Central Plastics Co. v. Goodson, 46783

• Decision Date: 06 May 1975
• Docket Number: No. 46783,46783
• Citation: 1975 Ok 71,537 P.2d 330
• Parties: CENTRAL PLASTICS COMPANY, an Oklahoma Corporation, Appellant, v. John W. GOODSON and Wayne Manufacturing, Inc., an Oklahoma Corporation, Appellees.
• Court: Oklahoma Supreme Court

Page 330

537 P.2d 330

189 U.S.P.Q. 748

CENTRAL PLASTICS COMPANY, an Oklahoma Corporation, Appellant, v. John W. GOODSON and Wayne Manufacturing, Inc., an Oklahoma Corporation, Appellees.

No. 46783.

Supreme Court of Oklahoma.

May 6, 1975.

Rehearing Denied July 14, 1975.

Dunlap, Laney, Hessin, Dougherty & Codding by C. Clark Dougherty, Jr., Oklahoma City, for appellant.

Abernathy & Abernathy by Kenneth Abernathy, Shawnee, for appellees.

HODGES, Vice Chief Justice.

This case involves purported violations of the Oklahoma Deceptive Trade Practices Act, 78 O.S.1971 §§ 51--55, and unfair competition through the alleged misappropriation and wrongful use of trade secrets.

Central Plastics Company, an Oklahoma Corporation, (Central Plastics) claims that John W. Goodson, (Goodson) its former employee, and Wayne Manufacturing Company, an Oklahoma Corporation, (Wayne Manufacturing) engaged in unfair competition through misappropriation of trade secrets, supplier and customer lists. Relief is also sought under the Deceptive Trade Practices Act. Central Plastics asserts that Wayne Manufacturing and Goodson knowingly distributed advertising which contained false representations in violation of 78 O.S.1971 § 53.

The case was tried to the court in camera. The trial court found that the allegations in Central Plastic's petition were not supported by the evidence and rendered judgment in favor of Goodson and Wayne Manufacturing.

Goodson was employed by Central Plastics in 1956. He worked at several positions until 1960, when he was promoted to shop foreman. During the time he was employed by Central Plastics, the company with his assistance, and that of his father, developed pertinent business information including: customer information indicating the products purchased by the customer and the customer's purchasing agent; cost indices relating to products manufactured; drawings, size and dimension specifications; a process for molding and bonding plastic material to metal surfaces of meter swivels and unions; tooling, including molds and dies developed in the manufacture of its products; information relating to suppliers of raw materials.

On February 9, 1970, Goodson and another employee left Central Plastics and formed Wayne Manufacturing. Goodson ordered identical equipment to that used by Central Plastics. Immediately he sent letters to prospective customers accompanied by samples of fittings and products which he planned to manufacture.

On February 1, 1972, Central Plastics sued Goodson and Wayne Manufacturing for the alleged misappropriation of trade secrets. Central Plastics charged Goodson had access to confidential information during his employment which he knew was confidential. It alleged Goodson misappropriated secrets relating to: the manufacture of insulated meter swivels, transition fittings, meter risers; blueprints and designs concerning molding and bonding of plastic material to the metal surfaces of swivels and unions; tooling, including molds used in the production thereof; information used in the production of meter risers and transition fittings; and customer supplier lists.

Central Plastics did not manufacture meter swivels. It took uninsulated meter swivels and applied insulation to them. Central Plastics also coated meter risers furnished by customers and assembled transition fittings, the transition between plastic and steel pipe.

A few days after Goodson left Central Plastics, February 13, 1970, he obtained an order from Oklahoma Natural Gas Company (ONG) for 602 transition fittings identical to those previously furnished to ONG by Central Plastics.

The former employee who left Central Plastics to help Goodson form Wayne Manufacturing testified that he had taken materials, price and customer lists from Central Plastics to Wayne Manufacturing as had Goodson. This employee had returned to Central Plastic's employment.

Goodson denied that he had taken any trade secrets. He testified that he was able to develop his own designs, customer and supplier lists by using his memory, experience, and his father's advice.

