throbber
Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 1 of 21 PageID #: 926
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`United States District Court
`EASTERN DISTRICT OF TEXAS
`SHERMAN DIVISION
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`
`
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`Civil Action No. 4:17-CV-00062
`Judge Mazzant
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`NORTH AMERICAN DEER REGISTRY,
`INC.
`
`
`v.
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`DNA SOLUTIONS, INC.
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`
`
`MEMORANDUM OPINION AND ORDER
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`Pending before the Court is Plaintiff North American Deer Registry, Inc.’s Application
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`for Preliminary Injunction (Dkt. #17). After reviewing the relevant pleading, motions, and
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`evidence received at hearing, the Court finds the motion should be granted.
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`BACKGROUND
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`The deer breeding industry is a potentially lucrative industry with single straws of buck
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`semen selling for $5,000 to $20,000 on average, and ranging all the way up to $1 million to
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`purchase the entire buck. Many deer are sold through auctions. Auction houses require a deer
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`either to be registered, or if it is a fawn, to have a registration pending.
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`Breeders belong to several different deer associations nationwide. Before 2007, each
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`association had its own registry. In particular, the Texas Deer Association and North American
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`Deer Farmers Association (the “Associations”) had their own registries. Under this system,
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`information about a deer’s lineage was often spread across several registries. If a breeder needed
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`information about a deer from a different state or association, the breeder would have to join that
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`registry. This increased the overhead cost of the breeder, as well as lowered the price of a deer.
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`Deer prices suffered because lineage verification required substantial work and was of
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`questionable reliability.
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 2 of 21 PageID #: 927
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`In 2007, the Associations joined forces to create the North American Deer Registry, Inc.
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`(“NADR”). NADR is comprised of five board members from each of the Associations plus two
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`board members from a Mexican association. To be a member of the NADR, a breeder only
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`needed to be a member of either the Texas Deer Association or the North American Deer
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`Farmer’s Association. This allows breeders to gain access to a larger database to confirm lineage,
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`therefore reducing overhead costs.
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`DNA Solutions, Inc. (“DNAS”) began performing DNA lineage verification in 2000
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`when both Associations employed DNAS. DNAS hosted a registry for each Association that
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`performed DNA testing and confirmed lineage for the deer profiles therein. Each registry
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`restricted DNAS’s ability to compare lineages only to those deer within the respective registry.
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`DNAS’s service can be broken down in two steps. First, DNAS performs a DNA analysis
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`wherein DNAS creates a genetic profile of the deer. This profile is comprised of various DNA
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`markers known to the public. The second step uses DNAS’s proprietary system to interpret DNA
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`markers and compare them to other deer related in the first-degree. From DNAS’s proprietary
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`system, they are able to create or verify the lineage of each deer sample.
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`In 2007, NADR hired DNAS to host its registry (the “Registry”). The contract required
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`DNAS to process deer genetic information, perform matching services, and host a database for
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`NADR’s information, which would be accessible online. As part of the agreement, DNAS agreed
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`to preserve the confidentiality of NADR’s information and to return such information upon
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`termination of DNAS’s services. Also under this agreement, DNAS performed most of the client
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`outreach for NADR and DNAS accepted samples directly at its office in Oklahoma City.
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`
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`In 2013, NADR reduced DNAS’s role in their relationship. The 2013 contract eliminated
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`DNAS’s role in administration and client outreach. Under this agreement, clients sent samples to
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 3 of 21 PageID #: 928
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`NADR in Edmond, Oklahoma, rather than to DNAS. As part of NADR’s new client outreach
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`role, clients were directed to call NADR directly with questions or concerns. NADR forwarded
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`the question to DNAS, who answered NADR, and finally NADR would inform the client. Debra
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`Lyon (“Lyon”) and Dr. Brandt Cassidy (“Cassidy”) testified for DNAS that the switch in 2013
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`caused some confusion with customers who did not understand the evolving relationship
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`between NADR and DNAS.
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`The parties further revised their agreement in 2014 (the “Contract”). The Contract
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`terminated by its terms on January 1, 2017.
