MBL (USA) Corp. v. Diekman

• Decision Date: 25 January 1983
• Docket Number: No. 82-1029,82-1029
• Parties: , 67 Ill.Dec. 938, 221 U.S.P.Q. 725 MBL (USA) CORPORATION, an Illinois corporation, Plaintiff-Appellant, v. Frederick J. DIEKMAN, Surface Additions, Inc. and FBN Industries, Inc., Defendants-Appellees.
• Court: United States Appellate Court of Illinois

Page 418

445 N.E.2d 418

112 Ill.App.3d 229, 67 Ill.Dec. 938,

221 U.S.P.Q. 725

MBL (USA) CORPORATION, an Illinois corporation, Plaintiff-Appellant, v. Frederick J. DIEKMAN, Surface Additions, Inc. and FBN

Industries, Inc., Defendants-Appellees.

No. 82-1029.

Appellate Court of Illinois,

First District, Second Division.

Jan. 25, 1983.

Rehearing Denied March 1, 1983.

James R. Mitchell, Jerrold E. Fink and Nancy E. Sasamoto, Chicago, for plaintiff-appellant.

Rosemarie J. Guadnolo and Leonard Saphire-Bernstein of Arvey, Hodes, Costello & Burman, Chicago, for defendants-appellees.

DOWNING, Presiding Justice:

This is an interlocutory appeal of the trial court's order of April 29, 1982, denying plaintiff MBL (USA) Corporation's motion for a preliminary injunction and dissolving a temporary restraining order entered on December 23, 1980. Plaintiff seeks to enjoin the alleged misappropriation and disclosure of its trade secrets and other confidential proprietary information by defendant, a former employee of plaintiff. After a lengthy hearing, the trial court, basing its decision upon 48 specific findings and its conclusions of law, determined that there was no likelihood of plaintiff's success at trial on the merits. Plaintiff contends that the decision is contrary to the manifest weight of the evidence and therefore an abuse of discretion.

At trial, plaintiff asserted that its trade secrets and proprietary information were being misappropriated and disclosed to third persons by defendant in violation of an employer-employee confidentiality agreement and defendant's fiduciary duty. In its decision, the trial court summarized what plaintiff considered to be its trade secrets as follows:

"1. A production process and technology which enables Chemi-Flex [a division of plaintiff corporation] to produce urethane flat belts and timing belts and products within an extremely short cycle time (often six minutes or less) through a centrifugal molding technique which does not require the use of a vacuum to degas (or eliminate entrapped air from) the urethane or reinforcing materials at any stage of the production process. This technology includes, in combination, the use of unique specialized molds and molding machinery; the use of centrifugal forces ( [sic] or the angular speeds which are related to the r.p.m. and the diameter of the mold utilized substantially in excess of those generally used or known in the industry; the heating of the urethane compounds to temperatures substantially lower than those recommended, specified and used in the industry; the use of a temperature differential between that of the mold and molding machine and the temperature of the urethane mix poured into the mold; and the use of a 'pot life' for the urethane compound substantially less than that generally used in the industry;

2. The design specifications for the molds, machinery and equipment used by Chemi-Flex;

3. The product specifications and formulas used by Chemi-Flex in the manufacture of urethane belts and products for its customers;

4. The identities of the customers of Chemi-Flex and the data, including production and product data, developed by Chemi-Flex with respect to such customers and products; and

5. Specialized products and molds, including the Teletype Corporation carrier belts, multi-durometer (or hardness) belts and products, such as the Teletype Corporation bumpers and IBM tractor belts; 'six-hold,' or 'six-cavity,' molds; and a system of interchangeable mold cores and barrels."

Plaintiff is owned by two Japanese corporations. Plaintiff purchased all the stock of Chemi-Flex, Inc., an Illinois corporation manufacturing urethane timing belts and flat belts and related products. Chemi-Flex, Inc. was formed by Earnest Meeder. Defendant ¹ and Meeder met while both were employed at the J.W. Johnson Company. Defendant was hired at J.W. Johnson beginning in 1968, as a summer assistant during high school and college. Defendant received an engineering degree from Iowa State University in 1972, then was employed full-time by Chemi-Flex. Defendant was employed in various positions at Chemi-Flex until he was fired in 1978. Defendant was rehired by Chemi-Flex in February of 1979 after plaintiff had purchased Chemi-Flex. Defendant was again fired from his position as production manager in September 1979.

