RTE Corp. v. Coatings, Inc.
| Decision Date | 30 June 1978 |
| Docket Number | No. 76-045,76-045 |
| Citation | 267 N.W.2d 226,84 Wis.2d 105 |
| Parties | RTE CORPORATION, Appellant, v. COATINGS, INC., Respondent. |
| Court | Wisconsin Supreme Court |
Erwin Esser Nemmers, Chicago, Ill., for appellant.
Clifford B. Buelow (argued), Milwaukee, for respondent; John G. Vergeront, and Davis, Kuelthau, Vergeront, Stover & Leichtfuss, S. C., Milwaukee, on the brief.
This is an action in which the plaintiff, RTE Corporation, claims that the defendant, Coatings, Inc., improperly took its trade secret and made use of its idea and design for an electrical connector.
RTE is a large manufacturer of electrical equipment. RTE is a member of a group known in the industry as Original Equipment Manufacturers (OEM). The OEM group comprises companies that are both customers and competitors of RTE. Coatings is a small company specializing in metallizing, coating, painting and inertia welding.
The subject matter of this suit is an electrical component called a 200 ampere connector used in a loadbreak elbow. A loadbreak elbow is a rubber, L-shaped housing used in connecting cables in underground electrical systems. RTE (and other OEMs) manufactures and sells loadbreak elbows as kits. The 200 ampere connector involved in this suit is part of the kit, and it fits inside the housing and makes the actual connection.
The 200 amp. connector is cylindrical in shape, about two inches in length, and 5/8 inches in diameter. An aluminum electric cable is inserted into a hole running lengthwise into the connector from its bottom, and the connector is crimped down onto the cable to assure good contact. On the top half of the connector is a threaded eye running perpendicular to the length of the connector. A threaded copper probe is screwed into this eye to make the connection. The general shape of these connectors has been used by RTE and other companies for years.
Until 1972, 200 ampere and similar connectors were made entirely of aluminum. Historically, the part had problems of stripped threads and distorted eyes, because the aluminum eye is soft in comparison with the copper probe. In 1972, RTE introduced a bimetallic connector, with the top half made of copper, in an attempt to solve this problem. This original bimetallic connector was assembled by screwing the male-ended copper top into the female-ended aluminum base. This connector developed problems of its own when the connector was crimped onto the aluminum cable, because the crimping tended to distort the aluminum threads of the connector, reducing the contact between the aluminum base and the copper top.
A superior method for joining aluminum to copper is inertia welding. Inertia welding is a process whereby the two pieces to be joined are rotated against one another until friction raises the temperature to a plastic state. At that time the entire surfaces of the two pieces bond together. This process results in a smooth interface and a better electrical and physical contact.
RTE claims that Coatings misappropriated RTE's idea and design for inertia welded 200 ampere bimetallic connectors. This action was commenced in Waukesha county by the filing of a summons on December 2, 1974, but was later transferred to Milwaukee county. The complaint asserts three causes of action: (1) breach of contract, (2) trade secrets, and (3) misappropriation. These causes of action rest upon facts developed at trial showing the relationship between the parties and the sources of Coatings' knowledge of the design of the connectors.
Coatings acquired its first inertia welded machine in 1969. Coatings began soliciting the OEM group by holding an open house in 1969 to demonstrate inertia welding. Sutton, an executive of RTE, attended this open house.
During the 1969-70 solicitation, Coatings became aware of the problems in the use of all-aluminum connectors and those involved in connecting aluminum to copper in the fabrication of connectors. The technique of crimping aluminum over copper was used in other connectors prior to RTE's introduction of its bimetallic screw-type 200 ampere connector in 1972. During 1970, Coatings produced inertia welded connectors, which differed in size from the connector involved in this case, but the trial court concluded they were similar in design and function.
There were contacts between RTE and Coatings in 1969 and 1970 which made RTE aware of potential applications in its business of the inertia welded process. In 1971, in response to a phone call, RTE sent a drawing of a connector which is larger than the one involved in this case to Coatings, but there was no mention of confidentiality.
