Mycalex Corporation v. Pemco Corporation, Civil Action No. 2486.

• Decision Date: 05 February 1946
• Docket Number: Civil Action No. 2486.
• Citation: 64 F. Supp. 420
• Parties: MYCALEX CORPORATION OF AMERICA v. PEMCO CORPORATION et al.
• Court: U.S. District Court — District of Maryland

64 F. Supp. 420

MYCALEX CORPORATION OF AMERICA v. PEMCO CORPORATION et al.

Civil Action No. 2486.

District Court, D. Maryland.

February 5, 1946.

Edgar Allan Poe, of Baltimore, Md., and Howard L. Lilienthal, of New York City, for plaintiff.

Edwin H. Brownley, of Baltimore, Md., Ivan T. Tashof, of Washington, D. C., and T. Barton Harrington, of Baltimore, Md., for defendants.

WILLIAM C. COLEMAN, District Judge.

This is a case of alleged unfair competition, the plaintiff claiming that after it had disclosed to the defendants its process for the manufacture of a certain product for which the defendants were supplying the plaintiff with an ingredient, the defendants, without disclosing their intention so to do, themselves wrongfully began the manufacture of the same product in competition with the plaintiff.

The plaintiff asks that the defendants be enjoined from continuing their alleged unfair competition, and be required to account to the plaintiff for the profits resulting therefrom. No question of trade-mark infringement is involved.

The plaintiff is a New York corporation engaged in the manufacture of glass-bonded mica electrical insulating material, sold under the trade-name of Mycalex. One of the defendants, Pemco Corporation, is incorporated in Maryland. Its name prior to September, 1943, was the Porcelain Enamel and Manufacturing Company of Baltimore. The other defendant, International Products Corporation, is also incorporated in Maryland but is under separate ownership. Both defendants deny that they have engaged in any unfair trade practices with respect to the plaintiff, asserting that there was no relationship of confidence or trust between them and the plaintiff in the course of their business relations with it; that their product is a result of their own conception and not the result of any process or formula acquired from the plaintiff, and that there was no duty on their part to disclose to the plaintiff any of their processes or formulas, or their contemplated or prospective business activities.

The following material facts are found: Mycalex, a combination of two well known insulators, mica and glass, is an impervious heat-resistant, inorganic material with which metal members may be combined in molding or subsequent casting, and which is machinable and possesses unusual insulation value, especially at radio frequencies. It was invented about twenty-five years ago by a British chemist, Percy B. Crossley, and was first made with commercial success by a British company, Mycalex Co. Ltd., which was the parent company of the present plaintiff, and which, until 1941 when the present plaintiff bought it out, had supplied the plaintiff with Mycalex and which also had licensed the General Electric Company and Westinghouse Electric & Manufacturing Company to make and sell Mycalex in this country. Both the product itself and the process of manufacture are embraced in numerous British and American patents, some of which have expired. Among the United States patents are the following, unexpired: Patent to Percy B. Crossley, No. 1795200, issued March 3, 1931, and patent to Albert William Henry Wedlock, No. 2032239, issued February 25, 1936. At the present time, the Westinghouse Electric & Manufacturing Company is a licensee of the plaintiff under the latter patent.

In this ceramic material, glass, in semi-fused powered form, is used as the bonding agent to hold the particles of mica together, and in this state is known in the trade as frit, of which there are a number of types or grades, depending upon the formula used. Pemco, prior to its relations with the plaintiff which are here in issue, had been an extensive manufacturer of porcelain enamel frit used in the manufacture of stoves, refrigerators, sanitary ware, washing machines, display cases, etc. In April, 1942, the plaintiff entered into negotiations with Pemco looking towards the furnishing by Pemco to the plaintiff of the latter's requirements for frit in its manufacture of Mycalex. As a result, plaintiff's production manager visited Pemco's Baltimore plant in order to become acquainted more precisely with the kind of frit that plaintiff required. After witnessing and assisting in the manufacture of frit at Pemco's Baltimore plant, quantities of Mycalex were made with it by plaintiff at its plant in Clifton, New Jersey, and orders for specific amounts of this frit were then given by plaintiff to Pemco for delivery over a period of months, continuing into the year 1943. During this period, plaintiff's plant at Clifton, New Jersey, was visited on several occasions by officials of Pemco, always upon plaintiff's invitation, in order that these officials might acquaint themselves fully with the various stages in the production of Mycalex in which Pemco's frit was being used, and thereby might be able to improve the frit it was supplying to the plaintiff, the latter having found that this frit was not fully up to its requirements. In the course of these visits, full access to plaintiff's plant was given to Pemco's officials.

