Petition for Writ of Certiorari — Space Aero Products Co. v. R. E. Darling Co.

Supreme Court brief1965

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‘INDEX f hiss

oe eae . ; : ‘Page - .

- Opinions Below ...... pagenkc§hsasaavaekancuereelad me

Jurisdiction ........ Oe ‘cin ves ere verre re a

Questions Presented -... ; Pere Tr ty Troi TT oe 2

Constitutional Provisions and Statutes Involved segue ©

Statement of Facts s.c..6eseeeees (Stn devi deeds eae

Reasons for Granting the WEE cites we

Conclusion aE ae mere asennad shgas Antes ki “26

vasiaeina . |

A. Constitutional and Statutory 1 Provisions . din kao la

ms 4 Opinion of the Court of Appeals of Maryland... lla.

C. Mandate of the Ocari of Appeals of Maryland. . 43a -

' D. Opinion sna Order of the Court of Appeals. of

« Maryland Denying Motion for Modification ft =

Opinion and -Rearguyent noneaed eek wveggecs Ge

, ~E. Opinion of the’ ‘Circuit Court: for Montgoniery

County, Maryland ° ceecccesececsccsesecccceces 498

F. Order of the Circuit Court for ‘Montgomery : |

| County, Maryland ......... Peer Perere eee , 68a

@. Modified Order of the Cirenit Court for Mont-

gee County, ee wee eceeeegefecccecs 66a

an \

cad

aa? . - Index Continued

(CITATIONS, tae

- Cases: aS ; epee, Page

Artype, Tne: ¥. Zappalls 298 F. 2a 695 (2a Cir. 1956)! 24

Carondelet Canal & Nay. Co. v. Louisiana, 233 U.S. 362

ME i eta do ada Fi Ueuuessaucee dua ekunen seks oe ae

Compco Corp. v. ‘Day Brite Lighting, Inc., 376-U. "ae

S36). ) Peeererererercr rr a era 2-10, 12, 16

Dent v, West Virginia,.129 U S14 (1889) PE neat epee ne 24

E. I. Du Pont de NemoursPowder Co. y. Masland, 244 - |

US. 100,(1917)- ..... EE SSRN SPE A ree

Forgay-v. Contad, 6 How. 201 (1848); .. thaied vigenes’ eo:

~ Franke v. Wiltschek, 209 F. 2d 493 (2d Cir. 1953). eee Es:

Grannis v. Ordean, 234 U.S. 385 (1914) ../...... ee cils 11

Great Atl. & Pac. Tea Co. v. Supermarket Equip, Corp. be

| SAD U.S. 147 (1950). 52.0... ceeds eceeececseses 15 |

. Greene v. McElroy, 360 U.S. 474 (1959) ..e....2.....5524 |

.. * Harrisonville v.. W. S. Dickey Clay Mfg. Oo., 289 U.S. ar

ENE UG 5 vckda sd nd nub seelns sss eihevieienue 24

Head Ski Co. v. Kam Sti Co, ee oe :

MU OE Go Siw cae acuwended oh ees\eeeces evans os Wt

Hecht Co. v: Bowles, 321 US. 321 (1944) ....... vee 24

’ Herndon v. Georgia, 295 U.S. 441(1935) ......0..... 1

Jungersen v. aw, & Barton Co. 3 335 Uz S. 560 (1949) - .

14, 15

Local, 438, Constr. & adecal Laborers? Union v. Curry,”

: 371 U.S. 542 (1963) ELS oe ATER AD ED ED 9 :

Northwestern Bell Telephoné Co. v. Railway Comm bad

; SOT TB G71 CABGED 5. os Es ccc ec dc tccecvaces a

Paul v. United States, 371 U.S. 245 (1963) .......... - 20

Radio Station wow, Inc. v. Johnson, , 326 US. 120 7

“fi (1945) oe cee ARRAS ee ee PS Oe eR 9

Richmond | Raia Anchor Co. Vv. ‘United States, 275 :

WU NN ooo cci ca M Ccccsdeiceeeceis 21

Schriber-Schroth Co. 'v. Cleveland Trust Co., 305 U.S.

47 $a de KGiNecceds ieketaswesetaas aekivaese ds 18

6 - . ; <

Index Continued’ ii:

rhs on

Ahoeisi v. Board of Bar Examiners, 353 U. S. 232

e (1957) eee eee recent eee een esas te eeeenses 2A, 25

Sears Roebuck & Co. v. - Stiftel, 376 US. 225 (1964).

9, 12, “5 16,19 |

. Smith v. Dravo Corp., 203 F. 2d 369 (7th Cir. 4953) .. (24

” gully y. American Nat’! Bank, 178 U.S. 289 (1900) . 11

he United Carbon Co. v. Binney & Smith Co., 317 U, S. |

-.. QB (1048) ......: langbadescescduuweusseuwdes ade. oe

Wieman v. Updegraff, 344 US: 183 (1968) 0.028605,

William R. Warner & Co. v. Eli Lilly Co., 265 U. .

| 526 (1924) ...wsesececeseecectscceveveess we ee 016,19.

Wood v. Atlantic Gulf & Pac. Co., 296 Fed. 718 (Ss. D.

‘Alla: 199A) ...c.cccerseemesees waetigawites s86W4« 22

Constrruri0waL PROVISIONS AND Srarurzs: | gine? s

U. S. Constitution, Article I, Section 8, Clause 8 ...+. 2 3

U: S. Constitution, Article vI, Clause 2 cade eek endorses 3

U.S. Constitution, Fourteenth Amendment, Section i.. 2&3

10 U.S.C. § 2304 Peseeeetes usnes si cktnci nese

Te i sec os vasa ce sas iecovans 28.

28 U.S.C. ne Se ee swew ones iaaieteaa 3,15

2B USL: §U9B Myo pencseeeeseees rere e a8, 20,21

. Patent Code of 1952, 35°U.S.C. §101 6... ..... 2.525.314

’ Patent Code of 1952, 35 U / oo 5 Seer ademas 3, 14

Patent Code of 1952, 35 U.S.C. §103 .......... cae 3,14.

Patent Code of 1952, 35 U,S.C- Ser

Patent Code of 1952, 35 U.S.C. $106 2.52... .. 2.3, 14, 16

Patent Code of 1952, 35 U.S.C..§ 173 eauenseuns wee ed, 14

Patent Code of 1952, 35 U.S.C. § 283 .........6200+ 23) 16 |

° .

Page,

iv * | ‘Index Continued MG ae

‘ ate : Fa

on Page. *

; Mrecutzawnows : | = i

32 C.F.R. $8 2501 to 2808 v.censadfonsieceleeconl enol eae

56 Cong: Rec. 7960-61 (1918) ...........050. e004 21-22 aa |

Note, Protection a Use of Trade Seerets,. 64 Harv. cae cedee he

L,-Rev. 976 (1961) oo... 5cc0c0sPacsccscaces ces 16 |

Note, ‘Su eme Court, 1953 Term, 78 Harv. L. Rev. Biavietes

“gg MAB, SILAS (19Q4) 2s 0i spe eeees eects ge’ Hekivieel IE. |

‘Parner, The Law of rade agian (1962) ip 4, IB 16,24 eae:

7 fig - : al a

TS AN THE see ee

_ Sepem Court uf the ated Bisiea.

