Daniel Orifice Fitting Co. v. Whalen

• Decision Date: 08 January 1962
• Citation: 198 Cal.App.2d 791,18 Cal.Rptr. 659
• Court: California Court of Appeals Court of Appeals
• Parties: DANIEL ORIFICE FITTING COMPANY, a corporation, Plaintiff and Respondent, v. John WHALEN and Whalen, Inc., a corporation, Defendants and Appellants. Civ. 25640.

Page 659

18 Cal.Rptr. 659

198 Cal.App.2d 791

DANIEL ORIFICE FITTING COMPANY, a corporation, Plaintiff and Respondent, v. John WHALEN and Whalen, Inc., a corporation, Defendants and Appellants.

Civ. 25640.

District Court of Appeal, Second District, Division 1, California.

Jan. 8, 1962.

Hearing Denied March 7, 1962.

Cadoo & Tretheway, Inglewood, Catlin & Catlin, Frank D. Catlin, George L. Catlin, Los Angeles, for appellants.

O'Melveny & Myers, Pierce Works, Everett B. Clary, Los Angeles, for respondent.

FOURT, Justice.

This is an appeal from a judgment which in effect enjoined the defendants from using or disclosing to others certain drawings and patterns used or useful in the manufacture of a specialized valve and from manufacturing or selling items depicted therein, and requiring the defendants to deliver the drawings and patterns to plaintiff and to assist plaintiff in obtaining patents on any patentable invention depicted therein.

