National Rejectors, Inc. v. Trieman

• Citation: 409 S.W.2d 1
• Decision Date: 12 September 1966
• Docket Number: No. 50568,50568
• Parties: NATIONAL REJECTORS, INC., a dissolved Missouri corporation, and National Rejectors, Inc. (formerly U.M. Investment Co.), a Missouri corporation, Respondents (Plaintiffs), v. Rollyn C. TRIEMAN, Albin S. Pierz, Fred J. Melvin, Coin Acceptors, Inc., aMissouri corporation, and The Vendo Company, a Missouri corporation, Appellants(Defendants).
• Court: United States State Supreme Court of Missouri

Page 1

409 S.W.2d 1

152 U.S.P.Q. 120

NATIONAL REJECTORS, INC., a dissolved Missouri corporation and National Rejectors, Inc. (formerly U.M Investment Co.), a Missouri corporation Respondents (Plaintiffs), v. Rollyn C. TRIEMAN, Albin S. Pierz, Fred J. Melvin, Coin Acceptors, Inc., aMissouri corporation, and The Vendo Company, a Missouri corporation Appellants(Defendants).

No. 50568.

Supreme Court of Missouri, En Banc.

Sept. 12, 1966.

Rehearing Denied Dec. 12, 1966.

Albert E. Jenner, Jr., Prentice H. Marshall, Chicago, Ill., Walter R. Mayne, H. M. Stolar, Stuart Symington, Jr., St. Louis, Raymond, Mayer, Jenner & Block, Chicago, Ill., Fordyce, Mayne, Hartman, Renard & Stribling, St. Louis, Stolar, Kuhlmann, Heitzmann & Eder, St. Louis, of counsel, for respondents.

Thomas L. Croft, Terrence L. Croft, Coburn, Croft & Kohn, St. Louis, Donald E. Johnson, Don M. Bradley, Hovey, Schmidt, Johnson & Hovey, Kansas City, James M. Douglas, Thompson Mitchell Douglas & Neill, St. Louis, Albert F. Hillix, Hillix, Hall, Childers, Brown & Hoffhaus, Kansas City, for appellant Vendo Co.

Edmund C. Albrecht, Jr., Albrecht & Homire, Lawrence H. Cohn, Cohn & Powell, St. Louis, for appellants Rollyn C. Trieman, Albin S. Pierz and Coin Acceptors, Inc.

WELBORN and PRITCHARD, Commissioners.

This is an action for injunctive relief and damages, based upon alleged misappropriation of trade secrets and unfair competition. A separate trial was had on the injunctive issues, resulting in a judgment and decree in favor of plaintiffs. Defendants appealed and the injunction was stayed (except as to defendant Melvin) upon the filing of an appeal bond in the amount of $1,250,000.00.

The principal party plaintiff in this action is National Rejectors, Inc., a Missouri corporation engaged in the manufacture and sale of, among other products, slug rejectors and electrical coin changers. Joined as a party plaintiff is a now dissolved Missouri corporation, also known as National Rejectors, Inc., and sometimes referred to herein as 'Old' National. Old National was incorporated in 1935 as National Slug Rejectors, Inc. In 1947, its corporate name was changed to National Rejectors, Inc. Old National was primarily a family-owned corporation, with the Fry and Gottfried families owning equal shares of the Class A voting stock. Class B nonvoting stock of Old National was owned by some of its employees.

In 1956, the Gottfried family sold their Old National Class A stock to U.M. Investment Co., a wholly owned subsidiary of Universal Match Corporation. On January 29, 1959, all of the business and operating assets of Old National were transferred to U.M. Investment Co. Old National was dissolved and U.M. Investment Co. changed its name to National Rejectors, Inc., and succeeded to the business of Old National. 'Old' National joined as party plaintiff because some of the alleged wrongful conduct of the defendants occurred prior to the 1959 transaction. See § 351.565, RSMo 1959, V.A.M.S. Unless the separate corporate identities are significant, plaintiffs will be referred to herein as 'National.'

The parties defendant are three individuals, Rollyn C. Trieman, Albin S. Pierz and Fred J. Melvin, formerly employees of National, who in 1958 incorporated the defendant Missouri corporation Coin Acceptors, Inc., as Boxer Tool and Engineering Company. Also named as party defendant is The Vendo Company, a Missouri corporation. The individual defendants will be referred to herein by their last names, Coin Acceptors, Inc. as 'Coin Acceptors' and The Vendo Company as 'Vendo.'

The essence of the plaintiff's charge is that the individual defendants, together with other employees of plaintiff, conspired, while in plaintiff's employ to enter the business of designing, manufacturing and selling coin- handling devices in competition with plaintiff; that in furtherance of such conspiracy, the individuals misappropriated plaintiff's trade secrets and caused Coin Acceptors to be incorporated, which, making use of plaintiff's trade secrets, did go into business in competition with plaintiff; that Vendo under a contract with the other defendants made use of plaintiff's misappropriated trade secrets, with knowledge of the other defendants' wrongful acts.

