70 N.J. Eq. 588 | New York Court of Chancery | 1906
The evidence in this cause shows that the firm of “Th. Goldschmidt,” of Essen, Germany, had, prior to 1894, as the result of experiments pursued for that purpose, so perfected a process by which well-known chemical and mechanical principles could be so applied in the separation and recovery of different metals as to render the detinning of tin scrap profitable to a degree not theretofore attained.
The successful combination was not patented, but its inventors sought to protect themselves against infringement by keeping their discovery a secret, only imparting it to such of their employes as the carrying on of the business required, and then only upon a promise not to divulge.
Dr. Hans Goldschmidt, the member of the firm most active in making the experiments and obtaining the results, testified in detail regarding the agents used, viz., electricity, steam, lime and caustic soda, and the required relative' power and quantity of each, and also described with great particularity the size, character and relative positions of the machinery and other necessary mechanical instruments used in their detinning plant.
In order to understand precisely what these inventors claimed was the secret process which they had discovered, we cannot do better than reproduce a portion of the cross-examination on this point, which is as follows:
“Q. You say that jtou invented this process that you have described?
“A. Yes, sir, I did.
“Q. Wasn’t electrolysis well known before the time you claim you invented this process?
*590 “A. If you mean by electrolysis electrolytical processes,. I answer that there were known a good many electrolytical processes for recovering metals of different kinds.
‘‘Q. You mean by that the separation of metals by electric current?
“A. The principles were known and some of them applied in practice.
“A. And this was true of tin, was it not?
“A. No.
“Q. So that your answer is that tin had never been removed from iron by electricity?
“A. That is not my answer; it has been removed before, but on a .smaller scale.
“Q. Regeneration of lye was known before the time last spoken of, was it not?
“A. What kind of regeneration of lye do you mean?
“Q. Application of carbonic acid and caustification by lime?
“A. The principle was known.
“Q. What, then, was novel in your process of invention?
“A. There were a good many things new, which I partly described this morning; the main tilings are the size of the baskets, the size of tho tubs, and the distances, especially worked out. of the baskets from the walls of the tubs; then the especial kind of inflow pipes, as described, .and the overflow; the electric combination of the tubs, as described;
. last, not least, the whole arrangement of the plant, which was set up in a manner that the handling of the bulky material was saved as much .as possible ; also, the making of the bundles by the steam hammer was new; all those details, of course, were never published, but were kept ■secret.”
It also appears, by a great preponderance of evidence, that while, prior to the discovery by Goldschmidt, a number of per- . sons were engaged in detinning scrap, and in so doing used the ■same agents employed by Dr. Goldschmidt, the business was not especially profitable; but when the processes which Dr. Goldschmidt claims to have discovered were applied to the detinning ■of scrap a very profitable result followed, leading to the building up of a successful business under their management at Essen. The growth of the business at Essen required the purchase of large quantities of tin scrap, some of which was bought in England and some in New York, the purchases in the latter city being made largely, if not entirety, from A. Kern & Company, a firm engaged in importing and exporting goods. The scrap from England appears to have been shipped, prior to 1895, through the Zealand Steamship Company, in the employment of which company were M. Lacmoes, R. J. Brakema and H. L. Herman,
No reasonable doubt can exist under the evidence in this cause that the methods and processes in use by the defendants, the complainant Laernoes and his partners, under the name of the Electro-Tinfabriek, and by the Messrs. Goldschmidt at Essen, are, for all practical purposes, identical, the changes in mechanical construction being so small and unimportant as to hardly merit consideration. The bill of complaint prays that the American Can Company, and the defendants Assmann, Baumann, Schmaal and Egbert, may be enjoined from operating the detinning plants at Paulsboro and Joliet, or constructing or operating any other factories in imitation of those of the complainants, or for the purpose of utilizing or operating under said secret process, or any improvements thereon, and that the three defendants last named be enjoined from performing any further services in the detinning plants of the can company, and that the employes of Assmann and the can company be enjoined from using or communicating any knowledge they may have of the secret process, or of the construction or operation of complainant’s plant, and that they be required to surrender and destroy all copies of such secret process and of all drawings and
