Syntex Ophthalmics, Inc. v. Novicky, 80 C 6257.

• Citation: 591 F. Supp. 28
• Decision Date: 12 December 1983
• Docket Number: No. 80 C 6257.,80 C 6257.
• Parties: SYNTEX OPHTHALMICS, INC., et al., Plaintiffs, v. Nick N. NOVICKY, et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

591 F. Supp. 28

SYNTEX OPHTHALMICS, INC., et al., Plaintiffs, v. Nick N. NOVICKY, et al., Defendants.

No. 80 C 6257.

United States District Court, N.D. Illinois, E.D.

December 12, 1983.

COPYRIGHT MATERIAL OMITTED

Holland C. Capper, Chicago, Ill., for plaintiffs.

Randy G. Black, McLennon, Nelson & Nudo, Park Ridge, Ill., McDougall, Hersh & Scott, Chicago, Ill., for Nick N. Novicky.

Gerald Geren, Epton, Mullin, Segal & Druth, John T. McEnroe, James T. FitzGibbon, Chicago, Ill., Howard M. Peters, Palo Alto, Cal., Roger Milgrim, Milgrim, Thomajan, Jacobs & Lee, New York City, for Tsuetaki and Fused Kontacts of Chicago, Inc.

MEMORANDUM OPINION AND ORDER

DECKER, District Judge.

Introduction

Plaintiffs, Syntex Ophthalmics, Inc. (Syntex), and Arapahoe Chemicals Inc. (Arapahoe)¹, brought this trade secret/patent infringement suit against a former employee, Nick Novicky (Novicky), Novicky's subsequent employer, Fused Kontacts of Chicago, and that corporation's president, George Tsuetaki (collectively referred to as Tsuetaki). Plaintiffs claimed title to patents obtained by Novicky (the Novicky patents) and sought injunctive and monetary relief for patent infringement and misappropriation of trade secrets concerning chemical formulae and manufacturing processes used in the production of silicone-containing, gas-permeable, rigid contact lenses.

On May 4, 1981, the court severed Syntex's patent infringement claims pending resolution of the patent ownership and trade secret claims. On May 6, 1982, the court entered a preliminary injunction enjoining the defendants from using certain chemical compounds and process steps in dispute between the parties. Syntex Ophthalmics v. Novicky, 214 U.S.P.Q. 272 (N.D.Ill.1982), aff'd, 701 F.2d 677 (7th Cir. 1983).² On June 13, 1982, partial summary judgment for Syntex entered, upholding its title to the patents with the court relying on a settlement agreement between Syntex and Tsuetaki and collateral estoppel from a prior state court judgment against Novicky. Tsuetaki v. Novicky, No. 80 CH 4724 (Cir.Ct. Cook Cty. Ill. Jan. 13, 1981).³ After settling with Tsuetaki, Syntex filed a stipulation of voluntary dismissal of all claims against Tsuetaki on June 15, 1983 under Fed.R.Civ.P. 41(a)(2).

After the final pretrial conference, Syntex dismissed with prejudice all claims against Novicky for damages from Novicky's alleged theft of trade secrets under Count I of the complaint incurred up to and including the date of the dismissal. Syntex reserved its claims to all other available relief, including a permanent injunction, costs, and attorneys' fees. Syntex dismissed without prejudice its remaining claims under Count II for damages for past and present infringement of the Novicky patents and for an injunction against future infringement of them.⁴ In return, Novicky stipulated that (a) Syntex need not prove the requirement under Schulenburg v. Signatrol, 33 Ill.2d 379, 212 N.E.2d 865 (1965), cert. denied, 383 U.S. 959, 86 S.Ct. 1225, 16 L.Ed.2d 302 (1966), that defendant profited from the theft to the detriment of plaintiffs and (b) the following would not be issues at trial: (1) patent validity, (2) dates of invention, (3) identity of inventors, and (4) the relationship of one patent to the other. The parties also excluded issues of (1) Syntex's compliance with FDA regulations, (2) the testimony of Warren D. McPhee on preliminary injunction issues,⁵ and (3) the grounds for appeal of the state court judgment against Novicky in favor of Tsuetaki.

The court conducted a trial on the claim for injunctive relief for trade secret misappropriation on June 22-23 and June 27-30, 1983. Novicky represented himself at trial, but he employed an attorney until the eve of trial when his attorney sought leave to withdraw. The court enters the following findings of fact and conclusions of law.⁶

I. Findings of Fact

Novicky's use of information that he obtained while working for Arapahoe is intertwined with the invention and development of advanced types of contact lenses. The court must begin with the background of this technology.