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`Under the Contract, NADR retained ownership of all biological materials, genetic
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`information, genotype analysis data, membership directory, and any other information provided
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`by NADR. DNAS, on the other hand, retained ownership of any code it created because of
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`running the registry. DNAS agreed to keep confidential the content of the registry or any other
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`information it received from NADR in the performance of the Contract or in its prior dealings
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`with NADR. DNAS further agreed that, upon termination of the Contract, it would return all
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`information provided by NADR.
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`On January 27, 2017, NADR filed a complaint, alleging unfair competition under the
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`Lanham Act, misappropriation of trade secrets, constructive trust, unjust enrichment, and
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`requesting injunctive relief (Dkt. #1). The same day, NADR made a demand for arbitration
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`seeking relief for breach of contract, temporary and permanent injunctions, declaratory
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`judgment, and attorneys’ fees (Dkt. #21, Exhibit 2). On February 27, 2017, NADR filed its
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`Application for Preliminary Injunction (Dkt. #17). On March 14, 2017, DNAS filed a response
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`(Dkt. #21). On March 21, 2017, NADR filed a reply (Dkt. #23). On March 28, 2017, DNAS filed
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 4 of 21 PageID #: 929
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`a sur-reply (Dkt. #26). On May 17 and 18, the Court held an evidentiary hearing on NADR’s
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`application.
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`LEGAL STANDARD
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`A party seeking a preliminary injunction must establish the following elements: (1) a
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`substantial likelihood of success on the merits; (2) a substantial threat plaintiffs will suffer
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`irreparable harm if the injunction is not granted; (3) the threatened injury outweighs any damage
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`the injunction might cause the defendant; and (4) the injunction will not disserve the public
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`interest. Nichols v. Alcatel USA, Inc., 532 F.3d 364, 372 (5th Cir. 2008). “A preliminary
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`injunction is an extraordinary remedy and should only be granted if the plaintiffs have clearly
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`carried the burden of persuasion on all four requirements.” Id. Nevertheless, a movant ‘“is not
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`required to prove its case in full at a preliminary injunction hearing.’” Fed. Sav. & Loan Ins.
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`Corp. v. Dixon, 835 F.2d 554, 558 (5th Cir. 1985) (quoting Univ. of Tex. v. Comenisch, 451 U.S.
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`390, 395 (1981)). The decision whether to grant a preliminary injunction lies within the sound
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`discretion of the district court. Weinberger v. Romero-Barcelo, 456 U.S. 305, 320 (1982).
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`ANALYSIS
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`
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`Before addressing the merits, the Court must assess its jurisdiction to grant injunctive
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`relief. DNAS continues to argue the Court does not have jurisdiction to grant injunctive relief.
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`DNAS argues that injunctive relief is proper for the arbitrator because: (1) the arbitration clause
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`is broad and encompasses injunctive relief; (2) NADR requested injunctive relief in its demand
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`for arbitration; and (3) any determination by the Court will necessarily interfere with the
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`arbitration proceedings.
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`NADR claims that the Court does have jurisdiction. NADR argues: (1) the arbitration
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`provision is narrow and does not prefer either the Court or arbitrator to order injunctive relief; (2)
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 5 of 21 PageID #: 930
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`the arbitrator could not even order injunctive relief; and (3) the Court may enter injunctive relief
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`in order to preserve the status quo pending arbitration. During closing arguments of the hearing,
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`NADR went even further to argue the Court can order injunctive relief over even the breach of
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`contract claim, which is undisputedly in front of the arbitrator.1
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`NADR did not request relief over its breach of contract claim in its application.
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`Therefore, the Court will only address the claims argued in the application: Lanham Act, trade
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`secrets, unjust enrichment, and constructive trust (the “non-contract claims”). Based on the
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`foregoing analysis, the Court finds it has jurisdiction to order injunctive relief over the non-
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`contract claims.
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`First, the non-contract claims are properly before this Court and are not subject to
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`arbitration. The Court has already entered an order regarding the arbitrability of NADR’s claims
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`(Dkt. #43). The Court found NADR’s claims under the Lanham Act were not subject to
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`arbitration (Dkt. #43 at p. 10). The Court denied DNAS’s motion as to NADR’s trade secret
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`claims, but left open the question of whether the basis for NADR’s claim was so related to the
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`contract that it should be ultimately sent to arbitration (Dkt. #43 at p. 10).
