Pyromatics, Inc. v. Petruziello

• Decision Date: 27 January 1983
• Citation: 7 OBR 165,454 N.E.2d 588,7 Ohio App.3d 131
• Parties: , 7 O.B.R. 165 PYROMATICS, INC., Appellee, v. PETRUZIELLO et al., Appellants.
• Court: Ohio Court of Appeals

Page 131

7 Ohio App.3d 131

454 N.E.2d 588, 7 O.B.R. 165

PYROMATICS, INC., Appellee, v. PETRUZIELLO et al., Appellants.

Court of Appeals of Ohio, Eighth District, Cuyahoga County.

Jan. 27, 1983.

Syllabus by the Court

1. Where a plaintiff seeks primarily equitable relief with attendant and incidental money damages, neither party is entitled to a trial by jury.

2. Factors to be considered by a trial court in recognizing a trade secret are: (1) the extent to which the information is known outside the business, (2) the extent to which it is known to those inside the business, i.e., by the employees, (3) the precautions taken by the holder of the trade secret to guard the secrecy of the information, (4) the savings effected and the value to the holder in having the information as against competitors, (5) the amount of effort or money expended in obtaining and developing the information, and (6) the amount of time and expense it would take for others to acquire and duplicate the information.

3. Where competition arises solely from the misappropriation of trade secrets, injunction is the proper remedy.

4. Punitive damages may be awarded in a trade secret case where the evidence shows that the defendant acted willfully and intentionally and with malicious intent.

Cavitch, Familo & Durkin Co., L.P.A., and Michael C. Cohan, Cleveland, for appellee.

Demer & Demer Co., L.P.A., and John A. Demer, Jr., Cleveland, for appellants.

PARRINO, Judge.

This appeal arises from a grant of injunctive relief and the award of money damages to plaintiff-appellee, Pyromatics, Inc., based on its verified complaint alleging unlawful use and disclosure of various trade secrets and other proprietary information by defendants-appellants, Michael J. Petruziello, Romanco, Inc., Glen A. Siders, William R. Erzen, Charles S. Blackwell and Raymond S. Woodcock. ¹

Pyromatics, Inc. was incorporated in June 1975. At that time, it bought the entire quartz products division of Sherwood Refractories, Inc., a subsidiary of TRW, Inc., including patents, production technology, recorded technical information and data and equipment. The principal shareholders in Pyromatics were former employees of Sherwood. The business of Sherwood's quartz division, and of Pyromatics since its inception, has been the manufacture of fused and powdered quartz products for industry. The fused quartz products, which are the focus of this lawsuit, are targeted to a limited market; investment costs for production are high. Fused quartz cores, as used in investment casting, comprise a major portion of the production of fused quartz products. These cores are manufactured by use of a redraw machine. The trial court's findings of fact may be quoted for a brief description:

"The redraw machine is a device in which quartz rods or tubes are fed at a controlled speed by means of wheels into a flame that maintains a regulated temperature on the surface of the quartz rod so that the quartz becomes viscous. The viscous quartz is cooled as it emerges from the heat center and by means of a second set of wheels is drawn or extruded from the heat center so that it cools into a rod or tube of smaller but similar configuration to the feed item. The goal of this process is to produce a smaller rod or tube with very fine dimensional tolerances. That smaller rod or tube is then further cut, ground, bent, beaded and fused with other rods or tubes to fine tolerances for use in casts for metal products. The casts primarily produce metal products for the jet engine industry. The function of the small quartz rod or tube is to enable the jet engine piece to have very small air passages that will facilitate cooling the engine."

The particular designs of the redraw machine and the production techniques used are claimed by Pyromatics to be trade secrets and proprietary information.

Defendant-appellant Michael Petruziello also worked for Sherwood Refractories, Inc. at the time its quartz division was purchased by Pyromatics. He became one of the first employees of Pyromatics in 1975. Petruziello worked with the redraw machine and had access, over the years, to production costs, yield rates and other operating information. Petruziello held a number of positions with Pyromatics during his tenure there and was familiar with all the equipment and production techniques used by Pyromatics in manufacturing fused quartz. He had also had contact with the major customers, particularly General Electric Company ("GE").

