have aroused the cupidity of trusted employees, inciting them to set up rival enterprises in an attempt to employ the knowledge acquired through their former employment. Competitors have also induced employees of rivals who were familiar with their trade secrets to take service or to embark in business with them, and in this way attempted to obtain the use of valuable methods. A New York court, in the course of an opinion involving the legality of the use of secret processes of a business house by its former employees, observed that "This is not legitimate competition, which it is always the policy of the law to foster and encourage, but it is contra bonos mores and constitutes a breach of trust which a court of law-and much more a court of equity-should not tolerate." A similar expression is found in another decision of the New York courts, and in a still later case it was said, in a like connection, that "fair competition is always encouraged, but a man can not, through deceit * enter the household of his benefactor and steal his belongings.' It is apparently established that a court of equity will restrain the disclosure or use of a trade secret by one who has become familiar with it through confidential employment, or will enjoin its use by one who has acquired it with knowledge that the person from whom it was obtained had, because of the manner in which it came into his possession, no right to divulge it. AMERICAN DECISIONS. In accordance with this principle it was held by a New York court that a manufacturer of photographic supplies was entitled to an injunction restraining former employees from using his secret processes and appliances, with which they had become familiar while in his employ. And where the former employees of a manufacturer of 1 Eastman Kodak Co. v. Reichenbach et al., 79 Hun, 183, 194 (N. Y. Sup. Ct., App. Div., 1894). Little v. Gallus et al., 4 N. Y. App. Div., 569 (1896). 3 Eastern Extracting Co. v. Greater New York Extracting Co. et al., 126 N. Y. App. Div., 928, 931 (1908). A trade secret has been defined by the Ohio Circuit Court as follows: "A trade secret Is a plan, or process, tool, mechanism, or compound, known only to its owner and those of his employees to whom it is necessary to confide it in order to apply it to the uses for which it is intended. It is not protected by patent, for the secret then is made public, and the inventor is protected by letters patent from infringement thereof; while, as soon as anyone fairly and honestly discovers a trade secret, either by examination of the manufactured products sold or offered for sale to the public, or in any other honest way, that person discovering it has full right to use it." National Tube Co. v. Eastern Tube Co. et al., 3 Ohio C. C. Rep. (N. S.), 459, 462 (1902). The Pennsylvania Supreme Court says: "The character of the secrets, if they be peculiar and important to the business, is not material. They may be secrets of trade or secrets of title, or secret processes of manufacture, or any other secrets important to the business of the employer." MacbethEvans Glass Co. v. Schnelbach et al., 239 Pa., 76 (1913). • Eastman Kodak Co. v. Reichenbach et al., 79 Hun, 183 (N. Y. Sup. Ct.. App. Div., typewriter ribbons engaged in a like business, they were restrained from using or disclosing the secret processes of their former employer. Likewise, where a man entered the employ of a corporation, and, after remaining only long enough to become familiar with his employer's secret process of extracting alcohol from empty whisky barrels, left and organized a corporation to engage in the same business, it was held that neither the former employee nor his company could use the process.2 The same principle is invoked by the courts to protect the owners of secret but unpatented machinery and, under some circumstances, patterns for constructing machinery or other articles sold to the trade. Thus, where a corporation employed a mechanic to perfect a machine for manufacturing paper bags, under an agreement that it should belong to the employer, the employee was subsequently enjoined from manufacturing the machines for other parties. Similarly, it has been held by the Supreme Court of Massachusetts that an engineer who had become familiar with his employer's secret machinery and process for manufacturing gunny cloth from jute butts, under an agreement that he would not use or disclose the information, should be restrained from constructing machinery for others, built on his former employer's models, and from imparting to them other secrets of the process of manufacture. And where an employee learned his employer's secret process of manufacturing fly paper under circumstances which left no doubt that the process was regarded as a secret and that the employment was of a confidential character, the Supreme Court of Michigan restrained the employee from communicating the process. So also the New York Court of Appeals held (1) that a manufacturer was entitled to an injunction restraining a rival, who had surreptitiously obtained copies of his patterns for making certain unpatented pumps, from using or disposing of them, and (2) that, as the dimensions of the patterns could not be determined from the parts of the completed pump, the sale of the pumps did not constitute such a publication of the secret of the specifications as to entitle the defendant to use the patterns so obtained. In like manner it has been held that a former employee could be enjoined from using a secret process of manufacturing oils and greases where he had executed an affidavit not to use or disclose such process. And where an employee of a steel company, under con 1 Little . Gallus et al., 4 N. Y., App. Div., 569 (1896). * Eastern Extracting Co. r. Greater New York Extracting Co. et al., 126 N. Y., App. Div., 928 (1908). * Westervelt et al. r. National Paper & Supply Co., 57 N. E., 552 (Ind. Sup. Ct., 1900). Peabody r. Norfolk, 98 Mass., 452 (1868). O. & W. Thum Co. r. Tłoczynski, 114 Mich., 149 (1897). 