‘lo TERM, 1965,

SPACE Agro’ PRopucts Co., Inc:, et al., Petitioners :

: ae ie iat ot

RE. Daruine Co., Ino., Respondent

G , , |

PETITION a A WRIT OF CERTIORARI TO THE «2

_ COURT OF APPEALS OF MARYLAND :

: =

tn enn

‘Petitioners: Space Aero Products Co; Ine., J oseph |

A. Jackson, Douglas J. Oreger, Eugene E.: Fasano,

Gloria Rines Creger, Mary D. Quinter, William H.

” _ Wilkinson, William Brandenburg;*and Norris Manu- >

_ facturing Co. pray that a Writ ‘ofGertiorari issue to —

_review the judgment of the Court of Appeals of Mary-

land 3 in the above entitled case...

OPINIONS. BELOW

“The opinion of the Court of Appeals of Marylapd is

reported at.238 Md. 93, 208 “A.2d 74 (1965),°and is —

reprinted in the Appendix. p. lla, infra. The“per

curiam opinion of that court on petitioners’ motion for® ~

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NRA i AM a a Cis WORRY ee Prt amen ty Reh geen eee Tee tae oe

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‘reargument is reported at 238 Md. 129, 208'A.2d 699

- (1965), and is reprinted i in the Appendix, p. #5a, wnfra,

The opinion of the ‘Cireuit' Court for Montgomery:

County, Maryland, is not reported. It is ee in S

-— oe P. 49a, infra.

oat “JURISDICTION = |

' The judgment of the Court of Appeals of Maryland

‘was entered on March 12; 1965.' (Appendix, p. 44a, .

infra). A timely Motion for Reargument was deniéd on

April 12, 1965. (Appendix, p. _ 44a, infra). The

| jurisdiction of this Court is invoked pursuant to 28

U.S.C. § 1257(3), since petitioners claim that the deci-

sion of the Court of Appeals of Maryland conflicts with

the federal scheme of patent regulation established by .

the Constitution and the federal patent \laws, and has

deprived them of their property and freedom without

due process of law in contravention of the Fourteenth —

_ Amendment of the Constitution of the United States.

QUESTIONS PRESENTED m, @

1. Whether, consistently with the federal scheme of

patent regulation embodied in Article I, Section. 8,

Clause 8, of the Constitution and the federal patent

laws, a state court, which, found that petitioners had

misappropriated: res ‘dent’s secret process of manu-

facture, may invoke the state law of unfair competition

and trade secrets as a basis for permanently enjoin- .

ing petitioners from manufacturing and selling an un- .

patented and unpatentable ay regardless of the

‘process of manufacture emp oyed,

2. Whether, consistently with the guarantes: of the ~

Fourteenth Amendment that no State shall ‘deprive

head person of sit salad or property, without due.

- 4

me 2

process of law,’’ the individual petitioners may be per-

manently enjoined from working in their chosen field

of endeavor merely because they were found to have

competed unfairly with respondent by manufacturing

an unpatented and unpatentable product, using an un-

patented and unpatentable process developed by re- -

spondent and found by the lower courts to ers a

_ trade secret. |

- ~ CONSTITUTIONAL PROVISIONS AND

STATUTES INVOLVED

This case involves Article: I, Section 8, Clause 8;

Article VI, Clause 2; and the Fourteenth Atnendment,

- Section 1 of the Constitution ; Sections 101, 102, 103,

. 112, 154, 173 and 283 of the Patent Code of 1952, 35

U. S. ©. §§ 101-03, 112, 154, 173, 283; 28 U.S.C. §§ 1338,

1498; and 10 U.S.C. "§ 2304. These provisions are set

| forth in the Appendix, beginning at p. la, infra.

STATEMENT OF FACTS

The respondent, R. E. Darling, Co., Inc., is a manu-

facturer of oxygeh breathing hose. (E. 452).’~ This

hose is a highly specialized product used primarily for

military and space projects, and until the formation of

1The record references are to the four-volume printed recdtd

extract prepared for the Court of Appeals of Maryland., Volume

I (pp. E. 1-E. 696) contains the pleadings, orders and opinion of

_ the circuit court, and portions of the testimony printed for the

Court of Appeals; Volume II (pp. E. 697-E. 1278) contains addi-

tional portions of the testimony printed for the Court of Appeals;

_ Volume III (pp. E. 1279-1908) contains additional portions of the

testimony printed for the Court of Appeals; Volume IV (pp.

E. 1909-E. 2050) contains the exhibits which were introduced in

the circuit court. We have filed ‘nine copies of this record extract ~’

with the Petition.

DROS cidiwraed ts:

ie:

petitioner Space Aero, Darling was the Government's

sole source of supply for much of it. (HE. 474).

The individual petitioners, with the exception of

Brandenburg, worked for Darling in various-capacities

and for various periods of time.? ‘In December, 1960, ©

these individuals became dissatisfied with their em-

ployment by Darling and left Darling’s employ. They -

then formed Space Aero Products Co., Inc. for the pur-

pose of manufacturing oxygen breathing hose assem-

blies and entered its employ. (E. 81, 113-14). This -

company was partially financed by petitioner Norris

Manufacturing Co., which had for many years sup-

‘plied silicone material to Darling for use in the manu-

facture.of Darling’s hoses, and.by petitioner Branden-

burg, the President of Norris and a research chemist

thoroughly versed in the techniques of manufacturing

pressure hose assemblies. (H. 97-100, 110).

In 1954 and 1955, the United States Navy and onc-

of its prime contractors, Douglas Aircraft Co., were

engaged in perfecting a seat pan assembly for use in

a high-speed jet aircraft, the A4D. (E. 1547). One of

the elements of this assembly is an oxygen air hose

system: used to supply oxygen to the pilot during flight

2 Jackson went to work for Darling in 1956, and- dbring most

: of his tenure was an account specialist. (E. 93). Douglas Creger

was first hired by Darling in 1954 as-a hose assembler and later

_ became foreman of one of the shops. (E. 392-93). Fasano was

employed by respondent in 1957 as a production supervisor. (E.

451). Mrs. Douglas Creger was employed by Darling as a hose

* builder. (EZ. 304).. Quinter came to work for Darling in 1957 as

a@bookkeeper. (E. 150). Wilkinson was employed intermittently

by Darling as an engineering draftsman. (E. 127). _ None of

these individuals had an employment contract which imposed upon

him any obligation of secrecy regarding matters which might come

to his attention during the course of his employment, and each could

have been discharged by Darling at will. .

and during descent in the event of emergency ejection.

- (KE. 1248, 1251). In April, 1960, after the assembly

had been ‘parfected, the Navy issued Military Specifica- |

_tion H-22489, which.described the type of oxygen hose

to be used in'the assembly and indicated how the hose

was to be qualified for acceptance by the Government.

' (EH. 1910-1927). The issuance of such a specification

is standard procédure as a prelude to formally adver-

tised, competitive bid procurement by the Government.’

