*1 dismissing be set the cause should intervene, held that order trial on the State’s interven- the same for and remanded aside holding. agree with this do not 2d 500. tion. 311 We S.W. timely was not opinion to intervene motion In our State’s Septem on entered the trial court order of dismissal filed. The subject only power of the Court final 5th had become ber following days thirty the order aside. Rule to set within 329-b, right respondent-taxpayers, lost their had The T.R.C.P.* their case. No complain dismissal of appeal and to until and filed in the cause unless plea intervention could be and this he judge his order of dismissal set aside the district opinion We, therefore, Rule are of the refused to do. T.R.C.P., inapplicable. we conclude the circumstances Under power Appeals without to set aside that the of Civil Court judgment of dismissal. the trial court’s question whether the determine the not reach or as We do litigation forty-five days” after within district was “involved litigation validating effective in statute became attacked, contemplated by validity district was pass ques- statute, Appeals did the nor Court Civil tion. Appeals is judgment of the Court of Civil reversed and trial is affrmed.
that of the court July Opinion 1958. delivered * Texas 646] [152
Hyde Corporation Donle Huffines v. James No. A-6486. Decided March 1958. Rehearing overruled June hearing (314 July 16, 1958.
Second overruled 763) S.W. Series *3 Christopher Christopher Bailey, Bailey, & T. S. M. Ward Worth, petitioner. all of Fort
Thompson, Walker, Cook, Smith & Shannon Paul C. all Worth, respondent. Fort Mr. Justice opinion Norvell delivered the of the Court. *4 This is a “trade secret” case in the of which Court Civil Appeals, eliminating after recovery attorneys’ fees, a has for money judgment affirmed $17,520 both a for in favor of James against Hyde Corporation Donle Huffines perpetual a and decree injunction restraining Hyde Corporation manufacturing selling any or substantially device made in accordance with garbage compressor original feature of a in described Huffines’ application for a the to thereafter issued him. Hyde Corporation Huffines, App., Texas Civ. S.W.
Petitioner, Hyde Corporation, presents upon the case here eighteen assignments error; closely some of which are re- grouped purposes argument. unnecessary lated and It is assignments points discuss these seriatim in order dis- pose granted, of the case. the When writ was we had some doubt propriety injunctive granted the toas the relief and one of justices Appeals opinion Court of Civil was of the issued; injunction However, erroneously upon was consideration, further we have reached the conclusion that none petitioner’s assignments point judgment in out error accordingly judgment Appeals. will Such Court Civil be affirmed. present major assignments in three the main
Petitioner’s jury’s pleadings, (a) the evidence contentions: That the theory recovery findings support for Huffines do not through Hyde Corporation a confidential violation of had exploited “trade relationship, wrongfully Huffines’ secured and (b) remedy, any, lay in federal That Huffines’ secrets.” infringement, (c) essentially courts as suit is one issued, wrongfully particularly in view was That the covering had issued Huffines of the fact that been patent application. part of the contended his claims assignments that various other raise contentions Certain findings support portions jury’s in the evi- of the are without correctly dence, decided we find that these matters were discussed here. appelate and hence need not lower court essentially Appeals is The statement of the Court of Civil major However, petitioner’s conten- first correct. view of patent ap- enlarge tion, quoting from we will thereon licensing agreement plication executed Huffines made and the contending parties. respondent (plaintiff below) director Huffines Falls, Department City of Wichita Sanitation compressed the trash constructed Texas. He a mechanism Department garbage so that by the collected Sanitation carry hauling garbage employed in refuse could this trucks patent upon substantially larger applied He loads. “Compressor application aas and in his described device It stated in Mechanism for Refuse Truck.” that: garbage improvements relates to
“This invention garbage particularly trash hauling trash trucks and more compressor compress hauling mechanism trucks that utilize *5 transportation. refuse proposed of character have been here- trucks this “Various part, complex in tofore, were construc- for the most but these order, get presented relatively easy and certain tion, to out of refuse, loading unloading the once it had been difficulties carrying body of truck. compressed into garbage object provide a “An of invention is truck this to compact refuse compressor unit will to wherein enable greater transported disposal. place a load to to the object provide compressor
“Another a of this invention is to garbage hauling for a that mechanism trash truck has a mini- working parts perform compressing operation. mum provide still object “A a com- further the invention is to pressing specified a truck that mechanism for of the character hydraulically operated, compress is both to refuse and to body dumping position. elevate truck into object provide “Yet another a truck invention is body construction, specified, simple character that is operation, compressing dumping efficient mechanism simple operate, relatively inexpen- of which and which is sive to manufacture.” application novelty contained seventeen claims of conclusively appears
invention and it that mechanism was type subject protection equity trade secret. See, Inc., Fishing K & G Oil Tool and Service Co. et al v. G & G Service, al., Tool et 2d 782. volume 314 S.W. appears Maxson, Hyde
It that E. E. Vice President Corporation, through became interested in the device the offices friend originally of Huffines. Maxson talked with Huffines manufacturing Eventually, about the device for Huffines. how- agreed ever, Hyde Corporation it was should manufacture pay royalty January and sell the device and Huffines. On licensing agreement was executed became effective is, later, April three months on agreement Hyde
This refers to Huffines as “Licensor” and to Corporation as It “Licensee.” recites the fact that Licensor had improvements certain new and useful in a invented refuse com- pressor mechanism for vehicles and made had Office, bearing letters in the States United Patent Serial 400,236 filing covering date of No. December such device, acquiring and that Licensee was desirous of an exclu- make, and sell license to use the said invention in the terri- sive tory possessions, of the United States America and its and in foreign countries. all *6 provided then that:
The contract LICENSEE, grants under hereby to “The LICENSOR forth, an EXCLUSIVE hereinafter set the terms and conditions make, in aforementioned device and sell to use said LICENSE any patent application, or under said accordance with ap- therefrom, any application or may or patents or that issue conveyed improvements to plications said device on filed on any patent LICENSEE, or under by the LICENSOR patents agrees use may therefrom. LICENSOR that issue diligence improvements and to continue protecting such in due applications application agreement present under long thereon, such may as improvements filed as be for * * * are fulfilled. agreements set forth herein and conditions agrees pay the sum one LICENSOR “The LICENSEE unit, per twenty ($120.00) and warrants and hundred dollars assigns pay produce, sell and LICENSOR itself and its binds * * * year. (100) units first a minimum of one hundred for infringement involving application “Any litigation said for involving applications application or for patent, or involving any device, patents improvements or any said on on defensive, may therefrom, but whether offensive or issue any proceedings, paid Office shall be connected with Patent proportion parties to the monies received hereto However, and sale of said devices. the manufacture part parties proportionate his fails to bear either hereto litigation, aforesaid, party any shall have such as other right, expiration (30) thirty days written notice party expense intention to bear the full to the default his bearing litigation, expense party such shall of such damages any as a full be collected result receive litigation, damages, monies collected as or of such otherwise thereof, expenses proportionately. any shared shall be “The date this contract shall the date effective on which presents pilot a finished model of said device LICENSEE with of said manufactured application, accordance the disclosure pilot accepted and when such model LICEN- proper within as article of manufacture SOR salable application scope warrants and claims said LICENSEE assigns complete pilot itself and its said model binds build (90) days Ninety from date of contract. within any agrees question validity “The LICENSEE patents applications, or or issued improvements application, applications filed on result of said *7 device, on said to the said REFUSE COMPRESSOR relative MECHANISM FOR VEHICLES. agreement may automatically at end “This renewed the be long agreements year, set
of the first so as the and conditions being fulfilled, may apply herein are and the same each forth to succeeding year pendency patent application for the of said or patents may applications, any patent and or that for life issue therefrom. Failure to fulfill conditions herein set out terminating agreement, shall be considered as this contract party being either such hereto who conditions are considers met, effect, setting notify party writing shall the other in to that particular receiving deficiencies, party out and the such days thirty (30) remedy notice in shall have which to such deficiencies, agreement before the contract shall become null Sixty days (60) and void. notice to terminate this contract shall given by (100) be If than LICENSEE. more one hundred units any are year, manufactured and sold in one the additional year amount so sold shall credited to the be amount to be ensuing year. sold the next expense prosecution “The application ap- of said or
plications patent patents expense for or shall at the LICENSOR, agrees diligence and he prosecuting use due applications said patents bring or in an effort to same ato successful conclusion. agrees convey
“LICENSEE improve- to LICENSOR employees upon ments made or LICENSEE its the machine herein, agrees assignment involved may that such be made any designated agent, LICENSOR at LICENSOR’S expense, improvement during and LICENSEE use the contract, term royalty.” of this without additional conclusively appears agreement It result negotiations execution, Hyde preceding Corporation its gained knowledge full only of the Huffines device not from models, but from prints, scale blue May actual construction of the device. On when the parties year operations were in the second under the con- Hyde tract, Corporation repudiated licensing agreement by giving sixty-day provided notice for in the contract. How- ever, according jury’s findings, said defendant did not contrary cease to manufacture the Huffines’ device but on substantially in with produce accordance the same continued to contained in Huffines’ description of the mechanism application. patent was received trial
Shortly was concluded before are ten claims introduced evidence. Some Huffines original as set in the instead of seventeen out listed patent ap- prosecution application. In the course of the appears were cancelled plication that certain claims Huffines, ones before and additional added others amended finally patent was issued.
Against background Corporation Hyde contends this factual equity damages it cannot be held in restrained they manufacturing did the mechanism further because *8 through fraud, any in- gain knowledge or deceit of device equitable practice.
Special jury’s thereto Issues 2 and the answers Nos. and upon this contention and are as follows: bear “Special you preponderance Issue 1: Do find from No. compressor his the evidence that D. Huffines disclosed refuse J. agent Hyde Corporation mechanism to because some officer Hyde Corporation represented they that were inter- him manufacturing selling compressor in ested said refuse Yes. mechanism? Answer:
“Special you preponderance Issue 2: No. Do find from defendant, Hyde Corporation, acted evidence that knowledge design good acquiring in and novel faith features, garbage any, disposal body question? if Answer: Yes.” supporting that there is
Petitioner contends no evidence Special that issue jury’s answer to Issue No. 1 and insists if evidence, by be raised the trial court of confidence breach special request inquiring its submitted issue should have details, compressor plans specifications of Huffines’ refuse Hyde Corporation by Huffines to mechanism were disclosed representative in its confidence. pleadings arguments seem as to the and evidence
Petitioner’s the case as fixed the written run the realities to licensing agreement. counter explicit It is true that there no written precludes petitioner contract contained covenant making 'granted result of contract use of information as a negotiations the cancellation and disclosures Huffines after licensing agreement. respondent’s true that It is also stating by way pleadings “in do not use confidence” the words presented picture pleadings a conclusion. The undisputed interpreted by jury and as is that evidence both contracting good (in faith of a licensee after with an inventor according Special jury’s 2) for the to the answer to Issue No. upon use of an invention which an licensing agreement insisting
pending, repudiating upon utilizing despite the fact device that he secured informa- through tion which him manufacture the enabled device licensing agreement negotiations relating and the thereto. To say gain knowledge petitioner did not of the device in this deny licensing agreement. purpose manner is to the stated argument in the briefs and oral While pressed some concern was ex- Appeals’ opinion permit the Court of Civil would unscrupulous pockets claimants to delve into the of business through spurious compensation firms claims for for the use of ideas, Lines, Inc., Matarese v. Moore-McCormack Cir. danger hardly presented F.2d 170 A.L.R. here. are period not called consider at We what in the course negotiations petitioner’s actions have ceased to ethical- ly permissible. have culminating here business relations We licensing agreement. The case seems squarely to come within the rule of the American Law Institute’s Restatement of the Law that: *9 who secrets,