In 1979, Petruziello left his employment with Pyromatics and caused Romanco, Inc. to be formed. Romanco's only business has been the production of fused quartz products; Romanco is in direct competition with Pyromatics for the limited target market for these products. ² Romanco manufactures its fused quartz cores by use of a redraw machine, built by Petruziello, and a production process which are indistinguishable in their essential components from those at Pyromatics. In 1980, Romanco was able to successfully underbid Pyromatics on the GE CF6-50 core project. ³

Defendants-appellants Siders, Erzen, Blackwell and Woodcock are all former employees of Pyromatics and either current or former employees of Romanco.

Following a two-week trial to the court, the court rendered its opinion and extensive findings of fact and conclusions of law. The findings of fact are described more fully under the appropriate assignment of error; the conclusions of law, in pertinent part, read:

"1. The unpatented design and details of Pyromatics redraw machine that was in use when the individual defendants worked for Pyromatics are trade secrets of Pyromatics.

"2. Operating costs, prices, and yields of Pyromatics in making and selling redrawn quartz rods and tubes are trade secrets of Pyromatics.

"3. Procedures utilized by Pyromatics to cut, bend, bead, weld, and measure redrawn quartz cores and rods are in the public domain and their combination into a single process does not involve significant novelty to constitute a trade secret.

"4. By virtue of their employment relationship, all of the individual defendants owed a duty to Pyromatics not to disclose to outsiders or to use for personal advantage the trade secrets of Pyromatics.

"5. By written employment contract, all individual defendants had a duty not to disclose to outsiders nor use at any time, even after leaving the employ of Pyromatics, the trade secrets of Pyromatics except on behalf of Pyromatics. Such duty, however, did not preclude any individual defendant except Charles Blackwell from initiating a competing business or working for a competitor of Pyromatics so long as such defendant did not utilize trade secrets of Pyromatics.

"6. By written contract, Charles Blackwell had a duty not to engage any competing business to Pyromatics for a period of two years after he left the employ of Pyromatics.

"7. Michael Petruziello breached his duties under written contract to Pyromatics by using confidential information as to yields, prices, and operating costs of Pyromatics to enable Romanco to compete with Pyromatics.

"8. Charles Blackwell breached his duty not to engage in a competing business to Pyromatics by becoming an employee of Romanco.

"9. Romanco had a duty not to utilize information which it knew was obtained from another person in breach of a duty not to disclose that information. It violated that duty by using the information improperly obtained or disclosed by Petruziello.

"10. Romanco and Petruziello, by breaching their duties not to use confidential information obtained through a trust relationship, caused Pyromatics to lose $25,060.00 in profits on sales to ICL and AETC, $9,408.00 as a reduced price on a CF6-50 contract of 4,800 sets of cores let in December 1980, and $18,182.50, representing the further profit Pyromatics would have earned if it gained 60% of that December, 1980, contract from General Electric.

"11. Pyromatics has not proven by a preponderance of the evidence that at any time after 1979, it would have been a sole source supplier for General Electric on CF6-50 parts, that expenditures for capital equipment were losses of any sort, and that overstocking would not have resulted with competition from Romanco.

"12. The violations of duty by Romanco and Petruziello were intentional and wilful, and these violations which resulted in the breaches of duty were done with deliberate and malicious intent to injure Pyromatics. For such intentional, wilful, and malicious conduct, the court awards $32,000.00 as punitive damages."

Appellants filed a timely appeal and have assigned four errors which shall be addressed seriatim.

I

"The trial court erred in denying the defendants' request for a jury trial."

The right to a jury trial is not absolute. Where a plaintiff seeks primarily equitable relief with attendant and incidental money damages neither party is entitled to a trial by jury. Converse v. Hawkins (1877), 31 Ohio St. 209; Rowland v. Entrekin (1875), 27 Ohio St. 47; Harden Chevrolet Co. v. Pickaway Grain Co. (C.P.1961), 92 Ohio Law Abs. 161, 194 N.E.2d 177 .

In the instant case the right of the plaintiff to damages depended upon its right to have enjoined the activities of the defendants. The damage recovery sought was incidental to the main relief of preventing further use of plaintiff's trade secrets by the defendants. The denial of a jury trial was a proper action.

Appellants also argue under this assignment that even if the equitable claims of plaintiff-appellee were paramount, the trial court erred in not permitting a bifurcated trial whereby the damage issue would have been tried to a jury. Although such a decision would have been a proper exercise of discretion, the court was under no duty to bifurcate the trial. The first assignment of error is overruled.

II

"The trial court erred in concluding that the plaintiff corporation possessed any trade secrets which were misappropriated by defendants in...