Chief U.S. Bankruptcy Judge Ronald B. King of the Western District of Texas recently signed a final judgment awarding TXCO Resources Inc. $15.9 million for the misappropriation of trade secrets related to the Eagle Ford shale in South Texas.

James “Marty” Truss, a shareholder in San Antonio’s Cox Smith Matthews, led a trial team, which presented numerous documents and geologic facts and figures during the 41-day trial.

According to King’s July 26 opinion in TXCO Resources Inc. v. Peregrine Petroleum LLC, defendant Peregrine Petroleum allegedly had signed a 2009 confidentiality agreement to explore possible deals with TXCO. A final deal was never reached, but “Peregrine actively sought TXCO’s data . . .,” the judge wrote. “TXCO alleged that Peregrine impermissibly used TXCO’s confidential information and trade secrets to acquire oil and gas leases. . . . TXCO held the accumulated technical, geologic, geophysical, and engineering knowledge required to evaluate the economic viability of acreage in the region. This information would have been extremely valuable to an operator entering a newly discovered field or a field in which no significant amount of economic production had been obtained.”

King wrote that Peregrine used that information to lease acreage. The judge calculated the cost of a joint exploration agreement through which the defendant “could have properly used TXCO’s trade secret information” so that he could assess “a reasonable royalty” Peregrine owed the plaintiffs. Courts have been required to use such a “flexible and imaginative approach” to figure damages, including “a reasonable royalty,” in trade-secret misappropriation litigation when no damages from lost profits were owed the plaintiffs, King wrote.

In 2009, TXCO sought bankruptcy protection, then initiated an adversary proceeding in the bankruptcy court against Peregrine, an exploration and production company founded by a group of Hunt Petroleum heirs and their business associates, King wrote.

King issued a judgment for the reorganized TXCO on its misappropriation of trade secrets cause of action, but he denied all other requested relief.

Bruce K. Spindler, a shareholder in San Antonio’s Langley & Banack who represents Peregrine, did not return a telephone call seeking comment.

Truss says, when it comes to litigation related to gas exploration in the Eagle Ford shale, TXCO Resources will help set the rules for deal-making there. The Eagle Ford shale promises to keep gas drilling companies and lawyers in South Texas busy for some time, he says.

“This is a very competitive area, and players need to know they can protect knowledge,” says Truss.

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