During and prior to the period of these visits, the General Electric Company and the Westinghouse Electric & Manufacturing Company had manufactured and sold glass-bonded mica electrical insulating material, and Pemco's director of research from 1936 to 1943 had been employed by the General Electric Company from 1927 to 1934 as head of its enamel department which manufactured the glass for the General Electric Mycalex department; and in this capacity he became thoroughly acquainted with the composition and processing of both frit and the finished product, Mycalex. After coming with Pemco, this same person made visits to the General Electric Company's Mycalex plant as late as 1940.

In addition to information so acquired as to the composition and manufacture of this material, Pemco had enjoyed, both during and prior to this period, the benefit of knowledge acquired from the numerous patents previously referred to, and from trade publications and other sources. The technical knowledge required in order to manufacture this material was well known to ceramics engineers and chemists generally. Also, commercial success of glass-bonded mica insulating material depends basically upon the use of that type of frit best adapted for the particular use to which the finished insulating material is to be put, and a determination as to what is the best type of frit involves much experimentation with formulas in order to ascertain the critical temperatures, proper heating and cooling periods, the pressing to be employed, as well as other related factors.

In December, 1942, Pemco began for the first time the manufacturing of glass-bonded mica electrical insulating material, and International Products Corporation, the other defendant, was incorporated in March, 1943, but under separate ownership, for the purpose of taking over the manufacture of this material from Pemco, which it did, the frit used in such manufacture being thereafter supplied by Pemco. Both Pemco and International were largely induced to enter this new manufacturing field because of greater opportunities believed to exist as a result of Government war requirements. Neither Pemco nor International disclosed to plaintiff in advance of their doing so, that they intended to enter this field, although Pemco had informed the General Electric Company of its intention so to do, and that company had not objected.

Plaintiff continued to receive shipments of frit from Pemco pursuant to prior agreement until the latter part of 1943, which was several months after it had learned that International was making glass-bonded mica electrical insulating material in competition with it, and it was not until August 25, 1944, that the plaintiff made any real protest. On that date it wrote both defendant companies that it considered their commercial manufacture of glass-bonded mica electrical insulation material to be in violation of plaintiff's rights in that such manufacture, after plaintiff had disclosed its process to Pemco while the latter was supplying plaintiff with frit with the implied understanding that Pemco would not compete with plaintiff, as well as defendants' failure to disclose their intention to enter into such competitive manufacture, constituted unfair competition. Defendants replied to this letter denying the charges therein contained, and on February 21st, 1945, the present suit was filed.

In order to entitle the plaintiff company to relief it is necessary for it to prove two things: (1) That what it disclosed to the defendants was of a secret or confidential character whether in terms of formulas or in terms of means for using those formulas, namely, physical plant or equipment; and (2) that the defendants made use of such disclosure, without permission, in competition with the plaintiff. See Vulcan Detinning Co. v. American Can Co., 72 N.J.Eq. 387, 67 A. 339, 12 L.R.A.,N.S., 102. The law is thus summarized in the Restatement of the Law of Torts (Sec. 757) upon which the defendants themselves purport to rely:

"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) he learned the secret from a third person with notice of the fact that it was a secret and that the third person discovered it by improper means or that the third person's disclosure of it was otherwise a breach of his duty to the other, or "(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."

A trade secret may consist of any formula or pattern, any machine or process of manufacturing, or of any device or compilation of information used in one's business; and which may give to the user an opportunity...