197 A.D. 66 | N.Y. App. Div. | 1921
The plaintiff has been granted, except as to the defendant Waaler, a most comprehensive decree, perpetually enjoining and restraining the defendants, their agents, servants, employees," representatives or other persons in any manner connected with them or any of them, (1) from manufacturing, selling, advertising or offering for sale, directly or indirectly, any transfer trade-mark stamps, embroidery designs, indelible letters, figures, or other similar articles made by the process known as the Kaumagraph dry process, or by the same process under any different or other name and from employing said process or the secret formula or formulas, machinery, dies, engravings or information used in connection with or forming a part of said process; (2) from disclosing to any other person, real or in law (sic), the said process or any part thereof, or any of the formulas, machinery, dies, methods of engraving or trade secrets used by said plaintiff in connection with said process; (3) from manufacturing, except for and at the request of the plaintiff, any machine or die to be used in manufacturing or producing transfer trade-mark stamps, embroidery designs, indelible letters, figures, or other similar articles by said process; and the decree further directs the Stampagraph Co., Inc., to account to plaintiff for all sales or contracts of sale made by it for any of the above specified articles.
To support such an injunction there must be adduced considerations of the strongest and most convincing character, for it is a perpetual restraint on these parties from prosecuting a business, and on some of them from engaging at any time in a trade or occupation in which they have spent a large portion of their lives. It is in restraint of trade and competition, and is an inhibition upon a man’s right to pursue his occupation, except for and in the interest of the plaintiff.
The reasons stated by the learned justice at Special Term for his decision are twofold: First, that two of the defendants had made contracts of employment with the plaintiff in which were negative covenants against engaging in a similar occupation; and second, that the plaintiff was engaged in manufacturing under a secret process and that the defendant Turner, after leaving plaintiff’s employ, had joined with the
When a person has a secret process by which he is manufacturing an article for commerce, those who occupy a confidential relation, whereby they become possessed of the formula and method of manufacture, may not communicate such secret to competitors in business or engage in the same business and use the knowledge thus acquired to the detriment of the employer.
“ Courts of equity will restrain a party from making a disclosure of secrets communicated to him in the course of a confidential employment. And it matters not, in such cases whether the secret be secrets of trade, or secrets of title, or any other secrets of the party important to his interests.” (2 Story Eq. Juris. [14th ed.] § 1283.)
“ The plaintiff has the right to keep the work which it has done, or paid for doing, to itself. The fact that others might do similar work, if they might, does not authorize them to steal the plaintiff’s. * * * The plaintiff does not lose its rights by communicating the result to persons, even if many, in confidential relations to itself, under a contract not to make it public, and strangers to the trust will be restrained from getting at the knowledge by inducing a breach of trust and using knowledge obtained by such a breach.” (Board of Trade v. Christie Grain & Stock Co., 198 U. S. 236, 250.)
These principles are well settled and have been recently declared and enforced by our courts. (Vulcan Detinning Co. v. Assmann, 185 App. Div. 399; Eastman Kodak Co. v. Powers Film Products, Inc., 189 id. 556.) In these cases the plaintiff had developed a new process for producing the results obtained; all the knowledge that the employees had of this secret process they had obtained in the course of their employment by the plaintiff and as a necessary incident of their employment. In order to bring itself within the protection of these equitable principles it was necessary for the plaintiff to prove that it was employing in its business a secret process either developed by itself, or the sole right to use which had been acquired by
The plaintiff is engaged in the business of manufacturing and selling designs printed upon tissue paper with a composition that will transfer the design to a fabric when the paper is laid face down upon the fabric and a heated iron applied to the back of the paper. These designs are used for transferring trade marks and lines for embroidery or pattern cutting. The manufacture and sale of such transfer designs had been known and carried on in England, and in more limited extent in this country, for many years before the plaintiff was organized. One. of the principal concerns in the business was William Briggs & Co., Ltd., of Manchester, Eng., who had a representative in this country selling their product or manufacturing similar designs by their process. The process they employed was that patented by John Briggs in 1874 in England and in the United States by his executors in 1879, and an improvement in such process patented in England by Joseph Scott. The Briggs patent covered a transfer of pattern to fabric “ by printing the pattern paper from a surface block or otherwise, as usual with the design to be produced in a bituminous substance or varnish, and transferring the said pattern to the fabric when required by the application of heat to the back of the paper,” and stated: “ We make no claim to any process or apparatus for printing the patterns in bituminous substance or varnish on the pattern paper as they may be printed by blocks, or cylinders, or otherwise.” The Scott patent covered an improvement on the Briggs patent by adding a metallic powder to the existing process, thereby preventing running or spreading on the application of heat. This patent set out the formula which is substantially the same as that used by the Stampagraph Co., Inc. Shortly prior to 1902, one J. C. Jack visited England and learned of the process used by William Briggs & Co., Ltd., and met and discussed the matter with the defendant George Chadwick and William Scott who were then in the employ of William Briggs & Co., Ltd. Chadwick had been so employed for thirteen or fourteen years and Scott for three or four years. Jack suggested that Scott and Chadwick leave
The $350 was sent to William Scott and he came to this country, bringing with him some machinery and the knowledge of the process used in the business conducted by William Briggs & Co., Ltd. Neither Scott nor Jack was owner or licensee of any patents or secret formulas. Monro, the plaintiff’s president, testified that he had obtained a copy of the Scott patent and that it was the underlying basis for all of the plaintiff’s work, experiments and improvements. About four months after Scott came, to this country, George
Thus it would appear that all the plaintiff did was to appropriate a process of manufacture of transfer stamps that had been in use for many years before plaintiff obtained the knowledge of the process. Calling the process by a different name gave them no exclusive rights in the thing itself. It was thus proved that the plaintiff, when it commenced to manufacture, used the process and machinery theretofore used by Wilfiam Briggs & Co., Ltd.
