Aerosonic Corporation v. Trodyne Corporation
| Decision Date | 07 October 1968 |
| Docket Number | No. 25257.,25257. |
| Citation | 402 F.2d 223 |
| Parties | AEROSONIC CORPORATION and MacLeod Instrument Corporation, Appellants, v. TRODYNE CORPORATION, Appellee. |
| Court | U.S. Court of Appeals — Fifth Circuit |
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Norman C. Roettger, Jr., Fleming, O'Bryan & Fleming, Fort Lauderdale, Fla., for appellants.
Joseph J. MacDonald, Ridgewood, N. J., John Cyril Malloy, Miami, Fla., for appellee.
Before TUTTLE, COLEMAN, and MORGAN, Circuit Judges.
Trodyne Corporation, the successful complainant below, sued Aerosonic Corporation, and its subsidiary, MacLeod Instruments Corporation, as well as Anthony J. Femina, an individual who does not appeal, in a diversity action for unfair competition in trade, tortious interference with contractual and business relations, and for breaches of confidence by Femina as a former trusted officer and director of Trodyne. After trial to the District Court, judgment was entered for the plaintiffs as hereinafter described. We affirm that part of the judgment which granted injunctive relief, but the award of damages must be reversed.
Trodyne is engaged in the design, manufacture, and sale of aircraft instruments. In response to an invitation from Sikorsky Aircraft in 1962, Trodyne submitted a design for a pressure sensing device intended to give early warning of fatigue cracks in rotor blades in order to prevent helicopter crashes. The first design was approved and 100 units were ordered. These units proved unsatisfactory and were returned to Trodyne. After several months of additional research, a redesigned unit, Model 1201, was submitted to Sikorsky and proved satisfactory. Due to the production of Model 1201, the plaintiff enjoyed significant commercial success. The percentage of sales by the plaintiff of these pressure sensing devices increased steadily. A patent was applied for, but neither this patent nor the device itself disclosed the manufacturing techniques of the plaintiff. Instead, they remained trade secrets.
Following the production of Model 1201, Trodyne continued to engage in a research program to develop an improved pressure sensing device. This program resulted in Model 1202. After testing, the new model proved worthy of further investment and Trodyne directed efforts toward the production of the new system. To aid in the planning of Model 1202, a main production drawing, clearly labeled "Trodyne Corporation, 39 Industrial Avenue, Teterboro, New Jersey", was prepared in September, 1965.
Shortly after Trodyne's inception, defendant Anthony J. Femina became a director and officer of the company and worked directly with the development of the sensing devices. In 1965, Femina tried to persuade Trodyne to allow him to move to Florida. There were indications that, prior to this decision to locate in Florida, Femina had attempted to leave the corporation and take certain employees with him to compete with Trodyne.
Late in the Fall of 1965, Femina's employment with Trodyne was severed and he went to work in Florida for Aerosonic. Aerosonic was also engaged in manufacturing instruments for aircraft. About the time Trodyne was formed, Aerosonic had submitted to the same helicopter manufacturers a design similar to the plaintiff's Model 1201 device, but without response.
Aerosonic and Femina entered into an agreement whereby Senseair Division, an unincorporated division of Aerosonic, was created to design and model a pressure sensing device. MacLeod Instrument Corporation, a wholly owned subsidiary of Aerosonic, participated in this agreement by furnishing an office and secretarial services to Femina at Fort Lauderdale and made purchases for him. Senseair became engaged in a "crash program" to produce the devices. Femina was directly responsible for development of the devices.
Shortly after his employment with Aerosonic began, Femina showed the president of Aerosonic a drawing of Trodyne's improved Model 1202, clearly labeled with Trodyne's name and address. Traced copies of the Model 1202 device were then attached by Femina to letters sent to four manufacturers of helicopters, including the plaintiff's best customer. These letters bore Senseair's letterhead. The letters showed a specification list which included words and phrases used by the engineering staff of Trodyne, compiled by Femina when employed there and retained by him after his discharge. After referring to to the sealing and leaking problems of Model 1201, these letters offered to supply the Model 1202 before Trodyne could supply it.
