Kamin v. Kuhnau

• Citation: 232 Or. 139,374 P.2d 912
• Parties: , 135 U.S.P.Q. 133 Ernest KAMIN, Respondent, v. Richard KUHNAU and Superior Manufacturing Company, an Oregon corporation, Appellants.
• Decision Date: 19 September 1962
• Court: Supreme Court of Oregon

Page 912

374 P.2d 912

232 Or. 139, 135 U.S.P.Q. 133

Ernest KAMIN, Respondent, v. Richard KUHNAU and Superior Manufacturing Company, an Oregon corporation, Appellants.

Supreme Court of Oregon, Department 1.

Sept. 19, 1962.

William A. Babcock and William W. McGeorge, Portland, argued the cause and submitted briefs for appellant.

Robert A. Leedy, Portland, argued the cause for respondent. On the brief were Barzee, Leedy & Tassock, Portland.

Before McALLISTER, C. J., and WARNER, O'CONNELL, GOODWIN and LUSK, JJ.

O'CONNELL, Justice.

This is a suit in equity to enjoin defendants from unfairly competing with plaintiff and to recover damages resulting from such competition. Defendants appeal from a decree permanently enjoining them from engaging in unfair competition with plaintiff and from an award of damages in the amount of $19,272.48.

Plaintiff alleges that he employed defendant, Richard Kuhnau, as an independent contractor to furnish labor and materials required in the construction of garbage truck bodies embodying improvements invented by plaintiff. It is alleged that plaintiff perfected a so-called 'packer' garbage truck body involving the use of a 'plow' which is a power-operated device for compressing materials placed in the truck body and thereby increasing its capacity. It is asserted that these improvements were trade secrets communicated to defendant Kuhnau in the course of a confidential relationship, giving rise to a duty not to disclose or appropriate such secrets for defendant's own benefit. Plaintiff charges that defendant, in violation of this duty, manufactured packer truck bodies for his own account, sold them, and offered them for sale in competition with plaintiff.

Defendants interposed a general denial and affirmatively alleged, in effect, that the principle involved in their construction of garbage truck bodies had been in the public domain prior to plaintiff's experimentation. They also alleged that the truck bodies manufactured by defendants are different from plaintiff's product in that the former embody only the improvements invented by defendants.

The facts are as follows. For approximately 25 years plaintiff had been employed by a knitting mill as a mechanic. In 1953 he entered into the garbage collection business. From the time plaintiff entered into the garbage collection business he began thinking of methods of facilitating the loading of garbage trucks and of compressing or packing the materials after they were loaded. By 1955 he had done some experimental work on his own truck, devising a hoist mechanism operated by hydraulic cylinders to lift a bucket from the ground to the top of the truck box. By this time he had also arrived at the conclusion that the packing of the loaded materials could best be effected through the use of a hydraulically operated plow which would move against the loaded materials and compress them against the interior of the truck. At the time plaintiff conceived this solution there were on the market garbage truck bodies containing various 'packer' mechanisms, including hydraulically operated plows. However, plaintiff and defendant apparently were not aware of the use of hydraulic cylinders for this purpose and thought that plaintiff's idea was novel in this respect.

In January, 1955, plaintiff made arrangements with defendant Kuhnau, president and manager of Oregon Rental Equipment Company, to use the company's machine shop and one or more of its employees to assist plaintiff in carrying on further experimental work in developing plaintiff's ideas. This experimental work was carried on for approximately one year. According to plaintiff's evidence, all of the experimental work was done under his supervision and Kuhnau had no voice or control as to the manner in which the developmental work was to be carried on. It is Kuhnau's contention that he and the employees of Oregon Rental Equipment Company contributed suggestions and ideas which were used in the development and improvement of the truck body and compressor mechanism.

In the course of working on the project several persons who were engaged in the garbage collection business came to the defendant's machine shop, observed the progress being made by plaintiff and made suggestions as to the practical application of plaintiff's idea. Sometime in the summer of 1956 the truck and compressor mechanism which plaintiff was seeking to develop was crystallized substantially in the form in which it now exists.

When plaintiff had completed his experimental work he began to receive order for truck bodies embodying his improvements. The first two units sold were manufactured by Oregon Rental Equipment Company.

