Full Opinion (html_with_citations)

SCR-Tech LLC v. Evonik Energy Servs. LLC,
2014 NCBC 71
.


STATE OF NORTH CAROLINA                   IN THE GENERAL COURT OF JUSTICE
                                              SUPERIOR COURT DIVISION
COUNTY OF MECKLENBURG                               08 CVS 16632

SCR-TECH LLC,                )
                             )
            Plaintiff,       )
                             )
      v.                     )
                             )
EVONIK ENERGY SERVICES LLC, )                              ORDER
EVONIK ENERGY SERVICES       )
GMBH, EVONIK STEAG GMBH,     )
HANS-ULRICH HARTENSTEIN, and )
BRIGITTE HARTENSTEIN,        )
                             )
            Defendants.      )
                             )

      {1}    THIS MATTER is before the Court on Defendants’ Motion to Dismiss
the Trade Secret Claims Based on Plaintiff’s Lack of Standing or, in the Alternative,
for Partial Summary Judgment (“Motion”) pursuant to Rules 12(b)(1) and 56(c) of
the North Carolina Rules of Civil Procedure (“Rule(s)”).

      King & Spalding LLP by Timothy G. Barber, Natasha H. Moffitt, Antonio E.
      Lewis, David Glen Guidry, John W. Harbin, and Mary Katherine Bates for
      Plaintiff SCR-Tech, LLC.

      Troutman Sanders LLP by Samuel T. Reaves and Hamilton Martens Ballou
      & Carroll, LLC by Beverly A. Carroll for Defendants Steag Energy Services,
      LLC, Hans-Ulrich Hartenstein, and Brigitte Hartenstein.

      Bryan Cave, LLP by Mark Vasco, Benjamin F. Sidbury, and Christina
      Davidson Trimmer and Alston & Bird, LLP by M. Scott Stevens for
      Defendants Steag Energy Services GmbH and Steag GmbH.

