A Houston federal court this week permanently enjoined OFS International (OFSi) from manufacturing and selling oilfield pipe connections as part of a settlement that the Houston-based oilfield services company reached with a competitor.
The settlement abruptly ended what would have been a two-week bench trial starting Monday between OFSi and Tenaris, a Houston-based oilfield pipe manufacturer that alleged OFSi stole Tenaris’ trade secrets and designs for oilfield pipe connections in order to produce its own products.
The order, entered Tuesday by U.S. Magistrate Judge Christina Bryan, permanently enjoins OFSi from manufacturing and selling six connections that OFSi said were based on confidential information OFSi allegedly stole from Tenaris subsidiary IPSCO Tubulars through a licensing agreement. OFSi had purchased a license to market IPSCO’s threaded connection products in exchange for a licensing fee. Tenaris was also pursuing breach of contract claims against OFSi before the settlement went through.
“This was truly a breach of trust for one of a company’s licensees to take one’s product and develop their own using the licensor’s designs,” Baker Botts partner Ty Buthod, Tenaris’ lead attorney, told The Texas Lawbook.
Before the parties got hip-deep in settlement talks, Judge Bryan had paved the way for trial in an Aug. 4 ruling that denied OFSi’s summary judgment motion. In the same motion, she said she was skeptical that the plaintiffs could prove at trial that the design parameters of one of IPSCO’s products were trade secrets.
IPSCO originally initiated the litigation in June 2019, but Baker Botts did not get involved in the case until after Tenaris acquired IPSCO in January.
Buthod called the settlement an “extraordinary outcome.”
“What’s unusual is that they agreed to a permanent injunction without us even having to go to trial to prove our case,” Buthod said.“We expected to be able to get an injunction, but an agreed injunction that is this broad is pretty extraordinary. On top of that, they have to pay us money too.”
But AZA partner Tim Shelby, OFSi’s lead attorney, also viewed the outcome as favorable.
“This is a great commercial result for OFSi,” Shelby told The Lawbook. “The terms of the settlement include a payment of only $700,000, which is less than half of OFSi’s legal fees to defend the case at trial. Given the current market conditions, this settlement made sense for OFSi. It does not include any findings of wrongdoing.”
Shelby added that as of last year, OFSi had already discontinued four out of the six products at issue in the permanent injunction and the remaining were going to be phased out.
But Buthod emphasized that the permanent injunction — not the settlement amount — was the most important element of the outcome.
“It’s disappointing to hear that a manufacturer that was caught misappropriating trade secrets suggested ‘no harm, no foul’ when they got caught,” he said. “It remains vitally important for Tenaris to protect its intellectual property and we are proud of having done so against people who chose to misappropriate it rather than compete fairly in the market.”