478 F.2d 1074 (6th Cir. 1973), 71-1041, Kewanee Oil Co. v. Bicron Corp.

Docket Nº:71-1041, 71-1042.
Citation:478 F.2d 1074, 178 U.S.P.Q. 3
Party Name:KEWANEE OIL COMPANY, Plaintiff-Appellant, v. BICRON CORPORATION et al., Defendants-Appellees.
Case Date:May 10, 1973
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 1074

478 F.2d 1074 (6th Cir. 1973)

178 U.S.P.Q. 3

KEWANEE OIL COMPANY, Plaintiff-Appellant,


BICRON CORPORATION et al., Defendants-Appellees.

Nos. 71-1041, 71-1042.

United States Court of Appeals, Sixth Circuit.

May 10, 1973

Argued April 10, 1972.

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Edward P. Troxell, of Jones, Day, Cockley & Reavis, Cleveland, Ohio, Barry L. Springel, Cleveland, Ohio, on brief; Robert P. Mooney, John P. Hazzard, Kewanee Oil Co., Cleveland, Ohio, of counsel, for plaintiff-appellant.

William C. McCoy, Jr., of McCoy, Greene & Howell, Cleveland, Ohio, James A. Hofelich, Cleveland, Ohio, on brief;

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Theodore L. Abeles, Lum, Biunno & Tompkins, Newark, N. J., of counsel, for defendants-appellees and cross-appellants.

Before PECK, MILLER and KENT, Circuit Judges.

KENT, Circuit Judge.

This is an appeal and cross-appeal from a judgment of the District Court which held that the plaintiff-appellant, Kewanee Oil Company, had a protectable property right in 20 of its 40 claimed trade secrets in suit. The District Court granted a permanent injunction which enjoined defendants-appellees from disclosing and/or using the 20 trade secrets in question. The District Court found that Kewanee had failed to establish that the remaining 20 processes, procedures and manufacturing techniques were in fact trade secrets. Kewanee appealed on the theory that all 40 claimed trade secrets should have been protected while Bicron Corporation and the individual defendants filed a cross-appeal maintaining that none of the 40 alleged trade secrets should have been protected.

Kewanee, through its unincorporated subordinate division, Harshaw Chemical Company (hereinafter Harshaw or Kewanee), manufactures various types of synthetic crystals. The products resulting from the use of the alleged trade secrets here in controversy are described as sodium iodide thallium activated scintillation crystals. Such crystals are used in connection with nuclear fission equipment utilized in geophysical surveys searching for uranium and oil, in clinical measurement of radio isotopes and in certain aspects of outer space exploration. The crystals have a unique property which permits them to generate a minute particle of light when struck by ionizing radiation.

Harshaw's research into the growth (manufacture) of such crystals commenced in 1949. As a result of improvements in the manufacturing processes over the years Harshaw was able to produce progressively larger crystals until in 1966 it was able to grow a 17 inch crystal, an accomplishment which no other competitor had achieved. Harshaw claims that as a result of its research and discoveries over the years it developed many processes, procedures and manufacturing techniques in the areas of: (1) the purification of raw materials; (2) the growth of the crystals; and (3) the preparation and encapsulation of the crystals, all of which, it claims, are trade secrets, giving it a commercial advantage over its competitors.

Each of the individual defendants is a former employee of Harshaw, having a particular skill in some aspect of the production of synthetic crystals. As a condition of employment with Harshaw each of the individual defendants executed at least one agreement, and some of them more than one agreement, which required them, as Harshaw employees, to promise not to disclose confidential information or trade secrets obtained as employees of Harshaw. After varying periods of employment by Harshaw and its predecessor, the employments of the individual defendants were terminated, some voluntarily and some involuntarily. Defendants Hamner, Menefee, Spurney and Suscheck formed the defendant Bicron Corporation to compete with Harshaw in the manufacture of sodium iodide thallium activated scintillation crystals. The defendants Richert and Novak later became employees of Bicron. Although Harshaw required more than 16 years to perfect its processes and manufacturing techniques to such an extent that it was able to grow a 17 inch crystal, Bicron and its employees (the defendants here) claimed that Bicron was capable of producing such a crystal in approximately 9 months after the enterprise was started.