In 1972, Coatings produced several bimetallic inertia welded connectors for other members of the OEM group, in larger sizes than the size of the connector involved here.
The most significant transactions between the parties commenced on November 16, 1972. On that date, RTE sent to Coatings an inquiry with drawing attached (Exhibit 10) requesting a quoted price for inertia weldments. This drawing is the one from which RTE claims its design was appropriated, but neither the drawing nor the cover letter contains any reference whatsoever to confidentiality.
During early 1973, Coatings produced for RTE two separate lots of inertia weldments. The purchase orders for these two lots, dated March 9 and April 27, 1973, each contain a printed item on the back which reads:
On the basis of conflicting evidence, the trial court found that a copy of Exhibit 10 accompanied the first purchase order, dated March 9, 1973. RTE delivered the same drawing to at least one other inertia welding company, Flame Industries, again without any mention of confidentiality.
During this same period of time, Coatings had similar relationships with other members of the OEM group. Two other companies (Burndy and Chance) delivered drawings to Coatings of 200 ampere bimetallic inertia welded connectors, although it appears that Exhibit 10, received from RTE, was the first drawing of this type received by Coatings.
There were numerous contacts between the parties in late 1972 and early 1973, and the testimony was directly conflicting whether confidentiality was ever discussed. RTE claimed that it was, and Coatings claimed that it was not.
In October 1973, a meeting was held between the parties at which discussion was held of the idea of Coatings producing 200 ampere bimetallic inertia welded connectors exclusively for RTE. Again, Coatings claims there was no discussion of confidentiality at this meeting. Coatings displayed its 200 ampere connector to RTE at this meeting. The meeting concluded with Coatings' request that RTE present a specific proposal.
In an attempt to standardize the part, Coatings, on October 22, 1973, created drawing No. 102273 of a 200 ampere bimetallic inertia welded connector, and sent copies of this drawing to members of the OEM group. The drawing was sent to RTE in a letter of October 24, 1973, which discussed the recently held meeting on the exclusivity proposal and also included the following language:
This drawing No. 102273 is the one claimed by RTE to have been appropriated from its drawing, Exhibit 10. Coatings denies that this drawing originated from RTE's Exhibit 10.
Pursuant to a phone call from RTE, Coatings sent another letter to RTE on December 19, 1973, which stated, "Drawing # 102273 shows the type of finished part we are producing . . . ."
On January 9, 1974, a meeting was held to discuss RTE's proposal that Coatings produce the connector exclusively for RTE. Coatings rejected the proposal, because it concluded that RTE's share of the market was not large enough to justify an exclusive right to Coatings' production of the 200 ampere connector.
In April of 1974, Coatings advertised in a trade publication the fact that it was producing bimetallic inertia welded connectors. In the same month, both parties to this suit participated in a trade show in Dallas, Texas, displaying their products. Coatings featured the connector involved in this suit, and RTE also displayed and distributed samples of its inertia welded connectors. Each party saw the display of the other party.
Suit was commenced on December 2, 1974. Trial was held before Judge Harvey L. Neelen on May 5-6, 1975, and Judge Neelen filed his memorandum decision on January 22, 1976, which directed the dismissal of the plaintiff's complaint on the merits. RTE moved, on February 17, 1976, for a new trial in the interests of justice and because of newly discovered evidence. RTE also moved for reconsideration. Judge Neelen denied both motions. Judgment was entered on May 4, 1976, dismissing the action on its merits.
Although the trial court stated in motions after trial that the case on the evidence could have gone either way, it is apparent from the decision that on each crucial finding of fact the issue was resolved in favor of Coatings. The trial court found that the use of bimetal connectors was generally known prior to 1969-70, and that Coatings was producing inertia welded connectors similar in design and function to RTE's 200 ampere connector in 1970.
The court found that discussions for the production of inertia welded connectors which evidenced no...
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