Lowndes Products, Inc. v. Brower, No. 19486

CourtUnited States State Supreme Court of South Carolina
Writing for the CourtPER CURIAM; BUSSEY
Citation191 S.E.2d 761,259 S.C. 322
Parties, 177 U.S.P.Q. 209 LOWNDES PRODUCTS, INC., Appellant, v. Claude A. BROWER et al., Respondents.
Decision Date18 September 1972
Docket NumberNo. 19486

Page 761

191 S.E.2d 761
259 S.C. 322, 177 U.S.P.Q. 209
LOWNDES PRODUCTS, INC., Appellant,
v.
Claude A. BROWER et al., Respondents.
No. 19486.
Supreme Court of South Carolina.
Sept. 18, 1972.

[259 S.C. 324]

Page 763

Alfred F. Burgess and David L. Freeman, Wyche, Burgess, Freeman & Parham, P.A., Greenville, for appellant.

Ralph Bailey, of Bailey & Dority, and Leatherwood, Walker, Todd & Mann, Greenville, for respondents.

PER CURIAM:

[259 S.C. 325] The plaintiff, Lowndes Products, Inc. ('Lowndes'), appeals from an order denying injunctive relief and damages for the misappropriation by defendants of Lowndes' trade secrets, and for breach of duty of loyalty by certain defendants to Lowndes as employer.

Lowndes is principally located in Easley, South Carolina, where it is engaged in the manufacture of nonwoven textile fabric. This fabric is manufactured by forming a web from fibers such as nylon, rayon or dacron. To this web a liquid bonding agent--termed 'latex,' 'adhesive', or binder'--is applied. The web is then dried to form the finished product which is used in the manufacture of sanitary napkins, disposable diapers, and other products. The company was founded in 1953 and has experienced remarkable growth, with annual sales today approaching or exceeding $10,000,000.

In 1969, defendants Claude A. Brower, Billy Loftin, and Ralph B. Stanford, whom we shall call 'key employees', left their employment at Lowndes. With the help of defendants Reinhardt N. Sabee, C. Craig Sabee, Lois E. Sabee, and J. Michael Sabee, they organized B.L.S. Corporation. The new company was to manufacture nonwoven fabriv in competition with Lowndes. Defendants Harlan Owens, Lewis Owens, Ervin Herrin, Thomas Christopher and Samuel D. Breazeale, Jr.--other 'key employees'--also left Lowndes and went to work at B.L.S. The twelve individuals plus B.L.S. Corporation are the defendants sought to be enjoined.

The new corporation commenced its operation in a small shop in Easley. Financial backing by the four defendants Sabee was arranged; a loan was sought through the Small Business Administration. All of the individual defendants participated in the endeavors of the new corporation in some way.

As we consider the appeal we keep in mind the fact that no patents, copyrights, agreements to keep secret, covenants [259 S.C. 326] not to compete, nor contracts of employment for a specific term are involved.

This suit was commenced on August 11, 1969. The complaint alleged that B.L.S. Corporation had been organized to engage in the manufacture of nonwoven fabric by using Lowndes' employees and trade secrets. In addition, the complaint lists a host of unfair and/or unlawful deeds allegedly commited by the individual defendants. A temporary injunction, a permanent injunction, damages, and other relief were prayed for.

A temporary injunction was issued. It forbade defendants' duplication of plaintiff's machinery, processes, techniques and chemical formulations. It enjoined them from divulging information concerning plaintiff's operations.

The case was referred to the Master in Equity for Greenville County for trial on the merits. Hearings consumed twenty-five days. Thirty-one persons were called to testify. Two hundred eight exhibits were offered. The testimony consumed some twenty-eight hundred pages. The master visited the premises of both Lowndes and B.L.S. He issued a report dated May 15, 1970, recommending that all relief sought by Lowndes be denied, that

Page 764

the temporary injunction be dissolved and that the plaintiff be charged with payment of defendants' attorney fees.

Arguments on the exceptions to the master's report were heard by the Honorable Frank Eppes, resident circuit judge. On August 7, 1970, Judge Eppes issued an order affirming the master's report. This appeal is from that order.

