Appendix — Novicky v. Syntex Ophthalmics, Inc.

84-1089

No.

(3) Office Supreme Court, US.

is FILED

In THE

Supreme Court of the Bnited States

Ocroser Term, 1984

NICK N. NOVICKY,

Petitioner,

V8.

SYNTEX OPHTHALMICS, INC. and ARAPAHOE

CHEMICALS, INC. (now SYNTEX CHEMICALS, INC.),

Respondents.

NICK N. NOVICKY,

Petitioner,

Vs.

GEORGE F. TSUETAKI and

FUSED KONTACTS OF CHICAGO, INC.,

Respondents.

—_——_———

—_———

APPENDIX TO THE

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

KEITH V. ROCKEY

135 South LaSalle Street

Chicago, Illinois 60603

(312) 346-0338

Attorney for Petitioner

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

INDEX TO APPENDIX

Opinion of the United States Court

of Appeals for the Federal Cir-

cuit, filed October 3, 1984 .....

Opinion of the Appellate Court of

Illinois, First District, Third

Division, filed December 7, 1983

Page

la

53a

IN THE

SUPREME COURT OF THE UNITED STATES

OCTOBER TERM, 1984

No.

NICK N. NOVICKY,

Petitioner,

vs.

SYNTEX OPHTHALMICS, INC. and

ARAPAHOE CHEMICALS, INC.

(now SYNTEX CHEMICALS, INC.),

Respondents.

NICK N. NOVICKY,

Petitioner,

vs.

GEORGE F. TSUETAKI and

FUSED KONTACTS OF CHICAGO, INC.,

Respondents.

APPENDIX TO THE

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

—la—

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

SYNTEX OPHTHALMICS,

INC., et al.,

Appellees,

V. Appeal No. 84-838*

NICK N. NOVICKY,

et al.,

dd i

Appellants.

GEORGE F. TSUETAKI,

et al.,

Appellees,

V. Appeal No. 84-857*

NICK N. NOVICKY,

et al.,

dl

Appellants.

DECIDED: October 3, 1984

Before DAVIS, Circuit Judge, NICHOLS, Senior

Circuit Judge, and BALDWIN, Circuit Judge.

DAVIS, Circuit Judge.

*For some reason, two seperate appeals

(identical in content) were noted by appellant;

we treat the two appeals as, in reality, one

appeal. Tsuetaki, et al., did not partici-

pate in this appeal.

ailitine

Appellant Novicky seeks review of four

related decisions of the United States Dis-

trict Court for the Northern District of

Illinois: (1) a grant of summary judgment for

appellee Syntex, deciding that Syntex has

title to all of the patents and patent appli-

cations naming Novicky as inventor ;~’ (2) a

decision holding that Novicky misappropriated

Syntex's trade secrets; 2/ (3) a final in-

junction, enjoining Novicky for a twenty-year

period from using or disclosing Syntex's trade

secrets;>’ and (4) a denial of Novicky's

i/ Syntex Ophthalmics, Inc. v. Novicky,

No. 80 C 6257 (N.D. Ill. June 13, 1983).

2/svntex Ophthalmics, Inc. v. Novicky,

No. 80 C 6257 (N.D. Ill. Dec. 12, 1983).

3/syntex Ophthalmics, Inc. v. Novicky,

80 C 6257 (N.D. Ill. Feb. 9, 1984).

—3a—

motion to remand the proceedings back to state

court. 4/

| We affirm the grant of summary judgment

on the patent issue as to six of the eight

patents and applications covered by that decision

and remand to the District Court the question

of Syntex's title as to the other two patents.

On the issue of trade secret misappropriation,

we affirm the District Court's holding that

Novicky misappropriated Syntex's trade secrets,

but reverse the court's twenty-year injunction

and remand for reasons explainedinfra. Finally,

we affirm the District Court's denial of Novicky's

motion to remand the state action back to

state court.

4/tsuetaki v. Novicky, No. 81 C 4050

(N.D. Ill. Feb. 13, 1984).

Novicky does not seem to be appealing

from the District Court's denial (in June 1983)

of Novicky's motion to file a new counter-

Claim alleging illegal dumping in count one

and attacking the validity of the Gaylord

patents in count two. Consequently, we do

not address those issues directly, although

the parties touch upon them in their briefs.

—4da—

I

Background

A. The Polycon project and Novicky's

employment: The roots of this complex litiga-

tion2/ go back to 1977. Early in that year,

the appellees, Syntex Ophthalmics, Inc. and

Arapahoe Chemicals, Inc. (collectively referred

to as "Syntex") &/

embarked on a joint venture

for research and commercial development of a

contact lens material from which rigid gas-

3/ Counsel greatly added to the complexity

of this case by failing to provide an adequate

index for their seventeen-volume appendix.

In particular, counsel's haphazard indexing

of the opinions of the various courts that

have heard aspects of the case made this court's

work considerably more difficult.

&/ Syntex Ophthalmics, Inc. and Arapahoe

Chemicals, Inc. are sister subsidiaries of

Syntex (U.S.A.), Inc. Since the initiation

of this litigation Arapahoe Chemicals has

changed its name to Syntex Chemicals.

—5a—

permeable contact lenses could be made .2/

They called their venture the "Polycon project".

Appellant Novicky, who had been employed by

Arapahoe since 1973, was selected to be a

chemist on the Polycon project. This litigation

arises out of that employment relationship.

When first employed by Arapahoe in 1973,

Novicky signed a standard Syntex employment

agreement, promising confidentiality and as-

signing to Syntex all ideas and inventions

conceived or developed by him while at Syntex.

The agreement provided, in pertinent part:

3. Disclosure of Information

and Assignment and Ownership of

Ideas. The Employee agrees to

fully disclose, deliver, trans-

fer and assign to Employer, his

i/ Prior to the development of rigid,

gas-permeable lenses, contact lens wearers

often wore "hard" contact lenses. These lenses

blocked the transmission of oxygen to the

wearer's cornea, a condition which can lead

to corneal swelling. Gas permeable lenses

allow oxygen to reach the cornea and, for

that reason, can be worn for longer periods

of time than "hard" lenses.

in and to any and all ideas,

methods, inventions, devices and

improvements, whether patentable

or not, originating with, con-

ceived, acquired or developed by

Employee, either solely or jointly :

with others during any times, )

whether during working hours or

not, when the Employee is employed

by Employer, if the same be reason-

ably related to Employer's actual

operations. All such ideas,

methods, inventions, devices,

and improvements are hereafter

jointly and severally referred

to as "ideas".

a

entire right, title and interest

The parties hereto agree that

for purposes of Paragraphs (3)

and (4) herein, the Employee

shall be deemed as Employee of

the Company twenty-four (24)

hours a day for every day during

the year notwithstanding any

leaves of absence, vacations, or

other leave.

4. Secrecy: The Employee recog-

nizes and acknowledges that various

secrets and/or facts as defined

below, are valuable, special and

unique assets of the Employer's

business. The Employee agrees

that during the term of his employ-

ment he will use the aforementioned

various secrets and/or. facts

only in connection with his employ-

ment with Employer, and that

during and after the term of his

employment he will not use or

disclose any of the various afore-

mentioned secrets and/or facts

—7To—

either on his own behalf or the

behalf of any other person or

entity.

The phrase "secrets and/or facts"

as used herein shall include, in

addition to its usual meaning,

any processes, ideas and other

information pertaining to research,

development, production, and

other business or activities of

Employer (and/or Employer's cus-

tomers), and Employer's list of

customers.

At least in its initial phases, the

Polycon project was based on two U.S. patents

(the Gaylord patents) and some preliminary

manufacturing batch sheet se’

which Syntex had

purchased as part of its acquisition of Polymer

Optics Corporation. The patents disclose

processes for synthesizing certain silicone

monomers and using them to create an oxygen-

permeable plastic lens material. Novicky's

role in the project was to develop processes

8/ The District Court described a batch

sheet as: "a cross between a recipe from a

cookbook and a laboratory notebook. The batch

sheet contains instructions about how to carry

out a procedure or reaction with spaces for

the chemist to enter data about reaction con-

ditions and results."

a

for the commercial development of this contact

lens material which would optimize a combina-

tion of properties such as high oxygen perme-

ability, wettability, rigidity, and trans-

parency .2/ The procedures Rovicky and others

followed in the preparation of the Polycon

material and its component ingredients were

recorded on "Arapahoe batch sheets" which

were used as a basis for further refining the

Polycon process. Novicky was also involved

in developing or revising analytical procedures

to determine if the raw, intermediate, and

finished materials would satisfy the Food and

Drug Administration's (FDA's) requirements.