Gale, Chief Judge.
      {2}    The central issue the Motion presents is whether Plaintiff SCR-Tech
LLC (“SCR-Tech”) has standing to pursue claims for trade secret misappropriation
where it is a licensee rather than an “owner” of the proprietary technology on which
the trade secret claims are presented. The issue arises because the North Carolina
Trade Secrets Protection Act (the “Act”) provides that “[t]he owner of a trade secret
shall have remedy by civil action for the misappropriation of his trade secret.”
N.C. Gen. Stat. § 66-153
 (2014) (emphasis added). The Act varies in this regard from the
Uniform Trade Secrets Act (“Uniform Act”) and the trade secret statutes of many
states modeled on the Uniform Act, where the action may be brought by a
“complainant.” Such statutes modeled on the Uniform Act have been interpreted
not to restrict an action for misappropriation to an “owner.” E.g., DTM Research,
LLC v. AT&T Corp.,
245 F.3d 327
, 332 (4th Cir. 2001) (interpreting Maryland law).
      {3}    The issue is compounded by the fact that the Act does not include any
definition of “owner.” No reported North Carolina case has addressed whether, in
North Carolina, an exclusive licensee can bring an action for trade secret
misappropriation or how the statutory term “owner” should be defined. In a
footnote, the North Carolina Pattern Jury Instructions note that the Act protects
trade secret owners, but then states that “[p]resumably” that includes a bona fide
licensee.” N.C.P.I. Civil 813.92 n.2. The Court is aware of no guiding legislative
history.
      {4}    Plaintiff contends that the term “owner” should not be restricted to
merely one who holds legal title, which it admits it does not, but rather that it
should be more broadly read to include an exclusive licensee like itself who
possesses and uses the underlying technology in a non-transitory way and, in fact,
continues to develop and improve the technology. (Pl. SCR-Tech LLC’s Br. Opp’n
Defs.’ Mot. Dismiss the Trade Secret Claims Based on Pl.’s Lack of Standing or, in
Alternative, for Partial Summ. J. (“Pl. Opp’n Br.”) 14.) Defendants instead contend
that the North Carolina Legislature’s choice to restrict actions to an owner must be
strictly construed and excludes an exclusive licensee. (Br. Supp. Defs.’ Mot. Dismiss
Trade Secret Claims Based on Pl.’s Lack of Standing, or, in Alternative, for Partial
Summ. J. (“Defs. Supp. Br.”) 8–9 (citing License Agreement § 3.1).)
      {5}    While the Court has thoroughly considered the parties’ extensive,
thorough and well-written briefs on the present motion, it has also revisited the
extensive briefing that preceded Judge Tennille’s ruling on an earlier motion. In
2010, Defendants filed a Joint Motion for Summary Judgment on Issues of Statute
of Limitations, Release, and Lack of Standing (“First Motion”). The First Motion
asserted, as does the present Motion, that only an “owner” has standing to bring a
trade secret misappropriation claim. The parties fully briefed case authorities and
policy arguments as to whether SCR-Tech could qualify as an “owner” within the
meaning of the Act when it is an exclusive licensee. After this full briefing, Judge
Tennille summarily denied the First Motion. SCR-Tech LLC v. Evonik Energy
Servs. LLC, Court Order at Âś 1, 08 CVS 16632 [Mecklenburg] (N.C. Super. Ct. July
12, 2010).
      {6}    The essential background facts are these. In January 2004, Catalytica
Energy Systems, Inc. (“Catalytica”) purchased SCR-Tech GmbH and, consequently,
SCR-Tech. Under the transaction, Catalytica’s subsidiary, CESI-SCR, Inc. (“CESI-
SCR”), acquired SCR-Tech’s intellectual property rights. (Supplemental Interrogs.
Resps. No. 4.) Sometime after that, CESI-SCR assigned its rights in the intellectual
property to CESI-Tech Technologies, Inc. (“CESI-Tech”). CESI-Tech changed its
name several times and is now known as CoaLogix Technologies Holdings, Inc.
(“CoaLogix”). (Pl.’s Second Supplemental Resp. to German Defs.’ Interrog. No. 4
(“Second Supplemental Interrog. Resp.”).) CoaLogix presently owns the trade
secrets at issue. SCR-Tech has an exclusive right to use the trade secrets within
the power generation field. (License Agreement §§ 1.4, 2.1(a).) SCR-Tech
“acknowledges and agrees that [CoaLogix] owns and shall continue to own all right,
title and interest in and to the Technology, including, without limitation, all . . .
trade secret and other intellectual property rights in the Technology[.]” (License
Agreement § 3.1). The license expires on December 21, 2017, but automatically
renews for a one-year period unless it is otherwise terminated. (License Agreement
§ 1.10.)
       {7}     During briefing on the First Motion, SCR-Tech acknowledged that it
was a licensee of the technology. SCR-Tech produced its 2007 License Agreement
with CESI-Tech on November 5, 2013. The Court understands that the agreement
was not actually executed in 2007, but its terms have controlled the relationship
between the parties since 2007, prior to the filing of this action.
       {8}     On January 3, 2014, Defendants filed the present Motion. As they did
in the First Motion, Defendants assert that Plaintiff lacks standing and seeks to
dismiss the trade secret claims on that basis. The Motion has been fully briefed and
argued. The arguments and legal principles in the briefs on the present Motion
essentially repeat those presented to Judge Tennille in connection with the First
Motion. Although Judge Tennille did not expound on his view of these arguments
in his order denying the First Motion, they were clearly before him.
       {9}     Plaintiff contends that the Court should not now further consider the
arguments which Judge Tennille rejected. Plaintiff invokes the rule that one
superior court judge cannot overrule another, relying on Huffaker v. Holley,
111 N.C. App. 914, 915
,
433 S.E.2d 474, 475
 (N.C. Ct. App. 1993).
       {10}    Defendants counter that this rule has no application when the
underlying issue addresses the Court’s subject matter jurisdiction, citing
Transcontinental Gas Pipe Line Corp. v. Calco Enterprises,
132 N.C. App. 237, 241
,
511 S.E.2d 671, 675
 (1999)) and McAllister v. Cone Mills Corp.,
88 N.C. App. 577, 579
,
364 S.E.2d 186, 188
 (1988)).1




