Trademark Trial and Appeal Board Electronic Filing System. httgj/estta.usQto.gov
`
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`
`
`
`92057201
`
`Defendant
`
`StoneEag|e Services, Inc.
`
`STONEEAGLE SERVICES INC
`SUITE 100, 111 W SPRING VALLEY ROAD
`RICHARDSON, TX 75081
`UNITED STATES
`
`Answer
`
`Andriy Lytvyn
`
`
`
`andriy.|ytvyn@smithhopen.com
`
`/andriy Iytvynl
`07/12/2013
`
`Exhibit 1.pdf(587488 bytes)
`Exhibit 2.pdf(157999 bytes )
`Exhibit 3.pdf(5878783 bytes )
`Answer.pdf(50599 bytes)
`
`Trademark Trial and Appeal Board Electronic Filing System. http://estta.uspto.gov
`ESTTA548155
`ESTTA Tracking number:
`07/12/2013
`
`Filing date:
`IN THE UNITED STATES PATENT AND TRADEMARK OFFICE
`BEFORE THE TRADEMARK TRIAL AND APPEAL BOARD
`92057201
`Defendant
`StoneEagle Services, Inc.
`
`STONEEAGLE SERVICES INC
`SUITE 100, 111 W SPRING VALLEY ROAD
`RICHARDSON, TX 75081
`UNITED STATES
`Answer
`Andriy Lytvyn
`andriy.lytvyn@smithhopen.com
`/andriy lytvyn/
`07/12/2013
`Exhibit 1.pdf(587488 bytes )
`Exhibit 2.pdf(157999 bytes )
`Exhibit 3.pdf(5878783 bytes )
`Answer.pdf(50599 bytes )
`
`Proceeding
`Party
`
`Correspondence
`Address
`
`Submission
`Filer's Name
`Filer's e-mail
`Signature
`Date
`Attachments
`
`

`
`Case 3:11—cv—O2408—P Document 148 Filed 07/16/12 Page 11 of 21 Page|D 2396
`
`A
`
`Tum1hnmc&mTedmdogia,mqmOHa1wmmrpmfima3-OKLTdmfimwmfim1bdmob3im.hqa
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`enterintoflzisAgmema:teffecfiveasofJu)y15,2010(flmeBHecflveDate).
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`suppo:tsuvloesofiexedbySESmd13-ixhtcumxecfimwifiufizezflosucame Owne:shipinV'PayAssist,Im-.
`didmtaffedfimeparflesfiiglmmdobflgafionstmdel-dxezooélicense.
`0 OnMay13,2m9,fltenameofVPayAssist,h1¢wasdm1gedtoVPay,hIc(VPay).
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`anypatenzsisstdng&omsud1appR:2fionandanyonnfinuaEons,divis!omL nonlinuationaein-paxtorfozeign
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`thee:¢tanta11yo£13-1'X.13-Oxorcillmanhasazuyxiglzt,IitJsaori:1tarestinIheMaxkoriixePata1tPendirng.
`assignsandtrarIs£e:sthesanv.ebo$1!S.
`flflsAyem:mt0)émHnmbedeumdmadmfidmduwh¢mHaWiybymyparqhadmfiDmwfimhB
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`
`
`
`EXHIBIT
`
`§
`
`2
`
`APP O08
`
`Case 3:11-cv-02408-P Document 148 Filed 07/16/12 Page 11 of 21 PageID 2396
`
`APP 008
`
`

`
`Case 3:11—cv—O2408—P Document 148 Filed 07/16/12
`
`Page 12 of 21 Page|D 2397
`
`Sdwdulo A
`
`SERVICE MARKS
`
`
`
`APP O09
`
`Case 3:11-cv-02408-P Document 148 Filed 07/16/12 Page 12 of 21 PageID 2397
`
`APP 009
`
`

`
`SERVICE MARK AGREEMENT
`
`THIS SERVICE MARK LICENSE AGREEMENT {this License) is entered into July 27, 2010 (the Effective Date), by
`and between Stoneiiagle Services, Inc., a Texas corporation {Lice-nsor), and Talon Transaction Technologies, Inc., a
`Texas corporation (Licensee).