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`After a hearing, the Court finds NADR’s trade secret claims are not subject to arbitration.
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`NADR developed its trade secret deer profiles, lineages, and member list over several years pre-
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`dating the Contract. NADR is composed of two other associations that have been in existence for
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`many years. The other associations had their own contracts with DNAS beginning in 2000. Since
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`2000, they have developed deer profiles, lineages, and member lists independently from the
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`Contract. While the Contract will be evidence of protection of the trade secrets and NADR’s
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`entrustment of information to DNAS, it is not dispositive of the entire trade secret history.
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`1 At the hearing, NADR mentioned that it withdrew certain requests from the arbitrator’s consideration. The Court
`did not allow evidence of those claims, however, the Court notes that the claims before the arbitrator are now more
`limited.
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`5
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 6 of 21 PageID #: 931
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`Therefore, the trade secret claims are not subject to arbitration under the narrow arbitration
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`provision in the Contract.
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`
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`Further, the Court has jurisdiction to order injunctive relief to preserve the status quo.
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`The Fifth Circuit recognizes the general authority of a district court to enter injunctive relief to
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`maintain the status quo. Janvey v. Alguire, 647 F.3d 585, 595 (5th Cir. 2011). In Janvey, the
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`Fifth Circuit recognized a circuit split over the question of whether a district court has power to
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`enter an injunction while arbitration is pending. Id. at 592. However, the Fifth Circuit held that
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`the circuit-split cases were not applicable because it had not yet decided whether the case was
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`arbitrable. Id. at 594. Similar to Janvey, the circuit-split cases are not applicable to the non-
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`contract claims because the court has determined those claims are not subject to arbitration at all.
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`Without Fifth Circuit precedent on the issue, the parties cite opposing district court
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`opinions from districts in Texas to support their positions.
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`DNAS cites Grasso to argue that the Court should not enter injunctive relief because it
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`would “necessarily would inject the court into the merits of issues more appropriately left to the
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`arbitrator.” Grasso, 143 F. Supp. 3d at 543 (quoting Merrill, Lynch, Pierce, Fenner & Smith, Inc.
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`v. Hovey, 726 F.2d 1286, 1292 (8th Cir. 1984)). In its sur-reply, DNAS also cites East El Paso
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`Physicians’ Medical Center, LLC v. Aetna Health Inc., to argue that the Court cannot order
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`injunctive relief when it is inextricably linked with the agreement. No. EP-16-CV-44-KC,
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`2017 WL 876313, at *15 (W.D. Tex. Mar. 2, 2017).
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`NADR cites Amegy Bank National Association v. Monarch Flight II, LLC to argue that
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`most circuits that have addressed this issue have held that a district court may enter injunctive
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`relief to preserve the status quo pending arbitration. 870 F. Supp. 2d 441 (S.D. Tex. 2012). In
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`Amegy, the court entered an injunction before ruling on the motion to compel arbitration. Id. at
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`451. The court then decided the motion to compel arbitration and determined all claims should
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`be tried in arbitration. Id. at 450–51. Having gone a step further than Janvey by deciding the
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`arbitrability of disputes, the court dealt with the circuit split Janvey avoided. Id. at 451–52. In
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`recounting the circuit split, the court recognized that only the Eighth Circuit reached the result
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`that a district court cannot order injunctive relief when all claims are sent to arbitration. Id. at
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`452. The court also recognized that most district courts in the Fifth Circuit follow the majority
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`position. Id. The court went on to hold that a court should be able to order injunctive relief
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`pending arbitration so that the parties are not able to “continue maneuvering to the disadvantage
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`of each other outside the arbitration model.” Id. (citation omitted).
