The A. H. Emery Company v. Marcan Products Corporation, Marshall Control Products Corp., Hugh A. Mills, Ronald R. Marshall, and David E. GoldingThe A. H. Emery Company v. Marcan Products Corporation, Marshall Control Products Corp., Hugh A. Mills, Ronald R. Marshall, and David E. Golding
The complaint in this action charged the defendants with patent infringement and unfair competition. Federal jurisdiction was based on
The appellants claim that certain of the trial court’s findings in regard to the trade secrets charge were “clearly erroneous” and that the court abused its discretion in not sustaining the defense of “unclean hands.” Judge McLean’s opinions set out carefully and in detail the facts on which his conclusions were based. In the light of the evidence and the inferences reasonably to be drawn therefrom we are satisfied that there was no clear error.
For many years the plaintiff-appellee, the A. H. Emery Company (Emery), has been engaged in the manufacture and sale of a variety of precision weighing devices at its plant in New Canaan, Connecticut. The hydraulic load cell, the device involved in the present litigation, was designed to weigh a large load without sacrificing the accuracy achieved in substantially smaller weighing devices. In simplest terms it consists of a cylindrical chamber, containing hydraulic fluid, a load head or platform upon which the thing to be weighed is positioned, and a piston which transmits the weight of the object from the load head to the fluid in the chamber where a measuring instrument records the increase in pressure thereby created. The high degree of accuracy achieved in the plaintiff’s cell is in part attributable to the presence of a steel ball between the load head and the piston, which operates to reduce the adverse effects of torque and other disturbing forces which are produced when the object to be weighed is not exactly centered on the load head. The ball may be either “low” or “high” in the load cell; in the former construction it is contained in a recess in the piston below the load head, whereas in the latter it is housed in a recess in the load head itself and rolls on the uppermost surface of the piston, rather than on the bottom of the recess in the interior of the piston. The plaintiff makes load cells of both the “high” and the “low” ball variety.
From 1943 until his departure from Emery in 1960, the defendant, Hugh A. Mills, was employed by the plaintiff, first as a research and development engineer and later as a sales representative. While he was so employed Mills assem
Robert Northrop was a draftsman employed by Emery from 1949 until September of 1960 when he left the plaintiff’s employ. For the most part, his work had consisted of making drawings of parts of Emery cells, particularly of the EC 30 cell, the plaintiff’s principal product, and he was therefore thoroughly familiar with the dimension and tolerance data used in their construction. In December of 1960 Northrop produced, at Mills’ request, a complete set of parts drawings of the Emery EC 30 cell, showing dimensions and tolerances, which he sold to Mills for $150. An accurate load cell could not have been produced by the defendants without the tolerance information contained in the Northrop parts drawings and, although some of the more obvious features of the cell might have been measured and copied from the model Mills had assembled, it was these drawings which enabled the defendants to manufacture a cell to compete with those made by the plaintiff.
As stated above it had become apparent at pre-trial that the patent, which the plaintiff asserted, had become invalid because over a year before the patent application had been filed, the plaintiff had made to two customers several sales of its low ball cell device. See
Although at the trial the plaintiff claimed that a variety of trade secrets had been misappropriated and used by the defendants, the court held only that the information contained in its parts drawings, which had been reproduced from memory by Northrop for the use of the defendants, constituted protectable trade secrets. It said, “ * * * the detailed data contained in the parts drawings was intended by plaintiff to be confidential, for use by plaintiff’s employees in the course of their employment, and that the employees, specifically Mills and Northrop, so understood.” The court correctly ruled that, through the sale of its product in the public market, the plaintiff had released any claim to trade secrets in readily discernible physical features of the cell or in its measurable dimensions.
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The tolerance data, on the other hand, could not be obtained through observation or analysis of the cell itself, and sales of the product did
Appellants contend that the plaintiff failed to prove there was a trade secret and, if there ever was one, the appellants showed conclusively that it was released when the plaintiff circulated parts drawings to certain of its customers and to various members of the trade. They point to the testimony of the defendant Mills to the effect that these drawings were freely shown to prospective customers and to others on demand. This testimony, however, was contradicted by that of Tate who could recall only “a few rare instances” where parts drawings might have been shown or sent to customers but in those instances the parts drawings revealed only the external portions and “whatever we sent out did not show the internal construction of the cell, the internal workings of the cell.” The trial judge was clearly justified in believing Tate, who, he found, was “an honest man” rather than Mills whose testimony he discredited. Graver Tank & Mfg. Co., Inc. v. Linde Air Products Co.,
The only other argument which the appellants have pressed in regard to trade secrets is that the plaintiff failed to prove that either Northrop or Mills had any reason to believe that the data contained in the plaintiff’s parts drawings was intended to be confidential or that a divulgence of this information would be considered a breach of confidence.
