Minuteman, Inc. v. Alexander

Decision Date01 February 1989
Docket NumberNo. 86-2248,86-2248
PartiesMINUTEMAN, INC., Plaintiff-Appellant-Petitioner, v. L.D. ALEXANDER, George Cash and Amity, Inc., Defendants-Respondents.
CourtWisconsin Supreme Court

Anthony R. Varda, argued, and DeWitt, Porter, Huggett, Schumacher & Morgan, S.C., on brief, Madison, for plaintiff-appellant-petitioner.

Robert W. Aagaard, Madison, for defendants-respondents.

DAY, Justice.

This is a review of an unpublished opinion by the court of appeals which affirmed in part and reversed in part a decision by the circuit court for Dane county, Honorable P. Charles Jones, judge. 140 Wis.2d 868, 412 N.W.2d 902. The circuit court denied a motion for a temporary injunction against L.D. Alexander, George Cash, and Amity, Inc., (Defendants) on behalf of Minuteman, Inc. (Minuteman). Minuteman alleged the Defendants had misappropriated trade secrets and computer data. Minuteman sought the temporary injunction to prevent the Defendants from using these materials. The court of appeals reversed the circuit court's determination on one of the trade secrets and remanded the issue to the circuit court. On all other questions, the court of appeals affirmed the circuit court's conclusions. We affirm in part and reverse in part the court of appeals' decision and remand to the circuit court for further proceedings not inconsistent with this opinion.

The basic question to be answered in this review is: what is the proper test for determining what is a "trade secret?" The answer is to be found in sec. 134.90, Stats. We do find, however, that our holding in Corroon & Black v. Hosch, 109 Wis.2d 290, 325 N.W.2d 883 (1982), still provides helpful guidance in determining what are trade secrets under sec. 134.90.

Several other issues are raised: (A)(1) What remedy, if any, is available if a trade secret is improperly acquired, but not subsequently used, by a wrongful taker? We conclude that under section 134.90(2)(a), Stats., an improper acquisition is enough to constitute a misappropriation of a trade secret, and therefore, all remedies in sec. 134.90 are available. (2) What effect, if any, does the possibility of reverse engineering 1 the chemical formula of a trade secret have on remedies available under sec. 134.90? We hold the possibility of reverse engineering is not enough to prevent a temporary injunction from being issued, but rather should be considered when determining the length of the temporary injunction.

(B) What is the trade secret status of customer lists and lists of persons who have made inquiries as a result of a businesses' advertisements? We conclude these lists may be eligible for trade secret protection under sec. 134.90, Stats.

(C) Did the circuit court abuse its discretion by refusing to grant a temporary injunction against the use of allegedly misappropriated computer data in violation of sec. 943.70(2), Stats., of the criminal code? We conclude that because the circuit court articulated acceptable reasons as stated in Werner v. A.L. Grootemaat & Sons, Inc., 80 Wis.2d 513, 519, 259 N.W.2d 310 (1977), for refusing to issue the temporary injunction, it did not abuse its discretion.

Minuteman and Amity, Inc., (Amity) are both engaged in the furniture stripping business. Both sell products to people in the furniture restoration business, usually small enterprises. Chemicals, tubs for dipping the furniture, and other related products are sold to customers mostly from catalogs. Their products are essentially the same and both companies consider the other a direct competitor.

This case arises out of events occurring during March and April of 1986. Some facts are in dispute. In March, 1986, Defendants L.D. Alexander (Alexander) and George Cash (Cash) were employed by Minuteman. Alexander was vice president and general manager. Cash was the vice president in charge of Research and Development. Both were employees at will and had not signed any form of non-competition or non-disclosure agreement with Minuteman.

In late March, Alexander and Cash met with Jerry Cook, president of Amity. It is unclear what was discussed, but Minuteman alleged that Alexander and Cash discussed the possibility of leaving Minuteman to join Amity.

On April 7, 1986, the president of Minuteman, Jim Gauthier (Gauthier), returned from a two week vacation. Upon his return to work he was allegedly met by Alexander and Cash who gave him their immediate resignations. Gauthier stated he did not take the two seriously and told them to take that day off.