The cornerstone of the lengthy complaint in this action seeking to prevent defendants from using plaintiff's trade secrets seems to be paragraph VII:

'VII

'That the processes of manufacturing such non-woven fabrics, the chemical formulations, and the machinery in connection therewith have been developed by the Plaintiff over [259 S.C. 327] a long period of time, and such processes, chemical formulations, and machinery involve Confidential techniques and trade secrets which are the unique property of the plaintiff; that such trade secrets are known only to the plaintiff and certain of its employees necessarily involved in the development thereof, and Plaintiff has maintained the confidential nature of such trade secrets by prohibiting any examination of its machinery, chemical compounding, and manufacturing processes by outsiders.' (Emphasis added).

The answer denied that defendants acquired confidential knowledge, since any knowledge they acquired was never regarded as confidential, nor were any of the Lowndes processes considered by them to be a trade secret. It also denied acts of disloyalty.

The first issue to be determined in every trade secret case is not whether there was a confidential relationship or a breach of contract or some other kind of misappropriation, but whether, in fact, there was a trade secret to be misappropriated. 2 Callman, The Law of Unfair Competition, Trademarks, and Monopolies § 51.1 (3d ed.1968), herein cited as 'Callman'.

Comment b to Restatement of Torts § 757 defines 'trade secret' as follows:

'A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. It differs from other secret information in a business in that it is not simply information as to single or ephemeral efforts in the conduct of the business, . . . A trade secret is a process or device for continuous use in the operation of the business. Generally, it relates to the production of goods, as, for example, a machine or formula for the production of an article. . . .'

[259 S.C. 328] Callman § 52 et seq. contains a lengthy treatment of the nature of trade secrets. Excerpts are quoted below:

'Almost anything may be in the nature of a trade secret. . . .' (§ 52)

'A trade secret can exist in the unique combination of otherwise known components; although each of its parts, by itself, may be in the public domain, the unified process, design and operation of the combination may be the essence of the secret. . . .' (§ 52.1)

'. . . (A) trade secret need not be essentially new, novel or unique; . . .' (§ 52.1)

'. . . (A)n unique combination of generally known elements or steps can qualify as a trade secret, if it represents a valuable contribution attributable to the independent efforts of the one claiming to have conceived it. The combination must differ materially from other methods revealed by the prior art. . . .' (§ 53.3)

Page 765

Lowndes has framed six questions on this appeal. The first two are:

'I

'Did the Appellant acquire trade secrets in the course of entering into and developing its nonwoven business?

'II

'Have the Appellees shown a failure on the part of the Appellant to protect its trade secrets which would permit them to copy and use such secrets?'

It is appropriate to here restate this general proposition: Concurrent findings of fact by the master and trial judge will not be disturbed on appeal unless against the clear preponderance of the evidence or without evidentiary support. Ex parte Guaranty Bank & Trust Co., 255 S.C. 106, 177 S.E.2d 358 (1970).

A detailed review of the evidence presented would be unnecessarily burdensome to the reader and, under the view we take, would serve no helpful purpose.

[259 S.C. 329] The burden of proving the existence of a trade secret falls, of course, upon the plaintiff. Callman § 53.3. Accepting as the criteria for 'trade secrets' those set forth above, we conclude that the lower court should have found that the equipment, formulas and techniques employed by Lowndes brought into being defendable trade secrets.

Appellant's allegatin in the complaint:

'That the processes of making such non-woven fabrics, chemical formulations, and the machinery in connection therewith have been developed by the Plaintiff over a long period of time, and such processes, chemical formulations, and machinery involved confidential techniques and trade secrets which were the unique property of the Plaintiff;'

has been fully and clearly proven by the preponderance of the evidence.

However, such does not require reversal of her lower court on the injnctive issue for all trade secrets are not entitled to the protection of a court of equity. 'Intent to keep an idea or particular fact secret is the first requirement for protection. . . . Intent will be disregarded, however, if secrecy is not justified, or if the owner's activity renders him undeserving of equitable protection or other requirements are not met. Absence of evidence of proper precautions against publication will sometimes support the conclusion either that a secret or its protection was not intended.' Callman § 53.1.

The evidence supports the findings of the master concurred in by the trial judge that Lowndes failed, prior to July, 1969, to take proper and reasonable steps to protect its trade secrets.