The details of the relevant specifications

2/ Contact lenses are made by reacting

certain chemical compounds (monomers) into

plastics (copolymers) by a process called

polymerization. The plastic lens material is

then formed in the shape of rods which are

subsequently sliced into discs (buttons) which

are then ground into lenses. Novicky's job

was to optimize processes and procedures for

making the polymer rods.

—9IJa—

and analytical methods were recorded on Specifica-

tion and Analytical Method sheets and incorp-

orated in an FDA master file.

In addition to his regular duties, Novicky

experimented with alternative silicone monomers,

| trying to improve the permeability of the

lens material to be used in manufacturing the

contact lenses. Syntex had already designated

a specific silicone monomer (T-2) to be used

in the Polycon material for which it was seeking

FDA approval.

In December, 1977, Novicky prepared,

signed, and had two Syntex empolyees witness a

patent disclosure dealing with certain of the

alternative silicone monomers he had developed.

Those monomers and the processes related to

them were apparently the basis for two patents

ee EEEEEEeeeeeEeEeee_erti( it —

Novicky obtained in 1980 and 1981, U.S. Patent

Nos. 4,242,483 and 4,248,989 (the "'483 and

‘989 patents", or the so-called "private

patents").

—10a—

On May 12, 1978, Novicky's employment

with Syntex was terminated. Four days later,

on May 16, 1978, Novicky prepared a second

patent disclosure statement regarding other

monomers he claimed to have discovered for

use in making gas-permeable lens materials

(one of which was later designated the S-9

monomer and patented under U.S. Patent No.

4,216,303 (the "'303 patent")). According to

Novicky, the discovery contained in the May

16th disclosure had been prompted by his

"review" of a 1961 German article on silicone

chemistry subsequent to leaving Syntex.

In August 1978, Novicky began negoti-

ating with Tsuetaki, a Chicago optometrist

and the president and sole owner of a small

optical company (Fused Kontacts of Chicago,

10/

Inc.) for the sale of the technology em-

10/ Tsuetaki and his company, Fused

Kontacts of Chicago, Inc., are collectively

referred to as Tsuetaki.

—lla—

bodied in the May 16th patent disclosure.

Tsuetaki and Novicky agreed that Tsuetaki

would hire Novicky as a chemist to develop a

commercial operation for the manufacture of

the new lens material. Novicky signed an

employment agreement, promising, inter alia,

to assign to Tsuetaki all patentable and un-

patentable inventions, developments, or im-

provements he produced, within or without the

scope of his employment, for the life of the

agreement (August 31, 1978 - August 31, 1982)

plus six months. Novicky resigned his job

with Tsuetaki in May 1980.

B. The state and federal litigation:

In July 1980, Tsuetaki sued Novicky in the

Cook County Circuit Court (an Illinois trial

court) for breach of his employment contract.

After a sixteen-day bench trial, the state

court issued its decision in January 1981.

Tsuetaki v. Novicky, No. 80 CH 4724 (Ill.

Cir. Ct. Jan. 13, 1981). It held, inter alia,

that the employment agreement was binding and

ordered Novicky to assign to Tsuetaki "any

and all interest" he had in the patents he

had obtained and the patent applications he

had filed pertaining to contact lens tech-

nology. The state court also enjoined Novicky

from "disclosing to any person or entity the

contents . . . Of any laboratory books and

records dealing with the experiments, research,

progress, and development of the technology

involved in the manufacture of contact lenses

--- "and from "disseminating matters conf iden-

tial to George Tsuetaki and/or Fused Kontacts

of Chicago, Inc."

While the state proceedings were pend-

ing, Syntex filed this suit (in November 1980)

in the federal District Court below, against

Tsuetaki and Novicky for misappropriation of

trade secrets. Later, Syntex amended its

complaint to add an additional count claiming

title to certain patents and patent applica-

—13a—

tions naming Novicky as inventor, and seeking

relief for patent infringement. The court's

jurisdiction was invoked under 28 U.S.C. §

1332 and 28 U.S.C. § 1338. In May 1981, the

court severed Syntex's patent infringement

claims, pending resolution of the patent title

and the trade secret questions.22/

One consequence of the federal proceedings

was that Tsuetaki initiated contempt proceedings

(in February 1981) aainst Novicky and Syntex

in state court. Tsuetaki claimed that Novicky

had disobeyed the court's January 1981 order

against "disseminating matters confidential

to George Tsuetaki" by improperly conferring

with Syntex's attorney about patent rights,

disclosures, and other matters in the context

of the federal court litigation.

il/ Before the trial on Syntex's trade

secret claim, Syntex, pursuant to an agreement

with Novicky, filed a Stipulation of Dismissal,

dismissing without prejudice its patent infringe-

ment claims.

—l4a—

Both Syntex and Novicky opposed Tsuetaki's

petition in the state court. Syntex also

ei

cross-petitioned for a stay of certain paragraphs

of that court's January 1981 order until the

federal District Court (in the present litiga-

tion) decided the respective rights of the

three parties in the property the state court

had held Tsuetaki owned.

Subsequently Tsuetaki requested permission

from the state court to add Syntex as a defendant

ina supplemental complaint. That court granted

Tsuetaki's motion on July 10, 1981, saying

that Syntex, by filing its cross-petition and

responding to Tsuetaki's petition, had made a

general appearance, thereby submitting itself

to the jurisdiction of the state court. Tsuetaki

added a fifth count to its original complaint,

seeking declaratory relief as to both Syntex

and Novicky. In essence, Tsuetaki sought a

declaration that the property which it had

purchased from Novicky no longer belonged to

—15a—

either Syntex or Novicky.

On July 14, 1981 Novicky filed a notice

of appeal seeking review of both the trial

court's original judgment and its order of

July 10th which had denied Novicky's prayer

for post-trial relief. Three days later,

Syntex filed a petition in the District Court

to remove the "action . . . pending in the

Circuit Court [the state trial court]" to

federal court. That petition as granted by

the District Court in September 1981. In

March 1982, the District Court denied

Tsuetaki's motion for remand.

In the meantime, Novicky filed with the

state trial court (in September 1981) a petition

under a special provision of Illinois law,

asking that the judgment of the trial court

be vacated on the basis of newly discovered

evidence arising from the federal proceedings.

The state trial court dismissed that petition.

Novicky's appeal from that decision was con-

—16a—

solidated in the state system with his earlier

appeal, supra.

The Illinos appellate court agreed with

Novicky that the evidence given by Tsuetaki

in the federal case (1) directly contradicted

testimony relied upon by the state trial court

in its resolution of the case and that (2) it

established that Syntex was an indispensable

party that should be joined in the state court

action. It also held that the trial court

had abused its discretion in dismissing

Novicky's post-trial petition, vacated the

trial court's judgment, and remanded the case

for a new trial, directing that Syntex be

joined.

On December 28, 1983, Tsuetaki filed a

petition for rehearing, asking the Illinois

appellate court to vacate its decision and

dismiss Novicky's appeal on the theory that

Syntex's petition for removal to federal court,

filed in July 1981, had divested the appellate

—17a—

court of jurisdiction. That petition for

rehearing is still pending.

The litigation in federal District Court

had continued throughout these post-trial

events in state court. On May 6, 1982, the

District Court granted Syntex a preliminary

injunction (Syntex Ophthalmics, Inc. v.

Novicky, 214 USPQ 272 (N.D. Ill. 1982), which

was affirmed by the Seventh Circuit. Syntex

Ophthalmics, Inc. v. Tsuetaki, 701 F.2d 677,

219 USPQ 962 (7th Cir. 1983). The preliminary

injunction enjoined Novicky and Tsuetaki from

using the monomers and the processes in

dispute.

Later, In October 1982, Novicky filed

an amended answer and counterclaim against

Syntex. The counterclaim charged Syntex with

fraud, misrepresentation, and unjust enrichment

for breaching its alleged agreement with Novicky

to waive all interest in Novicky's December

1977 inventions (the '483 and '989 "private

patents"). The District Court dismissed

~~

Novicky's counterclaim in November 1982, saying

that Novicky was collaterally estopped by the

state court's judgment (ordering Novicky to

assign the '483 and '989 patents to Tsuetaki)

from claiming unjust enrichment (on the basis

of those patents) against Syntex.

In March 1983, before Syntex's case

against Novicky and Tsuetaki went to trial,

Syntex and Tsuetaki settled the controversy

between them. Pursuant to that settlement,

Syntex dropped its claims against Tsuetaki,22/

and Tsuetaki assigned to Syntex "all of ...

[its] rights in the Novicky patents and patent

applications relating to the. . . [federal

District Court action] and the State Court

action between Tsuetaki/Fused [Kontacts] and

Nick Novicky ... ." On the basis of that

assignment, combined with the "collateral

12/ As indicated in note *, supra,

Tsuetaki has not participated at all in the

current appeal.