On June 23, 1960, the Navy sent a copy of the specifica-

tion to Darling and solicited samples. (E. 2011). Simi-

lar letters were sent to all hose manufacturers known

to'the Navy at that time. (E. 1573-74, 1612). Space |

‘Aero and Darling each submitted an oxygen breathing

hose to the Navy for. qualification under specification --

/° - H-22489. (KH. 1575-98).° Both hoses were ‘‘qualified’’

by the Navy. Thereafter, as a result of advertised pro-

curements in which it was low bidder, Space Aero en-

tered into. several prime contracts with the Navy, and

. also obtained certain prime subcontracts, to supply

hoses complying with specification H1-22489. (KE. 164).

It also subsequently entered into contracts to develop

and supply umbilical. hoses for use in the Apollo space-

craft, similar to the hose used-by astronaut White dur-

‘ing his recent ‘‘walk in space’’. These hoses are in

many respects similar to - hoses called for a speci-

_ fication H-22489.

On February 27, 1961, ‘Darling initiated this litiga-

tion, alleging that its former employees learned how

to make oxygen breathing hoses while working for the

respondent, that this sist was based largely upon

. See 32 C.F.R. §§ 2.501 to 2. 503 for a complete description of the

‘*Qualified Products List’’ procurement aaa used in situa-

tions ” the a here involved.

cortain trade secrets developed by the respondent, that

these secrets were used by petitioners to compete un-

fairly with respondent, and that petitioners Norris and

Brandenburg conspired with respondent’s former. em-

‘ployees to encourage and effectuate a plan whereby |

Space Aero could compete unfairly with respondent. .

(K. 7). . Darling prayed for conventional ‘‘trade se-

eret’’ relief, including, among other things, a perma-

~ nent injunction prohibiting petitioners from using any

part of the trade secrets allegedly obtained from Dar-

ling; an accounting for such damages as Darling may

have incurred as a result of the alleged wrongdoing;

and an order requiring petitioners to ‘deliver to the

court for destruction documents and materials relat-

ing to, containing disclosures of, or produced with the

benefit of respondent’s trade secrets. (E. 15+16).

After a lengthy trial, most of which was conducted

in camera, and at which the facts were strongly con-_

tested as to whether Darling’s processes were in fact

‘*trade secrets’? and whether there was any improper _ ane

2 appropriation of them, findings were made adverse to

petitioners. The trial judge—while not describing even

the broad perimeters of the alleged ‘‘trade secrets’”—

found that Space Aero’s personnel had used those

secrets in producing oxygen breathing hoses, and that

petitioners Norris and Brandenburg had illegally -par-

ticipated in this use by assisting respondent’s former

employees to establish a competing enterprise. (E. 34).

Thereupon, the cireuit court proceeded to issue an

order containing an injunction much broader than was

even prayed for in the complaint. In the fashion of a

decree appropriate in a patent infringement suit, the

order permanently enjoins petitioners, ‘‘their agents,

servants, employees, successors and assigns’? from —

‘further manufacture and/or sale of high or low pres-

sure hose assemblies’” which are ‘‘of like or similar

construction. to hose assemblies manufactured to. the

requirements of United States Military Specification

Mil H-22489,” regardless. of the process used in such

manufacture. (E. 67). It also directs petitioners to

deliver to the court for destruction all documents,

drawings, manuals and other material in their posses-

sion which describe the equipment, components, meth- ~

ods or techniques used in the manufacture of. hose

assemblies manufactured to the requirements of speci-

fication H-22489, regardless of the process used in such

manufacture. (K. 68). Finally, the court retained

jurisdiction to determine the respondent’s rights to an

accounting and d unages. (EH. 68). :

The Court ‘of. Appeals of Maryland affirmed, but .

ordered that the injunction be modified in certain re-

spects not pertinent here. The court rejected peti-

tioners’ argument_that-the-injunction should merely

prohibit use of Darling’s secret process, and not the

manufacture of the end product itself, saying that

‘‘Darling’s trade secret consists too largely of the or- |

dered’ relationship and combination of various

and devices, some in themselves quite simple in nature,

‘to make a prohibition of specific steps or processes

* The court ordered that the injunction be modified (1) to permit

termination of its prohibitions if,and when the ‘‘methods and

processes’’ used by Darling in the manufacture of hoses become

generally known to the public (Appendix, p. 38a, infra) ; (2) to

exclude‘from its coverage one of the components listed in

tion H-22489 (Appendix, p. 39a, infra) ; and (3) to permit com- :

‘pletion of three specific contracts between Space Aero and the

Government and of certain other subcontracts between Space Aero

and prime Navy contractors, if it can be shown that completion .

of such subcontracts is in the interest of national defense (Ap-

pendix, p. 42a, infra).

PO to

practical’, (Appendix, p. 39a, infra).° A motion for:

' yeargument was denied by the Court of. Appeals. ,

The Court of Appeals remanded the case to the fia}

court for modification of the injunction and for sub- ’”

sequent proceedings to determine the damages, if any,

- sustained by. Darling. On remand, the trial judgé.

_ entered the modifications ordered by the Court of Ap-

peals, and granted ‘petitioners permission to complete

_ certain specified Government contracts and prime sub-

contracts. (Appendix, p. 66a, infra)." —

5 As pointed out, the Injunction did not: ‘cooly merely to the

‘‘secret process,’” no matter how ‘simple in nature’? most of its —

components were; but, rather,.to the manufacture and sale of the:

end product itself, regardiogs of the process used.

In its opinion accomp ying the denial of petitioners’ motion

for reargument, the Court of Appeals directed the trial judge to

insert the following additional modifications in the’ injunction:

-(1) a provision -permitting petitioners to complete any contracts

or subcontracts entered into pendente lite providing the Govern-

‘ment can demonstrate that such completion is necessary in the -

national interest. (Appendix, p. 47a, infra); and (2) a provision

indicating that employees of petitioners ‘(but not the individual

_ petitioners themselves) ‘‘are not to be prohibited from using their

. skills and from working for any other company in the manufacture

or sale of pressure hose assemblies, if such hose assemblies have a

construction different from that used by Darling and if such

manufacture or sale does not use Datling ’getrade secret methods

and proteéss’’ (Appendix, p. 48a, infra). “Re

7 Petitioners recognize that the trial court has retained jurisdic-

tion and that further state court proceedings to determine possible

damages are contemplated: However, they assert that the decision

of the Court of Appeals is sufficiently final as to the federal ques-

tions involved to permit review by this — — 28. U.S.C.

§ 1257(3).

The federal question raised by this Petition concerning the

lower court’s unconstitutional encroachment upon the federal

patent system, pp. 12-22, infra, cannot be affected by any prospec-

‘tive state court proceedings, since that portion of the injunction

£ ° ; : gle .

The Raising and Disposition Below of the Federal

Questions—-In their brief in the Court of Appeals,

petitioners cited this Court’s decisions -in “Sears

Roebuck & Co. v. Stiffel, 376 U.S. 225 (1964), and

which gives rise to the federal question has been affirmed by the

' Court of Appeals and is in no way touched by the modifications

which have been decreed. Neither can it be affected by the pro-

ceedings to determine damages. : .

