Monolith Portland Midwest Co. v. Kaiser Alum. & Chem. Corp.

• Decision Date: 06 January 1967
• Docket Number: Civ. No. 553-58-S.
• Citation: 267 F. Supp. 726
• Court: U.S. District Court — Southern District of California
• Parties: MONOLITH PORTLAND MIDWEST COMPANY, a Nevada corporation, Plaintiff, v. KAISER ALUMINUM & CHEMICAL CORPORATION et al., Defendants.

267 F. Supp. 726

MONOLITH PORTLAND MIDWEST COMPANY, a Nevada corporation, Plaintiff, v. KAISER ALUMINUM & CHEMICAL CORPORATION et al., Defendants.

Civ. No. 553-58-S.

United States District Court S. D. California, C. D.

June 7, 1966.

Final Judgment and Supplemental Memorandum of Decision Fees January 6, 1967.

Order Fees October 17, 1966.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Enright, Elliott & Betz, Joseph T. Enright, Norman Elliott, Michael J. Fitzpatrick, Lyon & Lyon, Leonard S. Lyon, Jr., Los Angeles, Cal., for plaintiff.

Thelen, Marrin, Johnson & Bridges, Peter Anderson, Fulwider, Patton, Rieber, Lee & Utecht, Robert W. Fulwider, William K. Rieber, Richard A. Bardin, Los Angeles, Cal., for defendants.

Final Judgment and Supplemental Memorandum of Decision Re Attorneys' Fees January 6, 1967.

Order Re Objections to Plaintiff's Interrogatories to Defendants Re Attorneys' Fees October 17, 1966. MEMORANDUM OF DECISION

STEPHENS, District Judge.

This cause came on regularly for trial before the Honorable Albert Lee Stephens, Jr., Judge presiding, sitting without a jury. Oral and documentary evidence was introduced by the parties and after oral argument, the Court ordered the cause submitted.

JURISDICTION AND PARTIES

Federal jurisdiction is invoked on the ground of diversity of citizenship and an amount in controversy, exclusive of interest and costs, of more than $3,000.00. This action was filed prior to the effective date of 28 U.S.C. § 1332(b), as amended July 25, 1958. There is no doubt that the amount in controversy was and now is in excess of $10,000.

Jurisdiction as to the Sixth Cause of Action patent infringement is invoked under 28 U.S.C. § 1338.

This is an action by Monolith Portland Midwest Company, a Nevada corporation, against Kaiser Aluminum & Chemical Corporation, a Delaware corporation, Kaiser Aluminum & Chemical Sales, Inc., a California corporation, and three Kaiser employees—George C. Davis, Palmer Ford and Pete Olive. Palmer Ford is no longer employed by either of the defendant Kaiser companies. On June 6, 1958, when the original complaint was filed, George C. Davis was a resident of California, Pete Olive was a resident of Washington, and Palmer Ford was a resident of California.

Plaintiff is a cement company. It owns and operates a cement plant at Laramie, Wyoming. Monolith Portland Cement Company hereinafter called "Monolith" which owns all of plaintiff's common stock, also owns and operates a cement plant in the Tehachapi Valley at Monolith, California, about 125 miles north of Los Angeles. Plaintiff and Monolith are joint venturers with respect to exploitation of the invention that is the subject of this action. Both companies maintain their executive offices at 643 South Olive Street, Los Angeles, California.

The defendant Pete Olive was never served with process and has never answered or formally pleaded herein. Plaintiff has contended that because of his contacts with the litigation, Olive has submitted to the jurisdiction of this Court. The Court ruled against this contention, and the action was therefore ordered dismissed as to Pete Olive without prejudice.

INTRODUCTION

In the first five counts, plaintiff claims a right to damages or compensation from defendants upon several legal theories. The sixth cause of action is for patent infringement which will be treated separately later. But other than patent infringement, plaintiff's chief reliance is upon the theory that plaintiff is entitled to damages for breach of confidence. The law on this subject is usually associated with trade secrets. A brief exposition will help to identify the issues of fact which are about to be discussed. The case turns upon the facts rather than upon fine points of law.

Plaintiff has preferred to use the term "valuable information" in place of the term "trade secret." The Court has adopted the use of plaintiff's terminology to avoid the impression that the plaintiff and the Court are not talking about the same thing.

If the plaintiff's claim were established, then, independent of plaintiff's claim of patent infringement, an award of damages resulting from that breach would be proper. Engelhard Industries, Inc. v. Research Instrumental Corp., 324 F.2d 347 (9th Cir., 1963).