So Rar ey oe

—19a--

estoppel effect of the state trial court judg-

ment," the District Court granted summary

judgment on the patent title issue for Syntex.

The District Court said that Tsuetaki owned

all Novicky's patents and patent applications

by virtue of the state court judgment; the

settlement agreement then transferred

Tsuetaki’s rights in the patents and applica-~

tions to Syntex. The District Court con-

cluded, "[wlhatever Tsuetaki formerly owned,

Syntex now owns."

In June 1983, the District Court held a

bench trial on the trade secret misappropri-

ation issue. Following that trial, the court

held that Novicky had misappropriated Syntex's

trade secrets and entered a final injunction

enjoining Novicky for a twenty-year period

from using Syntex's trade secrets.

II

Removal

We consider first the threshold issue

of the removal of the state action to federal

—P0a—

court pursuant to 28 U.S.C. § 1441 (the removal

statute). We emphasize that, in our view,

the only claim the District Court could remove

from the state trial court was Count V of

Tsuetaki's supplemental complaint, adding

Syntex (post-judgment) as a party and seeking

a declaratory judgment regarding the respective

rights of Syntex, Tsuetaki, and Novicky in

the property the state trial court had held

belonged to Tsuetaki. The state trial court

had already entered a finel judgment on the

other four counts, and Novicky filed a notice

of appeal from that judgment three days before

Syntex filed its petition to remove.

Under Illinois law, the jurisdiction of

the reviewing court attaches instanter upon

the timely filing of a notice of appeal.

From then on, the lower court has no jurisdic-

tion to modify its judgment or rule on matters

of substance which are the subject of the

—2la—

appeal .43/ City of Chicago v. Myers, 227 N.E.2d

760 (Ill. 1967). Montgomery Ward & Co. v.

Wetzel, 423 N.F.2d 1170, 1176 (Ill. App. 1981).

"(T]he cause is beyond the jurisdiction of

the trial court." City of Chicago v. Myers,

227 N.E.2d at 761. Accordingly, at the time

Syntex filed its petition to remove the action

pending in the state trial court, the only

claim still pending in that court was Tsuetaki's

post-judgment addition to his complaint, Count

V. Because the state trial court no longer

had jurisdiction over Tsuetaki's original four

13/ 4 trial court May retain jurisdiction

after a notice of appeal is filed for the

limited purpose of ordering the repayment of

attorney's fees and costs because that is a

matter not affected by the appeal or dependent

upon the outcome of the suit. Chicago Title

& Trust Co. v. Czubak, 384 N.E.2d 765 (Ill.

App. 1978). The lower court may also have

jurisdiction to dismiss, under certain circum-

stances, the appeal of a party in the interim

period between the filing of a notice of appeal

and the docketing of the case by the reviewing

court. See Rickard v. Pozdal, 334 N.E.2d

288, 291 (Ill. App. 1975). Also, a trial

court may amend the record to correct "matters

of inadvertence or mistake." Arnold v. Leahy

Home Building Co., 420 N.E.2d 699, 707 (Ill.

App. 1981).

—22a—

Claims, the federal court, which has only

derivative jurisdiction on removal, also had

no jurisdiction over those particular claims.

See Minnesota v. United States, 305 U.S. 382,

389 (1939).

The District Court's opinion (March

1982) denying Tsuetaki's motion for remand of

the action to state court is consistent with

this view that only Count V against Syntex to

be seperate and independent, and it also noted

that the state trial court's decision on

Tsuetaki's original four counts was a final

judgment and that Novicky had taken an appeal

from it. It said (in discussing whether the

joinder of Novicky in Count V was "fraudu-

lent"):

Tsuetaki has suggested .. .

that its claim against Novicky

represents an actual controversy

because Novicky is'- presently

appealing the [state trial court's]

ruling. The court does not agree

14/ Syntex's removal petition, though

not absolutely precise, is likewise consistent

with this view.

—23a—

“a ay ar [The] ruling [of the

state trial court] amounts to an

absolute declaration of Tsuetaki's

and Novicky's rights with respect

to the technology at issue in

this case. Under Illinois law,

the ruling is res judicata as to

any further litigation of that

claim between the two notwith-

standing the pendency of the

appeal [citation omitted].

These comments support the view that only

Count V was removed from the state court. If

all the claims had been removed, including

the four claims already decided, the Distrit

Court could not anticipate that the state

appellate court wouid hear Novicky's appeal.

Once a case is removed, the state court may

proceed no further "unless and until the case

is remanded." 28 U.S.C. § 1446(e). Any further

proceedings in the state court subsequent to

removal are coram non judice and will be vacated.

-14 C. Wright, A. Miller & E. Cooper, Federal

Practice and Procedure: Jurisdiction § 3737

(1976); see Steamship Co. v. Tugman, 106 U.S.

118, 122 (1882); Kern v. Huidekoper, 103 U.S.

—24a—

485, 493 (1880). In short, the only conclusion

that harmonizes with all the circumstances is

that Count V alone was removed. MThat count

was indisputably removable at the time Syntex

filed its removal petition (see 28 U.S.C. §

1441(c)) and Tsuetaki's early motion to remand

was properly denied.

The District Court consolidated the

removed claim with Syntex's original federal

suit "for all purposes” in March 1983. Follow-

ing the trial on Syntex's trade secret claim

and the District Court's entry of the resulting

order, Novicky filed a motion to remand the

state action back to state court. We agree

with the District Court that Novicky's motion

to remand was filed too late. The section

of the removal statute that gives the court

the authority to remand, 28 U.S.C. § 1447(c),

provides:

If at any time before final judgment

it appears that the case was

removed improvidently and without

jurisdiction, the district court

shall remand the case ....

—25a—

(Emphasis added.) Pursuant to that statute,

the District Court could properly consider

Novicky's motion to remand only if it were

filed before final judgment. Novicky's motion,

however, was filed after the court's entry of

Syntex's voluntary dismissal of its claims

against Tsuetaki and the court's entry of

Summary judgment on the patent claims. We

agree with the District Court that these

orders constituted a final judgment on the

removed state court action. Novicky's motion

to remand was correctly denied.

III

Patent Title

In its settlement agreement with Syntex,

Tsuetaki assigned to Syntex "all of [its] ...

right, title, and interest in and to United

States Patent Nos. 4,216,303, 4,242,483,

4,248,989, 4,303,772, 4,314,068 [a division

—26a—

of the '‘'303 patent supra,], and 4,365,074

[another division of the '‘'303 patent] i5/

Unites States patent applications Serial Nos.

81,682, filed October 4, 1979, and 103,408,

filed December 19, 1979, and any patent(s)

maturing therefrom .. . ." These patents

and applications (except for the two divisionals

of the '303 patent) are the ones which the

state trial court ordered Novicky to assign

15/ U.S. Patent Nos. 4,314,068 and

4,365,074 resulted from "divisional applica-

tions" filed by Novicky. A divisional applica-

tion is defined in Section 201.06 of the Manual

of Patent Examining Procedure as:

A later application for a distinct

or independent invention, carved

out of a pending application and

disclosing and claiming only

subject matter disclosed in the

earlier parent application ....

Both must be by the same appli-

cant.

While a divisional application

may depart from the phraseology

used in the parent case there

may be no departure therefrom in

substance or variation in the

disclosure that would amount to

"new matter" if introduced by

amendment into the parent case .

—?7a—

to Tsuetaki in its January 1981 decision:

(1) Novicky is ordered to forth-

with assign any and all interest

he may have or claim to have in

the following identified patent

applications and patents to GEORGE

TSUETAKI:

081682

072449 [U.S. Patent No. 4,303,772]

103408

06725 [U.S. Patent No. 4,216,303]

66054 [U.S. Patent No. 4,242,483]

74427 [U.S. Patent No. 4,248,989]

On the basis of collateral estoppel, the District

Court granted summary judgment for Syntex on

its title to the patents and applications

which Tsuetaki had assigned to it.

Sometime after the District Court's

grant of summary judgment, the state appellate

court ordered that the state trial court's

decision (on which the District Court had

relied) should be set aside. However, as we

show infra, the appellate court did not disturb

the trial court's findings that Tsuetaki was

the owner of U.S. Patent Nos. 4,216,303 and

4,303,772 and applications Serial Nos. 81,682

—28a—

and 103,408. Accordingly, we hold that Novicky

is still precluded from raising his claim to

the two divisionals of the '303 patent (U.S.

Patent Nos. 4,314,068 and 4,365,074). We

remand to the District Court the question of

Syntex's title to the '483 and '989 patents

(the "private patents"), because the appellate

court did not accept the trial court's conclusion

as to Tsuetaki's rights to those patents.