The defendants, among other things, seek to justify their action upon the ground that the process was not a secret one. It certainly appears that a number of persons, particularly in Germany, were engaged in detinning by a process in some particulars not unlike that in use at Essen by the Messrs. Goldschmidt, yet it is equally clear that until the Goldschmidts had perf ected their plant the detinning business cannot be. said to have been successful, and I am inclined to the belief that the Goldschmidts did discover a method or process for detinning scrap, which was not known to their competitors, and that so far as they are concerned their secret could not be said to have been divulged by them, and .if it escaped it was through the gross betrayal of a confidence reposed in a trusted employe. While it thus appears that when Mr. Kern was dealing, on behalf of his associates, with Laernoes and his partners for a sale of the information which'they possessed, and which they had surreptitiously obtained from the Essen factory, the methods and processes then employed were not so well known as to have become the property of the world, it is manifest from this evidence that from the year 1900 down to and including the year 1903, numerous publications appeared in scientific journals describing with some particularity these or similar processes. A notable article on this subject, by Dr. Hans Mennicke, was published in May and June in the “Zeitschrift fur Electrochemie.” A reading of this article, in comparison with the formula furnished by Laernoes, justifies the testimony of Mr. Leitch that it describes the process employed at Paulsboro and Joliet. So if this case was devoid of what the complainant insists is a trust relation between the parties, I should have no hesitation in declaring that the process is no longer such a secret as to justify the interference of this court in preserving it to the complainant. What the complainant insists upon is that Mr. Assmann, as one of the original associates, occupies a relation of trust and confidence towards those who, in conjunction with him, purchased this .secret, and who, relying upon his agreement to preserve the secret, became stockholders of the com
While the proposition thus stated by Vice-Chancellor Reed appeals with great force to a court of equity, and is one which I would be bound to follow if the conditions which he states were present, viz., that “it had been obtained honestly,” it has no application here, because, in my judgment, the secret was not honestly obtained by Mr. Kern for his associates, because he had sufficient knowledge of the dishonest manner in which the Holland people obtained the secret from the rightful owner to charge him with notice of all such facts as a proper inquiry would have disclosed, and that knowledge will be imputed to his associates and the officers of the company for whom he was acting, in the business to which it related.
A corporation is liable for the fraud of its agents acting within their authority and in due course of its business, and cannot shield itself from responsibility by showing that the agent also failed in his duty to the corporation. First National Bank of Hightstown v. Christopher, 40 N. J. Law (11 Vr.) 435, 439. “The fact that the information had not been acquired by him in the course of his agency does not militate against the application of the rule in question, when the agent personally participates in the later transaction in behalf of the corporation. Where information is casually obtained by an agent for a corporation the cor
Mr. Kern admitted that before he had any dealings with .Laernoes, and on the 16th day of May, 1896, he learned from Dr. Goldschmidt, by correspondence, that Laernoes, representing the Holland conctern, had obtained his secret processes through Mr. Zeyen, one of his servants, and that Zeyen had been arrested and punished in a German court for taking from the Essen faetorjr, for the purpose of conveying it to Laernoes, a sample part of a metal basket used in the Essen factory, and that one of these letters from Goldschmidt, if not two, contained copies, taken from German newspapers, of articles describing the alleged offence. A part of the article which Mr. Kem had reads as follows:
“During the duration of the shipping contract by which the Zealand company acted as agents for Th. Goldschmidt, the officers' of this company advertised anonymously in the Essen papers for workmen on goods such as the Goldschmidt concern was making. After several workmen had applied, and had been engaged, although they remained for the timo being in the employ of the Essen firm, Inspector Laernoes obtained from them an exact description of the process and drawings of the apparatus. Workman Zeyen, who is now accused, refused to furnish samples, as only a short time before another workman had been punished for a similar theft. After the necessary apparatus had been constructed in accordance with drawings obtained from the man Zeyen, employed by Laernoes, Zeyen took leave of absence, under false pretences, went to Vlissingen, and made the first experiments on a steamer belonging to the Zealand company. The workman thereupon returned to Essen, and remained after his engagement, by order of the company, as it were, as a spy, with the firm in Essen. Later the Essen firm got wind of the competition, but without knowing that the Zealand company was back of it. The firm of Goldschmidt therefore turned to the Zealand company, whom they considered as their friends, and asked for information regarding the new firm, whereupon they were told that the Zealand company knew nothing of such a firm in that place. At the same time, the workmen engaged by Laernoes and his associates were speedily called*598 away from Essen to Vlissingen. Later it was learned that the workmen had not only furnished information and plans, but also samples, which were of the greatest importance in the carrying on of the work.”
When Mr. Kern went to Holland for the purpose of obtaining the secret process he had with him the letters and newspaper extracts which he had received from Dr. Goldschmidt, and the only steps which he took to verify or disprove these charges was to communicate them to Laernoes, who very naturally denied them. The following extracts from the cross-examination of Mr. Kern on this point axe very suggestive:
“Q. Did you make any inquiry as to whether or not the plant at Flushing differed in the smallest detail from the Essen plant?
“A. I did not.
“Q. Did you inquire as to whether or not the process used at Flushing differed in the smallest detail from the process used in the Essen plant?
“A. Mr. Laernoes told me that it was a different process.
“Q. Did you ask him how it differed?
“A. We did not go into details, because he refused to speak of it; he refused to go into details in regard to it.
“Q. Did you ask him how it was that he had enticed this man away from Dr. Goldschmidt—why he did that?
“A. I did not.
