Over the last several years, there has been an intellectual property lawsuit bouncing around the Texas court system and while not exactly on par with a riveting “Law & Order” episode, it is worth Texans’ time to tune in to the next installment of Title Source v. HouseCanary set to happen in early December. That is when Bexar County District Judge David Canales will reconsider HouseCanary’s request to seal exhibits from the original trial in which it accused Title Source (now known as Amrock) of stealing trade secrets. The issue in front of Judge Canales sounds rather mundane, but there is much at stake here, including First Amendment repercussions.
To backtrack, according to a mutually agreed upon $5 million annual contract, HouseCanary was to provide Amrock a state-of-the-art mobile property appraisal app along with other property data, including a real estate automated valuation model (AVM) that would generate estimates of home values. A year later, Amrock found itself empty-handed and sued for breach of contract. This is where things get interesting as HouseCanary countersued, alleging that Amrock misappropriated its technology to develop their own AVM. Despite evidence clearly disputing that it stole any proprietary information—including from HouseCanary’s own expert witness—Amrock was hit with a record $706 million verdict by a San Antonio jury. Not a bad payout for failing to deliver a contractually obligated product.
The trade secret allegations at the root of this legal drama took a post-trial twist with several HouseCanary whistleblowers coming forward to give statements that cast doubt on whether there was even any proprietary information to misappropriate in the first place. One whistleblower stated the company never had the information it promised while another said there was no intellectual property to steal. A Texas appellate court has since tossed the astronomical verdict, but HouseCanary has petitioned the Texas Supreme Court to review that ruling and the petition is pending.
This brings us to HouseCanary’s post-trial motion to seal eight trial exhibits that it alleges contains their trade secrets. During the initial trial, both parties were aware that highly sensitive information would be introduced at some point given the nature of the lawsuit. A Stipulated Protective Order (SPO) was agreed upon that contained provisions to keep such sensitive information confidential, but to do so the party must follow a specific protocol including filing a motion before disclosing the sensitive information; otherwise, there was no protection for any information that became part of the public domain.
Not only did HouseCanary fail to file a motion to seal those exhibits per the SPO’s requirements, but they relied on them to bolster their argument in open court. The exhibits were entered into evidence by HouseCanary, discussed repeatedly by witnesses, and even projected on a large screen in the courtroom. Nevertheless, HouseCanary filed a motion to retroactively seal six weeks after the trial concluded, and such motion was ultimately granted. On appeal, the Texas Fourth Court of Appeals ruled that the trial court erred in granting the motion in view of HouseCanary’s failure to follow state law and the SPO’s requirements. The Texas Supreme Court affirmed that ruling and kicked the issue back to Judge Canales so he could apply the correct legal standard.
So why all the legal maneuvers to seal what has already been thoroughly discussed in a public trial? If trade secrets are indeed contained in those exhibits as claimed, why not take precautions as afforded by the SPO agreement before they were introduced into evidence? Something doesn’t add up.
The best theory is that these maneuvers are intended to keep inquisitive reporters from discovering and reporting on the flimsiness of HouseCanary’s initial allegations against Amrock. If so, Texans tuning in should be outraged at this blatant disregard for the First Amendment. As the Reporters Committee for Freedom of the Press and the Houston Forward Times—both media interveners in the case—noted in their brief to the Texas Supreme Court last year, “Decades of authority recognize the long tradition of public access to judicial records and the presumption of openness under both the United States Constitution and the Texas Constitution.”
This constitutional right, the brief continues, is “essential for the proper functioning of the judicial system. It enhances the quality and safeguards the integrity of the fact-finding process… plays a cathartic role by allowing a community to observe the administration of justice…and fosters public trust in the judicial system.” Public trust in our government institutions, especially courts of law, is critical and must be built upon, not eroded. Allowing these exhibits to remain under lock and key would do just that.
Fortunately, Judge Canales has a chance to get it right this time and once again open these key exhibits to public access. From the beginning, red flags have littered the legal landscape of this lawsuit—from the shaky allegations to damning whistleblower testimony. HouseCanary’s ongoing attempts to seal retroactively what has already been disclosed in open court is the latest desperate attempt to protect what little remains of its reputation and to restore value, by the magic of an irrational court order, to alleged trade secrets that no longer qualify as such (if they ever qualified at all as worthy of trade secret protection).
The courts should declare clearly and unequivocally what all who have been following this case clearly understand: there is no trade secret protection possible for information that is in the public domain, even if that disclosure was inadvertent. Unlike Law & Order, which is a series that seems to live on forever with many happy viewers, the HouseCanary series of misguided legal rulings and questionable legal tactics is on its final episode. The courts need to wrap up the series to put an end to any further plot twists that defy logic and contort the law to serve very questionable purposes. It is time to allow those exhibits to be exposed to the scrutiny of the Fourth Estate. And it is time for this case to fade to black.
Charles B. "Chuck" Meyer is a SE Texas tech lawyer with over 30 years' experience in intellectual property, privacy law and the protection of trade secrets.