`
`A. Licensor is the sole and exclusive owner of the service marks and registrations set forth on Schedule "A”
`
`attached hereto and made a part hereof {the Service Marks);
`
`B. Licensor has the power and authority to grant to Licensee the right, privilege, and iicense to use the
`Service Marks on or in association with the services covered by the registrations (the Licensed Services);
`
`C. Licensor and Licensee entered into a Grant of License to Use Proprietary Processes and Confidential
`Information, dated June 29, 2006 (the 2006 License); and
`
`I). Licensee desires to obtain from Licensor a license to use the Service Marks on or in association with the
`Licensed Services.
`
`NOW, THEREFORE, the parties agree as follows:
`
`1. LICENSE. Licensor hereby grants to Licensee for the Term of this License the rronexclusive right and license to
`use the Service Marks on or in association with the Licensed Services in the territory of the United States. This license
`shail pertain oniy to the Service Marks and the Licensed Services and does not extend to any other mark, product, or
`service.
`
`2. TERM. This License and the provisions hereof, except as otherwise provided, shail be in full force and effect
`commencing on the Effective Date and shall extend ior five (5) years, unless earlier terminated in accordance with the
`provisions of Section 5 {the Term).
`
`3. COMPENSATION. In consideration for the license granted hereunder for the Term hereunder, Licensee agrees to
`pay to Licensor the compensation set forth in the 2006 License.
`
`4. QUALITY CONTROL.
`A.
`The license granted hereunder is conditioned upon Licensee’s full and complete cornpiiance with
`the marking provisions of the trademark, patent and copyright iaws of the United States.
`B.
`The Licensed Services, as well as all promotional, and advertising material relative thereto, shall
`include alt appropriate legal notices as required by Licensor.
`C."
`The Licensed Services shail be of a high quality at {east equal to comparable services provided and
`marketed by Licensor under due Service Marks.
`D.
`If the quality of the Licensed Services falis below such quaiity, Licensee shall use its best efforts to
`restore such quality. In the event that Licensee has not taken appropriate steps to restore such quality within fifteen
`(15) days after notification by Licensor, Licensor shali have the right to terminate this License and require that the
`Licensee cease using the Service Marks.
`E.
`Licensee agrees that its use of the Service Marks inures to the benefit of Licensor and that Licensee.
`shall not acquire any rights in the Service Marks as a result of this iicense.
`
`‘:3. TERMIl\iA'I‘ION. The foilowing termination rights are in addition to the termination rights that may be provided
`elsewhere in this License:
`
`Termination of the 2006 License. This License shall irnmediateiy terminate on the termination or
`A.
`expiration of the 2006 License.
`8.
`Upon the expiration or termination of this License, all rights granted to Licensee under this
`Agreement shall forthwith terminate and iznrnediateiy revert to Licensor and Licensee shali irnrnediately discontinue
`all use of the Service Marks.
`
`

`
`6. MISCELLANEOUS. No waiver by either party of any deiauit shail be deemed as a waiver of prior or subsequent
`default of the same or other provisions of this License. If any term, ciause, or provision hereof is held invalid or
`unenforceable by a court of competent jurisdiction, such invalidity shall not affect the validity or operation of any
`other term, clause, or provision and such invalid term, clause, or provision shall be deemed to be severed from this
`License. The license granted hereunder is personal to Licensee and shall not be assigned by any act of Licensee or by
`operation of law. This License constitutes the entire understanciing of the parties regarding the subject matter hereof,
`and revokes and supersedes all prior agreements between the parties regarding the subfect matter hereof. it shail not
`be modified or amended except in writing signed by the parties hereto and specifically referring to this License. This
`License may be executed in any number of counterparts. Facsimile or scanned signatures shall be effective. This
`License is governed by and in accordance with the laws of the State of Texas.
`
`Executed to be effective as of the Effective Date.
`
`
`
`

`
`SCHEDULE A
`
`SERVICE MARKS
`
`SM/SN/RN/Disclaimer
`
`
`
`
`SN:77/847,279
`13,839,239
`
`
`SD/USN/RN/Disclaimer
`I AID. TODAY.
`
`PAID. TODAY.
