Ungar Elec. Tools, Inc. v. Sid Ungar Co.

• Decision Date: 23 May 1961
• Citation: 192 Cal.App.2d 398,13 Cal.Rptr. 268
• Parties: UNGAR ELECTRIC TOOLS, INC., a California corporation, Plaintiff and Respondent, v. SID UNGAR CO., Inc., Sidney D. Ungar, Alan Ungar, Al Nelson, Defendants. Sidney D. Ungar and Sid Ungar Co., Inc., Appellants. Civ. 24474.
• Court: California Court of Appeals Court of Appeals

Page 268

13 Cal.Rptr. 268

192 Cal.App.2d 398

UNGAR ELECTRIC TOOLS, INC., a California corporation, Plaintiff and Respondent, v. SID UNGAR CO., Inc., Sidney D. Ungar, Alan Ungar, Al Nelson, Defendants Sidney D. Ungar and Sid Ungar Co., Inc., Appellants.

Civ. 24474.

District Court of Appeal, Second District, Division 2, California.

May 23, 1961.

Rehearing Denied June 19, 1961.

Hearing Denied July 19, 1961.

Robert Haves, Morris E. Cohn, Beverly Hills, for appellants.

Max Fink, Hyman O. Donoff, Howard L. Thaler, Los Angeles, for respondent.

McMURRAY, Justice pro tem.

After a protracted trial, the trial court rendered judgment in favor of plaintiff-respondent Ungar Electric Tools, Inc., in the sum of $1,600 damages and permanently enjoined the defendants-appellants Sidney D. Ungar and Sid Ungar Co., Inc., from manufacturing or assembling heating units (sometimes known as 'tips') by utilizing knowledge which had been acquired with respect to respondent's trade secrets relating to ingredients, respondent's sources of supply of materials (specifically not including cement) and respondent's techniques and processes of manufacture and assembly of its heating units except that appellants were not enjoined from the use of the shape, dimensions and iron plating of the metallic parts of the soldering tips heretofore made by them.

The appellants were, in addition, permanently enjoined from selling or distributing any soldering heating units of the specifications as had previously been manufactured or assembled by them and from the further manufacturing, assembling, distributing or selling thereof.

Appellants were furthermore permanently enjoined from making, selling or distributing any other heating units which were manufactured or assembled by utilizing the said trade secrets of the respondent.

Finally the judgment specifically did not preclude the appellants from the manufacture, sale or distribution of soldering iron heating units (other than units of the specifications as were manufactured or assembled by the appellants as set forth in the specific prohibitions) provided the same were the result of independent research and development whether the same be of a screw type base or candelabra base or otherwise.

This judgment is supported by findings of fact wherein the trial court found that respondent had developed electric soldering tools over a period of many years, and had expended substantial funds, effort and time in the development thereof, with respect to the ingredients used therein, sources of supply of materials, and techniques and processes of manufacturing and assembling. It was also found that respondent had taken reasonable precautions to preserve information concerning the ingredients used in its products, its sources of supply of materials, excluding the source of supply of cement used, and had taken such reasonable precautions to preserve its technique and process of manufacturing and assembling as secret and confidential; that appellants substantially duplicated the soldering products of respondent, excluding soldering tools, by utilization of knowledge acquired by appellant Sidney Ungar as an officer and employee of respondent relating to the secret and confidential matters mentioned. It was further found that appellants employed four former employees of respondent to assist them in substantially duplicating respondent's products, and at no time did appellants employ for manufacturing or assembling products persons who were not former employees of respondent, with the exception of one employee who proved to be unsatisfactory.

It was further found that in developing their products, the appellants expended only nominal sums or effort in connection with the development thereof, and did not develop their products independently of their knowledge of the ingredients, sources of supply of materials, and dechniques and processes of manufacturing and assembling employed by respondent, which knowledge was gained by appellant Sidney Ungar in confidence in the course of his prior employment by the respondent.

It was also found that the words 'Tips' or 'Tiplets' had not acquired a secondary meaning insofar as the manner in which the respondent used said names to describe its products, and also that respondent failed to prove that the use of certain catalogue numbers to designate its various products had acquired a secondary meaning. It was also found that the names of respondent's customers were not confidential, and that respondent had no special right or interest in the method in which it packaged its various products, and it was further found that, since the filing of the principal action, the appellant corporation had ceased using a name which might confuse it with respondent corporation.

The court also found that respondent and appellant Sidney Ungar entered into a written agreement entitled 'Offer of Settlement' and 'Release'; that said Offer of Settlement provided, among other things in paragraph 7 thereof, as follows:

'(f) It is specifically acknowledged by of supply of materials, and techniques and them, tht Sidney D. Ungar may compete with Eldon and Ungar Electric hereafter, either personally or by participating in or starting a competing business, or otherwise. It is agreed by Eldon and Ungar Electric that Sidney D. Ungar may compete with them either personally or as set forth above.

'Neither Sidney D. Ungar, on the one hand, nor Eldon or Ungar Electric, on the other, will voluntarily say anything which will reflect discredit or dishonor upon the other by reason of any fact or event prior to the date hereof.

'The provisions of this contract, including but without limitation thereto, the provisions of this paragraph 7 providing for rendition of services in giving information, shall in no way limit the right of Sidney D Ungar to compete with Ungar Electric or Eldon.'

As conclusions of law the trial court found (1) that respondent had trade secrets properly protected by a court of equity relating to its manufacture and assembly of heating units, consisting of the ingredients it uses, its sources of supply of materials excepting and excluding cements and its techniques and processes of manufacture and assembling; (2) that appellant Sidney D. Ungar occupied a confidential relationship as between himself and the respondent corporation, relating to respondent's said trade secrets; (3) that the appellants violated the above described confidential relationship by utilizing the above described trade secrets of the respondent in the manufacturing and assembling of their soldering iron products; and further concluded (4) that the 'Offer of Settlement' and 'Release' hereinabove partially set forth did not give the appellants the right to utilize trade secrets of respondent in the manufacturing and assembling of their soldering products or to sell or distribute products manufactured or assembled by utilizing such trade secrets.

The records and briefs in this matter disclose an unfortunate antagonism between the principals to the action. The reporter's transcript of over 3,400 pages reflects this bitterness, and some portions of the briefs are impaired in their efficacy by the same emotion.

Appellants basically contend that the injunction is far too broad; that there is no evidence of any trade secrets in the entire record; and that, even if there were such trade secrets, they had been disclosed to the public by a patent which had expired before appellants commenced their operations. The appellants also contend that the actions of the trial court in dismissing proceedings for a new trial and denying a motion for relief filed under the provisions of Code of Civil Procedure, section 473, were erroneous and call for a reversal.

Respondent, throughout its brief argues matters which were determined adversely to it as though they had been determined in its favor, and, of course, stoutly defends the action of the trial court in dismissing the motion for new trial and denying the motion under Code of Civil Procedure, section 473.

A reading of the transcript reveals that the trial court's findings of fact are amply supported by evidence which, we believe, render all of appellants' arguments on the facts valueless. The trial judge displayed almost unbelievable patience in the course of this protracted trial, and from the record appears to have earnestly followed the testimony and to have properly decided the matter. Whether there is a breach on the part of an employee, or others, who are alleged to have divulged any of the trade secrets of his employers, whether such duty not to divulge is expressed in a contract or not, is a question of fact. Sarkes Tarzian, Inc. v. Audio Devices, Inc., D.C., 166 F.Supp. 250,...