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`The Court agrees with the majority of circuits that a district court has discretion to grant
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`injunctive relief to preserve the status quo pending arbitration. First, DNAS’s cases are
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`distinguishable simply because they involved broad arbitration clauses. Broad arbitration clauses
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`embrace “all disputes between the parties having a significant relationship to the contract.” E. El
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`Paso, 2017 WL 876313, at *13. Here, the arbitration clause is narrow. It only encompasses
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`disputes that fall within the scope of the clause. Injunctive relief does not fall within the scope of
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`the arbitration clause. The Fifth Circuit has held that when an arbitration provision is limited to
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`“interpretation” of the contract, then the parties intend that their dispute be governed by the four
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`corners of the agreement. United Offshore Co. v. S. Deepwater Pipeline Co., 899 F.2d 405, 410
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`(5th Cir. 1990). In United Offshore, the court found that the contract did not provide a means by
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`which the arbitrator could resolve the dispute because there was not remedy within the four
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`corners of the contract. Id. Similarly here, the Contract does not provide any means by which the
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`arbitrator could resolve a dispute as to the non-contract claims. Therefore, the non-contract
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`claims do not fall within the arbitration clause.
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`Further, as the Amegy court recognized, Hovey and Grasso are parts of an extremely
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`small minority. The majority of courts in the circuit split considered Hovey and refused to follow
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`it. See, e.g., Blumenthal v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 910 F.2d 1049 (2d Cir.
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`1990); Ortho Pharm. Corp. v. Amgen, Inc., 882 F.2d 806 (3d Cir. 1989); Teradyne, Inc. v.
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`Mostek Corp., 797 F.2d 43 (1st Cir. 1986); Merrill Lynch, Pierce, Fenner & Smith, Inc. v.
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`Bradley, 756 F.2d 1048 (4th Cir. 1985).
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`Finally, the Court does not interpret Hovey to foreclose this result. Hovey held “where the
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`Arbitration Act is applicable and no qualifying contractual language has been alleged, the district
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`court errs in granting injunctive relief.” Hovey, 726 F.2d at 1292. Here, neither prong is satisfied.
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`The Court found the Federal Arbitration Act (“FAA”) does not apply because the non-contract
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`claims are not subject to arbitration. There is also qualifying language in the Contract. The
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`parties did not agree to arbitrate injunctions. The parties agreed to arbitrate disputes concerning
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`interpretation of the Contract. Injunctive relief does not fall within the scope of the arbitration
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`clause. See United Offshore Co., 899 F.2d at 410.
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`As the majority of circuits have found, this position is more consistent with, and
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`necessary to enforce, the federal policy on arbitration. Amegy, 870 F. Supp. 2d at 452. The First
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`Circuit explained, “the congressional desire to enforce arbitration agreements would frequently
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`be frustrated if the courts were precluded from issuing preliminary injunctive relief to preserve
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`the status quo pending arbitration.” Teradyne, 797 F.2d at 51. “A district court must ensure that
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`the parties get what they bargained for—a meaningful arbitration of the dispute.” Blumenthal,
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`910 F.2d at 1053. Put simply, if the court is unable to order injunctive relief, arbitration may
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`become moot because the harm to NADR would be beyond repair.
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`Now, the Court will analyze the merits of NADR’s application for preliminary injunction.
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`8
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 9 of 21 PageID #: 934
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`I. Likelihood of Success on the Merits
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`To prevail on their motion for preliminary injunction, NADR must demonstrate a
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`substantial likelihood of success on the merits. This requires NADR to present a prima facie
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`case. Daniels Health Scis., LLC v. Vascular Health Scis., 710 F.3d 579, 582 (5th Cir. 2013)
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`(citing Janvey, 647 F.3d at 595–96). A prima face case does not mean NADR must prove it is
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`entitled to summary judgment. Byrum v. Landreth, 566 F.3d 442, 446 (5th Cir. 2009). NADR has
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`demonstrated a substantial likelihood of success on all of its claims.
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`A. Lanham Act
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`To establish a claim for false designation of origin or unfair competition under the
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`Lanham Act a plaintiff must prove:
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`(1) A false or misleading statement of fact about a product;
`(2) Such statement either deceived or had the capacity to deceive a substantial
`segment of potential consumers;
`(3) The deception was material, in that it is likely to influence the consumer’s
`purchasing decision;
`(4) The product is in interstate commerce; and
`(5) The plaintiff has been or is likely to be injured as a result of the statement at
`issue.
`IQ Prods. Co. v. Pennzoil Prods. Co., 305 F.3d 368, 375 (5th Cir. 2002). Defendant’s intent is
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`not an element, although it may be considered as a factor in determining the likelihood of
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`confusion. See Am. Rice, Inc. v. Prods. Rice Mill, Inc., 518 F.3d 321, 329 (5th Cir. 2008).