As already indicated in our discussion

of removal in Part II, supra, the Illinois

appellate court's jurisdiction over the trial

court's decision was unaffected by the removal

to District Court of the fifth count of Tsuetaki's

complaint which added Syntex (post-judgment)

as a party to the state litigation. The trial

court's decision (and the trial which preceded

it) was based on the original four counts to

Tsuetaki's complaint and it was that decision

which the Illinois appellate court reviewed.

itaaiaeaaiiaiaaiiaimaeaiiaiiii

—29a—

The only real patent title dispute between

Novicky and Tsuetaki in the original state

court litigation concerned the two "private

patents” --the ‘483 and '989 patents. With

regard to the other four patents and the applica-

tions at issue, +0/ the trial court said that

Novicky had "conceded that .. . [the four

patents and the applications] were duly assigned

to GEORGE [Tsuetaki] in accordance with the

employment agreement of August, 1978." The

state appellate court accepted the trial court's

conclusions with regard to those patents and

applications. It observed that (1) when Novicky

filed his first application, the 6,725 applica-

tion (for the '303 patent), he had been paid

$10,000 and was paid another $10,000 when the

patent issued, in accordance with his agree-

ment with Tsuetaki; (2) after the 6,725 applica-

tion, Novicky filed two more applications,

16/ Two divisionals of the ‘303 patent

were not explicitly mentioned in the state

court opinion.

DO eo

—i0a—

"which Novicky agrees belong to Tsuetaki"

and; (3) that the three additional applications

filed, Novicky contends that only two of those

three ("which he referstoas 'private patents'")

belong to him. These conclusions of the state

appellate court, in effect affirming the state

trial court on Tsuetaki's title, are entitled

to preclusive effect. They meet all the require-

ments for application of the doctrine of claim

preclusion of res judicata.2//

i7/ The doctrine of claim preclusion is

more appropriate here than the doctrine of

issue preclusion or collateral estoppel, cited

by the District Court. The doctrine of issue

preclusion normally comes into play to bar a

party from retrying an issue that was actually

litigated in a prior suit and was essential

to the final judgment. See Mother's Restaurant,

Inc. v. Mama's Pizza, Inc., 723 F.2d 1566,

1569-70 (Fed. Cir. 1983); International Order

of Job's Daughters v. Lindeburg & Co., 727

F.2d 1087, 1090. 220 USPQ 1017, 1019 (Fed.

Cir. 1984). Here it is the state trial court's

final judgment itself and the appellate court's

partial affirmance of it that are entitled to

preclusive effect.

The fact that a petition for rehearing

is pending in the state appellate court does

(continued)

—3la—

Under the doctrine of res judicata, a

judgment on the merits in a prior suit bars a

second suit involving the same parties or

their privies based on the same cause of action.

Parklane Hosiery Co. v. Shore, 439 U.S. 332,

326 n.5 (1979). See also 1B Moore's Federal

Practice q 0.405[1] (2d ed. 1983). In our

case, the state trial court had held that

Tsuetaki was the rightful owner of all of the

patents and applications covered in the settle-

ment agreement between Tsuetaki and Syntex.28/

~<a

q/ (continued)

not prevent that court's judgment from having

preclusive effect. See Sixty-Third & Halsted

Realty Co. v. Goldblatt Bros., 96 N.E.2d 838,

843 (Ill. App.), aff'd, 102 N.E.2d 749 (Ill.

1951). ("The law is cleariy established that

a judgment and decree pending on appeal is

res judicata.")

18/

Although the state trial court did

not explicitly discuss the two divisionals of

the '303 patent, its order that Novicky assign

the '303 patent to Tsuetaki necessarily included

the two divisionals because they are, by defini-

tion, "carved out of" the parent patent. See

Supra, note 15.

—32a—

The appellate court affirmed that ‘judgment

with regard to those patents and applications

except for the "private patents". Novicky is

thus barred from raising his claim to those

patents and applications against Tsuetaki or

against Syntex (which stands in Tsuetaki's

place by virtue of the settlement agree-

ment) .22/

It was title to the other two patents,

the '989 and the '483 patents (the "private

i9/ the state appellate court vacated

and reversed the state trial court's judgment,

remanding for a new trial, but that was based

on three grounds now irrelevant, and had no

effect on the patent title matters which we

have just discussed. The first ground of

reversal was that Novicky had stated a prima

facie case of fraud against Tsuetaki (with

respect to the "private paterts", discussed

Supra) under the special Illinois post-trial

procedure. The second ground was that Syntex

was an indispensable party to the state litiga-

tion -- a ground not obviously inapplicable

to conclusions as to preclusive effect in

Syntex's favor. The third ground was that

the state court injunction against Novicky

was too long, too broad, and too general.

That too, is irrelevant to the present issue

of patent title.

—33a—

patents"), which was in true dispute in the

state court litigation. Novicky's claim was

that these patents were not covered by his

employment agreement with Tsuetaki because

Tsuetaki signed a statement in January 1980,

in which he waived all rights to them under

the employment agreement. The trial court

said that Tsuetaki's waiver was ineffective

because it was coerced, but the appellate

court remanded on the precise issue, because

of Tsuetaki's apparently contrary evidence in

the federal litigation. See Part I, B,

Supra.

Syntex asks that this court affirm the

District Court's grant of summary judgment on

Syntex's title to these two patents despite

the state appellate court's order for remand.

This request is based on alleged "independent

documentary proof cf Syntex's title." Syntex

points out that Novicky admitted that he invented

the subject matter of these patents while

—34a—

working for Syntex20/ and it was the subject

of his December 15, 1977 patent disclosure wit-

nessed by two Syntex employees. However, Novicky

has alleged in a counterclaim for fraud and un-

just enrichment dismissed by the District Court

(on grounds of collateral estoppel) that Syntex

waived any ownership rights it might have in

these patents. According to Novicky, Court-

land Spicer, a Syntex vice president, told

him that "Arapahoe [Syntex] had no interest

in the subject matter of Novicky's 1977 inven-

tions and that Novicky was free to develop

such inventions in his own name and as his own

20/ We are aware that Novicky admitted

this fact as a pro se litigant, but attach no

significance to that because what he admitted

is a simple statement of fact, within Novicky's

knowledge, and calling for no legal conclusion.

We are more willing to discount Novicky's

admissions that the patents "belong" to Syntex

or that Syntex has "rights" in them because

those admissions are legal conclusions and

because Novicky withdrew those concessions

after he hired counsel.

—35a—

property." This explicit but unexamined allega-

tion of a significant statement by a Syntex

agent (admissible under Federal Rules of Evidence

801(d) (2) (D) warrants further inquiry, and we

therefore return this matter to the District

Court for trial or further proceedings.

IV

Misappropriation of Trade Secrets

The District Court found that Syntex

met its burden on each of the four factors

necessary to prove misappropriation of trade

secrets under Illinois law (the applicable

state law in this case) .22/ According to the

21/ A federal District Court must apply

the conflict of law rules of the state in

which it sits. Klaxon Co. v. Stentor Electric

Mfg. Co., 313 U.S. 487 (1941). The applicable

Illinois rule is that in an action based upon

alleged misappropriation of proprietary informa-

tion or trade secrets, the law of the place

where the alleged wrong was committed or the

benefit was obtained by the defendant should

govern. Smith v. Dravo Corp., 203 F.2d 369,

373, 97 USPQ 98, 101 (7th Cir. 1953). Here,

Illinois law is applicable because the alleged

wrong took place at Tsuetaki's place of business

in Illinois.

District Court, Syntex established (1) that

it had legally cognizable trade secrets, (2)

that Novicky obtained the trade secrets within

a confidential relationship with Syntex, (3)

that Novicky disclosed the secrets in breach

of the confidential relationship, and (4)

22/

that Novicky profited from the disclosure.

See Schulenburg v. Signatrol, Inc., 200 N.E.2d

615 (Ill. App. 1964), aff'd in part and rev'd

in part, 212 N.E.2d 865 (Ill. 1965), cert.

denied, 383 U.S. 959 (1966). On the record

before us, we cannot say that these findings

were Clearly erroneous. See Rosemount, Inc.

Ve Beckman Instruments, Inc., 727 F.2d 1540,

1544 n.4, 221 USPQ 1, S\n.4 (Fed. Cir. 1984);

Raytheon Co. v. Roper Corp., 724 F.2d 951,

956, 220 USPQ 592, 596 (Fed. Cir. 1983).

A. Existence of trade secrets: Illinois

22/ The parties agreed before trial

that Syntex did not have to introduce evidence

to prove this fourth element.