The principle of law urged by plaintiff is stated in Sections 757, 758 and 759 of the Restatement of the Law of Torts. A trade secret may consist of a device or compilation of information used in one's business which gives him an advantage over competitors who do not know or use it. Generally it relates to the production of goods. It may be a device or process which is clearly anticipated in the prior art or it may be a mechanical improvement that a good mechanic can make. Futurecraft Corp. v. Clary Corp., 205 Cal.App.2d 279, 23 Cal. Rptr. 198 (1962); Sarkes Tarzian, Inc. v. Audio Devices, Inc., 166 F.Supp. 250, 258 (S.D.Cal., 1958).

A trade secret need not reach the stature of an invention. Hoeltke v. C. M. Kemp Mfg. Co., 80 F.2d 912, 922 (4th Cir., 1935) cert. den. 298 U.S. 673, 56 S.Ct. 938, 80 L.Ed. 1395 (1936); Atlantic Wool Combing Co. v. Norfolk Mill, Inc., 357 F.2d 866 (1st Cir., 1966). In the latter case, Judge Hastie cites with approval Restatement of the Law of Torts, § 757, Comment b:

"* * * Novelty and invention are not requisite for a trade secret as they are for patentability. * * * The protection is merely against breach of faith and reprehensible means of learning another's secret. For this limited protection it is not appropriate to require also the kind of novelty and invention which is a requisite of patentability. * * *"

Although novelty in the patent sense is not a prerequisite for protection as a trade secret, the law requires substantial novelty. Berry v. Glidden Co., 92 F.Supp. 909, 912 (S.D.N.Y., 1950), and cases cited therein. "If the rule were not so restricted it is obvious that by disclosing an idea under delusions of confidence, the person making the disclosure could thereafter prevent the confidante (sic) from subsequently making use of it, even though the idea was well-known prior to the date of the disclosure and open to the use of all others in the world." Smoley v. New Jersey Zinc Co., 24 F.Supp. 294, 300 (D.N.J., 1938) Aff'd., 3 Cir., 106 F.2d 314.

It must at least be novel to the person receiving the disclosure. If the elements of the formula or pattern are known to him prior to the disclosure, he cannot be restrained from using the same or compelled to account for any past use. Berry v. Glidden Co., supra. A disclosure in confidence of a process which lacks the essential of novelty will defeat the allegation of an implied agreement to refrain from its use and plaintiff has the burden of establishing novelty. Smoley v. New Jersey Zinc Co., supra. "The word `disclosures' itself implies that the things referred to were secret, concealed or unknown prior to the time of their revelation." American Potato Dryers v. Peters, 184 F.2d 165, 172 (4th Cir., 1950). Lueddecke v. Chevrolet Motor Co., 70 F. 2d 345 (8th Cir., 1934). In the latter case, the Court determined that if there was no novelty in plaintiff's suggested idea, it was one "to the use of which the defendant had an equal right with plaintiff."

Matters of public knowledge or of general knowledge in an industry are not secret. Some of the factors which may be considered in determining whether some particular information that has been given is a trade secret are: The extent to which the information is known outside the particular business, the extent of measures taken to guard the secrecy of the information, the value of the information to the one who discloses and to his competitors, the amount of effort or money expended in developing the information, and the ease or difficulty with which the information might be properly acquired or duplicated by others. Mycalex Corporation of America v. Pemco Corporation, 64 F.Supp. 420 (D.Md., 1946); Restatement of the Law of Torts, Comment, Section 757.

"At best, a trade secret protects only during the period when others working in the same field do not, in the ordinary course of their work, make the same discovery. Even in pure science where the problem situation is much more diffuse than in industrial research or development, there are many well authenticated cases of simultaneous discovery by persons or groups who and whose works were completely unknown to one another. * * * When it comes to a trade secret in manufacturing there is greater likelihood of simultaneous discovery: * * * This, * * * may result in parallelisms of action which may be fortuitous because they are inherent in the problem and in its solution, and not the result of conscious copying or imitation." Sarkes Tarzian, Inc. v. Audio Devices, Inc., 166 F.Supp. 250, 279.

The Restatement of the Law of Torts, § 757, sets forth the general rule of liability in a case such as the instant one where a breach of confidence is charged:

"§ 757. Liability for Disclosure or Use of Another's Trade Secret — General Principle.

"One who discloses or uses another's trade secret, without a privilege to do so, is liable to the other if

"(a) he discovered the secret by improper means, or

"(b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him, or

"(c) * * *

"(d) he learned the secret with notice of the facts that it was a secret and that its disclosure was made to him by mistake."

In the comment which follows the rationale behind this rule is stated: "It is the employment of improper means to procure the trade secret, rather than the mere copying or use, which is the basis of the liability under the rule in this Section. * * * One who discovers another's trade secret properly, as, for example, * * * by independent invention * * * is free to disclose it or use it in his own business without liability to the owner."

The confidence does not arise if the...