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`1. False or Misleading Statement
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`An essential element of a claim for unfair competition is that the challenged statement is
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`one of fact. Pizza Hut, Inc. v. Papa John’s Int’l, Inc., 227 F.3d 489, 495–95 (5th Cir. 2000). A
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`statement of fact is one that “(1) admits of being adjudged true or false in a way that (2) admits
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`of empirical verification.” Presidio Enters., Inc. v. Warner Bros. Distrib. Corp., 784 F.2d 674,
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`679 (5th Cir. 1986). The challenged statement must make a “specific and measureable claim,
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`9
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 10 of 21 PageID #: 935
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`capable of being proved false or of being reasonably interpreted as a statement of objective fact.”
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`Pizza Hut, 227 F.3d at 496 (quotations omitted).
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`NADR asserts DNAS made false or misleading statements regarding the true owner and
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`“legitimate heir” to the Registry. NADR argues DNAS misled consumers by advertising that it
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`had a database of over 230,000 deer genetic profiles and could offer “comparisons and lineages
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`for white-tailed deer and mule deer across North America” (Pl. Exhibit 7). NADR argues this
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`confusion was furthered by DNAS claiming it will “continue” providing DNA services and
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`equating its services to the “gold-standard,” a phrase used by NADR for several years and in
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`connection with the Registry.
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`DNAS argues its representations cannot be false because they own the database. DNAS
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`asserts a provision in the Contract allows DNAS to retain “any information developed by DNAS
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`incidentally through the performance of its services hereunder that analyze or organize the
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`collective databases” (Pl. Exhibit 3 at ¶ 7). DNAS also relies on the provision that allows DNAS
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`to “use, sell, create derivative works of, assign, transfer, license and sublicense the Code” (Pl.
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`Exhibit 3 at ¶ 6).
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`The Court disagrees with DNAS’s assertion of ownership and finds that its
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`representations were false or misleading. DNAS selectively reads the Contract to assert its
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`“database” is much larger than the Contract provides.2 Throughout the hearing and in its
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`response to the motion, DNAS continually asserted the “database” is a giant repository of
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`information DNAS created and is entitled to keep. DNAS attempts to skirt the Contract and its
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`seemingly clear terms by bending backwards to explain its process.
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`2 When used in quotes, “database” refers to DNAS’s meaning of the term. The Contract does not define database,
`although it is used many times. The Court seeks to distinguish DNAS’s use of the term from any contractual or
`colloquial use of the term.
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`DNAS explains its process as follows. DNAS receives samples from breeders to perform
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`DNA analysis. DNAS then tests the samples to derive genetic markers. DNAS then puts all of
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`the raw information into a repository of all DNA data it has ever created. DNAS calls this
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`repository its “database.” From this repository, DNAS offers its services to interpret the data and
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`to create a “registry” for its client.3 DNAS then processes the subset of information in a way
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`desired by the client in order to create the registry. DNAS claims the registries that its clients
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`purchased were just a subset of information taken from the “database.” In this case, DNAS
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`processed deer genetic profiles in order to create and confirm lineages.
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`DNAS’s reading seems to render the Contract meaningless. The Contract defined more
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`than twenty terms in an effort to clarify the relationship and to protect the parties’ rights.
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`Importantly, the Contract defined terms for “Biological Materials,” “Genetic Information,”
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`“Genotype Analysis Data,” “Registry,” “Registration Data,” “Membership Directory,” “Code,”
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`“Retained Rights,” “NADR Information,” “DNAS Data,” and “Confidential Information.”
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`DNAS is correct in its assertion that the Contract does not define database. Nevertheless, it is
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`clear the database referenced in the Contract is nowhere near as broad as DNAS claims.
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`The definition for “DNAS Data” expressly excludes “NADR Information.” NADR
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`Information includes “Biological Materials, Genetic Information, Genotype Analysis Data,
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`Membership Directory and any other information provided by NADR or its members to DNAS.”
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`After reviewing the Contract, hearing evidence, and arguments of counsel, the Court finds the
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`3 DNAS defines a registry in its marketing materials as:
` A repository of genetic information that allows for the development of extensive pedigrees used to
`select for desirable genetic traits that improve the value of your animals
` A central location for identifying information including pictures, date of birth, ownership, ear tags,
`microchips
` Electronic storage of animal information that is easily retrieved
`(Pl. Exhibit 14 at NADR000214).
