Servo Corporation of America v. General Electric Company

• Decision Date: 14 March 1968
• Docket Number: No. 11208,11209.,11208
• Citation: 393 F.2d 551
• Parties: SERVO CORPORATION OF AMERICA, Appellant, v. GENERAL ELECTRIC COMPANY, Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

393 F.2d 551 (1968)

SERVO CORPORATION OF AMERICA, Appellant, v. GENERAL ELECTRIC COMPANY, Appellee.

Nos. 11208, 11209.

United States Court of Appeals Fourth Circuit.

Argued June 2, 1967.

Decided March 14, 1968.

John S. Davenport, III, Richmond, Va. (William R. Cogar, Collins Denny, III, Mays, Valentine, Davenport & Moore, Richmond, Va., B. Purnell Eggleston, Roanoke, Va., and Roy C. Hopgood, New York City, on brief), for Servo Corp. of America.

Charles H. Walker, New York City (David W. Plant, Fish, Richardson & Neave, George V. Eltgroth, New York City, Melvin M. Goldenberg, Washington, D. C., Frank W. Rogers, Leonard C. Muse, and Woods, Rogers, Muse, Walker & Thornton, Roanoke, Va., on brief), for General Electric Co.

Before HAYNSWORTH, Chief Judge, and BRYAN and WINTER, Circuit Judges.

WINTER, Circuit Judge:

As more particularly set out in Servo Corporation of America v. General Electric Company, 337 F.2d 716 (4 Cir. 1964), we held U. S. Patents Nos. 2,880,309 and 2,903,575, of which Servo was the assignee, invalid and, hence, incapable of infringement by General Electric. The patents were for devices known as "hot box detectors," useful in the railroad industry to detect an abnormal quantity of heat emanating from freight car journal boxes. At the same time, we concluded that General Electric had been unjustly enriched by its wilful copying of Servo's device, purportedly constructed under U. S. Patent No. 2,880,309, in breach of a confidential relationship between Servo and Southern Railway Company, for which Servo had installed a device for testing and experimentation; and we remanded the case for a determination of Servo's damages in its claim for unjust enrichment. General Electric, which had abandoned its efforts to develop a workable hot box detector near the close of 1955, was shown by the evidence to have obtained Servo's proprietary interest in its claimed invention on April 10, 1958, when its engineering personnel inspected Servo's installation, took photographs, made notes, and obtained drawings and engineering data. We made no determination of the extent and scope of Servo's proprietary interest or General Electric's misappropriation. Reference to the opinion in that case is made for a fuller statement of the facts and our holding.

Later, in Servo Corporation of America v. General Electric Company, 342 F. 2d 993 (4 Cir. 1965), we denied a petition for rehearing, but clarified the scope of our previous holding and our directions to the district court on remand, by stating:

"We think it consistent with the opinion heretofore filed that the district court should allow Servo damages only for General Electric\'s appropriation of that portion of its work which was not publicly disclosed prior to the visit to Salisbury on April 10, 1958, and that these damages should be measured by General Electric\'s cost of acquiring the same information by its own experimentation." Id., p. 993.¹

Thus, as the parties in this appeal agree, we directed the district court to address itself to the three questions: (1) what portion of Servo's work was not publicly disclosed prior to April 10, 1958, (2) what portion of the undisclosed work was appropriated by General Electric as a result of its April 10, 1958 inspection, and (3) what would it have cost General Electric to acquire the same information by its own experimentation?

The district court, with the aid of a Special Master appointed to assist in the determination of damages,² who participated in the proceeding, determined that Servo had not publicly disclosed its device in its entirety, that the essential undisclosed feature which General Electric appropriated was the orientation angles,³ and that damages of $50,000.00 "would be proper, fair and reasonable." Judgement accordingly was entered and both parties have appealed. We reverse, and remand for further proceedings.

