O. & W. Thum Co. v. Tloczynski

• Decision Date: 14 September 1897
• Citation: 114 Mich. 149,72 N.W. 140
• Parties: O. & W. THUM CO. v. TLOCZYNSKI.
• Court: Michigan Supreme Court

72 N.W. 140

114 Mich. 149

O. & W. THUM CO. v. TLOCZYNSKI.

Supreme Court of Michigan

September 14, 1897

Appeal from circuit court, Kent county, in chancery; Allen C. Adsit Judge.

Bill by the O. & W. Thum Company against Appollonious A. Tloczynski. From a decree for complainant, defendant appeals. Affirmed.

C. L Fitch (Frederick W. Stevens, of counsel), for appellant.

Earle &amp Hyde and Butterfield & Keeney, for appellee.

MOORE J.

The complainant is the successor of the firm of O. & W. Thum, who were manufacturers of sticky fly paper. It filed a bill of complaint to restrain defendant communicating to others the secret processes and methods, and the knowledge of secret machinery, which were learned by him while in the employ of O. & W. Thum. The court below granted an injunction, as prayed in the bill of complaint. Defendant appeals.

The testimony is voluminous, and very conflicting. We are satisfied, however, that it establishes, by a very clear preponderance, as follows: The defendant entered the employ of O. & W. Thum in 1887. They at that time were manufacturing sticky fly paper by machinery, and from formul� known only to themselves. They at that time had but one man and one boy in their employ. The business was carried on in the attic of the house, and in a small building in the back yard. The processes and machinery that were regarded as secret, and of great value to the firm, were used only by the members of the firm. As the business grew, it became necessary to employ more persons, and among others employed was the defendant. Because of the increase in the business and the employment of more persons, other precautions were taken, as the necessity grew for taking them. The public were excluded from the premises. The employ�s at one machine were not allowed to inspect other machines used in the manufacture, and were not allowed to visit all portions of the premises. Very rigid and careful requirements were made and enforced to guard the formul�, the processes of manufacture, and knowledge of the machinery used, so that no one could learn them, or either of them, to the detriment of the firm. The business of the firm steadily grew in magnitude, so that when defendant left its employ, in 1892, about $100,000 was invested in the business, and a large number of persons were given employment. Shortly before this bill was filed, complainant received the following letter: "Grand Rapids, Mich Jan. 7, 1893. The O. & W. Thum Co., City. Mr. Wm. Thum-Dear Sir: It is about fifteen months since I left your shops, and during that time have been more or less troubled by outside people in regards to fly paper and its manipulations at your works; not so much so until lately, when there were representatives from two large firms, one from Ohio, which was represented by the president and their attorney, which I looked up in G. R. Dun's, who quote them at $500,000, who were here for one week, and were directed by some people here in the city to me. They told me that they had sufficient artillery to put the paper on the market, but were a little short on cavalry in its workings; also told me that they were ready at any time to make arrangements,-that is, as soon as I say yes. I can show letters from the above firm and others. I have not said a single word of its manufacture since I left you, but do not think it's my place to keep mum unless you desire it. Awaiting your early reply, I remain, yours, truly, A. A. Tloczynski." It very soon became evident that defendant was negotiating with others to engage in the manufacture of the same product the complainants were making, and this bill was filed.

The terms of employment were not reduced to writing, and there is a sharp conflict of testimony between the defendant and O. & W. Thum as to the terms of his employment, so that it becomes necessary to consider carefully all the testimony in the case to arrive at the truth. One cannot read all the testimony, in the light of the facts and circumstances surrounding the condition of the business at the commencement of the defendant's employment, and its subsequent development and growth, without coming to the conclusion that the defendant and his employer regarded his relation to them as a confidential one, and that he should not disclose or make improper use of the secrets of the business. The conclusion is irresistible that defendant would not have been employed, and information which was imparted to him would not have been conveyed, if it had been understood that he might sever his relations with his employers at any time, and sell the valuable information which had been imparted to him whenever he could find a market. The inception, growth, and development of the business; the manner in which it was conducted; the care taken to exclude the public from means of obtaining knowledge of the processes; the fact that, when new machinery was to be constructed, part of it was got at one place, and part at another, so that no person outside of the members of the firm and their immediate employ�s, should see a completed machine in operation; the fact that employ�s in one department of the manufactory were not allowed in other departments; and the care which was taken to prevent employ�s from obtaining knowledge of any branch of the business, except that in which the employ� was immediately engaged, of all of which the defendant had knowledge,-all indicate conclusively that the business and processes were secret, and that no one knew that fact better than the defendant. We think it clearly established by the testimony that the employment was upon the agreement that defendant would not use the information imparted to him to the harm of his employer.