In: addition, petitioners’. Fourteenth Amendment claim will be

unaffected by further state court proceedings and calls for prompt

review. The essence of that claim, as will be shown below, pp.

23-26, infra, is that the injunction is so unreasonably broad: as

to deprive petitioners of liberty and property without due. process

of law.- This claim rests not only on the fact that the injunction

prohibits them from manufacturing oxygen breathir hoses: by

any process, even one totally dissimilar from respondent’s, but

also on‘the fact that the injunction requires petitioners, immedi- .

_ ately upon completion of pending Government contracts, to deliver

to the circuit court for destruction documents and materials coni-

pletely unrelated to respondent’s. process of manufacture. It is

apparent, therefore, that if petitioners must abstain from their

chosen field of employment and submit valuable documents and

materials for destruction while awaiting the termination of ancil-

lary and non-depositive issues in the state courts, and before ob-

taining review of their separate and distinct federal claims in this

Court, they are likely to be irreparably injured. Only recently,

the Court recognized that in situations such as this, unless a prompt

review of the federal claims is permitted, ‘the injunction ‘*may

effectively dispose of petitioner’s rights and render entirely illusory

his right to review here.’’ Local 438, Constr. & General Laborers’

Umon v. Curry, 371 U.S. 542, 550- (1963). Moreover, the Court’

has consistently held that a ‘Judgment requiring an ‘‘immediate

' delivery of physical property,’’ as the injunction ‘in this case does,

““is reviewable and is to be deemed disassociated from a provision

for an accounting even though that is decreed in the same order.’’

Radio Station WOW, Inc. v. Johnson, 326 U.S. 120, 126 (1945); -

Carondelet Canal & Nav. Co. v. Louisiana, 233 U.S. 362 (1914) ;

Forgay v. Conrad, 6 How. 201 (1848). _

In short, petitioners’ federal claims cannot: be affected by any .

further state court proceedings now contemplated, and are there-

fore ripe for review.

Compco Corp. v. Day-Brite Lighting, Inc., 376 U.S. .

_ 234 (1964), and suggested that the breadth of the in-

junction constituted an improper extension of the pat-

ent monopoly to an ee product. (Brief of |

Appellants, p. 48).

They also argued that the trial court’s findings did -

not justify an injunction so broad as to exclude them

permanently. from manufacturing hoses by processes

totally different from that embodied in respondent’s .

‘ alleged trade secrets.° Though not agreeing with peti- —

’ tioners’ argument, the Court of Appeals did recognize -

the distinction between ‘‘the use of an injunction to

protect proper lawful interests and its use as 4 pen-

alty’? (Appendix, pp. 36a-37a, infra), and did rely on

that distinction in suggesting that the injunction might

be lifted if and when the respondent’s trade secrets

‘“become generally known to the anal ee

p. 38a, infra).

* Fearing that their federal ‘daims had not ies spe-

cifically considered and passed upon by the Court of —

Appeals, petitioners, in their motion for reargument,

- contended that:

oe exclusion of iets ‘and all of their em-

ployees from the manufacttire of any oxygen’

breathing hoses ‘is an unlawful restraint upon

. their, freedom to pursue a lawful occupation as .

guaranteed by the Fifth and Fourteenth Amend-

ments to the Constitution of the United States.

of America, and: is in conflict with the Federal

_ Patent. laws and violates Article I, Sec. 8, cl: 2.

8 Petitioners’ complaint at this stage was not specifically couched

in language alleging a violation of their Constitutional rights.

. However, they did assert that the trial court’s order was basically

unfair because it: would ‘‘ permanently exclude al] appellants from .

the oxygen breathing hose business.’’ (Brief of Appellants, p. 57).

we derrcachiine ai

| 11 <* |

and Article. VI of the Constitution of the United.

States of America.” (Appellants’ ‘Motion for -

“yee ‘of Opinion ‘and _for Reargument,~

p.. 0). © ~ wis <i

a. - + a

In its opinion accompanying the dénial of. peti-

_ tioners’ motion, the @ourt of Appeals makes it clear

that it had originally considered and rejected peti-.

-tioners’ federal claims, gaying that the “contentions:

raised in appellants’ motion have been considered by

us in reaching the determinations set forth in the

opinion and in respect thereto -we adhere to the con-

clusions which we have set forth.” (Appendix, p. 48a,

— mfra). ras ee ) : :

. However, even assuming that petitioners’ federal.

' claims were first properly raised in the motion for re- -

argument, that fact is not a bar to this Court’s jurisdic-

tion if it appears that the highest State court “enter-

tained the petition, considered and overruled the

contention that petitioners’ rights under the Amend-

ment were infringed, declared that its decision was to

be interpreted as holding against the contention, and ©

therefore refused a reargument,”’ Grannis v. Ordean,

. 234 U.S. 385, 392 (1914). That is at least what the

. Court of Appeals did in this case. See also North-

western Bell Telephone Co. v. Railway Comm’n, 297

U.S. 471 (1936); Herndon v. Georgia, 295 U.S. 441 |

(1935) ; Sully v. American Nat’l Bank, 178 U.S. 289

(1900). see ae

Appeals ignored this argument, and,’ as indicated, passed on the

merits of petitioners’ contentions, ane

Bee i _ 2 :

REASONS FOR GRANTING THE pl

inners

r-,

7 «f

By | | Prohibiting Petitioners From Sciiaiaiien or Selling |

' Hose Assemblies Meeting the Government's Specifications, —

Without Regard to Use of the Process Found to be a Trade |

~ .: Secret, the Relief Ordered by the Maryland Courts En-

_croaches Upon the Federal Patent System.

By granting the respondent an exclusive right of | ~ ;

manufacture and sale of the end item called for by the .

Government’s specification ~H-22489, the. Maryland

state courts entrenched upon the area reserved éx-

clusively. to the federal patent laws. Only last year,

this Court exercised its certiorari jurisdiction -to con-

sider important questions presented by two cases in-

volving state encroachments upon the federal patent

system through the use of state unfair competition —

- laws. Sears, Roebuck & Co. v. Stiffel Co., 376 U.S.

225 (1964) ; Compo Corp. v. Day-Brite Lighting, Ine, .

376 U.S. 234°(1964).”"

Although we - believe that the ‘ila ‘below errone-

ously concluded that ‘the process of manufacture. here

in question constituted a trade secret, we recognize that. -

_ such an error cannot be corrected by this Court. _How-

ever, the state courts committed an even more seri- -

‘ous error, and one which does warrant this Court’s

attention, in issuing an injunction which conflicts with

this Court’s decisions in the Stiffet and Compeo cases.

