Midwest Micro Media, Inc. v. Machotka

• Decision Date: 25 September 1979
• Docket Number: No. 79-182,79-182
• Parties: , 32 Ill.Dec. 241 MIDWEST MICRO MEDIA, INC., Plaintiff-Appellee, v. Joseph MACHOTKA, Defendant-Appellant, and Micro-Scan, Inc., Defendant.
• Court: United States Appellate Court of Illinois

Page 188

395 N.E.2d 188

76 Ill.App.3d 698, 32 Ill.Dec. 241

MIDWEST MICRO MEDIA, INC., Plaintiff-Appellee, v. Joseph MACHOTKA, Defendant-Appellant, and Micro-Scan, Inc., Defendant.

No. 79-182.

Appellate Court of Illinois, Second District.

Sept. 25, 1979.

Lloyd E. Dyer, Jr., Wheaton, Shapiro & Kreisman, Oak Brook, Michael J. Scalzo, for defendant-appellant.

Wendell W. Clancy, St. Charles, for plaintiff-appellee.

SEIDENFELD, Justice:

This interlocutory appeal from an order granting a preliminary injunction tests whether a salesman's knowledge, acquired during his former employment, of customers' degrees of acceptance of a scientific test product is entitled to protection as a trade secret in the absence of an express contract.

On March 16, 1979, the trial judge granted the request of the employer, Midwest Micro Media, Inc. (MIDWEST) for a preliminary injunction against the employee, Joseph Machotka, barring him from contacting a particular list of hospitals described as "potential or established customers" and from divulging the degree of acceptance of the Midwest product until after the 5th day of August, 1979.

The defendant, Joseph Machotka, contends that the preliminary injunction was improvidently issued and should be dissolved. Alternatively he argues that the scope of the injunction is overly broad in enjoining him from contacting actual or potential customers for a period of six months.

In December, 1976, Machotka was hired by Midwest as its sales representative. Midwest was formed in June, 1976, by Dr. Frank Carone, its president, to sell and distribute throughout the midwest two products which are manufactured by Micro Media Systems, the parent corporation. The two products are described as the "MIC Test" and "Combo Plate." The products were described by Dr. Carone as a laboratory technique to determine whether certain microorganisms are susceptible or sensitive to antibiotics. He described it in terms of its advance over the "Kirby-Bauer" system of testing as it existed prior to 1976. Kirby is a technique in which a growth plate that has agar on it is streaked with a particular organism referred from a patient with an infection. Small paper disks are placed on top of the plate. These are impregnated with antibiotics in various concentrations and it is allowed to incubate overnight. The antibiotic device goes into the agar and the microorganisms sensitive to it. The antibiotic will impair the growth of the bacteria. When the bacteria grows, it forms a cloud over the plate. If there is a clear zone around the disk it means that the growth has been impaired; the larger the disk the more sensitive the microorganism is to the particular antibiotic. These are measured, referred to various tables to determine how the test will be read; and read out as either susceptible, intermediate, or resistant.

Dr. Carone contrasted that with the MIC system, which he described as a different concept and "one order of magnitude better in terms of the type of data it can give the physician." In the MIC, an antibiotic is diluted serially twofold. Precise concentrations of the antibiotic in the growth media is known. An equal number of microorganisms is placed in each tube. It is incubated. Then the smallest concentration that impairs the growth of the organism is the MIC. This is the minimal inhibitor concentration which "gives the clinician a precise quantitative end point." If he can achieve the level of impairment or more, Dr. Carone testified, the clinician is "assured to prevent the growth of the organism." He described it as a different concept than the Kirby system in that the data is recorded in a different way, the test is read in a different way, the data is interpreted in a different way and the "use of the physician is entirely different."

From December, 1976 until September, 1978, Machotka was plaintiff's only salesman. Prior to joining Midwest he had worked for Gibco Diagnostics selling microbiological supplies and research products. As a "diagnostic representative" for Gibco he contacted hospital laboratories and acquired knowledge of who was in charge of purchasing microbiological supplies at the various hospitals.

