Hayes-Albion v. Kuberski

• Court: Supreme Court of Michigan
• Citation: 421 Mich. 170,364 N.W.2d 609
• Docket Number: HAYES-ALBION,Docket No. 67897,No. 18,18
• Parties: , a Delaware Corporation, d/b/a Gladen Division of Hayes-Albion Corporation, Plaintiff-Appellee, v. Michael A. KUBERSKI, Robert F. Lunger, individually and d/b/a National Pattern and Model Company, International Silicone Corporation, a Michigan Corporation and Erie Marking Tool Company, a Michigan Corporation, Defendant-Appellants. Calendar,
• Decision Date: 01 April 1983

Page 609

364 N.W.2d 609 421 Mich. 170 HAYES-ALBION, a Delaware Corporation, d/b/a Gladen Division
of Hayes-Albion Corporation, Plaintiff-Appellee,
v.
Michael A. KUBERSKI, Robert F. Lunger, individually and
d/b/a National Pattern and Model Company, International
Silicone Corporation, a Michigan Corporation and Erie
Marking Tool Company, a Michigan Corporation, Defendant-Appellants. Docket No. 67897.
Calendar No. 18, April Term, 1983. Supreme Court of Michigan. Argued April 7, 1983.
Decided Dec. 28, 1984.
Released for Publication Jan. 29, 1985.

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[421 Mich. 173] E. Frank Cornelius, Ann Arbor, for plaintiff-appellee.

[421 Mich. 174] Henry G. Marsh, Saginow, for defendant-appellant.

LEVIN, Justice.

The defendants, the former chief engineer and the former chief tool supplier of the plaintiff, appeal a decision of the Court of Appeals, 108 Mich.App. 642, 311 N.W.2d 122, affirming a decision of the trial court that the defendants appropriated and used trade secrets of the plaintiff, and granting plaintiff a permanent injunction and compensatory, exemplary, and unjust enrichment damages. Having determined that the trial court's findings are adequately supported in the record, we affirm the decisions of the Court of Appeals and of the trial court on the questions of unjust enrichment and actual damages, but reverse on the question of exemplary damages, and modify the injunction so that it does not bar the defendants from earning a living in the field in which they have expertise or from doing business with customers or suppliers of the plaintiff.

I

As in many trade secret cases, ¹ the issues in this case are primarily factual. The voluminous record yields the following outline of the events that led to this litigation.

Plaintiff, the Gladen Division of Hayes-Albion [421 Mich. 175] Corporation, manufactures four silicone rubber products necessary to perform hot stamp decorating: silicone rubber sheets, molded silicone rubber dies, silicone rubber rollers, and silicone rubber sleeves. Broadly speaking, hot stamp decorating is an art that involves the transfer of a colored design from a thin color coated cellophane or mylar carrier tape to a plastic part. Through the use of a heat, time, and pressure cycle, the design is integrated with the plastic part. Hot stamp decorating is widely used in the automobile industry (e.g., to apply dashboard finishes), in the appliance industry (e.g., to mark control dials), in the packaging industry (e.g., to decorate cosmetic containers), and in other large industries.

The manufacture of silicone rubber products for hot stamp decorating is a specialized, competitive industry, in which secrecy about manufacturing processes is particularly important and widely maintained. There is little commercially available technical literature on the manufacture of silicone rubber products for hot stamp decorating, and it would be most difficult, it has been said virtually impossible, to reverse engineer the silicone rubber products that plaintiff manufactures.

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In the manufacture of silicone rubber products, plaintiff employs equipment, methods, techniques, and processes that its employees, particularly its founder, Carl Gladen, have developed over a number of years. These methods, techniques, processes and items of equipment have been derived from costly and lengthy experimental research. Plaintiff's technological prowess is respected world-wide, and plaintiff has received offers to purchase processes that it has developed.

Plaintiff has chosen neither to sell nor to patent its technology because it wishes to safeguard the technology from competitors. Plaintiff also guards [421 Mich. 176] the secrecy of its technology by impressing upon its employees that plaintiff's methods, equipment and processes should not be disclosed to unauthorized persons. The plaintiff's manual contains a secrecy clause, and Gladen regularly instructs employees about the importance of maintaining silence. Although much of plaintiff's technology is embodied in a manufacturing procedures manual, commonly referred to within the company as the "Bible," employees are forbidden to remove that document from the plant premises. All visitors to the plant must register with the receptionist. In addition, when plaintiff works on a project for a customer, plaintiff retains possession of any molds developed for that customer and does not divulge to the customer the procedures developed to meet the customer's needs.