`
`N:77/732,612
`
`nsurance claims ané payment: data
`
`V/PAYMENT
`
`SN:7'7/847,275
`
`Statusfstatus Date
`
`egisterecl
`' ugust 24, 2010
`
`
`
`
`
`Services
`
`(Int'1 Ciassz 36) Electronic process 0
`nsurance claims and payment data
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 1 of 36 PageID 6704
`
`IN THE UNITED STATES DISTRICT COURT
`
`FOR THE NORTHERN DISTRICT OF TEXAS
`DALLAS DIVISION
`
`STONEEAGLE SERVICES, INC.,
`Plaintiff,
`
`V.
`
`DAVID GILLMAN, et al.,
`Defendants.
`
`§
`g
`
`§
`
`g
`E
`
`ORDER
`
`3:1 1-cv-02408-P
`
`Now before the Court are six motions. One of these motions involves findings and
`
`recommendations for two additional underlying motions.1
`
`First, StoneEagle Services, Inc. (“StoneEagle”) filed a Motion to Partially Dismiss the
`
`Second Amended Answer and Counterclaims on May 3, 2012. (Doc. 96) After an intervening
`
`order, Talon Transaction Technologies, Inc., a Texas Corporation (“Talon-Texas”), and Talon
`
`Transaction Technologies, Inc., an Oklahoma Corporation (“Talon-Oklahoma”) (collectively, the
`
`“Talons”) filed a Response on June 6, 2012. (Doc. 126) StoneEagIe filed a Reply on June 11,
`
`2012. (Doc. 127)
`
`Second, StoneEagle filed a Motion for Partial Summary Judgment on July 16, 2012.
`
`(Docs. 146-48) David Gillman (“Gillman”) and the Talons filed a Response on August 6, 2012.
`
`(Doc. 16?‘)
`
`Third, Gillman and the Talons filed Objections to the Findings and Recommendation of
`
`the United States Magistrate Judge on July 23, 2012. (Docs. 152-61) These findings and
`
`recommendations were issued on July 9, 2012 and involve a Second Motion for Order to Show
`
`' On January 7, 2013, Defendants filed consolidated motions to dismiss following SloneEagle’s First Amended
`Complaint. (Doc. 22?) While this Order does not address these pending motions, the principles of res judicata and
`collateral estoppel may apply in subsequent proceedings.
`
`Order
`3:11-cv-02408-P
`
`Page I of 36
`
`
`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 1 of 36 PageID 6704
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 2 of 36 PageID 6705
`
`Cause Why Defendants Should Not Be Held in Contempt filed by StoneEag1e and a Motion for
`
`Clarification of the Preliminary Injunction Order filed by Gillman and the Talons. (Docs. 42, 50,
`
`144) StoneEagle filed a Response on July 26, 2012. (Doc. 164) Gillman and the Talons filed a
`
`Reply on August 9, 2012. (Doc. 169)
`
`Fourth, Gillman and the Talons filed a Motion for Leave to File Supplemental Objections
`
`on August 28, 2012. (Docs. 176-T?) StoneEagle filed a Response on September 5, 2012. (Doc.
`
`179)
`
`Fifth, Gillman and the Talons filed a Motion to Strike StoneEagle’s Proposed Preliminary
`
`Injunction and a Motion for Leave to address additional concerns on October 22, 2012. (Doc.