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`definition of NADR Information does not allow DNAS to keep any of the information related to
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`DNA that has been presented to the Court.
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`2. Deception of a Substantial Segment of Potential Customers
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`Next, a plaintiff must show the statement was “(1) literally false; or (2) likely to mislead
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`and confuse customers.” IQ Prods., 305 F.3d at 375 (citing Pizza Hut, 227 F.3d at 495). If the
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`statement is literally false, the court must assume it actually misled consumers, without requiring
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`evidence of the impact of the statements on consumers. Pizza Hut, 227 F.3d at 497. If the
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`statement is shown to be misleading or ambiguous, however, the plaintiff must introduce
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`evidence of the statement’s impact on consumers, referred to as materiality. Id. at 495. The type
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`of evidence needed to prove materiality varies depending on the type of recovery plaintiff seeks.
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`Id. Plaintiffs seeking injunctive relive must prove the defendant’s representations “have a
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`tendency to deceive consumers.” Id. (quoting Balance Dynamics Corp. v. Schmitt Indus., Inc.,
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`204 F.3d 683, 690 (6th Cir. 2000)).
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`NADR has met its burden to show a likelihood that DNAS’s statements were literally
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`false. As explained above, DNAS did not have any rights to keep the DNA information as it did.
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`Therefore, DNAS’s statements were literally false in claiming they had a large registry that it
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`owned a registry of over 230,000 deer profiles and that it could provide comparisons. As such,
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`the Court must assume DNAS’s statements actually misled consumers. Because DNAS’s
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`statements were literally false, NADR has established the second and third element of their
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`Lanham Act claim. Pizza Hut, 227 F.3d at 497 (“With respect to materiality, when the statements
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`of fact at issue are shown to be literally false, the plaintiff need not introduce evidence on the
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`issue of the impact the statements had on consumers.”).
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`3. Interstate Commerce
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`DNAS admits the Registry is used in interstate commerce. The Court finds DNAS’s
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`advertising involved interstate commerce.
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`B. Trade Secrets
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`A claim for misappropriation of
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`trade secrets requires: (1) a
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`trade secret;
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`(2) misappropriation; and (3) use in interstate commerce. 18 U.S.C. § 1836(b)(1). A trade secret
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`includes all business information, including compilations, if the owner has taken reasonable
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`measures to keep such information secret that derives independent economic value from not
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`being generally known to and not being readily ascertainable by another person who can obtain
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`economic value from the disclosure or use of the information. Id. § 1839(3). Misappropriation is
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`satisfied if disclosure of the trade secret is made, without consent, by a person who acquired the
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`knowledge under circumstances giving rise to a duty to maintain its secrecy. Id. § 1839(5).
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`“Improper means” includes breach of a duty to maintain secrecy, but does not include reverse
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`engineering or independent derivation. Id. § 1839(6).
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`Oklahoma has adopted the Uniform Trade Secrets Act, which has similar elements to the
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`federal act. See Okla. Stat. tit. 78, §§ 85–95. Misappropriation and improper means have the
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`same definitions under the federal and Oklahoma acts. Compare 18 U.S.C. § 1839 with Okla.
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`Stat. tit. 78, § 86.
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`1. Trade Secret
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`A trade secret includes compilations of data that the owner has taken steps to keep secret
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`and that derive independent economic value. NADR argues it has trade secret information in the
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`form of its deer genetic profiles, deer lineages, and member list that have been created and
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`compiled by their members, before and during the Contract with DNAS.
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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 14 of 21 PageID #: 939
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`DNAS argues in its brief that the deer genetic information, deer lineages, and
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`membership directory are not trade secrets because (1) DNAS rightfully obtained rights to the
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`genetic information which it can now derive lineages from and (2) the Court could not fashion an
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`injunction to properly address any non-NADR information. DNAS argues the biological material
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`and genetic data create the “database.” DNAS argues NADR only purchased selections from the
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`“database” from which it created the Registry. Therefore, DNAS argues it is allowed to compare
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`data that is stored in its own “database.” At the hearing, DNAS also argued that NADR made
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`several portions of its Registry public through auction brochures or other advertising.