7 Fralicht. Despar, 165 Pa., 24 (1894). tract not to disclose a secret process and formula for making certain products, was enticed from its service by a competitor for the purpose of securing his knowledge of the process, the court not only restrained the employee and the rival company from using or divulging such secrets but also enjoined the company from continuing him in its employ. So where, as a condition of the sale of a business, its former manager contracted with the purchaser to enter his employ, disclose to him all the secret processes of the business known only to the manager, and not thereafter to disclose them to anyone else nor to use them in the business of any other person, it was held that the purchaser was entitled to an injunction restraining the manager from using in a rival business the secret processes known to him at the time his employer purchased the business, as well as other secrets subsequently disclosed to him during the course of his employment." As in the case of secret machinery or appliances or secret processes of manufacture, the owners of secret formulas for the manufacture of articles of commerce may enjoin their use or disclosure by former employees or by others who have obtained them in an inequitable manner. Thus where the president of a glass company had discovered a formula for making semitranslucent glass and had turned it over to his superintendent to make the necessary experiments in the factory furnaces, the Supreme Court of Pennsylvania decided that the superintendent could not subsequently use the formula for his own benefit, notwithstanding the fact that in the course of the experiments conducted for his employer he had himself discovered that satisfactory results could only be had from the formula by melting the glass a specified time, and that if this time were varied from, the product would not be of the desired quality. The company to which the superintendent disclosed the formula was also enjoined from making or selling glass manufactured by using the essential ingredients of the secret formula. In like manner, where the owner of a secret formula for compounding a medicine sold it, and his son, who was familiar with the formula, entered the employ of the purchaser under an agreement not to divulge the recipe nor to sell any similar medicine in a specified territory, the Federal circuit court held that the employee could not manufacture and sell 1 Taylor Iron & Steel Co. v. Nichols et al., 61 Atl., 946 (N. J. Eq., 1905). 2 National Gum & Mica Co. r. Braendly, 51 N. Y. Supp., 93 (Sup. Ct., App. Div., 1898). 3 Macbeth-Evans Glass Co. v. Schnelbach et al., 239 Pa., 76, 87 (1913). Per Elkin, J.: "To be entitled to equitable relief the burden was on the appellee [plaintiff] to show (1) that there was a trade secret, or, as in the case at bar, a secret process of manufacture; (2) that it was of value to the employer and important in the conduct of his business; (3) that by reason of discovery or ownership the employer had the right to the use and enjoyment of the secret; and (4) that the secret was communicated to Schnelbach while he was employed in a position of trust and confidence under such circumstances as to make it inequitable and unjust for him to disclose it to others, or to make use of it himself, to the prejudice of his employer." a substantially identical preparation. In this case the court apparently lays down the rule that where a secret formula is sold a court of equity will not permit either the vendor, or the members of his family familiar with it and knowing of the sale, to use it." So also a New Jersey court refused to permit the president of a corporation who discovered secret formulas or processes for the manufacture of ink, to sell or use them, where he had, while managing the business during a receivership, represented the recipes to be a part of the assets of the corporation, the court being of opinion that his whole course of conduct raised an implied contract that the formulas passed to the purchaser at the receiver's sale. And it has been held that a company engaged in the manufacture of pharmaceutical preparations could restrain a former employee from using its secret formulas in the manufacture of preparations for a rival company." Apparently, also, an injunction may issue to prevent the disclosure of a secret method of compounding certain chemicals, although all of the ingredients of the compound are known to others. For example, where a manufacturer had, by much experimenting in mixing chemicals, produced a satisfactory preparation