`
`190) StoneEag1e filed a Response on October 26, 2012. (Doc. 19]) Gillman and the Talons
`
`filed a Reply on November 8, 2012. (Doc. 199)
`
`Finally, StoneEag1e filed a Motion to Dismiss Nexpay, Inc.’s (“NexPay”) Original
`
`Complaint on November 26, 2012. (Doc. 8, 3: 12-cv-04397-P) NexPay filed a Response on
`
`December 17, 2012. (Doc. 221) StoneEagle filed a Reply on December 27, 2012. (Doc. 225)
`
`After reviewing the parties’ briefing, the evidence, and the applicable law, the Court:
`
`DENIES StoneEagle’s Motion to Partially Dismiss the Second Amended Answer and
`Counterclaims. In addition, the Court DENIES the Request to Convert this Motion into a
`Motion for Summary Judgment;
`
`GRANTS StoneEag1e’s Motion for Partial Summary Judgment;
`
`ACCEPTS and ADOPTS the United States Magistrate Judge’s Findings and
`Recommendation on StoneEagle’s Second Motion for an Order to Show Cause Why
`Defendants Should Not Be Held in Contempt. Therefore, the underlying Motion is
`DENIED;
`
`DECLINES to ADOPT the United States Magistrate Judge’s Findings and
`Recommendation on Gillman and the Talons’ the Motion for Clarification of the
`
`Preliminary Injunction Order. Therefore, the Court CLARIFIES the preexisting
`Preliminary Injunction Order. In doing so, the Court GRANTS the underlying Motions
`
`Order
`3: 1 1-cv-02408-P
`
`Page 2 of 36
`
`
`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 2 of 36 PageID 6705
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 3 of 36 PageID 6706
`
`to Clarify, Strike, and Supplement filed by Gillman and the Talons. In addition, the
`Court DENIES the Request for Leave filed with the Motion to Strike;
`
`ACCEPTS and ADOPTS the United States Magistrate Judge’s Findings and
`Recommendation that StoneEagle should provide a bond in the amount of $100,000 for
`the clarified preliminary injunction; and
`
`GRANTS StoneEagle’s Motion to Dismiss NexPay’s Original Complaint.
`
`I.
`
`Background
`
`Some lawsuits are easier than others. StoneEagle develops and implements virtual
`
`payment systems for a variety of industries. (Doc. 19?, p. 3) In 2003, StoneEagle applied for a
`
`patent involving a method to facilitate warranty payments in the automotive industry. (Id.) This
`
`application is still pending. (Id.)
`
`Of particular relevance to this lawsuit, StoneEagle’s current Chairman and Chief
`
`Executive Officer, Robert Allen (“Allen”) endeavored to create a payment system for the
`
`medical industry that would virtually process medical benefit payments. (Id. at 4) On December
`
`5, 2006, Allen applied for a patent to protect StoneEagle’s rights under this virtual payment
`
`system.
`
`(Id. at l 1) Allen listed himself as the inventor and consulted Gillman during the
`
`application process. (Id.) StoneEagle alleges that it protected the virtual medical payment
`
`system through a variety of protocols, security standards, and agreements to preclude
`
`circumvention and maintain confidentiality.
`
`(Id. at 5) According to StoneEagle, this information
`
`is not generally known to the public.
`
`(Id. at 6)
`
`On or about May 1, 2006, StoneEagle entered a mutual non-disclosure agreement (“the
`
`NDA”) with Gillman, the company he represented at the time, and its affiliates. (Id) The
`
`parties agreed, inter alia, to not disclose certain information or authorize anyone else to disclose
`
`the information.
`
`(Id. at 6-?) Parties expressly agreed that unauthorized disclosure~—even after
`
`Order
`3:1]-cv-02-'-108~P
`
`Page 3 of 36
`
`
`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 3 of 36 PageID 6706
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 4 of 36 PageID 6707
`
`the expiration of the NDA’s term—would constitute unfair competition, a breach of the NDA,
`
`and result in irreparable injury entitling injunctive relief.
`
`(Id. at 7)
`
`On or about June 29, 2006, StoneEagle granted Talon-Texas a license to use information
`
`related to virtual medical payment processing (“the Licensing Agreement”). (Id) This
`
`agreement defined all confidential and proprietary information, obligated the parties to maintain
`
`strict confidentiality, and authorized inj unctive relief in the event of a breach. (Id at 8) This
`
`agreement bound all successors and assigns. (Id) On or around May 30, 2008, the Texas
`
`Secretary of State forfeited Talon-Texas because it failed to pay its franchise taxes. (Id)
`
`Following the forfeiture of Talon-Texas, Talon—Oklahoma was formed and Gillman
`
`assumed the position of President for the entity. (Id) In August 2008, StoneEagle and Talon-
`
`Oklahoma formed what would later be referred to as VPay, Inc. (“VPay”) for the purposes of
`
`expanding the parties’ existing customer base. (Id) At inception, StoneEagle and Talon-
`
`Oklahoma each owned 50% of VPay. (Id)
`
`As these activities progressed, Vincent and Jim Valentine (“the Valentines”) worked
`
`closely with StoneEagle programmers to refine its product offerings.