While Femina was with Trodyne, it had manufactured certain parts for Perkin Elmer Corporation and invested $7,000 in equipment to secure the work. After Femina's separation from Trodyne, Trodyne received no more orders from Perkin Elmer; instead, the same parts were made for Perkin Elmer by Aerosonic. At least one payment of $1,600 was made to Aerosonic and turned over to Femina.
Upon learning of the letters containing the Model 1202 drawing, plaintiff complained to Aerosonic and Femina of the apparent violation of its trade secrets. The president of Aerosonic advised Trodyne that it had no intention of discontinuing its activities and that Trodyne should pursue its remedy by a suit in federal court. The joint efforts of Aerosonic and Femina continued until the Fall of 1966.
On May 2, 1966, Trodyne filed suit. By decree rendated May 6, 1967, the court found that Trodyne's trade secrets were disclosed to Femina in confidence while he was an employee of Trodyne and that he breached his duty to them by disclosing these secrets to Aerosonic and MacLeod. It was further found that appellants and Femina engaged in a joint venture to divulge and utilize these trade secrets. These findings were unchallenged on appeal.
Damages were assessed in the sum of $15,000.00.
Appellants argue that the injunction is too broad in scope and in time.
Under Florida law the issuance of an injunction is within the sound discretion of the court and the exercise of this discretion will not be disturbed unless an abuse is clearly shown, United States Fire Insurance Company v. Brown, 3rd D.C.A.Fla., 1966, 185 So.2d 11. This Court has stated that the framing of an injunction appropriate to the facts of the case is a matter peculiarly for the consideration of the trial court, J. M. Fields of Anderson, Inc. v. Kroger, 5 Cir., 1965, 330 F.2d 686. The Florida courts do hold that an injunction "should never be broader than is necessary to secure to the injured party, without injustice to the adversary, relief warranted by the circumstances of the particular case", Florida Peach Orchards, Inc. v. State by Dickinson, 1st D.C.A. Fla., 1966, 190 So.2d 796; see also, Moore v. City Dry Cleaners & Laundry, Fla.1949, 41 So.2d 865.
Apparently there are no Florida decisions concerning injunctions dealing with trade secrets as such but this Court has stated that the Florida law of unfair competition is the same as prevailing in American Jurisprudence generally, Creamette Co. v. Conlin, 5 Cir., 1951, 191 F.2d 108.
The Fifth Circuit has not previously confronted the identical question here presented and it would appear that other Circuits have been divided on the subject.
In Shellmar Products Co. v. Allen-Qualley Co., 87 F.2d 104 (1936) the Seventh Circuit affirmed a decree permanently enjoining a defendant who by breach of confidence had learned of and copied a secret process for wrapping food products. Later, however, that Circuit, although citing Shellmar with approval, held that while the defendant should be enjoined only from making further use of the information received from the plaintiff's confidence, he should not be restrained completely from continuing to engage in a competing business with the plaintiff, Smith v. Dravo Corp., 7 Cir., 1963, 203 F.2d 369.
In A. O. Smith Corporation v. Petroleum Iron Works Co., 6 Cir., 1935, 74 F.2d 934, a permanent injunction was issued against a defendant who had obtained trade secrets illegally, even though the plaintiff's product was in the public domain.
The Second Circuit has held that an injunction did not have to be limited to the time when the trade, by legitimate means, caught up with the plaintiff. Instead, the Court felt that the trend was to place increasingly higher standards of commercial morality in trade generally, Franke v. Wiltschek, 2 Cir., 1953, 209 F.2d 493. In dissenting, one judge was of the view that this was not a proper case for a permanent injunction because the product involved was a slight, easily discoverable improvement. But he did agree that where the copied device was a "novel invention" and the inventor chose not to patent it but to keep it to himself, "a perpetual injunction affords a proper protection — a protection as enduring as the monopoly grounded on the secret invention".
In an earlier case the Second Circuit enunciated what became known as a Conmar rule, whereby a person who had unlawfully obtained a trade secret from another was enjoined from using the information and producing the copied product only until the plaintiff dedicated it to the public, Conmar Products Corp. v. Universal Slide Fastener Co., 2 Cir., 1949, 172 F.2d 150.
The Ninth Circuit, in a case where former employees of the plaintiff had used secrets while employed by the plaintiff to develop tape recorders, rejected both the plaintiff's argument that the defendants should be permanently enjoined from...
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