- 1©In the Stiffel case, the Court held that it ‘was an unconstitu- _

tional encroachment upon the federal patent laws for a state court,

relying upon the state law forbidding unfair competition, to enjoin

Sears from copying and selling Stiffel’s unpatentab ‘*pole lamp,’’

- or to award Stiffel damages for such copying and selling. Similarly,

in the Compco case, the Court held thatthe Constitution and the

federal patent laws forbid a state court both from enjoining:

Compco’s manufacture and sale of fluorscent lighting fixtures con-

taining a particular type of reflector on which Day-Brite “held ©

an invalid design patent, and from awarding Compco an =

for Gamage based upon Day-Brite’s anions.

i A ANN esac

° °

‘ Seg ae eh Me

_ and with the federal scheme for defining the -scope

of exclusive rights of ‘manufacture, and of -permis-

sible competition in manufacture, established by the

federal patent laws and the Constitution. .We be- _

live that this conflict merits the Court’s review, not:

only because of the gross incursion upon the fed-

eral. patent system here involved; but also because

the lower court’s decision places an unreasonable. .

and unwarranted impediment upon the Government’s

procurement program 'for materials essential’ to the

national security. . _

1. As indicated, the state courts did not issue what

“would be considered the. customary relief in a case of

this type, namely, an injunction prohibiting petitioners °

from making further use of respondent’s process. of

' manufacture which was found to bea trade secret.

Instead, they issued an extraordinary and virtu-

ally ‘unprecedented order” prohibiting — petitioners

from manufacturing or selling most oxygen breathing

hose assemblies currently needed by the Government,

> regardless of the process of manufacture employed.

».Thus, even if petitioners were able to produce these

hoses by a process totally dissimilar from that encom-

. passed in respondent’s alleged trade secret—as they

1 With Franke v. Wiltschek, 209 F.2d 493 (2a Cir. 1953), and |

Head Ski Co. v. Kam Ski Co., 158 F. Supp..919 (D. Md. 1958),

this case stands alone for the proposition that the misuse of

a trade secret relating to a process of manufacture justifies —

an injunetion which not’ only prohibits further misuse of the

' trade secret, but also prohibits the: manufacture, by any method;

and the sale of the unpatented’ end product itself. _However,

it should be noted that the specific federal ‘question ‘here.

presented: concerning an unconstitutional encroachment upon

the federal patent system was not considered in either of the above-

cited cases, though Judge Frank’s dissenting opinion in Franke v.

-Wiltschek, supra, at 500, persuasively analyzes other reasons for pre-

cluding the type of relief granted by the court below in-trade secret

-14 °°

_—

now in fact can do—the injunction prohibits them.from |

making the benefits of this new process available to-the

_, Government or any other prospective purchaser. As we

will show, this board proscription amounts to an imper-

- missible encroachment by the state courts upon the sen-.

“ sitive and closely circumscribed federal, patent system,

‘in which uniform federal standards are carefully ysed .

to promote inventton while dt the same time preserving

free competition.” Sears, Roebuck &: Co. v. Stiffel Co.,

supra, at 230-31, © |

The very essence of the federal sia sonia is that

the promotion of those inventions or discoveries which’

- ~ demonstrate ‘‘inventive genius,’’ Jungersen v. Ostby

' & Barton Co.; 335 U.S. 560, 566 (1949), should be en-

couraged. by: the granting of a patent monopoly for a

specified term. 35 U.S.C. §§ 101-03, 154, 173. The

patent monopoly i is a precise one: that tire patentee or

his assigns has, for the term of the patent, ‘‘the right

to exclude others from making, using, or selling the in-

_ vention throughout the United States, referring to the

specification for the particulars thereof.’’ 35 U.S.C.

§ 154. In similar fashion, as a matter of federal law,

this “right to exclude others from making, using or -

selling”’ an article does not extend to. products which

do not contain an ‘“‘invention” or“‘discoyery,”’ as those

terms are used in the patent laws and construed by the

fas.

decisions of this Court. Such unpatentable or un- . °

patented items—like the hose assembly called for by

Specification H-22489—as a. matter 5f federal law, are

‘‘in the public domain and‘may be made and sold by

‘whoever chodses to do so.” Sears, Roebuck & Co. v.

Stiffel Co., supra, at 231.

The question of what developments in manufacture

include a patentable ‘‘invention’’ or “‘discovery’’ Sal

‘matter purely of federal law. Before there is any

question of the grant of the. ‘monopoly ‘to exclude

% -§

others from making, using, or selling’ a device, the

procedures specified in the Patent Code fo¥ the issu-

ance of a patent must be followed and a patent obtained. -

Then, the question of the validity of the patent—includ-

ing the question whether in fact it embraces an ‘‘inven-

tion’’ or ‘‘diseovery’’—is open to litigation in the fed-

eral courts. See Great Atl. d& Pac. Tea Co. v. Super- :

Market Equip. Corp., 340 U.S. 147 (1950). Repeated

decisions of this Court teach that the patent. monopoly

‘‘to éexclude others: from making, using, or selling’’ de- -

vices, as a matter of federal law, may riet, be extended to.

devices:which do not embrace an ‘‘invention”’ or ‘‘dis-

covery.”’ Great, Atl. & Pac. Tea Co. v. Supermarket —

Equip. Corp., supra; Jungersen v. Ostby & Barton Co.;

“supra. The exclusivity of the federal interest in.de-

‘termining which devices are entitled to the patent

monopoly of excluding ‘‘others from making, using, or

selling’’ them, and which devices are to be free to be

‘made, used, or sold by anyone is underscored by the

fact that Congress has followed the unusual course of

expressly excluding the courts of the‘states from any

concurrent jurisdiction. in patent matters. 28 U:8.C.

‘§ 1338. a

To be sure, saat from the rules of the federal patent

_ system, there i is an area of the law of unfair competitiom

and ‘trade secrets in which the states may take a hand.

Based on éommon law principles of ‘contract and of

fiduciary duty, the law of unfair competition and trade

secrets has properly imposed certain narrowly defined

restrictions on the public’s otherwise unlimited right

to manufacture and to sell an unpatented item. Thus,

the law imposes liability upon a person who uses trade

secrets obtained through-a confidential’ relationship

with another to copy the other. person’s unpatented _

_ articles. E.I. Du Pont de Nemours Powder Co. v. Mas-~

land, 244 U.S. 100.(1917). See also Turner, The Law of

16 |

Trade Secrets (1962); Note, Protection and Use of

Trade Secrets, 64 Harv. L. Rev. 976 (1951). -

A typical form of relief in such a case is an injunc- .

tion directed specifically against the use of the

misapporpriated trade secret. See Turner, op.. cit.

- supra, at 427-58. Cf. William R. Warner & Co. v. Eli -

Lilly Co. , 265 U.S. 526 (1924). But, as this Court took

pains to point out only last year; the state law of unfair

competition cannot be used to frustrate the federal -

policy as to which items’shall.enjoy the monopoly of

manufacture, use, and sale provided for by the federal - |

patent system, and which shall not. Nor can it, |

consistently with the Constitution and the antitrust —

laws, be used to expand the narrowly circumscribed

patent monopoly which Congress has established as °

an exception to the antitrust laws.- Sears, Roebuck

_& Co. v. Stiffel Co., supra, at 230-33; Compco Corp. v.

. Day-+Brite Lighting, Inc., supra, at 238.