1  There is a separate corollary that a subsequent superior court judge may also revisit a prior ruling
where there have been “changed circumstances,” but Judge Bledsoe recently held in a well-reasoned
opinion that the reassignment of a case from one Business Court judge to another because of
retirement does not constitute such a change in circumstances. Taidoc Tech. Corp. v. OK Biotech
Co., Ltd.,
2014 NCBC LEXIS 49
, at *13 (N.C. Super. Ct. Oct. 9 2014). Consistent with the holding,
this Court determines that it does not have authority to revisit Judge Tennille’s earlier order solely
because of his retirement, and the reassignment of the case to the undersigned was not a “changed
circumstance.”
      {11}   A plaintiff’s standing is a necessary prerequisite to involving the
court’s subject matter jurisdiction. Woodring v. Swieter,
180 N.C. App. 362, 366
,
637 S.E.2d 269, 274
 (2006); Coker v. DaimlerChrysler Corp.,
172 N.C. App. 386
,
390–91,
617 S.E.2d 306, 310
 (2005). Whether a party has standing is question of
law for the court. Lee Ray Bergman Real Estate Rentals v. N.C. Fair Hous. Ctr.,
153 N.C. App. 176, 179
,
568 S.E.2d 883, 885
 (2002). And, it is generally true that
“[a]n objection to subject matter jurisdiction may be made at any time during the
course of the action.” Vance Constr. Co. v. Duane White Land Corp., 127 N.C. App
493, 494,
490 S.E.2d 588, 589
 (1997).
      {12}   In Transcontinental Gas,
132 N.C. App. at 241
,
511 S.E.2d at 675
, the
North Carolina Court of Appeals, on first reading appears to have adopted a blanket
rule that a subsequent superior court judge may revisit a prior judge’s ruling on
standing because questions of the court’s jurisdiction can always be revisited at any
stage of the proceedings. There, the issue was whether the claim fell within the
exclusive jurisdiction of the Industrial Commission by reason of the Workers’
Compensation Act. A first judge rejected the jurisdictional attack when ruling on
an early motion under Rule 12. A subsequent superior court judge found a lack of
jurisdiction when granting a Rule 56 motion. Although the underlying issue on
both rulings involved construction of the Worker’s Compensation Act, the decision
reflects that there was a more substantial record before the second judge. The
opinion does not further elaborate as to how the more developed record was relevant
to the ultimate determination. But, the North Carolina Court of Appeals
unquestionably upheld the right of the second judge to grant the Rule 56 motion
even though the ruling on jurisdiction effectively overruled the first judge’s decision.
      {13}   While acknowledging that the issue of subject matter jurisdiction can
be examined at any time, McAllister,
88 N.C. App. at 579
,
364 S.E.2d at 188
, the
Court does not believe the holding in Transcontinental Gas should be so rigidly
applied as to allow a party to present to a second judge essentially identical
arguments without significant new facts or changes in law or circumstances,
inviting a different ruling because the first judge was wrong. Yet, that is the
situation with which the Court is confronted by the present Motion. After carefully
considering the briefs and arguments presented on both motions, the Court does not
perceive any argument now presented as to why Plaintiff does not have standing
under the Act that was not presented and fully briefed to Judge Tennille. Moreover,
the Court does not believe that the newly-submitted License Agreement affects this
conclusion. Facts and arguments presented to Judge Tennille are consistent with
and are not materially altered in the present briefs and arguments by virtue of the
License Agreement.
      {14}     The Court does not read Transcontinental Gas and similar cases to
allow or require a subsequent court to rule on a virtually identical argument
presented to a prior judge. Finding that to be the effect of the current Motion, the
Motion is DENIED.
      {15}     The Court is mindful of the significance of the standing issue, the
uncertain question of how our appellate courts will ultimately interpret the North
Carolina Legislature’s unusual choice to restrict misappropriation claims to an
“owner,” and the fact that Judge Tennille denied the First Motion without
substantial discourse on the issue. But, the Court is equally mindful of the import
of allowing or requiring one Business Court judge to revisit the earlier order of
another Business Court judge without any material change in record, policy, or
authorities.
      {16}     Plaintiff suggested that any standing issue could be cured by adding
CoaLogix as a party. In light of the Court’s ruling, it need not further consider the
suggestion, as no formal motion to join CoaLogix, has been made.


      IT IS SO ORDERED, this the 31st day of December, 2014.