Defendant assisted Earnest Meeder in the ongoing development of the centrifugal molding process, now claimed as a trade secret, beginning with his summer employment at J.W. Johnson and continuing through September 1979. Even during the period that defendant was not employed full-time with Chemi-Flex between February 1978 and February 1979, he served as a consultant to Chemi-Flex.

Earnest Meeder purchased the centrifugal molding machine he was developing at J.W. Johnson Company and in 1971, formed Chemi-Flex, Inc. Throughout the corporate existence of Chemi-Flex, Inc., many people, including defendant, assisted in the ongoing development of the centrifugal molding process culminating in 1978 with the use of 15 machines designed to accommodate production needs.

While employed by Chemi-Flex from 1972 through 1978, defendant was restrained by an employer-employee confidentiality agreement. ² However, when defendant was rehired in 1979, he refused to sign such an agreement when asked to do so by plaintiff's president, believing it was too restrictive and unfair. No further discussions about the agreement took place and defendant never signed the agreement. In September 1979, defendant was again fired. According to defendant, he was fired because of continuing disputes over company hiring policies and the manner in which the company was being run. Although defendant stated that he was fired at that time, one of plaintiff's officers testified that defendant left the company voluntarily.

Following his second tenure with Chemi-Flex, defendant formed two companies, Surface Additions, Inc. and FBN Industries, Inc., and began to design centrifugal molding machines and designs for other belt-producing equipment. A Chemi-Flex division employee assisted defendant in the production of blueprints for defendant's molding machines.

When plaintiff's officers learned of defendant's activities, a letter was sent to defendant requiring that he comply with the employer-employee agreement which he signed in 1972. He was also requested to make certain disclosures regarding his designs and other business activities. Defendant did not respond to these demands whereupon plaintiff brought this action. The trial court entered a temporary restraining order on December 30, 1980. A hearing on plaintiff's motion for a preliminary injunction, which began on May 4, 1981, lasted nearly one year and involved extensive testimony and voluminous documentary evidence. On April 29, 1982, the trial court entered its order denying plaintiff's motion for a preliminary injunction and dissolved the December 23, 1980 temporary restraining order.

I.

Plaintiff strongly urges that the trial court abused its discretion when it denied plaintiff's motion for a preliminary injunction and that the court's findings that plaintiff's process, technology, machinery, customer data and production specifications are not protectible as trade secrets are contrary to the manifest weight of the evidence. We cannot agree.

"In order to prevail on a motion for a preliminary injunction a plaintiff must prove that: (1) a clearly ascertained right exists which needs protection; (2) irreparable injury will occur without the protection of an injunction; (3) the remedy at law is inadequate; and (4) there is a likelihood of success on the merits of the case." (Lincoln Towers Ins. Agency v. Farrell (1st Dist.1981), 99 Ill.App.3d 353, 355, 54 Ill.Dec. 817, 425 N.E.2d 1034.) The trial court here determined that the evidence failed to show a likelihood of plaintiff's success on the merits. In showing a likelihood of success on the merits " ' * * * a party is not required to make out a case which will in all events warrant relief at the final hearing. All that is necessary is that the petitioning party raise a fair question as to the existence of the right claimed, * * *.' " (Capsonic Group, Inc. v. Plas-Met Corp. (1st Dist.1977), 46 Ill.App.3d 436, 438, 46 Ill.App.3d 436, 361 N.E.2d 41, citing, Grillo v. Sidney Wanzer & Sons, Inc. (1975), 26 Ill.App.3d 1007, 1013, 326 N.E.2d 180.) On review, the question to be addressed is whether the evidence at trial was "so strong and convincing" (Andrea Dumon, Inc. v. Pittway Corp., 110 Ill.App.3d 481, 485, 66 Ill.Dec. 148, 442 N.E.2d 574 (1982)) in plaintiff's favor that this court is compelled to reverse the judgment of the trial court. Andrea Dumon, Inc., 110 Ill.App.3d at 485, 66 Ill.Dec. 148, 442 N.E.2d 574.

Plaintiff argues that the evidence shows that the trial court abused its discretion by failing to find that plaintiff's process, machinery and customer data were entitled to trade secret protection. Plaintiff properly points out, relying upon ILG Industries, Inc. v. Scott (1971), 49 Ill.2d 88, 273 N.E.2d 393, that a trade secret is generally 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." (ILG Industries, at 92, 273 N.E.2d 393.) As trade secrets are subject to variations depending upon the facts, an exact definition of trade secret is not always possible. Some factors a court may consider in determining whether the particular 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...