“One discloses or uses another’s trade without privilege so, a is (a) do liable to the other if he discovers by improper means, (b) the secret his disclosure or use con- reposed stitutes a breach of confidence in him the other in * * disclosing the secret to him. 4 Restatement of Torts Sec. evidently jury licensing believed that at the time the agreement into, Hyde acting Corporation was entered in good faith, respondent’s thereafter decided to use device accounting so, might without to him. If under be absolved (a) clause of rule but would held liable clause under (b) case, present parties occupied thereof. In the posi- They tion of licensor and licensee. in a sense were co-adven- rlationship turers. There existed between a confidential them as a matter of law there was no need to submit these inci- legal jury of dents status to a for its determination. In com- stated,
menting upon it is said (b) rule above clause the Restatement that: in this Clause
“A under the rule stated breach confidence subjects the actor to may also be a breach of contract which liability Restatement Contracts. under rules stated in the contract, the rule stated But whether or not there is breach of liability disclosure or subjects in this if his Section the actor re- the confidence use of another’s trade secret is a breach of disclosing him. The posed in him the other secret rule example relationship under this is chief of a confidential agent (see relationship principal Restatement of relationship Agency, 396). is also Sections 395 and Such partners joint adventurers. But this confidence between or other example, a trade may A has exist also other situations. For B sell or without his business. secret which he wishes to with negotiations, A prospective purchaser. In dis- the course of enabling solely him purpose of the secret to B for the closes B, banker, appraise Or, requests a loan from its value. A product by aiding A’s purpose for the manufacture process. In assure B the soundness secret order to about loan, In cases to him in both A discloses the secret confidence. adversely duty use it B is under not to disclose secret or * * *” Torts, 757, on Clause A. Restatement of Sec. Comment (b) p. 13. theory recovery may distinction in the
While there be some contract, (a) (b), in tort or under clauses whether States, App. Aktiebolaget Ct. of D.C. Bofors v. 90 U.S. United point In area of is not involved here. F.2d employers relationships partners, and em between confidential injured like, party licensees, and the ployees, licensors and express agreement rely upon to hold the required to is not confidence, Schreyer Corp., v. Casco Products trade secret Corporation, App., Dravo 190 F.2d Smith v. Cir. Ct. deprived App., 203 nor should he be Cir. F.2d 7th Ct. originally offending person have all relief because by a relationship unaffected then particular into the entered existing improper motive. ulterior or *10 any, remedy, respondent’s that contention Petitioner’s premise upon the that this is founded rests in federal courts infringement petitioner esesntially patent suit. After had a is pur- licensing respondent, it contract with entered into 2,487,412 Balbi issued to 0. cover- Valentine chased Patent No. against suit Huffines in ing compressing and instituted device
577 the United District Court for the District of States Northern asserting priority patent Texas of the that issued Balbi over contending to Huffines that the latter was invalid number of reasons. agree holding Appeals We with the of the Court Civil case”, although “patent “patent that may is questions” gravamen present be involved herein. suit is The of the distinguished breach confidence. Trade secrets as patents subject protection equitable are jurisdic under the tion of the state courts. In E.I. De de Powder Pont Nemours Co. Masland, 100, 1016, 575, 61 L. ed. Mr. Jus U.S. 37 S. Ct. case, tice Holmes stated the basis of the “trade secret” viz: ‘property’ applied “The word to trademarks trade unanalyzed expression secondary secrets is an certain con- sequence primary fact that the law makes some rudimen- tary good requirements plaintiffs faith. have Whether facts, valuable secret or not the defendant what- knows the they are, through special accepted. ever confidence that he property may denied, but the confidence cannot There- be. starting point present property fore the for the matter is not law, process or due but the defendant stood in confiden- tial plaintiffs, relations with the or one of them. These have given place hostility, thing and the first to be made sure of is that fraudulently defendant shall not abuse the trust reposed in It him. any disadvantage the usual incident of is confidential relations. plain- If there in the fact that he knew the secrets, good.” tiffs must he take the burden with the Laboratories, In the later case Becher v. Contoure 388, 356, 357, U.S. S. Ct. ed. 73 L. Mr. Justice Holmes distinguishing between secret said: and trade suits
“It is not
jurisdiction
denied that
courts
arising
United States is exclusive in
suits
under the
the case of
patent laws,
it was
suit in the state court
held below that the
did not
plain
arise under
It
that suit had
those laws.
wrongful
for its cause of
dis-
action the
of a contract or
breach
regard
independent
relations,
of confidential
both matters
law,
subject-matter
Oppenheimer’s
claim
undisclosed
did not need
invention which
protect
Irving
trust.
Iron
from disclosure
breach of
Flooring
Eq.
126 Atl.
Works v. Kerlow Steel
Co. 96 N.J.
291;
Masland, 244
E.I. Du
U.S.
Pont de Nemours Powder Co. v.
right
Rep.
Oppenheimer’s
Sup.
61 L. ed.
Ct.
*11
arising
prior
patent
independent
to
out of the
was
of
strange suggestion
that
law,
that the assertion of
it
seems
right
cognizance can
removed from the
tribunals
going
protect
opponent
into the Patent
its
established
Oppenheimer’s
is
a later title. It
said that
establish
Office for
mistakenly,
But,
patent.
if
claim is to
even
invalidate Becher’s
get
patent,
attempt
an
not
was
to invalidate
against
assignment
it,
assignment
of
and an
was decreed. Suits
him a trustee for
patent
has
of land to make
one who
received
ground
equity
plaintiff
paramount
are well
some
on the
of
logical
Again,
from the establish-
known.
even
conclusion
void,
ing
patent
is
Oppenheimer’s
that Becher’s
of
claim is
judgment.”
not the effect of
original
jurisdiction,
absent a
The federal courts have
action,
“a claim
diversity
citizenship
assert
of
of causes of
which
and related
competition
joined with
substantial
of unfair
when
copyright, patent
laws.” 28 U.S.
or trademark
claim under the
C.A.,
1338(b).
might
maintained this
Huffines
have
Section
in connection with
character of suit
in the federal court
required
infringement
patent,
was
claimed
of his
but he
open
way
do
courts
to him.
so as
relief
the state
competition
Hyde Corporation
unfair
has no claim of
based
alleged
any way
Huffines
is in
an
violation of confidence
which
patent.
related to
under
Balbi
However that
its claim
be,
by Hyde Corporation
it seems clear that the action taken
operate
proceeding.
federal court could
to abate
between
trade secret cases and those in
The distinction
volving
validity
infringement
patents
pointed up
by the trade secret cases tried in the federal courts because of
diversity
citizenships
of the state of the
which the law
regarded
controlling
forum is
under the rule of Erie Railroad
Tompkins,
Sup.
Company
82 L.
v.
U.S.