to be used in tanning hides, the court enjoined both a former employee and a rival corporation to whom he had disclosed it, from using or divulging the process, though the latter was familiar with all the ingredients and had used them, though less successfully, in the manufacture of a preparation used for the same purpose. And a corporation which used a peculiar mixture of metals to compound a bell metal, and had by experimenting determined the forms, sizes, and weights of the bells which could be satisfactorily produced from the metal, was granted an injunction restraining a former foreman in its factory from communicating this information to others. On the other hand, manufacturing processes, machinery, 1 Simmons Medicine Co. et al. v. Simmons, 81 Fed., 163 (C. C., 1897). * Pomeroy Ink Co. v. Pomeroy, 77 N. J. Eq., 293 (1910). G. F. Harvey Co. v. National Drug Co. et al., 77 N. Y. Supp., 674 (Sup. Ct., App. Div., 1902). Stone v. Goss et al., 65 N. J. Eq., 756 (Court of Errors and Appeals, 1903). Per Swayze, J.: "The injunction should not be refused, because the process was such that it would probably have been discovered by independent experiments in the manipulation of the ingredients of which the products of both parties were alike composed. The Grasselli Chemical Co., by its own conduct, has put itself in such a position that it may even lose the advantage of future independent experiments. It would be quite impossible hereafter to decide how much of the improvement in the product of the Grasselli Chemical Co, would be attributable to its own independent efforts and how much to the knowledge of Stone's process fraudulently acquired by it. Every doubt must be resolved against the parties to a fraudulent act. If the defendant thereby suffers, it suffers only by reason of having been a party to Goss' fraudulent disclosure of the secret." Cincinnati Bell Foundry Co. v. Dodds et al., 10 Ohio Decisions, Reprint 154 (Superior Court of Cincinnati, 1887). For other cases, see White Dental Mfg. Co. v. Mitchell, 188 Fed., 1017 (C. C., 1911); Phila. Extracting Co. r. Keystone Extracting Co., 176 Fed., 830 (C. C., 1910); Union Switch & Signal Co. v. Sperry, 169 Fed., 926 (C. C., 1909); Adams Co. v. Knapp, 121 Fed., 34 (C. C. A., 1903); Jones r. Baker, 7 Cow., 445 (N. Y. Sup. Ct., 1827). or formulas must apparently have some characteristic distinguishing them from others in general use in the trade in order that they may be protected as trade secrets. On this ground a New York court has held that a manufacturer could not prevent others from using a formula or process for making soap where the "method consisted in the exercise of great care in the selection of well-known materials previously in use in the trade, and in their combination and mixture in certain proportions, also approximately observed by other manufacturers, by means of appliances also more or less known to others." Likewise, where the combined efforts of the employees of a tube mill had resulted in a certain individuality in the patterns and castings, but it appeared that approximately the same mills could be constructed by any competent engineer, it was held that the patterns were not a trade secret and that a rival manufacturer could retain castings made from such patterns surreptitiously taken from the mill by an employee, although the court directed the return of the patterns themselves. And it has been held that an injunction should not issue where the general principles of the machinery which a manufacturer sought to prevent a competitor from using were well known to machinists and had been merely adapted to the complainant's use, and where it also appeared that no precautions had been taken to keep the machinery a secret from any of the company's employees. It has also been held that an employee who assisted in perfecting machinery, but was not employed for the purpose of making inventions, could not be enjoined from engaging in the same business, it not appearing that he had constructed or used any machines, processes, or formulas in which the employer had any exclusive right.* PARTIES WHO MAY BE ENJOINED FROM USING TRADE SECRETS.-While the courts will enjoin the use or disclosure of trade secrets not only by an employee, but also apparently by anyone coming into possession of the information with knowledge of its confidential nature or of the confidential character of the employment of the person from 1 Bell & Bogart Soap Co. v. Petrolia Mfg. Co., 54 N. Y. Supp., 663, 664, 665 (Sup. Ct., 1898). National Tube Co. v. Eastern Tube Co. et al., 3 Ohio Cir. Ct. Rep. (N. S.), 459 (1902); affirmed by Sup. Ct., 69 Ohio State, 500 (1903); Cf. Vulcan Detinning Co. v. American Can Co., p. 363. 3 Hamilton Mfg. Co. v. Tubbs Mfg. Co., 216 Fed., 401 (C. C., 1998); not reported until 1914. 4 American Stay Co. v. Delaney, 211 Mass., 229 (1912). Per Braley, J.: "No obligation rested upon him to forego the exercise of his inventive powers, even if they were incited because of knowledge necessarily derived from the performance of his contractual duties. It was legitimate for him, under these conditions, to invent and perfect improvements which were embodied in new machines of greater capacity and efficiency." See also Mahler v. Sanche, 223 III., 136 (1906). 30035°-16-23 |