`
`(Id. at 9) In November
`
`2009, both VPay and StoneEagle retained the Valentines as independent contractors. (Id) The
`
`Valentines executed independent contractor and confidentiality agreements with VPay.
`
`(Id. at 9-
`
`10) Under these agreements, Valentines acknowledged the relationship between VPay and
`
`StoneEagle and agreed to not disclose confidential or proprietary information.
`
`(Id. at 10)
`
`On January 1, 2010, Talon-Oklahoma and SWG Investments, Inc. (“SWG”) signed a
`
`marketing agreement involving the information related to virtual medical payment processing
`
`(“the Marketing Agreement”).
`
`(Id. at 8) This agreement contained provisions for confidentiality
`
`and non—disclosure.
`
`(Id. at 9) At some point during these transactions, StoneEagle registered
`
`Order
`3: 1 1-cv-02408-P
`
`Page 4 of 36
`
`
`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 4 of 36 PageID 6707
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 5 of 36 PageID 6708
`
`“VPay” and “VCard” as service marks related to processing and distributing virtual payments in
`
`the medical industry. (Id. at 12) Although StoneEagle’s First Amended Complaint reflects that
`
`Talon-Texas ceased to exist after 2008, the pleadings also suggest that Talon-Texas obtained a
`
`license to use these marks on July 27, 2010. (Doc. 197, p. 12; Doc. 197-1, pp. 87-88)
`
`During the pendency of the medical payment system patent, on July 15, 2010, Gillman
`
`and the Talons entered into an agreement with StoneEagle, whereby Gillman and the Talons
`
`agreed to: (1) release any rights to this patent; (2) not challenge enforceability; and (3) assign any
`
`rights to StoneEagle (“the Release Agreement”). (Doc. 197, p. 1 1)
`
`On September 7, 2010, the U.S. Patent and Trademark Office (the “PTO”) issued U.S.
`
`Patent No. 7,792,686 B2 (the “’686 Patent”) under the title “Medical Benefits System.” (Id. at
`
`12) The ’686 Patent lists Allen as the inventor and StoneEagle as the assignee. (Id.)
`
`With this backdrop in place, in or about August 201 1, Gillman purportedly commented to
`
`others in the medical industry that he “wrote” and “authored” the ’686 Patent.
`
`(Id. at 13) He
`
`also allegedly met with investors such as Nx Systems, Inc. (“NxSystems”) and Administrative
`
`Insurance Management Services, Inc. (“AIMS”) without StoneEagle’s representatives. (Id)
`
`Upon investigation, StoneEagle asserts that Gillman and the Talons are flouting the
`
`aforementioned agreements and seek to establish a competing product “virtually identical to
`
`VPay.” (Id. at 13-16) To facilitate these efforts, Gillman allegedly established Nexpay to
`
`process and distribute virtual payments in the medical industry.
`
`(Id. at 16)
`
`Pausing from the facts, a brief recitation of the procedural history is helpful to bring the
`
`present issues to light. On June 16, 201], StoneEagle sued Gillman and the Talons. (Doc. 2)
`
`After intervening filings and orders, Gillman and the Talons filed a Second Amended Answer
`
`Order
`3:] 1-cv-02408-P
`
`Page 5 of 36
`
`
`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 5 of 36 PageID 6708
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 6 of 36 PageID 6709
`
`and Counterclaims. (Doc. 92) StoneEagle then moved to dismiss those state law counterclaims
`
`related to breach of the Licensing Agreement and conversion. (Doc. 96)
`
`On October 14, 201 1, the Court enjoined Gillman and the Talons from using Plaintiff’s
`
`trade secrets and confidential information to set up a competing business. (Doc. 16, pp. 9-10) In
`
`particular, Gillman and the Talons were ordered to desist and refrain from:
`
`using, disclosing andfor otherwise capitalizing upon the Trade Secrets and
`Confidential Information, other than their permitted use of the Trade Secrets and
`Confidential Information in the regular course of business as permitted by the
`Grant of License to Use Proprietary Processes and Confidential Information
`entered by and between [StoneEagle] and Talon Transactions Technology, Inc., a
`Texas corporation on June 29, 2006; and
`
`discussing with and collaborating with Vincent Valentine, Jim Valentine,
`NxSystems, Inc., TxVia, Inc., First California Bank, and any other third party
`regarding the use or disclosure of the Trade Secrets and Confidential Information
`in setting up andfor operating a competing business, the basis of which is the
`conversion of paper-based insurance claim settlements to virtual, electronic
`settlements.
