WWCS's claim for infringement of the '185 Patent because Oceaneering had not used the FRS since the '185 Patent issued.[46]

         After the parties briefed the disputed claim language of the '725 Patent, the Court held a claim construction hearing on October 12, 2017. See Markman v. Westview Instruments, Inc., 517 U.S. 370 (1996). The Court issued its claim construction order on November 6, 2017.[47] On January 22, 2018, the Court dismissed WWCS's claim for infringement of the '725 Patent.[48] Oceaneering now moves for summary judgment on WWCS's breach of contract, fraudulent inducement, and tortious interference claims.[49]

         II. LEGAL STANDARD

         Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994). When assessing whether a dispute as to any material fact exists, the Court considers “all of the evidence in the record but refrain[s] from making credibility determinations or weighing the evidence.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398-99 (5th Cir. 2008). All reasonable inferences are drawn in favor of the nonmoving party, but “unsupported allegations or affidavits setting forth ‘ultimate or conclusory facts and conclusions of law' are insufficient to either support or defeat a motion for summary judgment.” Galindo v. Precision Am. Corp., 754 F.2d 1212, 1216 (5th Cir. 1985); see also Little, 37 F.3d at 1075. A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         If the dispositive issue is one on which the moving party will bear the burden of proof at trial, the moving party “must come forward with evidence which would entitle it to a directed verdict if the evidence went uncontroverted at trial.” Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264-65 (5th Cir. 1991). The nonmoving party can then defeat the motion by either countering with evidence sufficient to demonstrate the existence of a genuine dispute of material fact, or “showing that the moving party's evidence is so sheer that it may not persuade the reasonable fact-finder to return a verdict in favor of the moving party.” Id. at 1265.

         If the dispositive issue is one on which the nonmoving party will bear the burden of proof at trial, the moving party may satisfy its burden by merely pointing out that the evidence in the record is insufficient with respect to an essential element of the nonmoving party's claim. See Celotex, 477 U.S. at 325. The burden then shifts to the nonmoving party, who must, by submitting or referring to evidence, set out specific facts showing that a genuine issue exists. See id. at 324. The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue for trial. See, e.g., id.; Little, 37 F.3d at 1075 (“Rule 56 mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” (quoting Celotex, 477 U.S. at 322)).

         III. DISCUSSION

         A. Breach of Contract

         WWCS asserts that Oceaneering breached the December 2009 NDA by using confidential information for its own benefit, without WWCS's permission.[50] Specifically, according to WWCS, Oceaneering used confidential information about WWCS's hydrate remediation system to create the FRS.[51] Although Oceaneering contends that the NDA is not a valid contract because WWCS never executed it, [52] Oceaneering limits its argument to whether it breached the NDA. Specifically, Oceaneering argues in its motion for summary judgment that the NDA does not protect the information Oceaneering allegedly misused. According to Oceaneering, each piece of information it allegedly stole from WWCS either is in the public domain, was disclosed to third parties on an unrestrictive basis, or was disclosed to Oceaneering before the NDA came into effect.[53] WWCS argues that information in these three categories is not excluded by the NDA.[54]WWCS further argues that Oceaneering misused information not included in any of ...


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