After the sale of these two units (in the spring of 1956) Kuhnau terminated his connections with Oregon Rental Equipment Company. He rented a machine shop at another location and began business under the name of R. K. Truck Sales. Between May and October, 1956, he manufactured ten units for plaintiff. For each unit Kuhnau received an amount agreed upon by the parties. Plaintiff fixed the selling price of the unit and his profit consisted of the difference between the selling price and the amount he paid Kuhnau.

On or about October, 1, 1956, Kuhnau informed plaintiff that he was going to manufacture truck bodies in competition with plaintiff. Kuhnau testified that the relationship was terminated as a result of a disagreement over the amount he was to receive for manufacturing the unit for plaintiff. Plaintiff contends that Kuhnau terminated the relationship for the purpose of entering into competition with plaintiff. The units manufactured by Kuhnau were similar to those which he had previously manufactured for plaintiff. However, there were some differences in the design of the two units. The principal difference was that Kuhnau mounted the hydraulic cylinder operating the plow or blade under the truck bed whereas the cylinder in plaintiff's truck was above the bed. There was testimony supporting plaintiff's assertion that it was his idea to place the cylinder under the bed of the truck but that suggestion was not adopted because Kuhnau did not think it was feasible.

The trial judge inspected the competing devices at the conclusion of the testimony. The trial court concluded that the agreement entered into between plaintiff and Kuhnau for the manufacture of the truck bodies established a confidential relationship between the parties and that this relationship imposed upon Kuhnau the duty not to use the information disclosed to him by plaintiff for his own benefit.

The principal contentions advanced by defendants on appeal are (1) that the evidence does not show that the disclosure made to Kuhnau was a trade secret, (2) that even if the information were a trade secret originally, it ceased to be one after public disclosure by sale and patent, and (3) that a confidential relationship did not exist between the parties.

In support of the first point defendants introduced evidence to show that at the time the arrangement for the manufacture of the units was entered into there were on the market various types of compressor devices designed to pack loaded garbage. Among these units was one which employed a hydraulic cylinder for the movement of the plow or blade. It appears, however, that at the time in question these units were not in common use in Portland and the surrounding area. The evidence indicates that plaintiff proceeded with his experimentation in the belief that he was developing a novel method of compressing loaded materials. It further appears that although plaintiff did not first conceive the basic idea of a packer body employing a hydraulic cylinder, he was granted a patent on a packer unit involving the hydraulic principle. Thus there was a claim to novelty of some sort, although the evidence does not clearly show in what particulars the claimed improvements over the prior art had been copied by defendants in the construction of their truck bodies. The initial question is whether the disclosure to defendant Kuhnau of plaintiff's design for a garbage packer unit was made under such circumstances as to raise an implication of a promise by Kuhnau not to appropriate the design to his own use.

Obviously, no such implication could be made if Kuhnau had been employed simply to recreate a packer unit already on the market in the locality and commonly known to the trade. ¹ But this was not the case. It was established that garbage truck bodies of the type made by plaintiff had not been on the local market. Supporting the testimony to this effect was the fact that other garbage collectors in the vicinity exhibited great interest in plaintiff's project to develop what he thought was a new idea for packing garbage. Further support is found in the fact that there was a ready sale market for the trucks manufactured by plaintiff and by defendants. There was also evidence to support plaintiff's contention that he had made improvements in the mechanism of the packer of sufficient substantiality as to make his trucks preferable to others on the market. As we have already pointed out, there was issued to plaintiff a patent covering certain features of the garbage truck packer unit. Although the issuance of the patent does not conclusively establish the claim of novelty over the prior art, it will support the claim to novelty unless defendants can rebut this presumption by adequate evidence to the contrary. ² However, to make out a case of unfair competition plaintiff is not required to establish novelty requisite to patentability. ³ The novelty may consist of no more than 'mechanical improvements that a good mechanic can make.' Restatement, Torts § 757, comment b (1939). ⁴ Essentially, the question is whether the idea which is disclosed has such value that it may reasonably be implied that the disclosee is not privileged to use it for his own profit. The fact that the idea was already...