During his employment with Midwest Machotka was responsible for calling on the hospitals in a nine-state midwestern territory. He acquired the names of potential customers for Midwest products either from inquiries or from what he described as "normal canvassing", or he "knew them" from his previous employment. Gibco, however, did not sell a MIC system. Defendant's primary objective was to persuade the hospitals to switch from the "Kirby-Bauer Method" to Midwest's MIC test. When he joined Midwest in December of 1976 it had one customer; when he left in February, 1979 it had approximately fifty hospitals who were buying its product. Until September, 1978 when another employee was hired and trained for demonstrations of the product, Machotka had all the information as to potential customers but there was no written list.

Dr. Carone testified that he did not know the customers but conceded that the information was available to him at the present time. Dr. Carone also testified that when Machotka came to work for Midwest he was trained for about a month by a microbiologist; that it was four to six months before Midwest sold its first product; and that a total expense "in the neighborhood of $150,000" largely consisted of expenses for marketing. The Doctor also identified a list (Exhibit A) which represented the hospitals, clinics or laboratories contacted by Midwest for marketing purposes and which apparently was constructed for the trial from various notes which Machotka turned over. He described that the experience had been that from the time of initial contact to purchase there could be a period of working with a potential customer to persuade him to buy the product of "over a year, almost two years."

Some time in December, 1978 or January, 1979, Machotka apparently decided to leave Midwest and planned to work for Micro-Scan which manufactured a product competitive with Midwest's MIC. There was evidence that in January of 1979 defendant called on several of Midwest's customers notifying them of his planned departure and requesting a chance to make a subsequent demonstration of his new product. On February 4, 1979, defendant left Midwest and began actually working for Micro-Scan. When he left Midwest, defendant turned over all his records and documents relating to plaintiff's customers to Dr. Carone.

Dr. Carone testified that since the time Machotka left they had lost only one account and that it had nothing to do with Machotka's leaving. When asked what particularized information Machotka had that Micro-Scan could not acquire by calling the various hospitals, Dr. Carone testified that in his opinion Machotka knew

"the intimate status of every hospital that we have contacted, not only whether they are on the product, whether they are likely, whether they have rejected it. He would know who to call, who not to call. He could operate at a very high level of efficiency it appears to me."

Following the hearing the trial court concluded that the "valuable factor" was the ability to persuade prospective customers to switch from the Kirby system into the MIC system; that the information gathered by the defendant during his employment was a valuable property right entitled to protection; that there was a reasonable expectation of the plaintiff prevailing on the merits and that irreparable harm would be caused if the preliminary injunction were not to issue. He concluded that "lead time" in which the company could acquire any information regarding acceptance of the process would be approximately six months and therefore extended the preliminary injunction for that period. Plaintiff was ordered to post bond in the amount of $20,000. Defendant's motion to dissolve was denied and this appeal followed.

As we recently noted:

"The requirements for the issuance of a preliminary injunction are well settled. For such an injunction to issue, the plaintiff must establish: (1) that he possesses a certain and clearly ascertained right which needs protection; (2) that he will suffer irreparable injury without the protection of an injunction; (3) that there is no adequate remedy at law for his injuries; and (4) that he is likely to be successful on the merits. (Bromberg v. Whitler (1977), 57 Ill.App.3d 152, 155, 14 Ill.Dec. 558, 372 N.E.2d 837, 840.)" Crest Builders, Inc. v. Willow Falls Improvement Association, 74 Ill.App.3d 420, 30 Ill.Dec. 452, 393 N.E.2d 107 (1979). (79-120).

We conclude that the plaintiff has not established his right to a preliminary injunction in compliance with these requirements. Defendant's knowledge of the customer's degrees of acceptance of the MIC test does not appear to us to be a certain and clearly ascertained right in the nature of a trade secret which needs protection.

A trade secret must, of course, be defined in terms of the facts of a particular case; but has been generally stated to be

"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. * * * " ILG Industries, Inc. v. Scott, 49 Ill.2d 88, 92, 273 N.E.2d 393, 396 (1971).

ILG Industries, adopting the statement in the Restatement of Torts, notes the factors to be considered:

"(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...