In our view, the only important question involved in the case is whether an employ�, when his employment terminates, may make use of secrets confided to him by his employer, necessary to be confided to him in the conduct of the business, when it is understood and agreed that he shall not make use of the secret knowledge so imparted to the detriment of the employer, and, if he attempts so to do, may he be restrained by writ of injunction?

It is said by counsel that the remedy by injunction will not be granted in such a case as this, where, from the nature of the subject, there could be no decree for a specific performance; citing Newbery v. James, 2 Mer. 446; Williams v. Williams, 3 Mer. 157; Kimberley v. Jennings, 6 Sim. 340.

It is also said that a decree for a specific performance will not be granted where the court has not the means of seeing that its decree shall be carried out; citing Voorhies v. Frisbie, 25 Mich. 482; Blanchard v. Railway Co., 31 Mich. 43; Bumpus v. Bumpus, 53 Mich. 346, 19 N.W. 29. An examination of the Michigan cases cited shows that in those cases the court was asked to decree the performance of an affirmative act, where the agreement was of an indefinite and uncertain character, instead of being asked to enforce a definite agreement not to do an act. As to the other cases, if they tend to sustain the contention of the defendant, they are contrary to the great weight of authority. Is it not true that, if one discovers a process of manufacture or an invention which is of use to individuals and the community, he has a property right in it, and that an agreement which must be respected may be made in relation to keeping the process of manufacture or the invention a secret between the discoverer or owner and an employ�, which agreement is made one of the conditions of the employment? It has been said by a very able justice: "If one invents or discovers and keeps secret a process of manufacture, whether a proper subject for a patent or not, he has not, indeed, an exclusive right to it as against the public, or against those who, in good faith, acquire knowledge of it; but he has a property in it which a court of chancery will protect against one who, in violation of contract and breach of confidence, undertakes to apply it to his own use, or to disclose it to third persons. Peabody v. Norfolk, 98 Mass. 452." And, again, Mr. Justice Gray, who delivers the opinion, says: "In this court it is settled that a secret art is a legal subject of property, and that a bond for the conveyance of the exclusive right to it is not open to the objection of being in restraint of trade, but may be enforced by action at law, and requires the obligor not to divulge the secret to any other person. Vickery v. Welch, 19 Pick. 523; Taylor v. Blanchard, 13 Allen, 373, 374. In Jarvis v. Peck, 10 Paige, 118, such a bond was held valid in equity." In Salomon v. Hertz, 40 N. J. Eq. 400, 2 A. 379, the court adopts the language of Justice Gray, and holds that there is a property in a secret process of manufacture. Hardware Co. v. Waibel (S. D.) 47 N.W. 814.

A recent and instructive case is that of Eastman Co. v Reichenbach (Sup.) 20 N.Y.S. 110. "To briefly summarize, then, the established facts of this case, it appears that the plaintiff is the owner of valuable trade secrets, which were either discovered by one or more of the defendants, or necessarily disclosed to them, while occupying a confidential relation towards the plaintiff; that as to such trade secrets as were discovered by either Reichenbach or Passavant, they have undertaken and agreed to give plaintiff the exclusive property in and control over the same; and that, in violation of this agreement, they are now proposing to make use of them, or some of them, in such a manner as to materially injure the plaintiff's business. With these facts established, the application of the legal principles which must govern the disposition of the case does not appear to be a very formidable undertaking. It may be safely assumed at the outset, I...