Ct.
Ed.
See,
Wiltschek,
“* * * But the all the delver in the art know was bound to teachings upon attempted improve of that art. he the When taught things, by others, patentable he to achieve inven- was tion, doing necessity merely he than was under the of more ad- apting teaching ato device as a skilled mechanic would do. consideration, agree After careful we with the District Court patentee adapt did no more than what he had been taught improved accomplishment to an container and that his height patentable did rise to the of invention as that term * * Supreme has been defined *.” Court. [*] [*] [*] [*]
“Plaintiffs assert if defendant is liable for breach of relations, plead estopped invalidity confidential it is of the patents. think, support, The decisions cited in we do not sustain argument. the finding entirely separate; The two causes of action are guilt upon
of
the first
counts can in no
two
wise effect
question
validity
patents
of the
under counts 3 and 4.
Co., Cir.,
In Booth v. Stutz Motor
7
F. 2d
we held the
56
patent
invalid but nevertheless defendant was
for breach
liable
relationship.
ruling
Schreyer
of a confidential
Similar was
* *
Corp., Cir.,
v.
Products
Casco
is in direct conflict with the Texarkana Appeals Fishing Court of Civil in & Tools v. K G Service & G Co., 305 S.W. & this volume G Oil Tool Service nomine, Co. (this day Tool & Service reversed K & G Oil sub Fishing Service) followed the Court wherein & Tools G G Fastner Corporation v. Slide Co. Products Universal Conmar 150, 155, held that App. in which was 172 F. 2d 2d Cir. Ct. against protect “trade secrets” issue to would not through of confidence had them breach one who obtained through grant public trade secrets had made such been after of Judge writing patent. Hand for the Circuit Chief Learned Appeals Court of said: patents in specifications disclosed the suit
“Since seventh, part that much first six secrets demesne; patents public fell issue of into secrets facie, prima free use them. The the defendants were Co., Allen-Qualley (Shellmar Products Co. v. Seventh Circuit *13 (A. well, 104) apparently and as O. Smith F. 2d the Sixth 87 have, Co., 934) 2d Corporation v. Iron Works 74 F. Petroleum unlawfully however, obtained held that if before issue one has disclose, specifications later information which the and used wrong issue; to after his de will not be free to continue do he prives right have as he would otherwise had him the public. to a doctrine; We have twice refused follow member Cir., (Picard Corporation, 2 v. Aircraft 128 United 632; Pennington Engineering Engineering Co. Houde F. v. 210) our Corp., F. 2d we adhere to decisions. and Cir. might employees a Conceivably employer his con an exact from after issued. to disclose the information even the tract not be, possible we find it hard what value such a contract could Of it, conceive; but, employer per if an did exact others would to obliged specifications, they haps would use be to turn to the may, information. Be that as it we should so construe the any secrecy put in most in contract unless the intent were terms; escapable plaintiff’s such. and contract had none wrongful why a inducement In their absence we do not see wrong deprive divulge the should disclosure before issue patentee’s dedication; right doer of his avail himself of the said, for, just as is to construed we have contract be upon secrecy only rest imposing until issue. The doctrine must original wrong theory proper penalty it for the is wrongdoer deny patent; we resort to the and for that can support principle.” no find
Upon granting upon any of the claims con of a longer application, file held confidence tained in the is no public thereof become office but the contents 376; property. 218, Raymond, 8 L. ed. v. Pet. Grant U.S.] [31 Corp. v. Petro- Sandlin Johnson 141 F. 2d A. Smith O. Ohio, App., leum Iron 73 F. 2d 6th Ct. of Works Cir. Competition 74 F. 2d The Callman. Law of Unfair (2d Consequently, Ed.) Trademarks Patents. See. are secrets its amendments disclosed available to all the world trial decree makes and the court’s exception argued petitioner, Corporation. Hyde It injunction protect- punitive petitioner such as to rather than respondent. ive to
If, cases, remedy equitable as has been said numerous prevent person damaging one another through an wrongfully appropriating abuse of confidence in separate remedy trade secrets is a incident different right patent, injunc than that secured it v/ould seem that protection against tive of the trade secret as a licensee should necessarily patent. cease the issuance of a may not protection while, afford the same as the secret and trade public with generally, may reference to the said that inventor has protection secrecy elected to surrender patent, return for hardly the same can be said in behalf of a person licensee or other wronfully who has used information through obtained a breach of confidence. The record here indi cates petitioner that at the time of trial up pro was tooled ducing compressor the refuse respon which was the result of *14 genius dent’s inventive or mechanical Undoubtedly skill. if an injunction upon were lifted (which the issuance of a may may protection or not afford for all the trade secrets con original application tained in the thereto), amendments the licensee who had abused confidence would thus obtain mar keting advantage compared patentee or head start as to the any processor by manufacturer or licensed him after the issu patent. damages ance of An infringe award of might prove inadequate fully protect ment well the one whose confidence had been violated.
The ordinarily operate should as a corrective punitive measure, than a when, through rather but inadequa processes law, cies in the and methods of the a choice must be punitive possible operation made between of the writ and provide protection adequate recognized failure legal aof right, the latter course seems indicated and the undoubted ten recognize dency higher of the law has been to and enforce stand- cases, morality In all business world.1 ards of commercial may extending beyond injunctive the issuance of relief injured party,2 adequate afford relief to not essential upon the disclosure of disclosure attendant preclude such relief.3 filed should not of itself argument cogent are not unmindful of the fact We existing controversy be marshalled sides of both among our own in a conflict of decisions which has resulted Appeals, as the federal Courts Courts of Civil as well Circuit are, opinion doc Appeals. however, that the better óf the We weight by of American supported trine as well as the one injunc authority of an permits the issuance the rule which though extending there be beyond patent, tion even the date secrecy enjoining after express parties no convenant between patent. issuance of passed upon this this has heretofore been As matter length opinion of the quote at Court we somewhat Gottscho, Adolph Inc. Am- Supreme Jersey Court of New 438, 440, Atl. 2d Marking Corporation, erican 18 N.J. authorities and our numerous citations of contains country the one majority represents rule minds followed us: which should be Jersey Court said: New Chancery pending Division the its action in the "While was plain- patents to States Patent issued several United Office though plaintiff’s
tiff.
secrets
These disclosed some of the
learn
of the secrets
all nor most
them.
did not
Jackson
patents;
in the
from the
them in confidence while
he learned
long
plaintiff’s employ
improperly
and used them
disclosed
nevertheless,
contends,
patents
He
before the
were issued.
automatically
patents
public
disclosures which
constituted'
against
action
plaintiff’s pre-existing cause of
terminated the
Kipp, Note,
contrary view,
36 Texas Law Review 384.
1.—For
see
Jaques,
App.,
—See,
Root,
no writ
Texas Civ.