National alleged that its trade secrets consisted of the physical features and characteristics of every part of its slug rejectors and electrical coin changers, including their dimensions, shapes, materials, its 'trial and error,' 'cut-and-try' and experimentation used in the development of its devices.

The trial court found that National was possessed of trade secrets consisting of dimensions, tolerances, shapes, forms, positions, relationships, strengths, and materials used in the design, development and mass production manufacture of slug rejectors and electrical coin changers, together with trial-and-error, cut-and-try, and experimentation. Permanent injunctions were entered against each defendant's designing, manufacturing, using and selling any slug rejectors or electrical coin changers embodying National's trade secrets; disclosing National's trade secrets to any other persons; using National's trade secrets for their own use or profit; and manufacturing, using and selling Coin Acceptors' slug rejectors and other types of slug rejectors and electrical coin changers being manufactured by Vendo.

The trial court ordered that defendants surrender and deliver to National for its use or destruction all drawings, sketches, photographs, memoranda and other writings and all copies thereof, and all tools and dies, used by defendants in the manufacture of the types of slug rejectors and electrical coin changers presently manufactured by Coin Acceptors and Vendo.

There are two classes of coin-handling devices involved in this suit: slug rejectors and electrical coin changers. Such devices are in common use on vending machines which dispense food, cigarettes, soft drinks, etc., amusement machines, such as phonographs, pin balls, etc., and service machines, such as coin-operated washing machines.

There are two general types of slug rejectors: single coin slug rejectors which handle single denomination coins--nickels, dimes and quarters; and multi-coin slug rejectors which handle coins of several denominations. '3-in-1' models handle nickels, dimes and quarters, and '4-in-1' models have added sections for either pennies or half dollars.

National currently produces single coin rejectors, known as its '700 Series.' Coin Acceptors' comparable devices were first its '500 Series,' later changed to its '50 Series.' National calls its 50-cent slug rejectors its '7900 Series,' while the comparable device made by Vendo is called its '80 Series.' National's 3-in-1 rejector is its '8000 Series,' Vendo's its '78 Series.' National's 4-in-1 rejector is its '8100 Series,' and Vendo's its '79 Series.' National's electrical coin changers are its '7600 Series' and '8800 Series,' Vendo's being its '90 Series.'

The operation of a slug rejector, the purpose of which is to separate genuine coins from slugs, may be described briefly as follows: The coin or slug is deposited in an inlet or 'coin insert' at the top. It then encounters a rotating cradle which has legs extending into the coin path. The legs are spaced to receive a coin of proper diameter. Undersized coins fall through to the reject outlet. If the coin or slug is too large in diameter or too light in weight, it remains in the cradle and must be removed by use of the 'reject' lever, which operates the scavenger and knockout for such purpose. If the coin is of proper size and weight, its weight causes the cradle to rotate and deposit the coin on an inclined rail.

The coin or slug travels down the rail and in doing so it is tested for thickness. If the coin or slug is of greater thickness than is normal for the coin which the device is designed to test, it cannot pass along the rail and through the space between the magnet and the rejector mainplate. Objects of excessive thickness are halted and operation of the scavenger permits them to fall into the rejected coin path.

In its passage between the magnet and the mainplate, the object is also tested for metallic composition. Legitimate coins are made of nonmagnetic metal. Some slugs are made of magnetic material and will adhere to the face of the magnet and must be removed by the wiper, also operated by the reject lever. Some slugs are also made of nonmagnetic metal. Nonmagnetic slugs and coins generate eddy currents as they pass through the magnetic field. Different materials generate different quantities of eddy currents and the retarding effect of passing through the magnetic field is related to the type of metal involved.

The speed, as affected by the passage through the magnetic field, at which the object leaves the end of the rail determines its trajectory and thereby its final course into either the reject area or into the area where legitimate coinage activates the switch to dispense to the customer a pack of cigarettes, a bottle of soda, etc., or place the amusement or service device in operation.

Coin changers provide for the return to the customer of the difference between the denomination of coin which he inserts and the charge for the product or service which he purchases. Coins pass first through a slug rejector, and, if accepted, into the changer. In passing into the changer, the coin strikes a switch wire located in the coin chute, activating a switch which starts the motor of the changer. The motor moves a coin pay-out slide which causes the correct amount of change in nickels or dimes to be returned to the customer. Some changers pay out nickels and dimes, others only nickels.

National has successfully engaged in the manufacturing and sale of coin-handling devices since 1935. Its growth is reflected in its 25 employees in 1938 and 800 in 1956. National developed and owned numerous patents relating to slug...