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`NADR’s member list, deer genetic information, and deer lineages are its trade secrets.
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`NADR expended significant time and effort in creating its Registry. Cassidy and Lyon each
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`recognized that no other deer registry has as many as 230,000 animals. Further, NADR took
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`significant steps to keep its biological materials, genetic information, genotype analysis data, and
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`membership directory secret. NADR’s efforts have been memorialized in three contracts it had
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`with DNAS and in the previous agreements of the North American Deer Farmers Association
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`and Texas Deer Association. Finally, the economic value of each trade secret is derived from the
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`compilation of many data points that are not readily ascertainable by the public. While small
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`pieces of the Registry have been made public, this has not been enough to affect the economic
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`value of NADR’s secret.
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`Cassidy testified that the economic value of the Registry flows from the deer lineages.
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`Cassidy also testified that a hole in a lineage would impair the value of the Registry. The sparse
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`amount of information that is available to the public through either advertising or auction
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`brochures is not sufficient to seriously affect the value of the Registry. A person compiling these
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`tidbits of information would inevitably be left with numerous holes in lineages across their
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`
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`14
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`

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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 15 of 21 PageID #: 940
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`compilation. Even if a person could successfully put together a reputable compilation based
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`solely off the public disseminations from the Registry, it would take a significant amount of time
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`and effort. The Court finds NADR has met its burden in showing that its compilations are trade
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`secrets and DNAS’s arguments have failed to rebut this.
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`Finally, the Court disagrees that there is an impediment to drafting appropriate injunctive
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`relief that would prohibit use of and comparisons to the trade secret information DNAS was
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`entrusted with during the Contract.
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`2. Misappropriation
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`DNAS misappropriated NADR’s trade secrets when it did not return the information
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`according to the Contract. DNAS argues that it did return all information it was required to
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`return under the Contract. However, DNAS contends that it can keep the same information
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`because it is part of its “database.” Essentially, DNAS argues that it can return information while
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`retaining the same information, as long as the information is in two different places. The Court
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`disagrees with such a strained reading of the word “return.”
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`Courts read a contract to give meaning to the parties’ intent. Okla. Stat. tit. 15, § 155. The
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`contract is read as a whole, giving effect to all words. Id. § 157. The intent of the parties may
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`also be ascertained from the language in the title of a section. Jones v. State ex rel. Office of
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`Juvenile Affairs, 268 P.3d 72, 77 (Okla. 2011); Atkinson v. Halliburton Co., 905 P.2d 772, 775
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`(Okla. 1995).
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`The “Return of Information” provision in the Contract requires DNAS to “deliver to
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`NADR all NADR and NADR member Information, Biological Materials, Genetic Information
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`and Genotype Analysis Data, along with the Registry in the form of a report in the manner in
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`which it is available in the current software” (Pl. Exhibit 3 at ¶ 8). The Contract defines each
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`
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`15
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`

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`Case 4:17-cv-00062-ALM Document 50 Filed 06/02/17 Page 16 of 21 PageID #: 941
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`capitalized term. The next section of the Contract defines confidential information as “any of the
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`content of the Registry or any other information it gains from NADR and/or NADR members in
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`the performance of this Agreement” (Pl. Exhibit 3 at ¶ 9).
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`DNAS seems to read the return of information provision to only require delivery of
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`information, rather than a complete return. However, the title of the section and reading the
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`Contract as a whole makes it clear that the Contract requires DNAS to return all DNA
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`information and not keep any for their own use.
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`DNAS admitted to creating two copies of information when it compiled its “database.”
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`DNAS put the information in its “database,” but then also took selections of that information to
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`create the Registry. DNAS also used member information collected during and in connection
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`with the Contract. DNAS selected certain individuals from that list and contacted them to offer
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`DNAS as an alternative service to NADR (See Pl. Exhibit 6). DNAS obtained the info while
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`under a duty to maintain its secrecy, but then used it without permission. These are all
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`misappropriations of NADR’s trade secrets.
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`3. Interstate Commerce
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`
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`DNAS admits the Registry is used in interstate commerce. Therefore, this element is
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`established.
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`C. C

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