Petitioners contend that the court below failed to

recognize the basic differences in scope and objective

between the patent laws and the laws of unfair competi-

tion, and accordingly sustained a trial court injunction

which would be proper in a patent infringement case, -

.35 U.S.C. § 283," put not in a case based upon the

12 Phe relief sanctioned below is quite similar to the type that.

would have been embraced in an injunction granted under the

patent laws. The parallels are arresting. The state court, in effect,

undertook to use the Government procurement specification as the

description of the extent of the respondent’s monopoly, just as a

patent granted in accordance with the patent’ laws ‘‘refer[s] to

the specification [of the letters patent] for the particulars’’ of the

monopoly. 35 U.S.C. § 154. In fact, the trial court undertook not

only to enjoin the defendants named in the suit from the “making,

using, or selling’’ of the device covered by the Government’s speci-

fication, but to enjoin all the employees of petitioner Space Aero

as well. However, as already indicated, supra, p. 8, n. 6, the

Court of Appeals subsequently modifie? the —e against the

~ Note, The Supreme Court,

- misappropriation of alleged trade secrets. Thus, the

state courts here, in effect, extended the patent

. monopoly to.an.unpatented and unpatentable device,

and, in so doing, have restrained the free and open °

competition which the antitrust laws require, and which

Congress and this Court have said may be restricted

for 14 or 17 years only if a person has made an inven-

tion or discovery demonstrating sufficient ‘‘inventive

genius”’ to warrant the issuance of a patent. .

If the court below had merely prohibited petitioners

» from-using respondent’s allegedly secret process in

manufacturing hose dssemblies, that relief would have

been consistent with. the trial court” Ss finding that peti-

tioners had violated their’ confidential relationships

. with respondent, and: would have protected society ’s

interest in the preservation of good faith dealings in

the business community." However, by extending the

prohibition from a specific process of manufacture to

the end product itself, the court. completely ignored

society’s equally strong interest in permitting the pub-

employees by limiting it to a prohibition against their misappro-

priation of Darling’s secret process. .

18 One commentator has suggested that ie Stiffel and Compco

cases cast doubt upon the validity of an. injunction directed only

against further misappro} riation of a trade seeret, since there. is

even some “similarity of r ‘emedy’’ between such an injunction and

the relief that would be decreed in a patent infringement case.

963.Term, 78 Harv. Li. Rev. 143 311-12

(1964). ‘This conclusion ig not unreasonable, since in many situa-

_ tions, unlike the one presented by this case, a secret process may

-encompass the only available method of manufacture, and an ‘in-

junction prohibiting the use of the secret. process is therefore

tantamount to a proscription against competitive manufacture of

_ the unpatented end product itself. It may well be that any :

injunction, the effect of which is to prohibit the manufacture of an

unpatented article, is inconsistent with the federal patent and anti-

trust laws, and that damages should:be the sole relief available to

the owner of a trade secret for any injury resulting from the

tortious misappropriation of that secret. .

lic at large to manufacture and sell unpatented articles, —

and bestowed upon the respondent, vis-a-vis petitioners,

-at least the equivalent of a patent monopoly on its un-

. patented and unpatentable hose assemblies.“

Moreover, the exclusive right of manufacture granted

to respondent by the state courts here was granted

without receipt of the consideration that the federal

patent laws demand of a patentee. For a patent must.

publicly disclose and teach the process which it covers,

so that a person of ordinary skill in the art might prac-

tice it on the basis of the information contained in the

patent papers. 35 U.S.C. §112; United Carbon Co.

v. Binney & Smith Co., 317 U.S. 228 (1942) ; Schriber-

Schroth Co. v. Cleveland Trust Co., 305 U.S, 47 (1938). -

Thus the public is free to use the teaching of the patent

as a point of departure into other fields of discovery,

and, of course, is instructed in the practice of the patent

itself, without cost, at the expiration of the statutory

period. But in exchange for the exclusive rights vested

* in respondent here, the public has. received no such

information. Respondent’s so-called ‘‘secret lal

remains clad in obscurity.

This Court has long recognized that reliefof the

nature sanctioned below is totally inappropriate as a’

remedy for acts of unfair competition. In a landmark

ease in the field, the Court indicated that ‘‘the right to

which respondent. is entitled is that of being protected

against unfair competition, not of having the aid of a

14 The patent laws at least place a 14 or 17 year limitation upon

the duration of the monopoly conferred thereunder. The monopoly

given to the respondent by the injunction in this case may be

perpetual, however, since it can be terminated only when respond-

ent’s trade secret is disclosed. to. the public ee event

which need never occur.

decree ‘to create or support, or assist in creating or.

supporting, a monopoly of the sale of a preparation

which everyone, including petitioner, is free to make

_ and vend.”’ William R. Warner & Co. v. Eli oe Co. aor

supra, at 532.

_ Henee, the state courts here, inition the guise of

the state law regulating unfair competition and trade

secrets, have given“<protection of a kind that clashes

with the objectivé he federal patent laws.’’ Sears,

Roebuck & Co. v. fel Cp., supra, at 231." State

‘law has been used to sanction| the monopolization of the

manufacture of an item whose manufacture federal

law has ordained. shall be “eft free. We suggest that

this is exactly the type of situation which the Court

foresaw and condemned last year, when it said:

_ **To allow a State by use of its law of unfair com-

petition to prevent:the copying of an article which

represents too slight an: advance to be. patented

would be to. permit the State to block off from the

_ public something which ‘federal law has said ‘be-

longs to the public.. The result would be that

while federal law grants only 14 or 17 years’ pro-

tection to genuine inventions, see 35 U.S.C. §§ 154,

173, States could allow perpetual protection to

articles too lacking in novelty to merit any patent

at all under federal constitutional standards. This

would be too great an encroachment on the federal

patent system to be ‘tolerated.’’ Sears, Roebuck:

& Co. v. Stiff el Co.5 ) supra, at 231-32. |

15 The absence of any possible necessity for the 1 relief

granted, and for the resultant clash with the federal patent.laws, is

demonstrated by the fact that the court below deemed it both appro-

priate and practical to permit petitioners’ employees to engage in

@ the manufacture of hose assemblies as long as they abstain from. mis-

appropriating Darling’s secret process in so doing. It is difficult to

appreciate why the court considered it necessary to issue a broader

proscription against petitioners,

20 -

.2. An additional element which makes this case an

. even more aggravated encroachment upon the federal °

patent system than the encroachments presented by

“......: the’ Stiffel and. Compco cases, is the fact that the in-

junction issued agaiiist~ petitioners constitutes a sub-

‘stantial impediment to the Federal Government’s right

to procure materials essential to the national security.

As has already been a alt the military and space

agencies are the major/users of the hose assemblies

here involved. The lower court’s injunction now per-

manently eliminates one of the Government’s major

‘hose assembly suppliers, and thereby not only makes

the task of procurement more difficult, but also reduces

the probability that the Government will be able to -

-purchase these assemblies at the lowest competitive

_ price, through the Congressionally ordained system of

advertised procurement. See.10 U.S.C. § 2304; Paul.

