Tracerlab, Inc. v. Industrial Nucleonics Corporation, 6055.

• Citation: 313 F.2d 97
• Decision Date: 04 February 1963
• Docket Number: No. 6055.,6055.
• Parties: TRACERLAB, INC., Plaintiff, Appellant, v. INDUSTRIAL NUCLEONICS CORPORATION, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

313 F.2d 97 (1963)

TRACERLAB, INC., Plaintiff, Appellant, v. INDUSTRIAL NUCLEONICS CORPORATION, Defendant, Appellee.

No. 6055.

United States Court of Appeals First Circuit.

February 4, 1963.

Norman A. Hubley, Boston, Mass., H. Lawrence Tafe, III, John A. Lahive, Jr., Herrick, Smith, Donald, Farley & Ketchum and Weingarten, Orenbuch, & Pandiscio, Boston, Mass., on the brief, for appellant.

James D. St. Clair, Boston, Mass., Blair L. Perry and Hale & Dorr, Boston, Mass., on the brief, for appellee.

Before WOODBURY, Chief Judge, and HARTIGAN and ALDRICH, Circuit Judges.

HARTIGAN, Circuit Judge.

This is an appeal from a judgment of the United States District Court for the District of Massachusetts granting defendant's motion for summary judgment in an action in which plaintiff alleged the misappropriation of trade secret information in connection with the construction of radioactive measuring devices known as "beta gauges" and in the issuance of a patent embracing these products.

Plaintiff-appellant is a Massachusetts corporation principally engaged in the research, development and manufacture of a diversified line of nucleonic equipment for industrial application, including industrial control apparatus for measuring radioactive elements.

Defendant-appellee is an Ohio corporation which also produces similar apparatus.

Plaintiff alleges that in 1949 it hired one Chope and one Foster to do research work; that in the course of their work they learned many of plaintiff's confidential and valuable trade secrets; that in 1950 both Chope and Foster left the employ of plaintiff and proceeded almost immediately to establish the defendant corporation. Thereafter, according to plaintiff, they illegally utilized the secret information which had been gleaned during the course of their employment with the plaintiff and proceeded to develop and market the products which form the general basis of this action.

The district court in acting on defendant's motion for summary judgment, accepted as true the facts alleged by plaintiff but granted the motion on the grounds that the action was foreclosed by the Massachusetts statute of limitations and by the doctrine of laches. The correctness of the trial judge's rulings on each of these grounds presents the principal issues on this appeal.

In Massachusetts,¹ the applicable period of limitations is two years. Mass. G.L. Ch. 260, § 2A. However, in an appropriate case, the two year period may be extended by § 12 of the above cited chapter which provides:

"§ 12. Extension of Time in Case of Fraudulent Concealment.

"If a person liable to a personal action fraudulently conceals the cause of such action from the knowledge of the person entitled to bring it, the period prior to the discovery of his cause of action by the person so entitled shall be excluded in determining the time limited for the commencement of the action." (Emphasis supplied.)

Defendant contends that whatever cause of action the plaintiff may have had arose in the 1950-52 time period — the time during which defendant was incorporated and first began producing radioactive measuring devices or "beta gauges." Consequently, in defendant's view, plaintiff's suit which was commenced on July 9, 1958 was clearly outside the two year Massachusetts limitations period.

On the other hand, plaintiff contends that its cause of action did not accrue until April 1, 1958 — the day on which a patent was issued to defendant incorporating principles bottomed on plaintiff's trade secrets. Until that day plaintiff claims that it lacked the "knowledge" of its cause of action within the purview of § 12 — owing to defendant's fraudulent acts of concealment — and that it thereupon acted seasonably upon acquiring that knowledge.

The trial judge rejected this contention and after reviewing the depositions of three of plaintiff's officers — which together with an affidavit of Chope, the president of the defendant corporation, and the pleadings furnish the sole evidence on the present state of the record — held that:

"In this case, on the admission of plaintiff\'s own principal officers, plaintiff had knowledge of the alleged misappropriation of their trade secrets as early as 1950."

In answer to plaintiff's argument that while it early "suspected" that defendant had in fact misappropriated its secrets — this suspicion did not rise to the statutory level of "knowledge" — the court replied:

"This was not, as plaintiff argues, mere suspicion, but rather a firm belief that defendant was using their trade secrets, a belief strong enough to lead them to take at least some steps toward bringing suit."

