Atlantic Wool Combing Company v. Norfolk Mills, Inc., 6520.

• Decision Date: 23 February 1966
• Docket Number: No. 6520.,6520.
• Citation: 357 F.2d 866
• Parties: ATLANTIC WOOL COMBING COMPANY, Plaintiff, Appellant, v. NORFOLK MILLS, INC., et al., Defendants, Appellees.
• Court: U.S. Court of Appeals — First Circuit

357 F.2d 866 (1966)

ATLANTIC WOOL COMBING COMPANY, Plaintiff, Appellant, v. NORFOLK MILLS, INC., et al., Defendants, Appellees.

No. 6520.

United States Court of Appeals First Circuit.

Heard November 3, 1965.

Decided February 23, 1966.

David Burstein, Boston, Mass., with whom Hale & Dorr, Boston, Mass., was on brief, for appellant.

Fernand A. Boudreau, Boston, Mass., with whom Henry Paul Monaghan, Holyoke, Mass., and Foley, Hoag & Eliot, Boston, Mass., were on brief, for appellees.

Before ALDRICH, Chief Judge, and HASTIE^* and McENTEE, Circuit Judges.

HASTIE, Circuit Judge.

The plaintiff and the defendants¹ are competitors in the business of dehairing raw cashmere, the fleece of certain Asiatic goats. The raw fleece is a matted mass of soft down, long coarse guard hairs and various impurities. Dehairing is the process of separating the commercially valuable down from the other constituents of the matted mass.

The plaintiff's business was conducted in Rhode Island from 1951 until 1962, when it moved its plant to North Carolina. The defendant is a newcomer in cashmere dehairing, having established its plant in Massachusetts in 1962.

In this suit the plaintiff claims that the defendant has tortiously appropriated the design of certain improved dehairing machinery, which the plaintiff had devised, used and withheld from general knowledge. The complaint, filed in the district court under a claim of diversity jurisdiction, seeks injunctive relief, an accounting and damages.

All of the relevant events and transactions in connection with the alleged tort occurred in Rhode Island and Massachusetts. We have discovered no conflict between relevant principles of law of these states governing liability. Indeed, the controlling concepts enjoy rather general recognition throughout the country.

After a full trial without a jury the court concluded that the mechanism developed, designed and used by the plaintiff "does not constitute a trade secret". The court's findings and decisive conclusions were set out in a brief opinion upon the basis of which judgment was entered for the defendant. The plaintiff has appealed.

The district court found that there are only six to ten American companies engaged in dehairing cashmere and that "machinery used in the industry is not readily available for purchase on the open market. Each company for the most part designs and builds its own machinery and traditionally keeps the nature of its process secret".

Prior to 1960, the method of dehairing employed by the trade proceeded in two stages. First the raw cashmere had to be carded to break up the matted mass to an extent that would enable it to pass through the conventional separating machinery. The principal elements of this machinery were cylindrical rollers and a cylindrical comb. The raw cashmere was compressed as it passed between two feed rollers. Then the emerging matter was brought into contact with a revolving cylindrical comb which removed a large part of the down. In addition to requiring preliminary carding, this process was inefficient in that it left a substantial quantity of down in the raw mass.

Throughout most of 1960, the engineer who was the plaintiff's director of research devoted full time to the devising of more efficient machinery. It was then generally known that in the combing of raw cotton, different from cashmere dehairing, the raw mass was pressed between a roller and a flat plate before being brought in contact with a comb. The plaintiff's engineer undertook to devise similar machinery for cashmere dehairing. He designed a set of iron plates, called pedals, which were to be positioned close to the revolving comb. A fluted feed roll was provided to compress the raw cashmere against the pedals as it moved toward contact with the comb. To make these modified basic elements work efficiently, the engineer also designed a system of fulcrums, levers and springs. This process made possible the forcing of the raw mass, without preliminary carding, through a much narrower opening than was possible with the conventional machinery. The result was a more efficient mechanism which removed a greater percentage of the down than had formerly been recovered.

