ILG Industries, Inc. v. Scott

• Decision Date: 24 June 1971
• Docket Number: No. 43714,43714
• Parties: , 171 U.S.P.Q. 371 ILG INDUSTRIES, INC., Appellee, v. Robert P. SCOTT et al., Appellants.
• Court: Illinois Supreme Court

Page 393

273 N.E.2d 393

49 Ill.2d 88, 171 U.S.P.Q. 371

ILG INDUSTRIES, INC., Appellee, v. Robert P. SCOTT et al., Appellants.

No. 43714.

Supreme Court of Illinois.

June 24, 1971.

Rehearing Denied Oct. 4, 1971.

David F. Holland, Chicago, for appellants.

Francis A. Even and Donald W. Carlin, Chicago, for appellee.

DAVIS, Justice.

The plaintiff brought this suit in the circuit court of Cook County for an injunction prohibiting the defendants from using and enjoying the benefits of certain alleged trade secrets. The trial court found that two particular drawings containing certain dimensional information and specifications regarding fan blades and retaining rings, which were integral parts of the plaintiff's industrial fans, were trade secrets. The court enjoined the defendants from using these drawings, and from selling any industrial fans built on information derived from the plaintiff's fans, for a period of 18 months from July 31, 1969.

The defendants appealed (43 Ill.2d R. 302(a)(2)), Ill.Rev.Stat.1969, c. 110A, § 302(a)(2), contending essentially that the findings of the trial court--that the two drawings contained trade secrets--were contrary to the manifest weight of the evidence; that it was error to enjoin the sale of the complete fans for a specified period when only the drawings of a component part thereof were found to be trade secrets; and that, since the fans and their components were not patented, the injunction barring the defendants from selling products built from the information derived from the plaintiff's fans violated the patent and supremacy clauses of the United States constitution, as well as its fourteenth amendment, and sections 1 and 2 of article II of the Illinois constitution, S.H.A.

The plaintiff cross-appealed and contends that the prohibition against selling the particular fans, for the limited period of only 18 months, was error, and that the rule laid down by this court in Schulenburg v. Signatrol, Inc., 33 Ill.2d 379, 212 N.E.2d 865, as to the time limitation of injunctions in this type of case, should be overruled.

The defendant, Robert P. Scott, had been employed by the General Blower Company since about 1945, and had been advanced to the position of vice- president and general manager. The company manufactured industrial fans. The plaintiff acquired this company in 1959 as a subsidiary, and ultimately it was operated and known as the General Blower Division of the plaintiff company. Scott was retained as an employee and, at the termination of his employment on December 31, 1969, was vice-president and director of the plaintiff company, a member of the executive committee of its directors, and the general manager of the General Blower Division.

The plaintiff manufactures heavy-duty centrifugal blowers--a type of industrial fan. Some are used for moving clean air; others are used for moving materials such as grain and sawdust. Within the housing of these fans are a series of blades which are welded at their back edges to a circular back plate, and at their front edges to a retaining ring. The blades surround a central hub. The retaining rings are a coneshaped piece of metal with a central opening called an 'eye'. The fans are built in a variety of sizes.

The drawings, which were taken by the defendant Scott when his employment was terminated, were found by the trial court to be trade secrets. They show the configuration of the retaining rings, the blades of a particular wheel, and the dimensions and materials for most of the size ranges. The design of these wheels, which are the central part of the fan, was developed in 1956 and 1957, over a period of some 18 months, by a consulting engineer. Subsequently, a number of changes were made, not in the design, but in the thickness of metal parts and the alloys used. These changes were necessitated by failures and breakage of the wheels in actual use.

When the defendant Scott left the employ of the plaintiff, he contacted the Iowa Manufacturing Company, which, at that time, was the plaintiff's largest customer for industrial fans. A representative of this company told Scott that he also could supply fans to the company provided the fans which he furnished were directly substitutable with the plaintiff's, and provided the fan wheels could be satisfactorily and interchangeably used in the housing of the plaintiff's fans.

Scott then contacted Metal Spinners, Inc., which manufactured the retaining rings for the plaintiff's fans. Metal Spinners declined to produce these rings from the special toolings and designs which they held for the use of the plaintiff. Scott then gave a drawing to Metal Spinners containing the desired design and specifications, which drawing contained data copied by Scott from one of the drawings claimed by the plaintiff to be a trade secret. This was one of the drawings taken by Scott when he left his employment with the plaintiff.

The defendants presented evidence that the fans of the plaintiff could be measured, and that through the application of certain mathematical formulae, the approximate dimensions of the parts could be determined. Evidence was also presented that such dimensions could be calculated from information contained in the plaintiff's catalog, although it was conceded that this would not yield a result which would be as accurate as that obtained from actual measurements.

The plaintiff's witnesses testified that because of the weld and variance from specifications resulting in the manufacture of the fans, the content of the two drawings could not be reconstructed by the measurements of the fans except by a statistical examination of many wheels of each size. The plaintiff's vice- president of engineering stated that such a statistical analysis might lead to a reproduction of the plaintiff's fans in a period of about 18 months.

The defendants also presented evidence that drawings of the type here in question, or information contained therein, were given to certain customers, such as Iowa Manufacturing Company. Francis L. Moore, a former chief engineer under Scott, testified that it was understood the drawings were confidential and that the information could be given out only with Scott's approval. Apparently, however, the drawings in the possession of certain customers were used to incorporate the fans into their products, and these drawings did not disclose all specifications and configurations.

The initial question for determination is whether the drawings utilized by the defendants were, or contained, trade secrets. The defendants claim that the fact that the information in the drawings could be ascertained through reverse engineering by measurements made on the finished product, and that disclosure of certain of this information had been made to customers, caused these drawings not to be trade secrets.

Trade secrets may cover a wide spectrum of categories. A definition of the possible objects of trade secrecy is undoubtedly subject to variations and change as the facts of any particular case might dictate. Generally, a trade secret is described as a plan or process, tool, mechanism, compound, or informational data utilized by a person in his business operations and known only to him and such limited other persons to whom it may be necessary to confide it. Schulenburg v. Signatrol, Inc., 33 Ill.2d 379, 385, 212 N.E.2d 865; Victor Chemical Works v. Iliff, 299 Ill. 532, 545, 546, 132 N.E. 806.

Obviously, a trade secret must relate to something held in secret or confidence, and it must relate to the operation of the particular trade or business. (Schulenburg v. Signatrol, Inc., 33 Ill.2d 379, 385, 212 N.E.2d 865; Victor Chemical Works v. Iliff, 299 Ill. 532, 545, 546, 132 N.E. 806; Revcor, Inc. v. Fame, Inc., 85 Ill.App.2d 350, 355, 228 N.E.2d 742.) That which is of general knowledge within an industry cannot be a trade secret; something which is fully and completely disclosed by a business through its catalogs or literature disseminated throughout an industry cannot be a trade secret (Victor Chemical Works v. Iliff, 299 Ill. 532, 545, 546, 132 N.E. 806; Bimba Mfg. Co. v. Starz Cylinder Co., 119 Ill.App.2d 251, 263, 264, 256 N.E.2d 357); nor can matters which are readily and completely disclosed by the product itself constitute a trade secret. Cook-Master, Inc. v. Nicro Steel Products, Inc., 339 Ill.App. 519, 534, 90 N.E.2d 657.

As stated in the Restatement of Torts, an exact definition of a trade secret, applicable to all situations, is not possible. 'Some factors to be considered in determining whether given information is one's trade secret are: (1) the extent to which the information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.'...