_v. United States, 371 U.S. 245 (1963).%° _ —

In this respect, it should be noted that the lower

court’s decision constitutes still another severe tamper-

.ing with the delicately balanced mechanism of the

federal patent system, in that it frustrates the obvious

purpose of Section 1498 of the Judicial Code, 28

U. S. C. § 1498. “That statute provides, that a patent .

16 The importance of petitioner Space Aero as a source of supply

for the Government is attested to by the affidavits submitted by

various officials i in connéction with the Government’s appearance

below as amicus curiae. ‘One affidavit from a Navy official described

petitioners’ hoses as ‘‘ essential for pilot safety in operation of the

. Navy’s first line fighter attack aircraft.’’ (Affidavit of Rear Ad-

miral E. R. Estwold, Deputy Chief, Bureau of Naval Weapons,

pp. 45). In addition, a NASA official described Space Aero as a

key supplier of the Apollo project umbilical hoses, which he char-

acterized as ‘‘an essential part of the equipment required for

Appollo Extravehicular Mobility Units.’’ (Affidavit of George

A. Lemke, Actirig Program Director of the Apollo Program, p. 2).

21 .

holder’s exclusive remedy for infringement by a Gov-

ernment contractor is an action for damages against

the United States in the Court of Claims. Richmond

Screw Anchor Co. v. United States, 275 U.S. 331 (1928).

The clear intent of Congress in adopting this law in

1918 was ‘‘to relieve the contractor entirely from

liability of every kind for the infringement of patenis

in manufacturing anything for the Government and

.,.. to stimulate contractors to furnish what was needed

for thé War, without fear. of becoming liable ‘them-

selves for ee to inventors or the owners or

assignees of patents.”” Richmond Screw Anchor Co.

V. Umted ‘States, supra, at 343, 345.”

” The statements on the floor of the House of Representatives of

Congressman Padgett, Chairman of the House Committee of Naval

Affairs, were quite illuminating on the Congressional intent under- °

-lying the passage “of 28 U.S.C. § 1498. He said:

‘‘This is an amendment. of the patent law, and generally

speaking, it would not be appropriate on the naval appropria-

tion bill. It makes only a slight change in the existing law, but

the urgency and necessity of.it was such that the Senate

‘deemed it proper to place it on the bill. . It is strongly recom-

mended ina letter from-the Acting Secretary of the Navy,

> Mr. Roosevelt. .

The existing law provides that when the Government wrong-

‘fully uses a patent: the. remedy of the patentee shall be to

sue the Government. The conditions now are such that it

becomes necessary for the Government to have contracts with

various private. manufacturers and for them to use these

patents where’ dispute may arise over the use of the patent. |

Now, if the Government itself is manufacturing, they cannot

. enjoin the Government, but under - ‘existing law must sue in

the Court of Claims for the recovery of their rights under the

use of tlie patent. If a man makes a contract with the Govern-

ment to perform the work, the patentee can enjoin the a

seontractor and the private manufacturer from doing the

ernment work. Now, the only change that is made’is to p

. vide that the private contractor who is doing the Government

’ work under contract with the Government shall be placed

Thus, if respondent could have aionted its hose

assemblies and had done so, and if petitioners had

infringed the -patent, the respondent could not have

sued petitioners for infringement; and. could. not

have obtained an injunction against their fyrther

production of hose’ assemblies for the Government.

- Respondent would have been limited to a suit against

the Government for damages in ‘the form of a rea- .

sonable royalty, and the Government would still have

_had the benefit of an alternative sowrce of supply.

- But here the Government is, paradoxically, excluded

from contracting with petitioners, even though no.

patent is involved, through the application of the

extraordinary monopoly granted to respondent under

eolor of state law. We submit that this disruption of

the relationships b@tween the federal system for the

protection of inventions and the system of Govern-

ment procurement, sanctioned by the court below, is a

further reason for the grant of certiorari.

on the same basis and shall bring suit against the Government

of the United States to recover certain:compensation from the

use of their patent, or such damage for the use of the patent, -

_as they could recover if the Government-of the United States

was doing the work itself. Thereby it would prevent the in-

junction process from the courts being used to prevent private

manufacturers doing Government work. That is the whole

change made in the law and the conditions are such as to

- require that it should be done.”’ 56 5 Cope. Rec. 7960-61 (1018)

( Emphasis added).

ee also Wood v. Atlantic Gulf & Pac. Co., 296 Fed. 718 (SD. Ala.

" 1924), for a comprehensive analysis of the Congressional history .

of the Act.

' *¥-

| By Practically Excluding Them From Their Chetan Calling,

the Manufacture of Oxygen Breathing Hose Assemblies,

the Decision of the Court Below Deprives the Individual

Petitioners of Their Liberty and Property Without. Due |

Process of Law in Violation of the Fourteenth Amendment.

- As has been indicated, the individual petitioners

have for many years earned their livelihood in a

technical: and specialized industry. Their chosen field —

of endeavor is the manufacture of oxygen breathing

hose ‘assemblies, a commodity which is used primarily

by the Government for highly sophisticated aeronauti- —

eal systems, such as that i in relation to which specifica-

tion H-22489 was issued. By enjoining the petitioners.

from manufacturing or selling hose assemblies ‘‘of

like or similar construction to hose assemblies. manu-

_ factured to the requirements of United States Military ‘

_ Specification Mil H-22489,’’ and by requiring them to

deliver to the trial court for destruction documents —

- and materials unrelated “to respondent’s process of

manufacture, the court below has unreasonably de-

prived the individual petitioners of ‘the right to engage

in their chosen occupation. Thus, for example, peti-

tioner Brandenburg, who has been in the rubber and |

silicone hose business since 1947, and who, -as both

the circuit court and the Court of "Appeals recognized,

had the know-how to build oxygen breathing’ hoses

independently of any knowledge acquired from Dar-.

ling (Appendix, pp. 23a, 31a, 39a, infra), is now en-

joined from engaging in the manufacture or sale of

most such hoses currently in. demand.

This court has long recognized that ‘“‘the right to

hold specific private employment and. to follow a chosen

profession free from unreasonable governmental in-

terference comes within the ‘liberty’ and ‘property’

concepts of the Fifth Arepndenctk % Greene v.

- McElroy, 360 U.S. 474, 492 (1959): See also:Schware

v. Board of Bar Examiners, 353 U.S. 232 (1957);

Wieman v. Updegraff, 344 U.S. 183 (1952) ; Dent v.

West Virginia, 129 U.S. 114 (1889).

The injunction issued by the court below can hardly

be deemed a reasonable or necessary interference with

petitioners’ right to engage in their chosen occupation.

’ It purports to. restrict them from making oxygen

breathing ‘hose assemblies meeting the Government’s

specification, or hoses “like or similar’’. thereto,

regardless of the method of manufacture. Thus, —

it bears no relation to ‘the relief requested by

respondent; it bears no relation to the relief which

would be necessary and appropriate to protect re-

spondent from the alleged misusé of its trade secret;

and it obviously reflects no concern for: petitioners’

constitutional rights. In short, the injunction issued

in this case is punitive rather than remedial.

_ It is well-known that ‘‘an injunction is not a remedy

which issues as of-course’’ Harrisonville v. W. S.

Dickey Clay’ Mfg. Co., 289 U.S. 334, 337-38 (1933) ;

that when it does issue, it is ‘designed to. deter,

not to punish,’? Hecht Co. v. Bowles, 321 U.S. 321,

329 (1944); and, therefore, that a court of equity

‘‘will shape the remedy. so as to do as little injury to

the defendant as is necessary in order to insure ade-

quate protection to the plaintiff,’’ Artype, Inc.. v.