“Q. Did you ask him how it was that he had the man that he had employed from Essen bring samples from .the jv°rks there?
•‘A. I did not.
“Q. Did you ask him whether they did or not?
“A. I did not; but he told me that they did not.
“Q. Did he tell you they did not?
“A. Ves, he told me that of his own accord; he gave me that information himself.
“Q. Did he explain, then, how it was that both of them were convicted of doing it—what did he say to you about that?
“A. He said that he was not convicted.
“Q. He said that personally to you; now, the paper told you that both of the men he employed were convicted and sent to prison?
“A. He explained it on the score of prejudice on the part of the court of Essen.
“Q. Did he deny that the men had bronght samples from the Essen plant to him?
“A. He did.
“Q. Did you ask him about his keeping the man at the Essen plant as a spy, after he had employed them to put up the Flushing plant?
“A. I did not.
“Q. Did he say anything to you about that?
“A. He did not.
*599 “Q. You knew that the paper—the steel and iron paper—had charged that?
“A. Yes, sir.
“Q. Did you ask him about his having advertised in Germany for men understanding this process?
“A. I did not.
“Q. Did you ask him whether or not, in fact, he obtained from these . two men that he had employed from Essen a thorough and detailed description of thp process and a drawing of the apparatus?
“A. I did not.
“Q. Did he make any statement on that subject to you?
“A. I do not think he did; he simply denied having stolen anything, and stated that the man whom he engaged knew very little about the process.
>‘Q. Did he state whether or not he availed himself of what that man did know about the process?
“A. He did not.”
A careful reading of Mr. Kern’s testimony discloses that he not only made no effort to obtain the whole truth from Laernoes, but admits that he made no attempt to find out from Dr. Goldschmidt, whom he afterwards saw, whether there was any truth in what Laernoes did deny, or whether the story published was true or false. It is perfectly clear to me that, being unable to negotiate with Dr. Goldschmidt, he decided to obtain the information he was so anxious to get from Mr. Laernoes, although, if not already convinced that he was purchasing from Laernoes stolen property, he very carefully abstained from so using the information which he had as to ascertain the truth.
When stripped of all refinements, the situation presented is this: Dr. Goldschmidt discovers a secret process for detinning; Laernoes entices Zeyen, a trusted employe, to betray his master, whereby he became possessed of a secret process belonging to another; that secret the complainant purchases, under condi- ' tions which charge it with knowledge of the wrong committed against Dr. Goldschmidt, thereby helping Laernoes and Zeyen to market their stolen property. It is not to he conceived that a court of equity will stain its hands by contact with such a disreputable proceeding.
It was most strenuously insisted on the argument by the complainant that its association with Laernoes in procuring this secret was a matter entirely distinct from the present contro
In Edward Thompson Co. v. American Law Book Co., 122 Fed. Rep. 922, relief by way of injunction was refused upon the ground that the acts of the defendant of which the complainant complained were of the same character as those in which the complainant was itself indulging, and that if the defendant was guilty of literary piracy, the complainant was guilty of the same offence, and that a literary pirate was not entitled to consideration in a court of equity, Judge Coxe saying, “consistency requires that the defendant should not be punished for doing that which the complainant does with perfect impunity.”
In Krauss v. Peebles’ Sons Co., 58 Fed. Rep. 585, Judge Taft stated the rule as follows: “The reason why relief is refused complainant in such cases has nothing to do with the defendant’s rights or wrongs. It is that the court will not protect a fraudulent business of a plaintiff, however much in the wrong the defendant may be.”
In eases of this class the jurisdiction of the court is rested upon its duty to protect property from wanton destruction, and it interferes by injunction because that is the only efficient method by which property of this character can be preserved to the owner. This complainant claims to be the true owner of a
The proposition advanced by the complainant, viz., that the defendants having agreed with the complainant, either as joint purchasers or employes, to keep secret this process, they cannot now be heard to question the title of the complainant because of a trust relation, either express or constructive, thereby raised, would appeal with great force to a court of equity if in the purchase of the secret process the complainant had acted honestly and was justified in the belief that the vendor’s title was without fault. But the mainstay of this proposition is absent in the case at bar. ' The purchasers knew, or were bound to know, that in treating with Laernoes and his partners they were obtaining for use the property of another, dishonestly procured, and for which they had unsuccessfully negotiated with the true owner. That they afterward disagreed as to which of them should appropriate what they had thus improperly secured does not make it the duty of a court of equity to interfere and by injunction protect some of the wrong-doers against the assaults of their confederates. The want of honor among thieves is not a ground of equitable jurisdiction.
Since the bill of complaint was filed in this cause, the defendants have obtained from the Goldschmidts a license, exe
After a careful examination of the whole case, I am satisfied that the complainant has failed to present a cause calling for equitable aid, and a decree will be advised dismissing the bill of complaint, with costs. >