TEXAS APPELLATE COURT AWARDS DAMAGES FOR MISAPPROPRIATION OF SEISMIC DATA WHICH WAS A “TRADE SECRET”

By TONI ELLINGTON

Have you or your clients ever dealt with the issue of who has the right to use seismic data and geological information once it has been obtained?  A Texas appellate court in San Antonio recently decided that improper use of a seismic map which was obtained by proper means was a misappropriation of a trade secret, and the resulting damages would be measured by lost profits.  In Lamont v. Vaquillas Energy Lopeno, Ltd., LLP, 421 S.W.3d 198 (Tex. App. – San Antonio, 2013), Thomas Lamont was a principal of Ricochet Energy, Inc.  Ricochet entered into prospect generation agreements (“PGAs”) with Vaquillas Energy Lopeno Ltd., LLP to generate seismic data and oil and gas prospects, for which Vaquillas obtained a right of first refusal.  Vaquillas retained a vested proprietary interest in all of the seismic data and interpretations of data which were acquired.

The investigation identified the Lopeno Prospect gas reservoir, which was approximately 161 acres in size and was valued at between $40 and $60 million.  Ricochet prepared a seismic map, which the parties referred to as the “Treasure Map.”  Lamont separated from Ricochet, and as a part of his separation agreement, Ricochet emailed the Treasure Map to him so that he could determine if he, individually, wanted to participate in the prospect.  However, Lamont showed the map to Carranco, which purchased an ownership stake from Lamont.  Lamont and Carranco then formed a joint venture called Montecristo Energy to compete against Ricochet and Vaquillas for drilling in the area.

In the trial court, the jury found that Lamont had misappropriated the Treasure Map, which was a trade secret.  Vaquillas was awarded $4.9 million in damages for lost profits.  Under Texas law, in order to establish a claim for misappropriate of a trade secret, the plaintiff must prove:  1) that the trade secret existed; 2) that the trade secret was acquired through breach of a confidential relationship or was discovered by improper means; 3) that the defendant used the trade secret without authorization; and 4) that damages resulted.  The court found that the seismic data contained on the Treasure Map was trade secret, and that even though Ricochet showed the Treasure Map to Lamont as a potential investor, his use of the map was improper.  The map was not provided to him for drilling wells on the tract in competition with Ricochet.

The appellate court upheld the jury verdict.  Accordingly, the case stands for the principle that trade secrets like seismic data acquired by proper means may not be used for an improper purpose.

For information on this case and other Texas oil and gas matters, contact Toni Ellington at 504-599-8500.