98 S.
&
Inc. v.
W.
Brown
duplicated
history,
Jaques
its
use but
defendant
own
in which the
saw
*15
not for sale to others.
dissenting opinions
majority
in Franke v.
in both
and
Wilts-
3.
discussions
—See
case,
chek,
App.,
583
Marking Corporation
him and the
it related
to the extent
Although
patents.
to secrets disclosed
there are decisions
suggests support
reason
position,
for his
we believe
weight
authority
contrary.
and the
are to the
See Shellmar
Allen-Qualley Co.,
104,
(7 Cir.,
Products
v.
109
Co.
87 F. 2d
1937),
695,
Sup.
923,
cretorari
L.
denied 301 U.S.
Ct.
81
Ed.
57
(1937) ;
Works,
1350
Corp.
A. O.
Iron
74
Smith
v. Petroleum
934,
(6 Cir.,
F. 2d
1935);
Wiltschek,
935
F. 2d
Franke v.
209
493,
(2
Bach,
639,
Cir., 153); Thilberg
Supp.
495
107 F.
v.
(D.C.D. N.J., 1952),
Cir., 1953)
(3
;
affirmed 203
956
In
F. 2d
Supp.
Corp.,
ternational
Industries v. Warren Petroleum
99 F.
907,
Del.,
184,
(D.C.D.
1951) ;
Cline,
913
McKinzie v.
197 Or.
564,
;
(1953)
252 P. 2d
Hyman
Corp.,
569
Julius
Velsicol
& Co. v.
563,
977,
123 Colo.
(1951),
233 P. 2d
999
certorari denied 342
Sup.
(1951).
U.S.
72
Ct.
96 L.
654
But
Ed.
cf. Conmar
Corp.
Co.,
Products
v. Universal Slide Fastener
172
2dF.
150
(2
1949)
Cir.,
;
(2
Corp.,
Picard v. United Aircraft
F. 2d 632
129
Cir., 1942),
Sup.
certorari denied
L.
317 U.S.
Ct.
(1942); Darsyn
Laboratories,
Ed. 524
Laboratories
Lenox
Supp.
(D.C.D. N.J.,
1954),
F.
affirmed
accounting misappropriated from the defendants who trade they confidence; secrets which response had learned in to the contention that expired secrets had been revealed an patent, the court said F. 2d : [209 495] “ argue process ’Defendants plaintiffs’ that the heart of expired patent,
revealed improvements and that the there- unpatentable on were applications of mechanical skill. This totally plaintiffs’ right. misconceives the nature Plaintiffs assert, assert, right do not property indeed cannot in their development against enjoyment such as would entitle them to exclusive patent,
the world. Theirs is not a trade secret. The essence of infringement, their action is not but breach of faith. gained It matters not that defendants could have their knowl- edge study expired patent plaintiffs’ from publicly product. they marketed they fact is that did not. Instead gained plaintiffs it via their relationship, confidential doing duty in so plaintiffs’ incurred to use it to detriment. duty they (Citing This authorities.) have breached.’ Hyman “In the case the court held that disclosures in applications plaintiff’s did not bar the action to restrain the de-
584 secrets; of course in the appropriating trade its fendants from 563, : opinion P. 2d it said Colo. 233 999] its [128 “ em- composition of matter Tt is conclusion our Patent applications Letters Serial for States braced United plaintiff’s were 643759 and 607078 and Nos. 581172 betrayal secrets secrets, these trade trade may and defendants’ Assuming that equity. by a court not be countenanced foreign and other patents in Britain applications for Great secrets plaintiff’s trade amounted to a disclosure countries here defendants the individual it did not relieve nevertheless fiduciary obligation. determina- and from their contractual respecting the any, rights public may what, have tion of application for plaintiff’s reason of use of trade secrets elsewhere, leave we will Britain letters Great presented. question where that decision “ knowledge chlordane and the construction ‘The plant same was manufactured— equipment in which the expended hundred thousands of dollars had several which knowledge Any —were, said, plaintiff’s trade secrets. as we have respecting acquired obtained those secrets was defendants a contractual they plaintiff’s employees, and under were while agreements, employment obligation, as evidenced their knowledge plaintiff’s secrets trade in addition thereto they were occu- acquired them in confidence and while was appropriate fiduciary relationship. They ping a now seek to profit by a to their own use and violation these trade secrets agreements betrayal and a of the confidence their contractual do; reposed by plaintiff. they may not such con- This them (Citing conception ordinary honesty.’ duct is to our abhorrent authorities.) in- are not here concerned with claim of rights
“We fringement public nor are with the we concerned generally. plaintiffs’ learned the trade secrets in Jackson confi- dence, fiduciary obligations, he and in violation of his disclosed employer’s purposes other than his benefit. and used them for N.J., Rideout, supra, page Corp. at 108 Dial v. 16 See Sun 442; Detinning Co., American 72 N.J. A. 2d Vulcan Co. v. Can 1907). 387, 395, L.R.A., N.S., (E. Eq. A. 67 A. 12 102 & grossly improper gave plain- His rise to conduct action, long-settled equitable principles on tiff’s based cause changes supported by attitude of the law the marked morality. Corp. Dial v. commercial Sun towards the need for 442; Rideout, supra, page at 108 A. 2d Franke 16 N.J. Restatement, page Wiltschek, supra, F. 2d 499. Cf. at legislative law, (1938) tendency of both Torts, : ‘the *17 increasing- enforcing common, in the direction of has been ly higher morality in trade.’ of fairness or commercial standards depriving persuasive plaintiff for the know of no reason We its of the of its accrued cause action because some of benefits patents protective secrets later disclosed were the issuance during pendency Surely the of its action. the are in defendants just position plaintiff no this to seek result and the should not subjected jeopardy to the be burden and of additional or di- proceedings complete vided to obtain the relief to which it is against fairly fiduciary here entitled as the defaultant Jackson company Marking Corporation.” and his the American opinion are of the Appeals We that the Court of Civil affirming correct injunction. petitioner the trial court’s The throughout litigation this position has taken the in that no junction should issue. It has not raised an alternative contention injunction, issued, that an duration, should be of limited such years as two or three patent, after the issuance of rather than being perpetual proper predicate by nature. No alternative pleadings supporting limiting evidence was laid the effect period ato certain of time after the is patent. suance of the plaintiff think that We when a out makes injunctive relief, a case duty opposing devolves party by competent to show evidence that an order of less dura permanent injured tion than a order will afford party ade quate protection. sug make We this statement in deference to a gestion contained in an amicus curiae brief filed herein and to point occupy out that as an amicus position curiae does not attorney party of an manage for a not vested with the case, Curiae, ment Am. Jur. Amicus Section authority suggested propriety issuing to and the type injunctive order is not before us. assigned no
We find error in trial court’s manner of sub- mitting jury case trial, to the which would necessitate a new objection employed nor is a valid made to the as- method damages. sessing assignments Petitioner’s of error are overruled and judgment Appeals Court Civil is affirmed.