Counsel claims that the plaintiff has made improvements. If so, what were they? The defendant had the same right to use the process and machinery which had been used by William Briggs & Co., Ltd., as did the plaintiff. If there were changes and improvements in the formulas or in the machinery which did not result merely from skill in manipulation acquired by experience or from the application of well-
There remains the question of the plaintiff’s right to enjoin the defendants George Chadwick and Arthur Turner by virtue of the negative covenants in their contracts.
The first agreement with George Chadwick contained a covenant that under no circumstances nor at any time would Chadwick “ engage in any business similar to, or conflicting with, the business of the Kaumagraph Company, or produce dies, trade-mark stamps, embroidery designs or
In the latter part of the year 1918 George Chadwick was reduced from the position of superintendent, and a man with no previous experience in the business was put over him; and on January 13, 1919, he gave the plaintiff one year’s notice in writing of the termination of the contract. He did no act in violation of his agreement, nor so far as the proof shows was he disloyal to his employer. The sole justification for enjoining him was his statement that when he left the plaintiff’s, employ he should go into a similar business. It must be borne in mind that Chadwick for thirteen or fourteen years before he entered into the plaintiff’s employ had worked for the William Briggs & Co., Ltd. It was because of his knowl
In contradistinction to the sale of a business an employee ordinarily receives no consideration other than the fact of present employment; his labor is a full return for his wage. Contracts by employees, unreasonably limiting their right to pursue their trade or occupation in the future, are held to violate public policy, because the employees’ means for procuring a livelihood for themselves and family are thereby diminished. They are deprived of the power of usefulness, and the public is deprived of the benefit of the exercise by them of their knowledge and skill. The purpose of the covenant before us is not to protect the plaintiff from the revelation or use of the secrets of its business, for it is not so limited; but it is to remove from possible competition one whose knowledge and skill, acquired before he came into its employ, has been found valuable to it and to prevent that same knowledge and skill being utilized for the benefit of himself and others, after he has ceased to be employed by plaintiff. Such a covenant is an unreasonable restraint of trade and competition and will not be enforced in a court of equity. .
Arthur Turner was employed at a salary of fourteen dollars per week and his contract contained a covenant in language almost identical with that in George Chadwick’s second agreement. When this contract was about to expire, a new contract was prepared. The person who drew the- contract seemed fearful that the words “ at any time ” might be construed to mean at any time during the term of the contract, and, therefore, the new contract provided “at any time before or after
The Stampagraph Co., Inc., was organized by Arthur Turner, George H. Chadwick, Mary Calrow, Henry A. Himer and Alexander W. Moffat in March, 1919, with a capital of 12,000; and is manufacturing some of the articles that the plaintiff manufactures under the process set forth in the Scott patent. They purchased two machines from the person who made machines for the plaintiff. As the machine was not patented and the manufacturer was not then bound by agreement not to manufacture them for others, he had a right to sell and they to buy. The evidence does not show that the defendants are using any secret process of the plaintiff.
The judgment and findings inconsistent with this opinion should be reversed, with costs, and judgment directed for the defendants, with costs.
Clarke, P. J., Laughlin, Smith and Merrell, JJ., concur.
Judgment reversed, with costs, and judgment directed for the defendants, with costs. Settle order on notice.
65 N. J. Eq. (20 Dick.) 756.— [Rep.