On this record, as a whole, it appears clear to us, as it did to the District Court, that the individual defendants used the information obtained during their employment by Harshaw for the benefit of Bicron. There can be no

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question on this record but what these individual defendants appropriated, to the benefit of Bicron, Harshaw's secrets, processes, procedures and manufacturing techniques.

The jurisdiction of the trial court, not questioned, is based upon the diversity of citizenship of the parties. Title 28 U.S.C. § 1332. Clearly the jurisdictional amount is involved. The Ohio law relating to trade secrets is applicable. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938).

In essence, the issues presented on this appeal, except one which will be discussed hereafter, deal with the evidence and the extent of the proof offered and required. Each party finds fault with the findings of fact and conclusions of law adopted by the District Judge. The appellees and cross-appellants, Bicron, et al., claim error on the part of the District Court in its refusal to conclude that Kewanee was not entitled to recover because of failure on the part of Harshaw to maintain security, i. e., secrecy, and cites cases which if read out of the context of this lawsuit might give some support to the cross-appellants' claim. Excelsior Steel Furnace Co. v. Williamson Heater Co., 269 F. 614 (6th Cir. 1920); Healey & Son, Inc. v. Murphy & Son, Inc., 357 Mass. 728, 260 N.E.2d 723 (1970). The record demonstrates that while unnecessary employees were permitted access to certain manufacturing areas wherein alleged trade secrets were used there was nothing in the evidence to show that such access was of sufficient scope as to disclose the nature of the trade secrets to employees who were not required to have knowledge of them by the nature of their employment. In addition the mere showing or writing about certain manufacturing techniques was found by the District Judge to be insufficient to amount to a disclosure to the public of those trade secrets involved in this law suit, which were found by the District Court to be trade secrets within the law.

The appellant complains because of the failure of the trial court to find that each of the 40 claimed trade secrets was in fact a trade secret. The trial court found that some of the elements of the devices in question relating to processes or procedures in the production of the crystals would be only ordinary good manufacturing techniques, an example being one relating to "scrap recoveries." (Plf.Exh. 56(1)(i)). A recent article in a popular magazine demonstrates the accuracy of some of the trial court's conclusions relating to security. In the SATURDAY REVIEW for July 8, 1972, there is a nontechnical description of the nature of synthetic crystals and a description of some of the manufacturing techniques used in the production of such crystals.

This Court has carefully reviewed the Ohio law applicable in the determination of what is and what is not a trade secret and what constitutes misappropriation of such a secret. W. R. Grace & Co. v. Hargadine, 392 F.2d 9 (6th Cir. 1968). There is no need for repetition of that review here.

It would be inappropriate for us to discuss the nature of the alleged trade secrets found by the District Judge to be trade secrets within the meaning of the Ohio law and those found not to be trade secrets. Suffice it to say that the District Judge fully considered all of the evidence offered, and that the alleged errors are based upon the appellant's and cross-appellants' disagreement with the trial court's evaluation of the credibility of the witnesses and the weight of the evidence. It is not for this Court to reconsider the credibility of the witnesses or to reweigh the evidence. After careful consideration of the entire record it appears that the findings of fact of the District Judge are not clearly erroneous within the meaning of Rule 52, Federal Rules of Civil Procedure, 28 U.S.C., and the District Judge properly applied the Ohio law relating to trade secrets.

If only the issues already discussed had been presented to this Court we would be required to affirm the judgment

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of the District Court. However, in addition to the issues already discussed there is a very serious and important issue of a claimed conflict with the provisions of the Constitution of the United States relating to patents, Article I, Section 8 (Clause 8):

"Section 8. The Congress shall have Power * * *

"To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; * * *"

and the Patent Laws adopted pursuant thereto, Title 35 U.S.C. § 101 et seq., and whether that conflict requires the application of the provisions of the Supremacy Clause of the Constitution, Article VI, (Clause 2):

"This Constitution, and the Laws of the United States which shall be made in Pursuance thereof, and all Treaties made, or which shall be made, under the Authority of the United States, shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding."

We must determine whether the trade secrets laws of the State of Ohio are required to be struck down in this case as being in conflict with the United States Patent Laws, and, if so, to what extent. Kewanee urges that the issue presented to this Court requires a determination as to whether the enforcement of any and all state trade secrets laws conflict with the policies of the United States Patent Laws. Thus framed we consider...

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