`
`(Id. at 9) The Court also ordered Gillman and the Talons to:
`
`fully comply with all confidentiality and non-disclosure requirements to the extent
`they are contained, referenced, adopted, or acknowledged in the Mutual Non-
`Disclosure Agreement entered by and between David Gillman and [StoneEagle] on
`or about May 1, 2006; the Grant of License to Use Proprietary Processes and
`Confidential Information entered by and between [StoneEagle] and Talon
`Transactions Technology, Inc., a Texas corporation on June 29, 2006; and the
`Mutual Confidentiality, Non-Disclosure, Non-Circumvention Agreement entered
`by [StoneEagle] and Talon Transactions Technology, Inc., an Oklahoma
`corporation on or about January 1, 2010.
`
`(Id. at 10)
`
`This single order sparked a flurry of motions. Plaintiff filed a motion for contempt,
`
`alleging that Gillman and the Talons violated the injunction by moving forward with a
`
`competing product. (Doc. 42) In response, Defendants moved to clarify, asking the Court to
`
`“give the parties clear guidance on how they must operate during the pendency of this action”
`
`Order
`3: 1 1-cv-02408-P
`
`Page 6 of 36
`
`
`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 6 of 36 PageID 6709
`
`

`
`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 7 of 36 PageID 6710
`
`and requested “specification so that it may have particularized notice of what is prohibited.”
`
`(Doc. 48, p. 8; Doc. 50) These two motions were referred to United States Magistrate Judge
`
`Kaplan for hearing and recommendation. (Does. 71, 81) On May 10, 2012, Judge Kaplan held a
`
`nine-hour hearing.
`
`On July 9, 2012, the magistrate judge issued his findings and made three specific
`
`recommendations. (Doc. 144) First, the judge found that it was “clear that [Gillman and the
`
`Talons] violated the spirit of the preliminary injunction, the purpose of which is to prevent them
`
`from competing with [StoneEagle] by using trade secrets and confidential information acquired
`
`during the course of their business dealings.” (Id. at 6) Nevertheless, the judge recommended
`
`that the Court deny Plaintiffs motion for contempt.
`
`(Id. at 7) Second, the judge recommended
`
`that the injunction be clarified to facilitate compliance and prevent “unwitting contempt.” (Id)
`
`To clarify, the judge proposed:
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`the named defendants and their respective agents, servants, employees, attorneys,
`and all persons in active concert or participation with them, including Vincent
`Valentine, Jim Valentine, and Nxsystems, Inc., should be enjoined from engaging
`in any and all business activities that involve processing or distributing virtual
`payments of insurance claims for the healthcare industry.
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`(Id. at 8) Finally, the judge recommended that StoneEagle post a bond in the amount of
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`$100,000. (Id)
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`On July 23, 2012, Gillman and the Talons objected to these findings and
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`recommendations. (Doc. 152) Without ruling on the findings and recommendations, on
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`September 12, 2012, the parties were ordered to confer about the preliminary injunction and
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`submit proposed injunctive language. (Doc. 183) On October 10, 2012, the parties submitted
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`proposed orders for a preliminary injunction. (Docs. I88-89) Gillman and the Talons
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`Order
`3: 1 I-cv-02408-P
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`Page 7 of 36
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`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 8 of 36 PageID 6711
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`subsequently moved to supplement their own briefing, strike StoneEagle’s proposed order, and
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`requested leave to address additional concerns. (Docs. 176, 190)
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`In a related matter, on October 31, 2012, NexPay sued StoneEagle, seeking a declaratory
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`judgment that it did not infringe on the ’686 Patent. (Doc. 1, 3:l2—cv-04397-P) StoneEagle
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`moved to dismiss. (Doc. 8, 3: 12-cv-04397—P) Thereafter, that case was transferred to this Court
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`and consolidated with the present dispute under case number 3:] 1-cv-02408-P. (Does. 10,
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`l 1,
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`3 : 12-cv-0439'?—P)
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`On November 11, 2012, StoneEagle filed its First Amended Complaint and sued
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`Gillman, the Talons, and Nexpay (collectively, “the Defendants”). (Doc. 19'?) StoneEagle sues
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`for: (1) declaratory relief; (2) misappropriation of trade secrets and confidential information; (3)
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`breach of contract under various agreements entered into between the parties including, inter
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`alia, the Licensing Agreement; (4) breach of the Release Agreement; (5) patent infringement; (6)
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`service mark infringement; (7) counterfeiting under the Lanham Act; and (8) unfair competition.