Opinion delivered March rehearing motion for
ON opinion delivered the Court. Mr. Justice Norvell nothing rehearing presents petitioner’s motion for . While original passed upon opinion, cer- there are that was not clarified further statement. tain matters which objection Petitioner seems to have some use of describing generally ac “trade secrets” in this case. The term in the Re cepted definition of a “trade secret” is that contained Foods, Leighton, Supreme statement Court, King’s Torts. In Extrin Inc. v. County, said: N.Y. Court 115 N.Y.S. resolving required first issue the Court to define “In applied ‘secret’ formula. term ‘trade secret’ the term *18 Torts, 757, 5, p. in the Restatement of Section is defiined follows: may trade secret. A trade consist Definition secret
‘b. formula, pattern, compilation device or of information gives business, oppor- him an used one’s which advantage competitors tunity know over who do not obtain may compound, process a it. a formula for chemical a or use It treating manufacturing, preserving materials, a pattern or * * * device, other list customers. A a machine or process or device for continuous use in trade secret Generally produc- to the operation business. it relates of the as, goods, example, a for the machine formula tion production an article.’ Competition (4th also on Unfair Trade Marks Nims
“See Ed.), page Kaumagraph Co., 403; Stampagraph v. Co. 235 N.Y. 487; Engine Airplane Corp. 485, 7, Fairchild 1, & 138 N.E. 643, Cox, 2d 656.” Sup., 50 N.Y.S. v. cited, following: we add the Dial authorities Sun
To Rideout, Super. 361, 90, 29 N.J. Atl. 102 af- Corporation 442; Gladding 252, 108 A. 2d B. F. firmed, & Co. Inc. v. 16 N.J. Cir., 722; Schreyer Angles, 6 245 F.2d Inc. v. Casco Scientific Supp. 159, part, reversed in Corp., F. F.2d Products C.J.S. the record before us Huffines had appears con It developed “Compressor a device which he called ceived Truck”, applied and had for a for Refuse Mechanism Hyde thereon. The unknown to details of this device were during negotia Corporation representatives until disclosed to its agreement. licensing tions which culminated in details of Such belonging Huffines, construction were “trade secrets” Smith Corp., Cir., fully v. Dravo 7th 203 F.2d were disclossed patent application, his the details were made avail of which Hyde together long Corporation, prints, etc., able to with blue public by before the was made Patent Office granted covering when a was some of the claims con original application. tained in the If these details as to construc by Hyde tion Corporation were received in confidence and that company attempted exploit injury later them to Huffines’ through confidence, lies, a breach of an action and it matters not designated whether the suit be as a “trade secret” case or as a confidence, suit for commonly breach of which is a term used describing Huffines in his claim for relief. Bercher See v. Con Laboratories, toure 279 U.S. 49 S. Ct. 73 L. ed. 752. We have not held as a matter relationship of law that of licensor and licensee in itself created a confidential relationship parties. true, between' undoubtedly It is as stated in one of herein, that, the briefs filed “The existence aof confidential rela tionship btween a Licensor and Licensee is to be determined in case each it does merely not follow that because the [and] parties occupy position of Licensor and Licensee a confidential relationship results as a judge matter of law.” The trial evidently opinion Hyde Corporation that the obtained its knowledge through dealings device involved its with *19 parties Huffines while attempting the were to work out con tract for their mutual benefit. As a result negotiations, of these they agreeable arrangement entered into an actually had putting Hyde Corporation the effect of the garbage into the dis posal body “Viewing picture whole,” business. the aas the con clusion was reached that a relationship confidential existed be parties tween the by which entitled Huffines way to relief in of junction. picture encompasses The as a whole the contract of parties, by the the facts undisputed shown the evidence as well jury’s as those holding established the verdict. The of the trial point court on the was affirmed Appeals the of Court Civil upon authority and also this Court of the decisions set forth original opinion. in the all-important question litigation in this is whether the beyond should extend the date of the of issuance patent. Upon point this there an is admitted conflict of author- ity. rehearing, petitioners adopt change On approach some' of argument. present emphasis judge
or in The trial in the case extremely compared one rendered detailed decree as with the Fishing Co., Inc., in entered K Tool v. & G. & G Oil & Service G. Service, at- Tool which was volume S.W. descriptions the in indefiniteness term. The tacked for claims incorporated in patent application patent and the itself were claims, decree, descriptions fea- of the not as injunc- protected by be tures of Huffines device which should suggestion there tion as so-called “trade secrets”. While is descriptions may to matters well certain of relate these claims long public knowledge held within the realm before Huffines negotiations representative Hyde Corporation, with argument hardly gravamen can nor it reason- ably supported by grounds new in the motion set forth be considering (even in “motion to amend trial filed the trial court trial), judgment” part and correct as a of the motion for new urged points Appeals, and the the Court of Civil original assignments application and amended contained in the for writ of error. patent,
It is contended issuance for as distin claims contained guished public from the claims of the itself became injunction is to property. course true. The effect of the This of every deprive right Hyde Corporation that which to do do, e.g., person make of the disclosures other could full use patent application which were claims contained protected by patent. carried This situation forward original again recognized opinion. in the encounter the con We Corporation flict v. Universal Slide between Conmar Products Adolph Gottscho, Co., Cir., 150 and Inc. v. Fastner 172 F.2d Marking Corporation, 18 N.J. 114 A.2d American patentable All are not and it cases. trade secrets and similar knowledge gained trade one has secrets that where seems confidence, exploit permitted he the economic ad should thereby opposing party vantage gained the detriment of the public disclosure the claims contained simply because knowledge prior who has application. One obtained in the manufacturing may well establish a in confidence of a device start, speak. not and often does not on He stand so head competing equality with manufacturers of economic the basis *20 public large at date of the disclosure public at or the way application. For this reason relief in the claims arbitrarily not be denied trade because the should injunction a an have been made contained secrets issue parti- should and if so an public. Whether