—37a—

courts define a trade secret as "a secret

plan or process, tool, mechanism or compound

known only to its owner and those of his em-

ployees to whom it is necessary to confide

it." Schulenburg v. Signatrol, Inc., 212 N.E.2d

at 868 (emphasis omitted); Bimba Mfg. Co. v.

Starz Cylinder Co., 256 N.E.2d 357, 363 (Ill.

App. 1969); Colony Corp. of America v. Crown

Glass Corp., 430 N.E.2d 225, 227 (Ill. App.

1981). The set of processes and ingredients

used in the manufacture of Polycon, as disclosed

in the batch sheets and the FDA file, fit

this definition. First, by its terms, the

definition provides that a process can be a

trade secret. See also Imperial Chemical

Industries, Ltd. v. National Distillers §&

Chemical Corp., 342 F.2d 737, 742-43, 144

USPQ 695, 698-99 (2d Cir. 1965) (trade secret

in process for constructing an autoclave re-

actor); Ferroline Corp. v. General Aniline &

—38a—

Film Corp., 207 F.2d 912, 921, 99 USPQ 240,

246 (7th Cir. 1953), cert. denied, 347 U.S.

953 (1954) (trade secret in process for pro-

duction of iron pentacarbonyl). Second, it

is clear that Syntex made great efforts to

keep its Polycon process secret. The District

Court found:

[Syntex] . . . restricted access

to [its] ... Research and Develop-

ment Department to only those

employees and consultants .. .

who had signed secrecy agree-

ments. Laboratory notebooks and

batch records were under lock

and key. Only those who needed

information in confidential re-

ports 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 orient-

ing new employees, [Syntex's]

- - - personnel department specifi-

cally reviewed . . . paragraphs

three and four of the employment

agreement which established the

duty not to disclose confidential

information [see Novicky's employ-

ment agreement with Syntex, supra,

Part I]. At orientation, employees

also learned that everything

they did or learned was secret

and subject to that duty. Dr.

—f0a—

Courtland Spicer, a supervisor

on the project, told his employees

that the information in the batch

sheets was valuable and confiden-

tial. Syntex never published

the batch sheets or the analyti-

cal methods [contained in the

FDA master file].

We agreewith the District Court that manufactur-

ing process,details which are given such confiden-

tial treatment are entitled to protection as

trade secrets. See Affiliated Hospital Products,

Inc. v. Baldwin, 373 N.E.2d 1000, 1002, 1006,

202 USPQ 220, 221-22, 225 (Ill. App. 1978).

Novicky argues, nonetheless, that the

Polycon process is not a trade secret. He

asserts that the "batch sheets... are nothing

more than a compilation of reactions, each of

which is well-known to the art and documented

intheliterature." Novicky fails to acknowledge

that it is the very "compilation of reactions"

--along with information about the ingredients

and procedures used in them --that is the

trade secret. Even if Novicky were correct

in his assertion that all the reactions used

—4)a—

in the Polycon process were individually well-

known in the art, that would not preclude the

existence of a trade secret in compilation of

processes:

[A] trade secret can exist in a

combination of characteristics

and components, each of which,

by itself, is in the public domain,

but the unified process, design

and operation of which, in unique

combination, affords a competitive

advantage and is a protectable

secret.

Imperial Chemical Industries, 342 F.2d at 742

(citations omitted). See also Ferroline Corp.,

207 F.2d at 921 ("process as a whole...

differfed] materially from any methods taught

in the prior art") (emphasis added). As the

District Court said: "the value of the secret

to Syntex lay in the accumulation and integra-

tion of the various basic steps into a com-

mercially feasible product” (emphasis added).

Novicky admitted at the trial before the Dis-

trict Court that no single public domain docu-

ment sets forth all the details contained in

a ee eee

—4la—

Syntex's batch sheets or FDA master file.

B. Novicky's Access to the Trade Secrets:

Novicky admitted at trial that he had access

to any documents he wanted relating to the

Polycon project. This would include the batch

sheets, much of which he developed himself,

and the FDA master file. The employment agree-

ment he signed with its non-disclosure and

assignment clauses (see supra, Part I) demon-

strates that he received the trade secrets in

the context of a confidential relationship.

Cs Novicky's Disclosure of the Trade

Secrets: The District Court cited the testi-

mony of Dr. McGrath (Syntex's expert) who

stated that the crucial portions of the

Tsuetaki and Syntex batch sheets were identical

and of Mr. Merker (Novicky's expert) who said

(confused as to which set of batch sheets he

was holding) that the material "both lookl[ed]

—

alike" to him. The court also noted that Dr.

McGrath had pointed out errors which appeared

in both the Arapahoe and Tsuetaki batch sheets

which he labelled "fingerprint errors" because

they were mistakes that a chemist was unlikely

to repeat, unless he was copying directly

from a document. McGrath likewise testified

that the specifications and analytical methods

contained in the FDA master file Novicky

prepared for Tsuetaki were "very very similar"

to and contained "an awful lot of very nearly

identical materials" to those in the Syntex

FDA master file. He said: "(T]he chemical

procedures, the data sheets, even some of the

log sheets are almost identical. There is no

—438a—

difference between several of these. Even

the typing is the same." Given this evidence

of the similarities between the two sets of

process sheets, we cannot find that the Dis-

trict Court's conclusion, that Novicky copied

Syntex's process sheets and used its trade

secrets at Tsuetaki's plant, is clearly errone-

ous.

V

The Remedy

The District Court's final injunction

provided in its most significant part:

Novicky and [his agents] are ...

enjoined for twenty (20) years

from May 12, 1978 [the day Novicky

‘resigned from Syntex], or until

May 12, 1998, from using or dis-

Closing information found in the

Arapahoe [Syntex] batch sheets

and the FDA Master File, and not

found in public domain documents,

for manufacture of silicone-

containing, rigid, gaspermeable

contact lens material ... .

—44a—

Novicky challenges both the scope and dura-

tion of the injunction. Under Illinois law,

an injunction in a trade secret case must be

limited to the approximate length of time

necessary for the defendant to duplicate the

trade secret by lawful means. Brunswick Corp.

v. Outboard Marine Corp., 404 N.E.2d 205, 207

USPQ 1039 (I11. 1980); Schulenburgv. Signatrol,

Inc., 212 N.E.24 at 869-70.22/

On this issue, there were three separate

pieces of evidence before the District Court.

Novicky's expert, Mr. Merker, testified as

fellows (on cross-examination) on the question

23/ Many other jurisdictions have used

this "independent development test." See,

e.a., K-2 Ski Co. v. Head Ski Co., 506 F.2d

471, 474, 183 USPQ 724, 726 (9th Cir. 1974);

Anaconda Co. v. Metric Tool & Die Co., 485 F.

Supp. 410, 431, 205 USPQ 723, 741 (E.D. Pa.

1980); Sperry Rand Corp., v. Electronic Con-

cepts, Inc., 325 F. Supp. 1209, 1219 (E.D.

Va. 1970), vacated and remanded on _ other

grounds, 447 F.2d 1387 (4th Cir. 1971), cert.

deniec, 405 U.S. 1017 (1972). See also 12 R.

Milgrim, Trade Secrets § 7.08[1] n.12 (1983).

oF tasty J “

RT ae oe

—45a—

of the time necessary for independent develop-

ment:

SYNTEX ATTORNEY (MR. GOULD): Do

you have any opinion how long

it would take someone starting

with the Gaylord patent and the

other public documents you talked

about to come up with those pro-

cedures for an optimized process?

MR. MERKER: To the final product?

MR GOULD: The final product

optimized process, all those

specifications and all those

analytic methods.

* * *

MR. MERKER: From start to finish,

if you lump everything together,

the last step takes the longest, ,

I would estimate maybe a year.

Dr. McGrath's (Syntex's expert's) corres-

ponding testimony (on direct examination)

went as follows:

24/ Mr. Gould's follow-up question makes

it clear that Merker was testifying with regard

to the length of time it would take to develop

procedures for an optimized commercial (rather

than a laboratory) process. He asked Mr.

Merker, "But you have never actually done a

scale-up yourself to a commercial process,

have you?"

. —46a—

MR. GOULD: Those time intervals

that you set [much less than a

year], were those for making a

laboratory scale or were they

for making an inéustrial-

commercial scale usable for con-

tact lenses as set forth in the

batch sheets?

DR. MCGRATH: I was thinking

about he laboratory scale to

make a sample or two.

MR. GOULD: How long would it

take to develop for you, if you

were given nothing but the Gay-

lord patent, to develop the specifi-

cation, annalytic techniques,

and the batch sheets, given just

the Gaylord patent?

DR. MCGRATH: It would take an

enormously longer period of time,

certainly months, maybe years.