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They rely heavily on the fact that neither of these employees had ever been expressly informed, while in the plaintiff’s employ, of the confidential nature of the parts drawings, or otherwise alerted to that fact, e. g., by labels or stamps giving notice that it was secret matter. But it is well settled that detailed manufacturing drawings and tolerance data are prima facie trade secrets. See e. g., Schulenberg v. Signatrol, Inc.,
Appellants urge as an independent ground for reversal “bad faith and unclean hands” for the way in which the plaintiff handled its patent infringement claim. They assert that the plaintiff engaged in misconduct sufficiently pervasive to disentitle it to the relief granted in connection with the trade secret claim. On this point the trial court found that the conduct of the plaintiff was at times “inept” or “negligent” but never fraudulent or malicious, and concluded that the defendants “should not be permitted to get off scot-free merely because plaintiff’s conduct in some respects may leave something to be desired.” On this aspect of the case we decide that, while the record would have supported the trial judge if he had reached a contrary conclusion, it does not show that he abused his equitable discretion in reaching the one which he did.
The first instance of alleged misconduct relates to the application for a patent on the plaintiff’s low ball cell which was filed by Tate with the Patent Office on July 5, 1957. Tate signed the usual inventor’s oath containing the following statement: “I do not know and do not believe that this invention was ever * * * in public use or on sale in the United States for more than one year prior to this application.” This statement was untrue, since, more than one year prior to the Tate application, the plaintiff had sold at least ten of the subject cells, five to the Hooker Electrochemical Company and five to Pratt & Whitney Aircraft, and, as the court noted, there was convincing evidence that Tate was aware of these sales at the time he signed the oath. The court found that Tate’s conduct had been negligent, but not intentionally fraudulent. This conclusion was based upon the finding that Tate did not read the oath which he signed and that he was therefore not aware of its contents.
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The appellants have argued rather persuasively that to excuse Tate’s cavalier behavior would disregard the public’s “paramount interest in seeing that patent monopolies spring from backgrounds free from fraud
or other inequitable conduct,”
Precision Instrument Mfg. Co. v. Automotive Maintenance Machinery Co.,
Appellants also contend that, at the time this action was commenced, the plaintiff either knew or believed that the Marean load cell, which is high ball, did not infringe the Tate patent which, they claim, is clearly limited to cells of the low ball type. For this they rely on the fact that Tate personally examined a Marcan cell prior to the commencement of this action, and was then of the opinion that it did not infringe his patent. The trial court refused to find that the plaintiff had acted with unclean hands on this basis, however, since, at the time the complaint was filed, Tate no longer held a position of executive responsibility in the plaintiff’s management and he was therefore not consulted about whether or not to sue. The claim for patent infringement was included with that for theft of trade secrets only on the advice of plaintiff’s counsel who, the court found, were then of the opinion that the Marcan load cell might be found to infringe claim 12 of the patent despite its high ball construction. The court further found that the attorneys’ advice was given in good faith and that it represented their honest professional opinion at the time. This finding appears to have been based largely upon statements made by the attorneys in the course of the hearing which was held in connection with the defense of unclean hands and therefore would depend heavily upon the credibility given to them by the trial judge. It is also supported, however, by the fact that the theory upon which the attorneys then claimed that the charge of infringement had been based, i. e., the doctrine of equivalents,
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was asserted by them at a very early stage in the litigation in their answers to certain interrogatories propounded by the defendants. While in its opinion the trial court expressed doubt as to the merit of the plaintiff’s theory, we are satisfied that the equivalents doctrine
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was at least suffi
Finally appellants contend that the plaintiff acted in bad faith when it failed to withdraw the claim of patent infringement after its attorneys learned in late 1963 of the sale of Emery cells to Pratt & Whitney and after they discovered evidence of the Hooker sales in plaintiff’s files in April of 1964. It is not disputed that in December of 1963 the plaintiff did offer to withdraw the pending infringement charge with prejudice; but in return it demanded that the defendants agree to give up “any claims of any kind with respect to this patent and its appearance in this litigation.” This was unsatisfactory to the defendants both because it left them without a judicial declaration of patent invalidity good against the world, and because it required the defendants to surrender their right to claim damages for what they consistently maintained was the intentional assertion against them of a baseless charge of infringement. When the Hooker sales were discovered in April of 1964, the plaintiff made no concessions from its earlier position, despite the fact that, according to a subsequent statement of one of its attorneys, they knew “without question” at that time that the patent was invalid. But this must have been equally apparent to the defendants, whose counsel were immediately advised of the Hooker sales by counsel for the plaintiff. If the presence of the patent infringement charge in the litigation was such a damaging brake on the appellants’ sales, as they now claim, 8 their obvious recourse was to move for summary judgment on their counterclaim of patent invalidity. Having failed to do so, they cannot now maintain that the plaintiff’s failure to move for a formal dismissal of that part of its action was so inequitable as to bar the relief for theft of trade secrets to which it is otherwise entitled.