589 must, large to a type rendered cular degree, depend upon of decree that should be Schreyer case. particular the facts of each Cir., 921; Franke v. Corp., 2nd 190 F.2d v. Casco Products Wiltchek, 493, Cir., 2nd 209 F.2d .Judge dissenting opinion filed Jerome
In view holding case, may thereof we comment on the Frank the latter sug- point a to that detail as the dissent raises similar some gested by in the us. Franke v. amicus curiae case now before jurisdic- strictly federal was a trade secrets case. The Wiltchek diversity citizenship parties. 28 tion was based 1332, York was Sec. and the law of the of New N.S.C.A. State urged applicable. plaintiffs’ process It heart of expired (alleged secret) a trade revealed to be “was improvements patent, unpatentable and that thereon were applications Appeals of mechanical skill.” The Court of said that,
“* * *
totally
plaintiffs’
This
the nature of
misconceives
right.
assert,
assert,
property
Plaintiffs do
indeed cannot
right
development
in their
such as would entitle them to ex-
against
enjoyment
patent,
clusive
the world. Theirs is not a
but
infringement,
a trade secret. The essence
their
action is
breach
It
of faith.
matters not that defendants could have
gained
knowledge
study
expired patent
their
plaintiffs’ publicly
product.
they
marketed
The fact
is that
did
they gained
plaintiffs
not. Instead
it from
their
via
confidential
relationship,
doing
duty
in so
incurred a
not to
it to
use
plaintiffs’
duty they
detriment. This
have breached. Junker v.
Plummer,
76,
667,
citing
320 Mass.
67 N.E. 2d
590 injunc- awarding propriety of The Court divided Judge upheld opinion by majority in Clark tive relief. The an granting perpetual injunc- judge in the action of the district tion. It was said: governs therefore, appear, York law
“It would New academic; largely point. question remains of this But unique all is only way at law seems which New York leading pertinent decisions. number and force only jurisdiction, its exten- but —in view case Hoffman, supra, country, still Tabor v. sive citation —for the 12, 740, 30, 37, Rep. 13, Am. where 118 16 St. N.Y. 23 N.E. preventive plaintiff remedies of the court held court,’ ‘entitled to respect can be discovered without to whether ‘one secret easily a defendant’s resort more than another’ or that necessity.’ de- than a That secret ‘was convenience more particularly point counsel there defendant’s cision is because grant dissenting opinion special exception and a an took damages distinguished at injunction, from the award of 32, 33, Among 30, 38, cases N.E. 12. recent law. See 118 N.Y. 23 following may Spiselman apply cited: which follow and it the be Rabinowitz, 548, ap- 138, supra, App. 2d v. peal 270 Div. 61 N.Y.S. 608; App. 921, Pub.
denied 270 62 2d Biltmore Div. N.Y.S. 337; Grayson Corp., 504, Div. 71 2d Co. v. Pub. 272 N.Y.S. App| 706, Co., App. N.Y.S. Petnel American Tel. & 280 Div. 117 v. Tel. 695, 295; Cluett, 294, Peabody Co., 31 2d & 177 Misc. Sachs v. supra, 718, J.; Corp., per Shientag, 2d v. Dravo N.Y.S. 7 Smith 369; Corp., Cir., Schreyer F. Products D.C. 203 2d. v. Casco issue, Cir., Conn., 159, 168, 2 Supp. on this 190 97 F. affirmed 360, 921, 913, Sup. 96 F. denied 72 Ct. certiorari 342 U. S. Industries, 683; Petroleum L. Inc. v. Ed. International Warren Del., 914; Corp., Supp. 907, American Re F. v. D.C. 99 Schavoir 582, 583; see Co., 133 bonded Leather 104 Conn. A. Trade-Marks, Competition Nims, The also Law Unfair ; (4th 1947) Note, 141, 143a, Protection Sections Ed. Secrets, apt in its L. Rev. Thus Use of Trade Harv. Foods, is the late of Extrin facts and citation of authorities case Leighton, supra,, Misc. 115 N.Y.S. 2d Inc. v. enjoined use of a formula where Justice Hart discoverable flavoring preparation products of certain and ordered for the accounting profits. an opinion show,, cases cited earlier in this
“As the several singular aspect nothing in this of New York law. In there point an citing cases to the inventor or dis- a multitude of granted injunction’ against ordinarily use of coverer ‘will lengthy secret, the editors of annotation formula trade 449, 488-490, say that in fact ‘most of the of cases 170 A.L.R. insignificant only or in- cases’ and cite two cases are contrary. Spiselman apposite like cases to See to effect *22 138, appeal Rabinowitz, supra, App. 270 Div. 61 N.Y.S. 2d App. have found no denied 270 Div. 2d 608. N.Y.S. We indeed, authority So, if a search case to throw on this law. doubt so-called, the be made for law’ result must be same ‘federal the existing authorities, above; see, pointed on out we have Schryer example, court the discussion below and in our Corp., supra.” Casco Products Judge opinion Frank While was of the that an award of dam- ages complete case, justice would do under the facts of the his
argument question injunction raises the of an of limited dura- dissenting tion. opinion In a reference was made to differ- suggested entiation as to remedies Restatement of the support Judge Law of Torts. In differentiation, of such Frank following argument: submitted the
“* * * (a) The harm done a defendant’s breach aof plaintiff’s plaintiff’s confidence is use the secret to ‘loss’ (b) By wrong deprives ‘detriment.’ defendant’s he plaintiff of something gives a trade secret defined as which plaintiff opportunity advantage ‘an to obtain competi- an over (c) tors.’ vention,’ process Where device a consists ‘novel in- plaintiff may have chosen not to it—which limit period monopoly would keep of his to the in- —but expectation vention to one, except himself with the that no those confidence, secret, in his will discover the monopoly so that his will endure for an unlimited time. If the defendant to comes know the by improper secret of such an invention means his use knowledge of this plaintiff will cause a loss to an indefinite during period plaintiff future ‘opportunity will lose his advantage competitors.’ an obtain perpetual over Wherefore injunction proper protection protection affords as endur- —a invention, ing grounded monopoly as the on the (d) secret But only slight, non-patentable where the secret involves easily-discoverable improvement, competitors soon, will in all probability, legitimately improvement. learn how to contrive this wrong Consequently, ‘advantage plaintiff’s defendant’s has caused loss of competitors’ most, which, over at would not have long. enjoin Perpetually lasted defendant in such circum- regard stances would to harm him be without to the loss or de- by plaintiff. triment suffered beyond time short, “In such —continued legitimate trade, will catch