Loyd Goodson, the father of appellee, testified he had been employed by ONG for forty-six years. For fifteen years prior to his retirement, he was General Distribution Engineer. He suggested to his neighbor, Melvin Pourchot, the founder of Central Plastics, that ONG was having difficulty in obtaining an effective insulated meter swivel to prevent shorts into the house pipes of customers and to cathodically protect the water system in Shawnee. Loyd Goodson drew a rough diagram of his idea for the swivel for Pourchot and provided him with swivels to experiment with from ONG. The swivel was perfected and ONG became Central's first customer. Goodson provided Pourchot with a suggested customer list including the registration of the American Gas Association Convention, the Southern Gas Association, National Association of Engineers, and Brown's Directory (all readily available to those in this field), and with technical information regarding needs of the gas pipeline industry.

Later, Goodson also suggested to Central Plastics that it get into the business of assembling transition fittings when ONG began the installation of plastic pipe. Various products were developed at Central Plastics as the result of information supplied by Loyd Goodson.

The ONG Company newsletter of November 4, 1968, described an improved method of transition fittings and plastic pipe distribution systems, which it had developed in cooperation with Central Plastics. It stated that the new method eliminated metal welding and that Loyd Goodson was largely responsible for the idea.

The testimony concerning the insulated meter swivel, meter riser and transition fittings was disputed. One expert testified that the molds necessary for production could be duplicated after a great deal of trial and error. The other was of the opinion that it was a very simple procedure and that the devices totally disclosed the elements of their construction.

The trial court found: the molds and method of making transition fittings, meter risers, and insulated meter swivels were not unique nor secretive; there was nothing that any person similarly skilled in that trade could not develop; the evidence did not disclose the Central used any unusual or secret material or equipment, and that the procedures were of common practice. The court also found that: any customer lists, plans, or designs, which might have been taken consisted of information which was available anywhere: Goodson might not have known about them except from his father but they were matters which anyone starting out in the business could acquire. The court stated the father had as much right to convey this information to his son as a competitor of Central Plastics as he did originally to Central Plastics, and getting the information and help from his father was not a violation of the Deceptive Trade Practices Act or any common law unfair competition provisions.

It is acknowledged in the Restatement of Torts that an exact definition of a trade secret is not possible. However, in several cases the courts have approved the definition of a trade secret found in Restatement of Torts § 757(b) (1939):

'The subject matter of a trade secret must be secret. Matters of public knowledge in an industry cannot be appropriated by one as his secret. Matters which are completely disclosed by the goods which one markets cannot be a secret. Substantially, a trade secret is known only in the particular business in which it is used. It is not requisite that only the proprietor of the business know it. He may without losing his protection communicate it to employees involved in its use. We may likewise communicate it to others pledged to secrecy. Others may also know if it independently, as, for example, when they have discovered the process or formula by independent invention and are keeping it a secret. Nevertheless, a substantial element of secrecy must exist, so that, except by the use of improper means, there would be difficulty in acquiring the information * * *.'

Trade secrets and confidential information, in order to be protected against disclosure by employees, must be the particular secrets of the employer as distinguished from the general secrets of the trade in which he is engaged. Aetna Bldg. Maintenance Co. v. West, 39 Cal.2d 198, 246 P.2d 11 (1952).

A trade secret is a formula, pattern, device or compilation of information which is used in one's business and which gives him an opportunity to gain an economic advantage over competitors who do not know or use it. A trade secret must have a substantial element of secrecy. While it need not be patentable it must contain elements which are unique and, not generally known or used in the trade. National Tile Board Corp. v. Panelboard Mfg. Co., 27 N.J.Super. 348, 99 A.2d 440 (1953).

The courts in Furr's, Inc. v. United Specialty Advertising Company, 338 S.W.2d 762, 765 (Tex.Civ.App.1960) and in Houser v. Snap-On Tools Corp., 202 F.Supp. 181, 187 (D.C.Md.1962), stand for the premise that...