The complaint in this case set forth several causes of action, however we are concerned with only the third count which set forth in effect that the plaintiff was a corporation organized in 1947 which had succeeded to a sole proprietorship theretofore operated by Paul A. Daniel since 1931; that John Whalen was a resident of Los Angeles County and the other defendant was a corporation; that plaintiff for many years had been engaged in the design, manufacture and sale of products used in industry for the measurement and control of liquids and gases, and among other products had designed, manufactured and sold piston controlled check valves and orifice fittings and plates. The complaint also set forth some of the problems involved with reference to pressures in pipelines; further it was stated that in 1939 the plaintiff developed a special kind of check valve which was referred to as a piston controlled check valve and there was set forth a general description of the workings of such a valve and the requirements with reference to having an assortment of valves to accommodate the different volumes and rates of flow, different pressures and different types of materials to be handled; it related that the plaintiff had expended large sums of money in developing the basic design of the piston controlled valve and in working with other pertinent factors and details with reference to said piston controlled valve, including the development of the market therefor, and that the result of such effect had been profitable to the plaintiff, the plaintiff being with minor exceptions the only manufacturer of piston controlled check valves in the United States for the oil and gas industry, excepting for the activities of defendants; it was stated further that the plaintiff through its efforts and money expended developed trade secrets and confidential information of great value to it including, among other things, the calculations and specifications for an assortment of valves and their component parts, the development of information pertaining to materials suitable for the parts and the manufacturing and techniques for the making and assembling of the component parts, the collection of reports of technical data with reference to the performance of said valves, and the pressures therein; it was set forth that the plaintiff had developed experimental modifications and attachments to its valves which were discussed among the employees of plaintiff (including the defendant Whalen) on a confidential basis, and experimental models were made and operated; that plaintiff had been in the business of designing, manufacturing and selling orifice plates and fittings since 1931 and had expended large sums of money, time and effort thereon; that all of the machines, devices, plans, specifications, drawings, processes, source of supply, reports and other matters related to the matters in part heretofore related were developed by plaintiff as its confidential business information and trade secrets and maintained as such, however they were not patented but were disclosed only to employees of the plaintiff whose work involved their use and to some suppliers; that the use of such information gave to the plaintiff an advantage over its competitors, and such information could not be acquired by a person who did not have access to it without the expenditure of a great amount of time, money and effort, even if such person had a supply of plaintiff's products; that John Whalen was a full time employee of plaintiff, being from 1945 to 1949 the chief engineer in charge of design, from 1949 to April 30, 1959, was chief engineer in charge of design and production, and from October 1955 to April 30, 1959, was a vice-president of plaintiff and senior officer in plaintiff's Los Angeles plant. It was further alleged that Whalen's duties were, among other things, to design and supervise the design of products manufactured and sold by the plaintiff and to prepare and supervise the preparation of working drawings for the manufacture of the same, to supervise the manufacture of component parts and the assembly of orifice fittings and plates and piston controlled check valves, to work with other employees to determine materials suitable for the manufacture of component parts, to work with suppliers and subcontractors who made such parts, and to work with plaintiff's patent attorneys to secure proper protection for plaintiff's rights in the inventions; that Whalen prior to his employment did not know any of the trade secrets of plaintiff and he was thereafter entrusted with and given all of the confidential information and trade secrets of plaintiff; that it was an implied condition of his employment that he would not use information so gained for his own use or benefit during or after the employment, that all of his inventions belonged to the plaintiff, that any and all patents and applications for such with reference to such inventions should be assigned to the plaintiff; that Whalen has now undertaken to use the confidential information and trade secrets for his own use and benefit in breach of his duty and confidence to the plaintiff; further, that all modifications and attachments to plaintiff's products and all new products related thereto that might be conceived by Whalen or under his supervision, and all notes, drawings and specifications of or relating to the same should be fully disclosed by Whalen to plaintiff and should belong to and become the property of plaintiff, and Whalen should not at any time use the same for his own benefit or for the benefit of any person other than plaintiff; that it was an implied condition that Whalen would take all necessary steps to apply for and obtain patents on patentable inventions made by him or under his supervision in connection with the aforesaid matters. It was further alleged that during the time and within the scope of his employment Whalen conceived of, designed improvements and modifications to plaintiff's valves and other products of plaintiff, that Whalen did not disclose the improvements, modifications and products to the plaintiff, and in fact he concealed them and embarked upon a plan to incorporate such improvements and modifications into a line of valves which he himself would ultimately offer to the public as an improved line of valves, and that he would market related products designed by himself as his own products. Further it was alleged that in carrying out said plan Whalen, during his employment by plaintiff, made layouts and tables of detailed specifications incorporating therein the modifications and improvements, together with working drawings of other matters, including some of the component parts; that since Whalen left the employment of plaintiff he made working drawings and patterns as derived from and based upon plaintiff's layouts, drawings and specifications; that by reason of the implied conditions of the employment the designs, inventions, modifications, improvements, layouts, drawings, tables and patterns heretofore referred to were the sole and exclusive property of plaintiff. The allegations continued to the effect that in March 1959 Whalen tendered his resignation from the employment, effective May 15, 1959, although he actually quit work on April 30, 1959, because of accumulated vacation time; that on May 1, 1959, Whalen caused to be filed with the Secretary of State of California the articles of incorporation of Whalen, Inc., of which Whalen and his wife were two of the three organizing directors and that Whalen controlled the company and caused it to do what it did; that there was printed and circulated among actual and potential customers of plaintiff a brochure and it undertook the manufacture and sale of the products therein described, using therein the designs, inventions, modifications, improvements, layouts, drawings, tables and patterns of the plaintiff in violation of plaintiff's rights and of the implied conditions of the employment; that the defendants could not have manufactured the products which were manufactured without the use of the property of the plaintiff. That one of the modifications designed by Whalen was of an orifice disc.

The cause proceeded to trial, findings of fact were made in which all of the important aspects of the complaint were found to be true, conclusions of law were made which were supported by the findings, and judgment was entered in favor of plaintiff. Findings numbered 8, 9, 12, 13, 14, 14.1, 15, 16, 17, 18, 19, 21, 22, 23, 24, 25, 26, 27, 29, 30 and 31 are set forth in the footnote. ¹

This appeal followed.

The real questions involved in this case are whether a person who is employed to use his skill and ingenuity along certain well designated lines can conceal from his employer and appropriate to his own use the benefits of the work done by him while an employee within the well defined area of his employment, and further how far an officer of a corporation may go in creating a...