The District Court discounted both Merker's

and McGrath's testimony?’ and relied almost

entirely on the testimony of Dr. Capozza,

President of Syntex Ophthalmics, that "in

excess of 20 man-years and in excess of one

million dollars was spent in developing the

25/ The céurt was wrong in finding that

the two experts' testimony related "to the

mere laboratory production of a polymer." As

shown supra, this testimony went much further.

eae ipo ie aid.

—47a—

process." The choice of a 20-year period for

the final injunction was squarely rested on

this evidence. We think that this was clear

error and an abuse of discretion. fThe fact

that Syntex may have spent 20 man-years (in-

volving quite a number of people) and a million

dollars on the development process does not

mean that Novicky would take 20 years to re-

create independently the trade secrets. Dr.

Capozza himself testified that the actual

elapsed time was some "two years of effort

- e « from the early '77 period to the point

at which the product was introduced into the

market in May of '79" (emphasis added). Par-

ticularly in view of this limited actual time-

Span, there are several defects in measuring

the duration of the injunction by the number

of man-years Syntex's employees spent during

that two years. For one thing, Syntex may

well not have needed all those man-hours merely

to develop the particular trade secrets (mainly

—_48o—

the batch sheets and FDA file) that Novicky

misappropriated; there is good reason to believe

that Dr. Capozza's estimate included much

else leading to the commercialization of the

product .26/ Then, too, Syntex may have expended

far more effort than actually necessary even

to produce the particular trade secrets; it

is not unknown for people to be more careful

and thorough than actually necessary. More-

over, it seems strange to enjoin appellant

for 20 years (until May 12, 1998) because

Syntex expended 20 man-years (using several

people) in an actual two-year span, and at

the same time to enjoin appellant (as the

final injunction appears to do) from utilizing

any agents, servants, or employees or any

other person in concert with him. In other

26/ Dr. Capozza agreed that his estimate

includes things involved "directly or indirectly"

in the whole process development. Of course,

the time spent on Syntex's efforts aside from

the development of the purloined trade secrets

must be excluded.

el san ie AT MANS ie te tT a eS

—49a—

words, appellant is enjoined from acting either

alone or with others for 20 years, on the

basis of Syntex's use of others (during an

actual two-year period) to the extent of 20

man-years. Even if Novicky were willing and

able to extend, along with others, the same

two years and the 20 man-years of effort to

develop independently the matters which he

misappropriated, he would apparently still be

barred until 1998.

An injunction was plainly warranted

but our conclusion, on this record, is that

it was clear error and an ause of discretion

to extend the injunction for 20 years until 1998.

This error is important because extending the

injunction beyond the time Novicky could in-

dependently have developed the Polycon pro-

cedures would give to Syntex "a windfall pro-

tection and would subvert the public interest

in fostering competition and in allowing em-

ployees to make full use of their knowledge

—Ha—

and ability." Brunswick Corp. v. Outboard

Marine Corp., 404 N.E.2d at 207.2//

The issue then becomes whether we should

simply remand to the District Court to eryercise

its judgment properly, or whether we can set

Gurational limits. We believe that, on the

whole record, the maximum duration this record

will permit is eight years from May 1978 (when

Novicky left Syntex's employ) or four years

from the date of the District Court's pre-

liminary injunction (May 1982) .28/

Since somewhat less than two years re-

main of the maximum span of the injunction

the District Court can enter, we proceed to

2i/ An employee can always take with

him, at the termination of his employment,

the general skills and knowledge gained while

working for an employer. Schulenburg v.

Signatrol, Inc., 212 N.E.2d at 869.

28/

Novicky was placed under the similar

state court injunction in January 1981.

Se re rd ar ee, nD er aw a

—5la—

discuss Novicky's further claim that the in-

junction is too broad in scope. First, the

injunction should be modified, to the necessary

extent (if any), to accord with the court's

determination (on remand) of the ownership of

the "private patents". Second, the very general

term "not found in public domain documents”

need clarification and specification. Third,

because the misappropriated trade secrets

consist of a compilation of reactions (see

Part IV, supra) not of the individual reactions

singly, the second and last paragraphs of the

injunction should be modified to assure that

appellant will not be in contempt merely through

use of already known individual reactions or

ingredients.

VI

Conclusion

We affirm the District Court's grant of

summary judgment for Syntex on its title to

the patents and applications covered by the

—52a—

settlement agreement with Tsuetaki, except

for the '483 and '989 patents. We remand to

the District Court the question of Syntex's

title to the latter patents and reverse the

court's dismissal of Novicky's counterclaim

for fraud and unjust enrichment regarding

them. We affirm the District Court's judgment

that Novicky misappropriated Syntex's trade

secrets, but reverse the final injunction and

remand for further consideration of the duration

and terms of the injunction in accordance

with this opinion. We affirm the denial of

Novicky's motion to remand the state action

back to the state court.

Affirmed in part, Modified in part,

Reversed in part, and Remanded.

Mn ti Ae a

ie we te

—§ie

THIRD DIVISION

DECEMBER 7, 1983

81-1727/

81-2857

GEORGE F. TSUETAKI

and FUSED KONTACTS

OF CHICAGO, INC.,

an Illinois corp- APPEAL FROM THE

oration, CIRCUIT COURT OF

COOK COUNTY.

Plaintiffs-

Appellees, HONORABLE REGINALD

J. HOLZER, JUDGE

vs. PRESIDING.

NICK N. NOVICKY,

Defendant-

Appellant.

i a

JUSTICE McGILLICUDDY delivered the opinion

of the court:

Following a bench trial, defendant,

Nick Novicky (Novicky), was found to have

breached his employment contract with plain-

tiffs, George F. Tsuetaki and Fused Kontacts

of Chicago, Inc. (Tsuetaki). The trial court

also found that modifications of the contract

—54a—

were void for duress, fraud and lack of con-

Sideration. An order was entered granting

the injunctive relief sought by Tsuetaki, and

Ordering Novicky to return sums of money re-

ceived pursuant to the contract modifica-

tions.

On appeal Novicky asserts (1) the injunc-

tion is overly broad, permanently precluding

him from disseminating any and all informa-

tion relating to the manufacturing of gas

permeable contact lenses, thus effectively

precluding him from pursuing his career; (2)

the modifications of his employment contract

were valid and not obtained by duress or fraud;

(3) the order of the circuit court is void

for failure to join an indispensable party to

the litigation; and (4) the circuit court

erred in dismissing Novicky's petition for

rehearing based on section 72 of the Civil

Practice Act (Ill. Rev. Stat. 1979, ch. 110,

par. 72), now codified as section 2-1401 of

—55a—

the Code of Civil Procedure (Ill. Rev. Stat.

1$81, ch. 110, par. 2-1401).

At triai, Tsuetaki testified that he

was a doctor of optometry doing business as

Fused Kontacts, Inc. The corporation makes

contact lenses for sale to doctors, labs and

patients. In August 1978, Novicky, a chemist,

stated to Tsuetaki that he had developed a

new composition for gas permeable contact

lenses that he wanted to sell to him. Tsuetaki

signed a security agreement, providing that

he would not analyze materials received from

Novicky at that time, but that, if a business

arrangement were reached, all technology would

become the property of Tsuetaki.

Subsequently, Tsuetaki and Novicky met

with Tsuetaki's patent attorney regarding the

new composition for gas permeable contact

lenses. Although Novicky had previously been

employed as a chemist by Syntex Opthalmics,

Inc., and/or Arapahoe Chemicals, Inc., (col-

—56a—

lectively Syntex), a manufacturer of gas per-

meable contact lenses, Novicky maintained

that he had developed the material offered to

Tsuetaki after leaving Syntex and while working

on his master degree at the University of

Denver. Novicky represented that his invention

did not infringe any patent owned by Syntex.

Tsuetaki and Novicky entered into an

employment agreement for the period from September

1, 1978 to August 31, 1982, providing that

Novicky would be employed to develop material

and techniques useful for the production of

contact lenses and related items. He was to

be paid an annual salary of $22,500 adjusted

annually to reflect increases in the cost of

living and a discretionary bonus. In addition,

in exchange for a present assignment of all

rights to any inventions previously made by

Novicky, he was to receive (1) $10,000 for

each patent application covering developments

made by Novicky for use in making contact

FL ct a as Le AEE RE AE OR

—57a—

lenses and related items, approved by Tsuetaki

and filed in the United States Patent Office;

and (2) an additional $10,000 when and if a

United States patent was issued on the appli-

cation.

In return, Novicky assigned all inventions,

developments and improvements to be made in

the future to Tsuetaki during his life of the

agreement plus six months thereafter. Novicky

also agreed to keep the subject of his work

"confidential" as long as such information

had value to Tsuetaki or was still confiden-

tial.