On the morning of April 8, Alexander was observed removing boxes of materials from Minuteman's premises. Shortly thereafter, Minuteman allegedly discovered both Cash's and Alexander's work stations completely empty of normal business materials. Minuteman claimed it was unable to locate various business related items. They thought Cash and Alexander had taken the materials.

Several days later, Alexander and Cash began working for Amity. Immediately thereafter, Minuteman filed a complaint against the Defendants. Minuteman claimed numerous causes of action against the Defendants, four of which are the subject of this review. The first allegation claimed the Defendants had misappropriated the trade secret formula for Minuteman's Stripper '76 (formula). The second allegation claimed the Defendants had misappropriated a list of inquiries made in response to Minuteman's advertisements (Inquiry list). The third allegation claimed the Defendants had misappropriated a list of Minuteman's customers which included information about what and how much each customer had ordered (Customer list). The fourth allegation claimed the Defendants had misappropriated various computer data from Minuteman. None of the items involved were protected by trademarks or patents.

Minuteman requested relief in the form of monetary damages, a temporary restraining order, and a temporary injunction against the Defendants. Although Amity did not concede the allegations contained in the complaint, it did, however, stipulate to the temporary restraining order.

A three day hearing was later held on the matter which included conflicting testimony about what happened. There was testimony about Cash's and Alexander's behavior just before they left Minuteman. In early March 1986, Alexander had requested a printout of the entire Inquiry list. Alexander told Minuteman's computer operator he needed the list for promotional reasons. A complete printout of the list had never been prepared for anyone before, nor had there ever been a complete printed copy of the list routinely maintained in the office. There was also testimony that Minuteman took some security measures to protect the contents of the list from being known by those outside the company. The list was provided to Alexander because of his executive position within Minuteman. After Alexander left Minuteman, it is claimed the list was never found.

There was also testimony that in early April of 1986, Cash had contacted one of Minuteman's two suppliers of Stripper '76. Cash asked for a copy of the formula of Stripper '76 and the supplier complied. The supplier had a record that it had sent the formula directly to Cash, but Minuteman claimed it never found the formula in its files. Cash admitted contacting the supplier for the formula, but said he did so at the request of Gauthier and that he left it on Gauthier's desk when he quit. Minuteman's second supplier of Stripper '76 testified that he considered the formula a trade secret and that he would not have disclosed it to Cash. There was evidence that other steps were taken to keep the formula a secret. There was also testimony that Stripper '76 could possibly be reverse engineered and that the elements of Stripper '76 could have been analyzed to discover its ingredients.

Minuteman asserted additional computer data assigned to Cash and Alexander by Minuteman were also discovered missing, including a recent printout of the Customer list.

A list of Amity's business solicitation mailings made by Cash and Alexander, on April 16 and 17, 1986, was also introduced into evidence. Minuteman argued this list was based on the Customer and Inquiry lists allegedly taken by Cash and Alexander. Minuteman's computer manager testified that the list was in the same sequence as Minuteman's Customer and Inquiry lists and that Minuteman's lists were the sources of Amity's list. Both Minuteman's and Amity's lists were basically in the same zip code order with some random additions in Amity's list. There were also similar mistakes in spelling and addressing on each list. Alexander stated he had written a list for his personal use while he was at Minuteman and used this personal list as the basis for the Amity mailings.

At the circuit court's request, the parties agreed to pay for a report from a Professor Vaughan of the University of Wisconsin, a court appointed expert. Professor Vaughan examined Stripper '76 and Amity's equivalent furniture stripper. The circuit court stated that Professor Vaughan found no evidence that Stripper '76 had been used to develop Amity's equivalent stripper. The report, however, was never introduced into evidence at the hearing, never made a part of the record, nor did Professor Vaughan testify at the hearing. Furthermore, the court of appeals noted that counsel for Minuteman claimed he never saw the report. The report is a fugitive document.

The circuit court issued a memorandum decision. On the first allegation, the circuit court ruled that the formula for Stripper '76 was a trade secret under sec. 134.90, Stats. (1985). 2 It found the formula had economic value and reasonable efforts were made to maintain its secrecy. It also found that Cash obtained the formula without the permission of Minuteman. However, it found the formula had not been used by Amity, allegedly basing its conclusion on Professor Vaughan's report which was not in...

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