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`(Id. at 18-26) Beyond that, StoneEagle seeks fees and a permanent injunction. (Id at 27-31)
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`Notwithstanding the pendency of this lawsuit, a preliminary injunction, and after
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`termination of all licensing and service mark agreements, StoneEagle contends that Defendants
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`proceed undaunted in their efforts to launch a competing business.
`
`(Id. at 16) From December
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`201 1 through February 2012, NexPay supposedly processed over $900,000 in payments using a
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`like process and system. (Id) Moreover, on or around February 1, 2012, Defendants allegedly
`
`confused customers by using the VPay mark to process a payment file totaling $1,546,046.56.
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`(Id. at 17) In addition, on March 22, 2012, Defendants purportedly began processing virtual
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`payments under the names “NexPay” and “QuicRemit.” (Id) The payment advice under these
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`Order
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`Page 8 of36
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`Case 3:11-cv-02408-P Document 246 Filed 02/19/13 Page 9 of 36 PageID 6712
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`systems is apparently identical to VPay.
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`(Id. at 17-18) StoneEagle also avers that Defendants
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`falsely represent to customers that VPay has changed its name to QuicRemit.
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`(Id. at 18)
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`Bringing this all together: (1) StoneEagle still moves to partially dismiss the Second
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`Amended Answer and Counterclaims; (2) StoneEagle still moves for partial summaryjudgment
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`on issues related to the ’686 Patent; (3) Gillman and the Talons still object to the findings and
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`recommendations; (4) Gillman and the Talons still wish to supplement these objections; (S)
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`Gillman and the Talons still move to strike StoneEagle’s proposed preliminary injunction order;
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`and (6) Stoneliagle still moves to dismiss NexPay’s Original Complaint.
`
`II.
`
`Discussion
`
`a. StoneEagle’s Motion to Partially Dismiss the Second Amended Answer and
`Counterclaim
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`StoneEagle moves to dismiss (1) Talon-0klahoma’s breach of the Licensing Agreement
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`claim because Talon-Oklahoma was not a party to the agreement, and (2) the conversion claim
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`because Texas law does not recognize the conversion of intangible rights. (Doc. 92, p. 1)
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`Alternatively, StoneEagle seeks summary judgment on these issues and requests an opportunity
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`for the parties to present evidence outside the pleadings.
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`(Id. at 3)
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`i. Talon-Oklahoma’s Claim for Breach of the Licensing Agreement
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`First, StoneEagle argues that Talon-Oklahoma lacks standing to enforce the Licensing
`
`Agreement because it was not a party to the contract. (Doc. 92, pp. 3-5)
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`1. Legal Standard
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`Where, as here, a party brings state law causes of action, federal courts apply state
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`substantive law and federal procedural law. Cf Foradori v. Harris, 523 F.3d 477, 486 (5th Cir.
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`2008). In the absence of controlling state court decisions, a federal court must make an “Erie
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`Order
`3:] 1-cv-02408-P
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`Page 9 of 36
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`Case 3:11-cv-O2408—P Document 246 Filed 02/19/13 Page 10 of 36 PageID 6713
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`guess” as to how the high state court would apply the substantive law. C}? Beavers v. Metro. Lrfiz
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`Ins. C0,, 566 F.3d 436, 439 (5th Cir. 2009) (quoting Travelers Cos. & Sur. Co. ofAm. v. Ernst &
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`Young LLP, 542 F.3d 475, 483 (5th Cir. 2008)).