We have reserved as the final point for discussion the under-girding issue of whether or not there was federal jurisdiction over the “pendent” state law claim for unfair competition, to which practically all of the evidence presented at the trial was directed, in view of the rather rapid evaporation at the trial of the patent infringement issue. The complaint asserted federal jurisdiction of the subject matter under
But the existence of federal power does not mean that the trial court must or should exercise its jurisdiction in all cases where it in fact exists. As the Supreme Court made clear in United Mine Workers v. Gibbs,
In its brief appellee states that the trial judge was informed during pre-trial conferences with the parties that the plaintiff “would offer no evidence relating to infringement in view of the prior use” established by the Pratt & Whitney and the Hooker sales. If this was so, then at that point, the proper procedure for the pre-trial judge to have pursued was to dismiss the plaintiff’s infringement suit and declare the patent invalid pursuant to the defendants’ counterclaim. This undoubtedly would have carried the trade secrets claim along with it. As the Supreme Court cautioned in
Gibbs,
supra, “Needless decisions of state law should be avoided both as a matter of comity and to promote justice between the parties, by procuring for them a surer-footed reading of applicable law. Certainly, if the federal claims are dismissed before trial, even though not insubstantial in a jurisdictional sense, the state claims should be dismissed as well.”
The judgment of the district court is affirmed.
Notes
. See Specimer v. Reynolds Metals Co.,
. The standards which the plaintiff’s proof must meet in an action for misappropriation of trade secrets are set out in the rule in § 757 of the Restatement, Torts (1939) :
“One who discloses or uses another’s trade secret, without a privilege to do so, is liable to the other if * * *
(b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him, or
(c) he learned the secret from a third person with notice of the facts that it was a secret and * * * that the third person’s disclosure of it was otherwise a breach of his duty to the other, * * *."
. The court made the following finding:
“1 find that when Tate signed his oaths he was unaware of the fact that the oath contained a representation denying the existence of the sales. -He signed the oaths in a purely perfunctory manner, without reading them carefully. His attention was not called to what he was signing. No investigation was made by him or by counsel to ascertain whether or not sales had in fact taken place. His representations, therefore, were negligent, but they were not intentionally fraudulent.”
. Traditionally the doctrine of unclean hands has required a finding of wrongful intent or wilful misconduct and mere negligent conduct has not sufficed. See e.g., Freeman Mfg. Co. v. Federal Department Stores Inc.,
.
. Under the equivalents doctrine a device which does not correspond literally to the claims of a patent may nevertheless be held to infringe if it is the functional equivalent of the subject matter of the patent. Graver Tank & Mfg. Co. v. Linde Air Products Co.,
. A possible difficulty with the plaintiff’s theory is that if the low positioning of
. In the testimony taken at the hearing on unclean hands the trial court found “no convincing evidence” to support the defendants’ claim that the patent charge was intentionally retained in the litigation by the plaintiff in order to exploit the competitive effect which it might have on Marean’s business. The evidence did suggest, however, that the patent litigation was at times mentioned to potential Marcan customers by representatives of the plaintiff, even after the discovery of the Hooker sales. But the defendants did not affirmatively make this conduct a ground for relief in their counterclaim, as they might have, see Cutting Room Appliances Corp. v. Empire Cutting Machine Co.,
.
. The test of what is a “substantial” claim under § 1388(b) is the same as that applied in determining whether a claim should be dismissed for want of jurisdiction rather than on the merits in cases involving original federal question jurisdiction. See United Mine Workers v. Gibbs,
. The complaint does not allege diversity of citizenship and in fact there was no complete diversity, as both tlie plaintiff and tlie defendant Mills are citizens of Connecticut. Had we decided that the trial court abused its discretion in exercising jurisdiction under