In the proceedings on remand in the district court, and in this Court, Servo insists that the combination of all of the elements of the hot box detector was undisclosed and, impliedly although far from explicitly, that General Electric did not theretofore know, and hence appropriated, all that Servo had developed. General Electric, on the other hand, sought to establish that all of the elements of the detector had been publicly disclosed in trade papers and industrial fairs prior to April 10, 1958, and, again impliedly but not explicitly, that General Electric had developed its competing product from such sources of information, rather than the April 10, 1958 inspection.

Servo sought to take the deposition of a patent attorney and other employees of International Telephone & Telegraph Company. I. T. & T. had expended great effort and considerable sums of money in an unsuccessful effort to develop a hot box detector of its own. The purpose of the deposition was to discover I. T. & T.'s cost of development, presumably as some measure of what General Electric's costs might have been had it been established that General Electric appropriated some of Servo's accomplishments. General Electric moved to quash the taking of these depositions, and served interrogatories upon Servo, seeking discovery of what disclosure Servo had made prior to April 10, 1958. Servo, in turn, served interrogatories upon General Electric to determine its costs in connection with its pre-April 10, 1958 attempts to develop a workable detector; and General Electric filed objections to these interrogatories.

The various motions and objections came on for hearing on July 19, 1966. The district court ruled on none of them, but instead appointed the second Special Master to aid the court "* * * in the determination of the damages which might be due Servo, in the event that the Court should be of the opinion that some portion of Servo's work was not publicly disclosed prior to the visit on April 10, 1958 * * * by representatives of General Electric Company * * *." As part of the order which was entered, Servo was directed to file a bill of particulars setting forth that portion of Servo's work which was not publicly disclosed prior to April 10, 1958, and a pretrial conference was directed to be held on October 18, 1966.

Servo filed its bill of particulars on the date fixed, containing a lengthy recital of claimed combinations. General Electric filed a responsive pleading, in which it asserted that every significant aspect of the detector had been disclosed prior to April 10, 1958.

At the pretrial conference held on October 18, 1966, considerable discussion between counsel and the court occurred, dealing with the relevancy of the discovery data sought to be elicited from I. T. & T. and the power of the court to require it, and also the propriety of General Electric's being required to divulge the costs which it had incurred in an attempt to develop a hot box detector prior to April 10, 1958. After hearing from counsel, the district judge summarily announced that he thought that the seven years that the litigation had been going on was long enough, that he had conferred during an earlier recess with the Special Master, and that they had collaborated and written an opinion and judgment, containing the essential provisions before described, which he read to counsel.

As an answer to each of the three questions that we directed be determined on remand, we find the district judge's opinion and judgment unsatisfactory, substantively and procedurally.

In remanding the case for a redetermination of the first two questions which the appeal presents, it is appropriate for us to state the substantive legal principles which will govern their outcome. Servo contends that the trade secret which General Electric appropriated from it lay in the "working combination" of various elements which it had developed, and urges us to rule that in order for there to have been public disclosure of the secret, there must have been a disclosure of all the components of the combination within the four corners of an integrated document. That Servo's trade secret may have been a combination of components, each of which was in the public domain, cannot be doubted. Imperial Chem. Indus. Ltd. v. National Distillers & Chem. Corp., 342 F.2d 737 (2 Cir. 1965). But it does not follow that public disclosure of the working combination may be accomplished only through a single integrated document. That doctrine is the defense of anticipation in the field of patent law. Dewey & Almy Chem. Co. v. Mimex Co., 124 F.2d 986 (2 Cir. 1942). It has no necessary application to a trade secrets case where the question is whether, taking into account all of the plaintiff's relevant disclosures, it is reasonable to conclude that a competitor could have ascertained the working combination from an examination of those disclosures. Sarkes Tarzian, Inc. v. Audio Devices, Inc., 166 F.Supp. 250 (S. D.Cal.1958); Cummings, Some Aspects of Trade Secrets and Their Protection: The Public Domain and the "Unified Description" Requirement, 54 Ken.L.J. 190, 197-201 (1966).

In holding that Servo's trade secret might consist of several discrete elements,...