`
`A party has standing to sue in contract if the party was in a privity relationship with the
`
`contracting parties or attained third party beneficiary status. See Maddox v. Vantage Energy,
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`LLC, 361 S.W.3d 752, 3756 (Tex. App.——Fort Worth 2012, pet. dism’d) (“To establish standing to
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`assert a breach of contract cause of action, a party must prove its privity to the agreement or that
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`it is a third-party beneficiaryf’). As a stranger to the contract, a third party beneficiary may
`
`recover only if the contracting parties: (I) intended to benefit the third party, and (2) entered into
`
`the agreement directly for the third party’s benefit. Basic Capital Mgmt. v. Dynex Commercial,
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`Inc., 348 S.W.3d 894, 900 (Tex. 2011) (“A third party may recover on a contract made between
`
`other parties only if the parties intended to secure some benefit to that third party, and only if the
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`contracting parties entered into the contract directly for the third party’s benefit. ”); see also
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`Refinery Holding Co, L.P. v. TRM1 Holdings, Inc. (In re El Paso Refinery, L.P.), 302 F.3d 343,
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`354 (5th Cir. 2002) (“In order to qualify as a third-party beneficiary, a party must establish both
`
`that (1) the contracting parties intended to confer some benefit to the third party, and (2) the
`
`contracting parties entered into the contract directly for the third party's benefit”). Under third
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`party beneficiary law,
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`[t]he intention to contract or confer a direct benefit to a third party must be clearly
`and fully spelled out or enforcement by the third party must be denied.
`Consequently, a presumption exists that parties contracted for themselves unless it
`clearly appears that they intended a third party to benefit from the contract.
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`Basic CapitalMgm1‘., 348 S.W.3d at 900 (emphasis added) (quoting MCI Telecomms. Corp. v.
`
`Tex. Utils. Elec. Co., 995 S.W.2d 647, 651 (Tex. 1999) (internal citations and quotation marks
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`Order
`3: I 1-cv-02408-P
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`Page 10 of 36
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`Case 3:11-cv-O2408—P Document 246 Filed 02/19/13 Page 11 of 36 PageID 6714
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`omitted)); Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011) (“[I]n the absence of a clear and
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`unequivocal expression of the contracting parties’ intent to directly benefit a third party, courts
`
`will not confer third-party beneficiary status by implication”).
`
`2. Analysis
`
`StoneEagle’s principle argument is that Talon-Oklahoma lacks standing to sue in contract
`
`because it was not a party to the Licensing Agreement. (Doc. 92, pp. 3-4) StoneEagle further
`
`alleges that Talon-Oklahoma is not a successor or assignee as intended under the Licensing
`
`Agreement. (Doc. 127, p. 2) In addition, the Marketing Agreement cannot serve as an extension
`
`of the Licensing Agreement because StoneEagle was not a party to the Marketing Agreement.
`
`(Id. at 3-4)
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`The Talons respond that Talon-Oklahoma was a third party beneficiary under the
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`Licensing Agreement and is therefore entitled to enforce its provisions. (Doc. 126, p. 5) The
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`Talons assert that the Licensing Agreement secured benefits to third party affiliates such as
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`Talon-Oklahoma.
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`(Id. at 5-6) In particular, the parties used language indicating that the
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`agreement “shall be binding upon and inure solely for the benefit of the parties hereto and their
`
`respective successors or permitted assignments.” (Doc. 126-], p. 18) Moreover, the Marketing
`
`Agreement, as “an extension of the Licensing Agreement” identifies Talon-Oklahoma as a party
`
`and lists StoneEagle under the recitals. (Doc. 126, p. 6) The recitals state, inter alia, that:
`
`“[Ta1on-Oklahoma] holds a valid and binding agreement with StoneEagle, ‘Grant of License to
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`Use Proprietary Processes and Confidential Information’ dated June 29, 2006 [i.e., the Licensing
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`Agreement] which provides [Talon-Oklahoma] an exclusive right to market the product now
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`trademarked and known as VPay.” (Doc. 126-2, p. 1)
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`Order
`3:11-cv-O2408—P
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`Page II of36
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`Case 3:11-cv-O2408—P Document 246 Filed 02/19/13 Page 12 of 36 PageID 6715
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`Reviewing the record and briefing in support, Talon-Oklahoma has proper standing to
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`sue for breach of the Licensing Agreement because it qualifies as a third party beneficiary under
`
`the agreement. First, the parties explicitly stated that the Licensing Agreement would be binding
`
`and directly benefit the p