Jet Spray Cooler, Inc. v. Crampton

• Decision Date: 17 May 1972
• Parties: , 174 U.S.P.Q. 272 JET SPRAY COOLER, INC., et al. v. Gifford K. CRAMPTON et al.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

Page 921

282 N.E.2d 921

361 Mass. 835, 174 U.S.P.Q. 272

JET SPRAY COOLER, INC., et al. v. Gifford K. CRAMPTON et al.

Supreme Judicial Court of Massachusetts, Middlesex.

Argued Feb. 8, 1972.

Decided May 17, 1972.

Morris Michelson, Boston (Joseph T. Fahy, Boston, with him), for plaintiffs.

Joseph Schneider, Boston, for defendants.

Before CUTTER, SPIEGEL, REARDON, QUIRICO and HENNESSEY, JJ.

HENNESSEY, Justice.

By this bill the plaintiffs seek injunctive relief and damages for the alleged use of their trade secrets by the defendants. The plaintiffs appeal from two interlocutory decrees, which were entered by a Superior Court judge after the filing of a master's report, and from a final decree dismissing the bill.

We set forth the facts as found by the master. The plaintiffs are Massachusetts corporations engaged in the design, manufacture and sale of various types of visual display beverage dispensers. Both plaintiffs operate as a unit out of the same offices and at the same plant located in Waltham. The individual defendants were formerly employed by the plaintiffs and are now the officers, directors, employees and stockholders of Crathco, Inc., a corporation also engaged in the manufacture and sale of beverage dispensers.

In 1949, William Jacobs, the president and treasurer of the plaintiffs, conceived and designed the first magnetically pumped visual display beverage dispenser. The plaintiff corporations were organized in 1953 and have since continued the business of making and selling beverage dispensers. Since their inception the plaintiffs have conducted an extensive research and development program in a constant effort to improve their products and have, on occasion, consulted with independent engineering firms to help develop new products as well as to improve their existing products.

In 1957, the defendant Crampton was employed by the plaintiffs as general sales manager, and in 1961 his title was changed to national accounts manager. While employed by the plaintiffs, Crampton had access to all sales records and to the annual sales analyses. These records contained the names of all of the plaintiffs' domestic customers who purchased twenty or more units and showed the quantities purchased by each of them from 1955 to 1961. Crampton resigned from his employment with the plaintiffs in 1962.

The defendant Robert Landfield was hired as office manager by the plaintiffs in 1954 and later became comptroller and an officer and director of the plaintiffs. The plaintiffs' financial and sales records were available to him at all times during his employment. He was discharged in May, 1962.

The defendant Robert B. Thomson served as purchasing agent for the plaintiffs from May, 1957, to September, 1962. Since he purchased all of the production parts necessary to manufacture the dispensers, he had in his possession a list of all of the plaintiffs' suppliers, which list indicated the nature of the items purchased together with their prices. He also kept on his desk a business card file and a telephone list finder supplied by the plaintiffs which contained the names and telephone numbers of the suppliers he most frequently called. Thomson added new names and numbers to the file as the occasion required. He resigned from his position with the plaintiffs in 1962.

The defendant Alfred Armstrong was employed by the plaintiffs in August, 1959, as chief engineer and continued in that capacity until he left on November 2, 1962. Prior to his employment with the plaintiffs, he had worked for several years in the refrigeration section of Westinghouse Electric Corporation. However, he had no prior experience with the type of dispenser made by the plaintiffs. As chief engineer, Armstrong's duties included making improvements and modifications on existing units and developing new designs. He resigned from his employment with the plaintiffs in 1962.

All four individual defendants, together with Jacobs, and the plant superintendent, were members of a so called Executive Committee which met weekly at the plant. On occasion, the production supervisor and the service manager were invited to participate in the meetings. The weekly meetings included a discussion of all phases of the plaintiffs' operation, except engineering details of research and development. Another committee, the research and development group, was comprised of Armstrong, Jacobs and individuals from Foster-Miller Associates, a consulting engineering firm. This group met once a week to discuss research and development of new products and improvements in existing products.

The master found that the individual defendants were 'trusted employees' of the plaintiffs and as such there were at all times available to them such information and data as would enable them to advance the interests of the plaintiffs. He also found that all records and reports affecting the manufacturing and selling aspects of the business were open for their inspection, and that '(i)t was understood that all such records and the information contained therein were to be used by them in furthering the business interest of their employers (and that) (t)hey were also aware of the fact that it was important that competitors did not obtain the information contained in these records.'