The employment contract was signed on

August 31, 1978, and Novicky began work in a

laboratory provided by Tsuetaki. Novicky

made rods of material from which his employer

cut discs to make contact lenses. MTsuetaki

tested the lenses by wearing them himself.

He would then suggest to Novicky changes that

might be made to improve the lenses. Eventually

—58a—

they developed a material which they called

"GN-1," and patent application serial number

6752 was filed in Novicky's name covering the

GN-1l material. Pursuant to the agreement,

Novicky was paid $10,000 at filing and $10,000

when the patent was officially allowed.

After the 6752 application was filed,

Novicky filed two more applications for other

inventions of which Tsuetaki was advised and

which Novicky agrees belong to Tsuetaki.

Novicky also filed three additional patent

applications for other inventions, two of

which he refers to as "private patents".

Novicky testified that Tsuetaki was uninterested

in these two patents and freely signed a state-

ment in January 1980, waiving all rights to

them. Tsuetaki, however, testified that he

Signed the waiver under duress and fraud and

without consideration. The alleged duress

was a backlog of orders which could only be

filled by the production of the rods by Novicky.

—59a—

The alleged fraud was Novicky's assurance

that the two private patents were inferior

to, and thus not competitivewith, those assigned

to Tsuetaki. However, following expert testimony,

the trial court found that the private patents

were competitive with GN-l. The court also

found that Tsuetaki had signed the waiver

under duress since the alternativewas a complete

shutdown of operations because of the stoppage

of the production of the rods by Novicky.

The employment contract was further

modified in May 1980, when Tsuetaki agreed to

pay Novicky a royalty of $1.00 per rod for

all GN-1 material produced. Tsuetaki testified

that this agreement, too, was the product of

duress. Novicky had started a production

slowdown. Tsuetaki allegedly had a backlog

of orders for 42,000 GN-1 blanks or 1900 rods

and no personnel other than Novicky to produce

them. At approximately the same time Novicky

also requested and received from Tsuetaki an

—60a—

additional $3,000 for preparation of a United

States Food and Drug Administration file seeking

approval of the GN-1l material. Again, Tsuetaki

testified that he acted under duress. In

June 1980, Novicky tendered his resignation

to Tsuetaki.

The trial court found that Novicky had

violated his employment agreement and on January

13, 1981, entered judgment for Tsuetaki, ordering

Novicky to repay the $3,000. The judgment

order also included an injunction which pro-

vided:

"(4) NICK N. NOVICKY is hereby

enjoined from disclosing to any

person or entity the contents in

whole or in part of any laboratory

books and records dealing with

the experiments, research, progress

and development of the technology

involved in the manufacture of

contact lenses, including, but

not limited to, those which could,

would or did lead to the filing

of letters patent. NICKN. NOVICKY

is also enjoined from otherwise

disseminating matters confidential

to GEORGE TSUETAKI and/or FUSED

KONTACTS OF CHICAGO".

—6la—

On October 24, 1980, Syntex had requested

permission tomonitor the circuit court proceed-

ings. Tsuetaki and Novicky objected. The

trial court denied the request. On November

19, 1980, Syntex filed suit against Tsuetaki

and Novicky in the United States District

Court for the Northern District of Illinois

alleging that Tsuetaki had wrongfully obtained

Syntex's trade secrets from Novicky.

On February 18, 1981, Novicky filed a

post-trial motion seeking modification of the

judgment of January 13, 1981. Novicky contended

that the injunction in paragraph (4) was overly

broad, and that it was anomalous since Novicky

was not precluded from manufacturing contact

lenses using confidential information and

processes belonging to Tsuetaki, as long as

that information or process was not disclosed

to any other person or entity.

Tsuetaki filed a petition for Rule to

Show Cause on February 11, 1981, contending

—62a—

that Novicky had improperly conferred with an

attorney for Syntex, regarding the case in

Federal court in which Novicky was appearing

pro se. In response to the petition for Rule

to Show Cause and in support of its own cross-

petition for a stay of the injunction entered

by the circuit court on January 13, 1981,

Syntex submitted a memorandum stating that

Novicky had agreed not to disclose or use

contact lens-related trade secrets learned

during the five years he had worked for Syntex.

While Novicky worked for Syntex he had allegedly

developed methods of making contact lenses,

generating a Patent Disclosure executed on

December 15, 1977, by three Syntex employees.

Although this patent belonged to Syntex, it

was allegedly substantially similar to the

patent awarded to Tsuetaki in the January 13,

1981 judgment. Further, the judgment required

Novicky to transfer to Tsuetaki documents

allegedly belonging to Syntex and drafted by

—6§3a—

Novicky during his employment there. Syntex

requested the trial court to enter a protective

order staying certain paragraphs of its order

pending the decision of the Federal court

regarding the rights of the parties.

On February 24, 1981, Syntex filed a

Special and Limited Appearance to contest

personal jurisdiction of the state court. On

July 10, 1981, the trial court held that Syntex,

by filing its cross-petition and its response

to the petition for Rule to Show Cause, had

made a general appearance thereby submitting

itself to the jurisdiction of the trial court.

The court, further, denied Syntex's petition

for a protective order. Novicky's post-trial

motion was also denied.

Novicky appeals the January 13, 1981

and July 10, 1981 decision of the circuit

court. In addition, he filed a petition pur-

Suant to section 72 of the Civil Practice

Act (Ill. Rev. Stat. 1979, ch. 110, par. 72),

—§4a—

now codified as section 2-1401 of the Code of

Civil Procedure (Ill. Rev. Stat. 1981, ch.

110, par. 2-1401), on the basis of testimony

given by Tsuetaki and by Fused's comptroller,

in the Federal case against both Tsuetaki and

Novicky. Novicky asserted in his petition

that (1) evidence given by Tsuetaki and the

comptroller in the Federal case directly con-

tradicted testimony relied upon by the circuit

court in its resolution of the case in the

circuit court; and (2) evidence in the Federal

case established that Syntex was an indispensable

party who should have been joined to the circuit

court action. Tsuetaki filed a motion to

strike the section 72 petition. The court

granted the motion to strike. Novicky also

appeals this order.

I.

We first address the issue of the dismissal

of the section 72 petition which alleged that

the evidence given by Tsuetaki in the circuit

—65a—

court was contradicted by subsequent depositions

given by Tsuetaki in the Syntex case in the

Federal court. MTsuetaki and his comptroller,

Bill Vranas (Vranas), testified in the trial

of the instant case in support of Tsuetaki's

Claim of coercion and duress that Tsuetaki

had not been able to fill his orders for lenses

during the summer of 1980 because of Novicky's

refusal to produce sufficient material and

his lack of other personnel to manufacture

the material. However, according to their

depositions in the Federal case, not only had

Tsuetaki been able to fill his orders on July

3, 1980 and July 15, 1980, from material made

by Nov icky before his resignation, but Vranas

testified further that sales were in fact

"bad" during the summer of 1980 and that when

Tsuetaki resumed production without Novicky

he still had an inventory over 1,000 "buttons"

produced by Novicky. This is inconsistent

with Vranas' and Tsuetaki's testimony in the

circuit court.

—66a—

Concerning Novicky's so-called "private

patents", Tsuetaki testified in circuit court

in support of his allegation that Novicky had

coerced him into waiving his interest in those

patents:

"I asked Mr. Novicky, what do

you want to do. What do I have

to do in order that we can have

production and satisfy our needs?

**** T had no choice but to sign

this."

However, in his deposition in the Federal

case filed by Syntex, Tsuetaki stated that

about six months after the commencement of

the employment agreement Novicky had offered

him the private patents for $10,000. Tsuetaki

stated that he simply did not wish to accept

hisoffer. Again this contradicts the testimony

in the instant case.

Further, regarding the alleged duress

resulting from Tsuetaki's complete dependence

on Novicky for the production of lenses due

to a lack of other qualified employees, the

—67a—

Federal deposition revealed that Tsuetaki had

actually opened a second laboratory, Paragon

Research Corporation, before Novicky resigned.

In the instant case, on the other hand, Tsuetaki

had testified that he had "no desire" to open

another laboratory facility and that Novicky

would not have permitted him to hire an additional

chemist.

In addition, in the circuit court, counsel

for Tsuetaki referred to Novicky as having

"extorted" the $3,000 received for preparation

of the United States Food and Drug Administra-

tion file, claiming that the typing bills in

conjunction with the preparation of the file

had amounted to only $54. The actual bills,

disgorged in the Federal court proceeding,

totaled approximately $1,400.

In the section 72 petition Novicky also

alleged that Syntex was an indispensable party

to the circuit court case, based on Syntex's

assertions in the Federal case that it had a

—68a—

proprietary interest in the subject matter of

this case. Novicky's section 72 petition was

Supported by his affidavit and memorandum.