when, likelihood, means in all * * * nothing- punishment, else. plaintiff up sheer with the —is designed deter, not injunctive process “The historic power equity has punish. jurisdiction been The essence of equity each decree to do and to mould of the Chancellor rigidity Flexibility particular rather than case. necessities * * * distinguished it.” has argument, might By way of Frank illustration magnetic fishing the “secrets” tool involved said Fishing Co., Service, & 594, Inc. v. & Tool K & G Tool Service G G readily be more ascer- this volume S.W. legiti- patent application publicized or from tained from itself than examination of the tool could the “secrets” of mate “Compressor for Refuse Truck” here Mechanism involved. *23 so, competitive by a a fair could be attained restraint If balance course, in one case than in other. Of as is of lesser duration may probable, the matter be academic. With the loss of indeed advantage, may wholly of the restraint the trade the duration be may be, pointed as to a defendant. However that original opinion, immaterial injunction question an in the out durating perpetual is not us. The issuance of limited before remedy injunction is common afforded in trade secret cases. majority by cited Franke v. can The authorities Wiltchek lightly disposed destroy are brushed aside. Nor we not be secrets,” carefully practical law of trade so that as a “the built (may) open highjacking assets be left “such business matter findings judge proper The trial from all sides.” has cor rectly injunctive is for this case relief. He determined e.g. equitable issue, per the usual order has ordered injunction. injunction It would seem to follow that petual an suggested by therefor as duration be substituted limited of Judge argument, an issuing abuse of discretion Frank’s injunction have be would shown. perpetual Franke v. Wilt showing- check, 1.c. 499. No such F. 2d was made in stated, question As heretofore limited case. dura perpetual opposed injunction injunction is not tion is party The matter by a hereto. before us. raised rehearing is overruled. motion Petitioner’s June Opinion delivered dissenting. Walker,
Mr. Justice consideration, de- I have concluded that our After further patent file cision in this is unsound. Since entire be- case issues, public property the information comes when longer secret. therein can no constitute a contained trade When agreement, respondent parties had filed made their license original containing separate patent application his seventeen novelty distinct claims of invention. Thirteen of these rejected by claims were the Patent Office because lack of prior patents by invention or respondent with and were conflicts cancelled subsequent application. amendments to his While claims, embody only patent as issued lists ten these four of original application listed in the those which were with some applications. asserted additional claims in the amended The entire world now has access the file and is free to incorporating manufacture and sell devices the features of the rejected except thirteen may cancelled claims as the same protected patents, petitioner be other perpet- has been enjoined doing ually petitioner so. The net result is that prevented doing from ever hereafter everyone that which respondent else is free to do. Since can adequately protected damages duration, of limited the trial judgment clearly punitive court’s more than remedial. justified by saying
This action cannot be that a protection not afford the same as a trade secret or that an award damages infringement may for respondent. Respondent fully protect
testified that his possible, made as broad as because Patent Office would *24 Although “kick back” all he couldn’t use. it was thus contem- plated might rejected that some the claims be and have no protection either from the or as trade secrets after the issued, petitioner the contract does not bind never to use any By the information disclosed applying to it. for ac- and cepting patent, respondent his elected to protec- look it tion and his secrets to the broadcast world. He chose disclosure protection preference and to a trade secret. The nar- question whether under all row these petitioner circumstances legal duty any never is under to use of the information ob- respondent, my opinion and in tained is not. original opinion apparently recognizes Our that the trial goes suggests It judgment too far. respondent that might
court’s only injunction to an entitled been have of limited duration if proper predicate by laid a petitioner had pleadings alternative showing evidence that supporting the same would afford my comport respondent adequate not protection. This does with resting moving party equitable upon in an idea of the burden simply proceeding. can establish It said that he should granted right much more his to some of relief and then be sort protection unless the defendant actually required for his than is proves that he is entitled to less. injunction argue that petitioner not here does While vigorously period years, it has
should have limited to a been injunction beginning permanent contended from the granted of Conmar the rule should not have been Cir., Co., Corporation 2nd Fastener v. Universal Slide Products my opinion 150, applied in this case. It F. 2d should be right his respondent establish the burden i.e., injunction. granted, perpetual he has the relief This justi- pleadings evidence done. In where there are no case duration, fying of limited we the issuance of deny injunctive of the Conmar case should follow the rule through public made secrets have been relief after the trade patent. Rev. 36 Texas Law 384. the issuance of See judgments the courts and render the be- I would reverse petitioner permanently enjoined from far as has been low so selling embodying manufacturing de- features device original patent application not carried in the which were scribed patent. in the forward reserved Opinion delivered June 1958. July rehearing 1958.
2nd Motion overruled Company, Incorporated, Tool and Service K & G Fishing Tool Service G G March A-6577. Decided 1958. No. Rehearing overruled June rehearring July 16, 1958. Motion for Second 782) (314 2d Series S.W.