Attracted to plaintiff because of its superior technology, defendant Michael Kuberski wrote to Gladen in 1972 applying for employment with plaintiff. On October 17, 1973, plaintiff hired Kuberski as chief engineer, responsible for tool design and inspection. Approximately one week later, Kuberski signed an invention assignment agreement and a trade secret agreement similar to agreements Kuberski had signed in his previous employment with RCA. Plaintiff would not have retained Kuberski in its employ had he not signed those agreements.

Although Kuberski was acquainted with the use of silicone rubber products when he began work with plaintiff, he had no experience in the manufacture of silicone rubber products. While employed with plaintiff, Kuberski had access to plaintiff's manufacturing procedures manual and worked closely with Gladen and other of plaintiff's employees to refine those procedures and to meet the requirements of specific customers. For example,[421 Mich. 177] Kuberski and Gladen helped Globe Union to resolve a problem with the design on Die Hard batteries that others in the industry had been unable to solve. Kuberski also conducted tests to determine what selection and combination of materials would produce the best product at the lowest cost.

During this period, Gladen reminded Kuberski of the importance of keeping plaintiff's technology secret. That Kuberski understood the need for secrecy is evidenced both by his own statements and by his instructions to other employees to be careful during their telephone conversations with customers.

Kuberski met defendant Lunger while working for plaintiff. Lunger controlled defendant National Pattern and Model Company and defendant Erie Marking Tool Company. As chief engineer for plaintiff, Kuberski was responsible for finding sources of tooling and determining the placement of tooling orders. In the fourteen months after Kuberski and Lunger first met, Kuberski caused plaintiff to become dependent upon Lunger, through Erie and National Pattern, for at least 80% of all its tooling. Before Kuberski and Lunger met, plaintiff had done less business with Erie and had done no business with National Pattern.

In October of 1976, without informing plaintiff, Kuberski and Lunger signed articles of incorporation for defendant International Silicone Corporation, a corporation organized to compete with plaintiff using the processes set forth in plaintiff's "Bible." Plaintiff became suspicious of Kuberski when Kuberski asked to examine the invention assignment and trade secret

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agreements he had signed, but Kuberski allayed plaintiff's fears a few weeks after he asked to see the agreements by stating that although he thought that "some opportunity[421 Mich. 178] might come up," that it was a "dead issue." Relying on Kuberski's assurances, plaintiff continued to provide Kuberski access to confidential information, contact with important customers, and to order plaintiff's tool machinery from Lunger. Although plaintiff asked Kuberski to find sources of tool machinery other than Lunger, Kuberski failed to do so. Kuberski continued to place orders with Erie and National Pattern, which had a shop rate of $20 per hour, when he could have placed the orders with Tri-City Tool & Die Co, Inc., which was located next door to plaintiff and which had a shop rate of $14 per hour. Further, while still employed by plaintiff, Kuberski ordered parts and supplies for International Silicone and, without informing plaintiff, went to Houston to investigate a method of improving upon one of plaintiff's processes that International Silicone intended to use. Kuberski took one of plaintiff's roller molds without signing for it, and kept it for several months before returning it. Kuberski continued to work for plaintiff until January 31, 1977, at which time he resigned and informed his supervisor that he would not be involved in competitive activities.

After Kuberski left plaintiff's employ, defendants proceeded to engage in competition with plaintiff, using equipment, processes, and formulas similar to plaintiff's. For example, defendants used a machine similar to the sizing machine that Gladen invented, used plaintiff's primer formula for bonding silicone rubber to metal, and used plaintiff's method for making silicone rubber dies out of matrix molds. Defendants also communicated with plaintiff's customers and performed services for clients such as Globe Union employing techniques that plaintiff had developed specifically for those clients. Defendants purchased virtually [421 Mich. 179] the same supplies used by plaintiffs, and quoted prices just below plaintiff's.

II

Defendants raise several issues on appeal: was the trade secrets agreement signed by Kuberski one week after employment valid; did plaintiff have trade secrets that defendants used in violation of plaintiff's rights; does plaintiff have the burden of proving that its alleged trade secrets are not known to others in trade; does the evidence support the trial court's finding that plaintiff is entitled to lost profits as a result of sales made by defendants; were defendants Lunger, Erie Marking Tool, and National Pattern unjustly enriched because of Kuberski's placement of business with them; was plaintiff entitled to exemplary damages; did the trial court err in excluding the testimony of Ray Flynt on a separate record; should a permanent injunction have been issued; and should the trial...