Tsuetaki filed a motion to dismiss the

section 72 petition alleging that it was insuf-

ficient at law to state a claim for relief.

The circuit court entered an order striking

the section 72 petition on the basis that the

newly discovered evidence could have been

presented at the trial if Novicky had exercised

due diligence.

First, we note that for purposes of a

section 72 petition, as in other pleadings,

failure to answer the allegations of the petition

constitutes an admission. (Campbell v. Kaczmarek

(1976), 39 Ill. App. 3d 465, 350 N.E.2d 97.)

Therefore, we must accept Novicky's allegations

as true and the only issue before this court

is whether the petition and its supporting

affidavit adequately set forth facts to show

that the trial court abused its discretion in

—69a—

denying the petition. (Colletti v. Schrieffer's

Motor Service Inc. (1962), 38 Ill. App. 2d

128, 186 N.E.2d 659.) A court of review may

disturb a trial court's decision regarding a

section 72 petition only if it finds that the

court abused its discretion. Stallworth v.

Thomas (1980), 83 Ill. App. 3d 747, 404 N.E.2d

554.

The criteria for a successful section

72 petition are well established. A party

must demonstrate: (1) the existence of a

meritorious defense or claim; (2) due diligence

in presenting this defense or claim to the

court in the original action; (3) that, through

no fault of his own, an error was made or a

defense or claim was not raised; and (4) due

diligence in filing the petition. In addition,

the petition must set forth specific factual

allegations in support of each element in

Order to prevail. Staliworth v. Thomas.

—T0a—

The purpose of section 72 petition is

to permit the vacation of judgments where

facts exist which, had they been known to the

trial court, would have precluded the judg-

ment. (Diacou v. Palos State Bank (1976), 65

Ill. 2d 304, 357 N.E.2d 518; People v. Hinton

(1972), 52 Ill. 2d 239, 287 N.E.2d 657, cert.

denied (1973), 410 U.S. 940.) It must be a

fact that influenced the court in its judgment

but about which the court was inerror. Further,

the petitioner must demonstrate that through

no fault or neglect of his own the error of

fact could not have been discovered at the

time of the original proceeding. (People v.

Jennings (1971), 48 Ill. 2d 295, 269 N.E.2d

474; People v. Stewart (1978), 66 Ill. App.

3d 342, 383 N.E.2d 1179.) Section 72 is an

appropriate remedy where the omission of a

valid defense was caused by fraud, duress or

excusable mistake. It is not intended to

relieve a party of the consequences of his

—Tla—

own negligence or mistake. Diacou v. Palos

State Bank; People v. Stewart.

It is our opinion that Novicky has alleged

specific facts in his petition, recounted

above, which could have led the circuit court

to a different decision regarding the agreement

between him and Tsuetaki, as well as the modifi-

cations of that agreement, had they been known

at the time of judgment. The cornerstone of

Tsuetaki's case was his claim of economic

duress produced by Novicky's alleged refusal

to produce sufficient material to fill Tsuetaki's

orders for contact lenses. It was on this

basis that the trial court held the modifica-

tions of the employment agreement to have

been made under duress and therefore unenforce-

able. Depositions taken during discovery in

the Syntex Federal case -- the testimony of

Tsuetaki himself as well as that of Bill Vranas,

the two principal witnesses in the action

against Novicky -- refute this. Thus, we

—7T2a—

believe that Novicky has presented ameritorious

defense and the initial requirement for a

successful section 72 petition has been satis-

fied.

In his petition Novicky stated, in support

of the due diligence requirement, that these

facts were not brought out at trial because,

as an individual, he was economically precluded

from the scope of discovery available to Syntex,

a corporation. While this may not be sufficient

to establish due diligence in itself, we note

that the equitable powers of the court are

invoked in the consideration of section 72

petitions (Elfman v. Evanston Bus Co. (1963),

27 Ill. 2d 609, 190 N.E.2d 348), and that

section 72 relief is granted to achieve justice,

and that a liberal construction is used to

achieve that end. (Elfman v. Evanston Bus

Co.; Electrical Wholesalers, Inc. v. Silverstein

(1977), 47 Ill. App. 3d 689, 365 N.E.3d 375.)

The requirement of due diligence need not be

—T3a—

rigidly enforced when fraud or unconscionable

behavior is’ shown. (Department of Public

Works & Building v. O'Hare International Bank

(1976), 44 Ill. App. 3d 934, 358 N.E.2d 1308;

see Esczuk v. Chicago Transit Authority (1968),

39 Ill. 2d 464, 236 N.E.2d 719.) We believe

that the apparently false testimony given by

Tsuetaki and Vranas may fairly be characterized

as fraud.

Further, it is our opinion that Tsuetaki's

self-serving testimony, depending upon the

court in which he had been called to testify

or to give a deposition, constituted unconscion-

able behavior. Since it can hardly be attributed

to any fault on Novicky's part that Tsuetaki

and Vranas did not testify truthfully, we

conclude that the requirement of due diligence

has been satisfied and that the trial court

abused its discretion in dismissing Novicky's

section 72 petition. Thus, the judgment of

the trial court is vacated and this matter is

remanded for further proceedings.

—T4a—

Il.

We next address the issue of Syntex as

a necessary party. We first note that we do

not believe that Syntex should be joined on

the basis of the section 72 petition, since

as Syntex's former employee any fault for the

failure to join Syntex originally must be

attributed to Novicky. Relief pursuant to

section 72 is not designed to remedy the con-

sequences of a party's own negligence. Diacou

v. Palos State Bank (1976), 65 Ill. 2d 304,

357 N.E.2a@ 518.

However, it is well established that if

a complete determination of a controversy

cannot be had without the presence of a party,

Or if a person, not a party, has a property

interest which a judgment may affect, the

court on application shall direct him to be

Made a party. (Ill. Rev. Stat. 1979, ch. 110,

par. 25(1), now codified as section 2-406(a)

of the Code of Civil Procedure (Ill. Rev.

ith eins allo ated ot a i at

—7T5a—

Stat. 1981, ch. 110, par. 2-406(a)); (Lain

v. John Hancock Mutual LIfe Insurance Co.

(1979), 79 Ill. App. 3d 264, 398 N.E.2d 278;

Lerner v. Zipperman (1979), 69 Ill. App. 3d

620, 387 N.E.2d 946.) This is required by

fundamental principles of due process, since

a court is without jurisdiction to enter a

decree or judgment which affects a right or

interest of someone not before that court.

(Lerner v. Zipperman.) The requirement of

joinder of necessary parties is absolute and

inflexible and therefore an appellate court

has a duty to enforce the principle of law

requiring the joinder of parties sua sponte

as soon as it is brought to its attention.

Lerner v. Zipperman.

In our opinion due process requires

that Syntex be joined to this action upon

remand. Syntex is clearly a necessary party

Since it is manifest from the record as well

as the parties" briefs on appeal that, as

—6a—

Novicky's former employer, Syntex has claimed

a property interest in the same alleged trade

secrets and patented processes that are the

Subject matter of the controversy between

Novicky and Tsuetaki. A judgment enjoining

Novicky from the use or dissemination of this

information, while allowing Tsuetaki to proceed

freely, could infringe the rights of Syntex,

as could a contrary disposition. Therefore,

we hold that upon remand Syntex must be joined

as a necessary party.

III.

Finally, since the issue is likely to

arise again upon remand, we address the scope

of the injunction against Novicky. An injunc-

tion should be reasonable and should only be

as broad as is essential to safeguard the

rightsof the plaintiff. (Village of Wilsonville

v. SCA Services, Inc. (1981), 86 Ill. 2d l,

426 N.E.2d 824.) Furthermore, as a general

rule, an injunctive order should not be broader

ake te Lap Rie a hatte AE iE ete

—T7a—

in scope than the relief sought in the plead-

ings. (Cook County v. Rosen & Shane Wine &

Spirits, Inc. (1978), 58 Ill. App. 3d 744,

374 N.E.2d 838; Schlicksup Druq Co., Inc. v.

Schlicksup (1970), 129, Ill. App. 2d 181, 262

N.E.2d 713.) We agree with Novicky that the

apparently perpetual injunction entered by

the trial court essentially enjoining him

from disclosing any and all information relat-

ing to the manufacture of contact lenses,

including but not limited to information which

could, would or did lead to the filing of

applications for letters patent, is too broad.

The granting of the injunction is reversed.

To aid in the enforceability of any possible

future injunction, the trial court should

delineate with greater specificity precisely

which information may not be disclosed or

used, and for what period of time.

—T8a—

For the foregoing reasons, the judgment |

of the circuit court of Cook County is reversed

and remanded for a new trial.

Reversed and remanded.

MCNAMARA, P.J., and RIZZI, J., concur.