During the latter part of 1960, the plaintiff contracted with Henry Lawton, the owner of a small machine shop, to fabricate the new structures its engineer had devised and to assist in their installation. The plaintiff's engineer supplied Lawton with the designs, drawings and instructions essential to the production of the new structures. In addition to manufacturing the essential new parts Lawton promised the plaintiff that he would not reproduce them for anyone else.

Among the plaintiff's employees was Roland Letoile. He was a mechanic regularly employed to assist in the repair of the dehairing machinery. In 1960, he actively assisted in the installation of the new machinery. He was aware that the plaintiff treated the design of its machinery as confidential. He left the plaintiff's employ when the business moved from Rhode Island to North Carolina.

In 1962, the defendant employed Letoile in its new cashmere dehairing plant. At that time the defendant knew in a general way that the plaintiff had made some important modifications of its machinery which it regarded as confidential. Letoile informed the defendant that the plaintiff had successfully incorporated a pedal feed mechanism in its operation and that Lawton had made the parts.

The defendant then approached Lawton to solicit the manufacture of a similar pedal feed dehairing mechanism for it. In so doing, the defendant supplied no detailed specifications of its needs. After consulting his lawyer concerning his legal position, Lawton manufactured the desired machinery which was duly installed in the defendant's plant and is now the subject of the present suit.

It appears without contradiction that when Lawton manufactured machinery for the defendants he still had the plaintiff's designs and blueprints in his possession. Moreover, an expert witness testified, and it is not disputed, that the dimensions of the structures in suit are the same as the dimensions of those designed and used by the plaintiff. And the court below explicitly found that, beyond general similarity to the plaintiff's pedal feeding machinery, the defendant's machine is "a substantially identical device". In these circumstances, we think it is a necessary inference, though no witness explicitly said so, that the defendant asked Lawton to fabricate a mechanism for them in essential conformity with the plaintiff's designs and specifications and that Lawton did so.

Viewing a selected few of the foregoing facts as controlling, the district court concluded that "there can be no trade secret when what is done is to take a device already well known in the textile trade and obviously capable of being adapted to use in plaintiff's operation, and adapting it to that operation by means of minor changes well within the capabilities of one skilled in the art". The court had prefaced this conclusion with the more general statement that to merit protection as a trade secret "a mechanism or process must embody some discovery or development not generally known in the trade".

Thus, the court denied the plaintiff's device protection against appropriation because (1) its essential mechanical concepts were already embodied in another well known machine that performed a not very different function, and (2) the adaption of that familiar machine to the exigencies of efficient dehairing of raw cashmere was, in the court's view, a relatively simple undertaking for a competent technician. However, we think these considerations are not decisive against the plaintiff's claim. Indeed, the significance accorded them in the court below unduly narrows the scope of trade secret protection.

What some other skilled person could or might have done is not controlling in this type of case, so long as the plaintiff did in fact design for its own exclusive use and withheld from general knowledge a new and different machine which embodied an economically valuable advance in the art and process of dehairing raw cashmere. Commercially valuable special knowledge which the plaintiff developed through the exercise of skill and ingenuity, through experimentation and through the expenditure of money and effort over a period of time, was embodied in the design and specifications of its new machinery. Moreover, this occurred in a small industry within which the court below found that each company designs and builds its own machinery and traditionally undertakes to keep the details of its process secret, just as the plaintiff did here. No more novelty or secrecy than these circumstances establish is needed to bring a proprietor's commercially valuable special knowledge within the area of legally protected trade secrets.² In contrast, the court below seems to have reasoned that the plaintiff's modification of an old and familiar machine merited protection as a trade secret only if it disclosed something very close to patentable invention over the prior art. This was a mistaken view. "Novelty and invention are not requisite for a trade secret as they are for patentability. * * * The protection is merely against breach of faith and reprehensible means of learning another's secret. For this limited protection it is not appropriate to require also the kind of novelty and invention which is a requisite for patentability." Restatement, Torts, § 757 comment b.

Within this area the law of torts affords limited protection varying with the circumstances. In...