This appeal, coming to us after the trial judge's grant of a motion for summary judgment, gives rise to the familiar principle that: "* * * a reviewing court must view the evidence in the light most favorable to the party against whom the motion has been granted, according that party the full benefits of all favorable inferences that may be drawn from the evidence in determining whether there exists a genuine issue of material fact." Atlas v. Eastern Air Lines, Inc., et al., 311 F.2d 156 (1st Cir., 1962), and cases cited therein.

Applying this principle, the question is whether the record discloses a genuine issue of material fact as to whether the plaintiff had knowledge or the means of acquiring knowledge as to its cause of action at some point prior to April 1, 1958 — the date on which defendant was issued its patent.²

Preliminarily, it will be helpful to be more specific with reference to plaintiff's "cause of action." The record indicates that a "beta gauge" is an exceedingly intricate and complex electronic instrument. The machine itself is a vertical console which stands some six feet high and which has recorders built into the unit. In the words of the complaint "A typical beta guage has a gap between the source and the detector so that as a material in sheet form, the thickness of which is to be measured, is passed through the gap the amount of radiation passing through the material to the detector varies according to the weight per unit area of the material. Variations in the amount of radiations passing through the material are measured by the detector unit and expressed on the recording device."

The particular trade secrets which the defendant corporation assertedly plagiarized did not, however, relate to the external configuration or design of the machine but rather to its highly complex and internal circuitry. Thus, again in the words of the complaint, plaintiff deemed it essential to develop "an automatic periodic standardization system to compensate for variables other than the weight of the material being measured. * * * To compensate for these variables plaintiff developed a measuring circuit means for comparing from time to time the intensity of radiations whose intensity is a function of the quantity being measured with radiations of a standard intensity."

It is the alleged pirating of the trade secrets relating to the above-described circuitry, inter alia, which is the cause of action — knowledge of which plaintiff must be charged — if summary judgment for the defendant was providently granted.

As noted above, the trial judge's finding of knowledge was predicated upon the depositions of certain officers of plaintiff and consequently an examination of those depositions is in order.

After analyzing the deposition of William E. Barbour, Jr., president of the plaintiff, the trial judge concluded: "Thus Barbour, the President of plaintiff from 1946 to 1955, testified that he knew Chope and Foster knew plaintiff's secrets and that they had left to go into the business of producing beta gauges and that within a year after they left he knew they were putting out a competitive product, that he then felt the design of plaintiff's beta gauge had been plagiarized from Tracerlab." It is obvious that even the trial judge's summary of Barbour's testimony apparently recognized the distinction between what Barbour "knew" and that concerning which he had a "feeling."

There is no question but that Barbour (and the plaintiff) was aware from the beginning that Chope and Foster knew plaintiff's trade secrets. All of plaintiff's secret information had been fully and freely made available to them in the course of their employment while they were employees of the plaintiff. Knowledge of these secrets was essential to the performance of their work. Similarly, there is no question that Barbour (and the plaintiff) was well aware from the very outset that Chope and Foster had gone into the "beta gauge" field and were producing a competitive product. However, all of this is a far different thing from having knowledge that the defendant had misappropriated and was using the self-same intricate electronic circuit details which were the plaintiff's trade secrets and which underlie the present cause of action. As to this specific misappropriation, even the trial judge seemed to recognize that Barbour only "felt" it was true.

Moreover, further analysis of Barbour's deposition shows that his "feeling" was based almost entirely on suspicion, conjecture and rumor. Upon examination by defendant's counsel, Barbour stated that while he had instructed his salesmen to attempt to secure information on the defendant's machine — the salesmen's efforts failed to unearth any tangible information.

"Q. Did you undertake any further investigation, such as sending persons out to look at and examine the machines sold by them? A. Yes, we made an effort through our sales department to ascertain where, when, what, how, they were doing.

"Q. How successful were these efforts? A. They weren\'t successful.

"Q. In any respect? A. Not factually, they were successful in that we got more rumors they were making gauges and had sold some gauges, but these were strictly rumors, to my knowledge. * * *"

When queried on the subject of plaintiff's knowledge that the defendant's...