A. History of Gas-Permeable Contact Lenses

Contact lenses are made of plastics called polymers that are made through a process called polymerization. Polymerization takes place when a chemical called a free radical initiator is added to a mixture of monomers, compounds that will polymerize. The process creates a series of cross-linking chemical bonds among the monomers. The extent of the cross-linking determines the physical properties of the polymer (a plastic formed from one monomer) or copolymer (a plastic formed from a mixture of different monomers). The cross-linking depends on the nature of the monomers, the initiator, and the reaction conditions, e.g., pressure and temperature. To make contact lenses, the manufacturer forms the polymers into rods and slices them into discs (buttons) which the manufacturer grinds into lenses.

Before the development of rigid, gaspermeable contact lenses, contact lens wearers wore either "soft" or "hard" contact lenses. The former provided suboptimal vision for some, required great care, supported bacterial growth, and wore out quickly. The original or hard lenses did not have these disadvantages, but they failed to allow oxygen to reach the wearer's cornea. This lack of oxygen permeability prevented wearing the lenses for extended periods and sometimes led to corneal swelling caused by oxygen deprivation to the cornea. These original hard lenses were made of a polymer called polymethymethacrylate (PMMA).

In the mid-1970s, researchers discovered that by using a silicone derivative of methylmethacrylate, the monomer used in PMMA, they could produce a rigid plastic with the desired optical properties that was gas-permeable. Rigid, gas-permeable lenses became possible. They gave the user extended wear and lower incidence of corneal swelling. They required less maintenance and provided more durability and better vision than soft lenses. This discovery led directly to the POLYCON project at Syntex and this suit.

B. The POLYCON Project

In early 1977 after it acquired Polymer Optics Corporation (POC), Syntex, (U.S.A.), Inc., formed Syntex Ophthalmics.⁷ The acquisition of POC provided the foundation for the POLYCON project as it included the purchase of United States Patent No. 3,808,178 and a pending application that became United States Patent No. 4,120,570. These patents were named the Gaylord patents after Norman Gaylord (Gaylord), the inventor who pioneered application of silicone-PMMA chemistry to the contact lenses field. Gaylord later consulted with Syntex about the commercial development of the POLYCON process. Syntex (U.S.A.) also purchased confidential and proprietary trade secret rights regarding laboratory manufacture of silicone-PMMA contact lenses. Preliminary work at POC related to a commercial process and product.⁸

Once incorporated, Syntex started the POLYCON project to develop a procedure for manufacturing a commercially feasible silicone-PMMA gas-permeable contact lens. The point of the project was to optimize the physical properties of the polymers for use in contact lenses. Relevant properties included oxygen permeability, wettability (important to ensure that the lenses would absorb rather than repel tears), rigidity, and transparency. Syntex optimized these characteristics by varying reaction conditions and perfecting procedures for manufacturing the monomers and carrying out the final polymerization. It developed analytical procedures to regulate the quality of the final product in conformity with Food and Drug Administration (FDA) regulations.

From May, 1977 until May 1978, Syntex spent more than one million dollars and twenty man-years on POLYCON to develop the process details for manufacturing commercially satisfactory silicone-PMMA contact lens material. The Arapahoe batch sheets (the batch sheets)⁹ and the accompanying analytical methods and specifications (the FDA master file or master file) contained the information generated from this expenditure of money and effort. In January, 1979, the FDA approved Syntex's silicone-PMMA contact lenses. Syntex designated the monomer for which it sought FDA approval as "T-2." Since then, Syntex has successfully made and sold its lenses under the trademark POLYCON.

Syntex worked to preserve the confidentiality of its trade secrets. It restricted access to the Arapahoe Research and Development Department to only those employees and consultants, such as Dr. Gaylord, who had signed secrecy agreements. Laboratory notebooks and batch records were under lock and key. Only those who needed information in confidential reports received them. The building housing the POLYCON laboratory remained locked after business hours. Visitors had to register, and employees accompanied them during their visit. While orienting new employees, Arapahoe's personnel department specifically reviewed the Employee Handbook and paragraphs three and four of the employment agreement which established the duty not to disclose confidential information. At orientation, employees also learned that everything that they did or learned was secret and subject to that duty. Dr. Courtland Spicer, a supervisor on the project, told his employees that the information in the batch sheets was valuable and confidential. Syntex never published the batch sheets or the analytical methods.

C. Novicky's Employment with Syntex

Defendant Novicky began working for Arapahoe in 1973 as an analytical technician. When he started work, he signed a standard Syntex employment agreement that contained one clause promising confidentiality and another clause assigning all ideas and inventions originating, conceived, acquired, or developed by him while at Syntex. He tested samples to produce data about Syntex's manufacturing processes.

In 1977, Syntex promoted Novicky to chemist and assigned him to the POLYCON project. His...