There is much evidence, indeed voluminous evidence, to the effect that Lowndes' principals, in their own minds, considered that their company's 'unique combination' of techniques, etc., constituted protectable secrets. There are isolated instances shown where positive steps were taken to preserve these secrets. But there is also considerable evidence [259 S.C. 330] indicating less than full concern with keeping the system of operation secret.

Lowndes' employees were not required to sign employment contracts...

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32 practice notes
  • Spirax Sarco, Inc. v. SSI Eng'g, Inc., No. 5:14–CV–519–F.
    • United States
    • United States District Courts. 4th Circuit. Eastern District of North Carolina
    • August 10, 2015
    ...715 S.E.2d 331, 335 (2011) ).The court's review of South Carolina law belies Johnson's assertions. In Lowndes Products, Inc. v. Brower, 259 S.C. 322, 191 S.E.2d 761 (1972), the South Carolina Supreme Court recognized:An employee has a duty of fidelity to his employer apart from the question......
  • Williams v. Riedman, No. 3127.
    • United States
    • Court of Appeals of South Carolina
    • February 28, 2000
    ...secret to be protected, we are not required by the facts of this case to make that initial determination. Lowndes Prods., Inc. v. Brower, 259 S.C. 322, 191 S.E.2d 761 (1972) (The threshold issue in any trade secrets case is not whether there was a confidential relationship or a breach of co......
  • Nucor Corp. v. Bell, C.A. No. 2:06-cv-02972-PMD.
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • January 30, 2007
    ...a SCTSA cause of action, the burden of proving the existence of a trade secret falls upon the plaintiff. Lowndes Prods., Inc. v. Brower, 259 S.C. 322, 329, 191 S.E.2d 761, 765 (S.C. Nucor argues that even if parts of its claims for breach of duty of loyalty, conversion, unjust enrichment, c......
  • Clark v. Ross, No. 0406
    • United States
    • Court of Appeals of South Carolina
    • November 21, 1984
    ...the affidavit and the information it contained. See 20 C.J.S. Costs Section 262 at 495 (1940); cf. Lowndes Products, Inc. v. Brower, 259 S.C. 322, 191 S.E.2d 761 (1972), appeal after remand, 262 S.C. 431, 205 S.E.2d 184 (1974) (trial court's award of attorney fees to defendants reversed whe......
  • Request a trial to view additional results
32 cases
  • Spirax Sarco, Inc. v. SSI Eng'g, Inc., No. 5:14–CV–519–F.
    • United States
    • United States District Courts. 4th Circuit. Eastern District of North Carolina
    • August 10, 2015
    ...715 S.E.2d 331, 335 (2011) ).The court's review of South Carolina law belies Johnson's assertions. In Lowndes Products, Inc. v. Brower, 259 S.C. 322, 191 S.E.2d 761 (1972), the South Carolina Supreme Court recognized:An employee has a duty of fidelity to his employer apart from the question......
  • Williams v. Riedman, No. 3127.
    • United States
    • Court of Appeals of South Carolina
    • February 28, 2000
    ...secret to be protected, we are not required by the facts of this case to make that initial determination. Lowndes Prods., Inc. v. Brower, 259 S.C. 322, 191 S.E.2d 761 (1972) (The threshold issue in any trade secrets case is not whether there was a confidential relationship or a breach of co......
  • Nucor Corp. v. Bell, C.A. No. 2:06-cv-02972-PMD.
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • January 30, 2007
    ...a SCTSA cause of action, the burden of proving the existence of a trade secret falls upon the plaintiff. Lowndes Prods., Inc. v. Brower, 259 S.C. 322, 329, 191 S.E.2d 761, 765 (S.C. Nucor argues that even if parts of its claims for breach of duty of loyalty, conversion, unjust enrichment, c......
  • Clark v. Ross, No. 0406
    • United States
    • Court of Appeals of South Carolina
    • November 21, 1984
    ...the affidavit and the information it contained. See 20 C.J.S. Costs Section 262 at 495 (1940); cf. Lowndes Products, Inc. v. Brower, 259 S.C. 322, 191 S.E.2d 761 (1972), appeal after remand, 262 S.C. 431, 205 S.E.2d 184 (1974) (trial court's award of attorney fees to defendants reversed whe......
  • Request a trial to view additional results

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