Following their employment with the plaintiffs, Crampton, Thomson, and Armstrong, in 1962, formed Crathco, a company engaged in the manufacture and sale of beverage dispensers similar to those manufactured by the plaintiffs. The defendants, in designing and developing the Crathco dispenser, utilized all of the information and knowledge which they had acquired while working for the plaintiffs, including the information contained in the Foster-Miller report, which will be particularly described below in this opinion.

When the Crathco dispenser was ready for marketing, Crampton, as sales manager, began to solicit orders from prospective customers including customers of the plaintiffs. By 1964, Crathco was making sales to all of the plaintiffs' largest customers. We infer from the master's findings that the sales to the plaintiffs' former customers were due, in part, to the information possessed by Crampton and acquired while he was employed as the plaintiffs' sales manager. In May, 1964, Landfield joined Crathco as executive vice-president and director.

The plaintiffs argue that in developing the Crathco dispenser the defendants wrongfully used certain confidential information belonging to the plaintiffs. Specifically, they refer to (1) the defendants' use of the information contained in the plaintiffs' customer and supplier lists, (2) the incorporation in the Crathco dispenser of certain features of the plaintiffs' dispenser, and (3) the use of the engineering information contained in the Foster-Miller report.

1. The general rule is that '(i)n situations where there has been no express contract of an employee not to use or disclose confidential information entrusted to him during his employment, . . . although an employee may carry away and use general skill or knowledge acquired during the course of his employment, he may be enjoined from using or disclosing confidential information so acquired.' New England Overall Co., Inc. v. Woltmann, 343 Mass. 69, 75, 176 N.E.2d 193, 198; Essex Trust Co. v. Enwright, 214 Mass. 507, 511, 102 N.E. 441; Aronson v. Orlov, 228 Mass. 1, 4--5, 116 N.E. 951; Junker v. Plummer, 320 Mass. 76, 67 N.E.2d 667. The above stated rule is based upon 'basic principles of equity' (New England Overall Co., Inc. v. Woltmann, 343 Mass. at 76, 176 N.E.2d 193) and upon an implied contract, growing out of the nature of the employer-employee relation. Aronson v. Orlov, 228 Mass. 1, 5, 116 N.E. 951.

We have applied the rule and reached varying results in numerous cases dealing with customers' and suppliers' lists (Woolley's Laundry, Inc. v. Silva, 304 Mass. 383, 23 N.E.2d 899; New England Overall Co. Inc. v. Woltmann, 343 Mass. 69, 176 N.E.2d 193), manufacturing processes (Wireless Specialty Apparatus Co. v. Mica Condenser Co., Ltd., 239 Mass. 158, 131 N.E. 307; J. T. Healy & Son, Inc. v. James A. Murphy & Son, Inc., 357 Mass. 728, 260 N.E.2d 723), merchandising techniques (United Tool & Industrial Supply Co., Inc. v. Torrisi, 356 Mass. 103, 248 N.E.2d 266), and other information gained by an employee in the course of his employee and used to the detriment of his former employer. Essex Trust Co. v. Enwright, 214 Mass. 507, 102 N.E. 441; Horn Pond Ice Co. v. Pearson, 267 Mass. 256, 166 N.E. 640. Indeed, the duty not to use confidential information is not limited to technical trade secrets. '(I)t matters not, in such cases, whether the secrets be secrets of trade or secrets of title, or any other secrets of the party important to his interests.' Peabody v. Norfolk, 98 Mass. 452, 459. See Restatement: Torts, § 757, comment b.

We have in cases such as the present one considered it significant that the former employee did or did not take actual lists or papers belonging to his former employer. Padover v. Axelson, 268 Mass. 148, 151, 167 N.E. 301; DiAngeles v. Scauzillo, 287 Mass. 291, 297--298, 191 N.E. 426; New England Overall Co., Inc. v. Woltmann, 343 Mass. 69, 74, 77, 176 N.E.2d 193; American Window Cleaning Co. of Springfield v. Cohen, 343 Mass. 195, 199, 178 N.E.2d 5. However, the fact that no list or paper was taken does not prevent the former employee from being enjoined if the information which he gained through his employment and retained in his memory is confidential in nature. See Essex Trust Co. v. Enwright, 214 Mass. 507, 102 N.E. 441; Aronson v. Orlov, 228 Mass. 1, 116 N.E. 951; Horn Pond Ice Co. v. Pearson, 267 Mass. 256, 166 N.E. 640.

2. The crucial issue to be determined in cases involving trade secrets, therefore, is whether the information sought to be protected is, in fact and in law, confidential. In our view, the result in each case depends on the conduct of the...