* Zappulla, 228 F.2d 695, 698 (2d Cir. 1956) (per L. —

Hand, J.). See also Smith v. Dravo Corp., 203 F.2d

369, 378 (7th Cir. 1953) ; ‘Turner, The Law eal Trade

| Secrets (1962), Pp. 454. :

There can be little doubt that the court ie ignored

these long-established principles. The only justifica-

tion ines by. the court for tbe unreasonable: breadth

-” of the injunction is that Darling’s secret process con-

sists ‘‘too largely of the ordered relationship and com-

bination of- various steps. and devices, some in them- .

selves quite simple in nature, to make a prohibition

of specific steps or processes practical.’ ”” (Appendix,

p. 39a, infra). Yet, in its opinion denying the mo-

tion for reargument, the Court of Appeals ordered

the injunction ‘modified to permit petitioners’ em--

_ployees (but not petitioners themselves). to use their

skills in manufacturing oxygen breathing hose as-

semblies as long as those ‘‘hose assemblies have

- a construction different from that used by Darling —

and if such manufacture . .. + does not use Dar-

ling’s trade secret methods and processes.’?**- (Ap-

pendix, p. 48a, wmfra). Surely, if Darling’s trade

~ secret is sufficiently. specific to permit a narrow pro- 7

hibition against its use by petitioners’ employees, itis ~~

sufficiently specific to permit an equally narrow injune-

tion against petitioners.

The punitive nature of the injunction—which went

beyond even the prayers of respondent’s complaint—

is thus made manifest. Fhe restraint placed upon the —

individual petitioners’ freedom to engage in their

- chosen occupation accordingly transcends any ‘‘rational

. connection,” Schware v. Board of. Examiners, supra,

at 239, to the legally protectible rights of respondent.

We submit that; as applied to the individual peti-

18 Petitioners’ endliiias oe an jail iw a sweeping clause ©

in the injunction issued by the trial court making its prohibitions

applicable to the petitioners, ‘‘their agents, servants, employees,

Successors and assigns, and all persons, firms, or corporations hold-

- ing by, under, or through them, and any and all persons acting. in

aid of or in conjunction with them.’”’ (Appendix, p. 64a, infra).

: ‘

eee

tioners, the injunction, ‘in view of its impacfupon

their livelihoods, is inconsistent with the Syarantoes of

_ the Fourteenth Amendment.

einai iii

For the foregoing reasons, this petition for a writ

of certiorari should be granted. Li

"Respectfully submitted,

“ABE ‘dine

Dennis G. Lyons

Murray H. Brina

1229 Nineteenth Street, N. W.

Washington, D. C. 20036

JOSEPH SHERBOW

Epwarp F’. SHEA, JR.

10 Light § Street

Baltimore, Maryland 91202

| _ Attorneys for Petitioners

Of Counsel: an

ARNOLD, Fortas & Porter |

Washington, D.C. . ae

- “SHersow, SHEA & Dovie

Baltimore, Maryland

RourkE J. SHEEHAN -

| Rockville, —:

July, 1965 «

aovig’

he BS LN TO thik HEP.

a ry «) : : ‘ la

APPENDIX A Pare

Constitutional and Statutory Provisions

1.. Article’ I, Section 8, Clause 8, of the Constitution

provides:

The Congress shall have Power...

| ; * * 4 *

To promote the Progress of Science and useful Arts,

by securing for limited Times to Authors and Inventors.

the exclusive Right to their respective _ and

Discoveries ree

2. Article VI, Clause 2 of the Constitution vipetves.

This Constitution, and the Laws of the United States

- which shall be made in Pursuance thereof; and all

Treaties -made, or which shall be made, under the

Authority of the United States, shall be the supreme ©

Law of the Land; and the J udges in every State shall

be bound thereby, any Thing in the Constitution or

Laws of any State to the Contrary notwithstanding. ,

3. The Fourteenth Amendment, _— 1 to the Consti-

tution provides:

All persons born or naturalized in the United States,

and subject to the jurisdiction thereof, are citizens of

the United States and of the State wherein they reside.

No State shall make or enforce any law which shall

abridge the privileges or immunities of citizens of the _

United States; nor shall any State deprive any person

of life, liberty, or property, without due process of law;

nor deny to any person within its jurisdiction the equal

protection of the laws.

4. Sections 101, 102, 103, 154, 173, and 283 of the Patent

Code of 1952 provide (35 U.S.C. §§ se = 173, 283) :

§ 101. Inventions patentable

Whoever invents. or discovers any new and useful

process, machine, manufacture, or composition of

Fee

ae |

2a ;

matter, or any new and useful improvement thereof,

may obtain a patent therefor, subject to we conditions

and requirements of this title.

§ 102. Conditions for patentability: novelty and loss of right

to patent

‘A person shall be entitled to a patent unless— -

(a) the invention was known or ‘used by others in

this country, or patented or described in a printed

publication in this or a foreign country, before the in-

vention thereof by the applicant for patent, or

(b) the invention was patented or described in a

printed publication in this or a foreign country or in

public use or on sale in this country, more than one

year prior to the date as the eae for patent in

* the United States, or:

(d) the invention was first patented or caused to be

patented by the applicant or his legal. representatives

©* assigns in a foreign country prior to the date of the

application for paterit in this country on an application

filed more than twelve months before the ee of the

application in the United States, or —

(e). the invention was described in a patent granted

on an application for patent by another filed in the

United States before the invention thereof al the: ap-

plicant for patent, or

(f) he did. not himself invent the subject matter

sought to be pafented, or

(g) before the applicant’s invention thereof the in-

vention was made in this country by another who had

not abandoned, suppressed, or concealed it. In deter-

mining priority of invention there shall be considered

not only the respective dates of conception and reduc-

— eee

tion to praetice of the invention, but also the reasonable *

diligence of one who was first.to conceive and last to

reduce to practice, from a time in to a by

the other. ©

$103. Conditions for patentability: non init subject

matter

A patent may not be obtained though the invention is

not identically disclosed or described as set forth in ~

section 102 of this title, if the differences between the

subject matter sought to be patented and the prior art

are such that the subject matter as a whole would have

been obvious at the time the invention was mace to a

person having ordinary skill in the art to which said

subject matter pertains. Patentability shall not be

negatived by the manner in which the invention was

made. :

§ 112. Specification

The specification shall contain a written description’

of the invention, and. of the manner and process of

making and using it, in such full, clear, concise, and

exact terms as to enable any person skilled in the art to

which it pertains, or with which it is most nearly con-

nected, to make and use the same, and shall set forth

the.best mode contemplated by the inventor of carrying

out his invention.

The. specification shall cuntiale with one or more

claims particularly pointing out and distinctly claim-

ing the subject matter which the applicant — as

his invention.

An element in a claim for a combination may be ex-

pressed as a means or step for performing a specified

_ function without the recital of. structure, material, or

acts in support thereof, and such claim shall be con-

strued to cover the corresponding structure, material,

or acts described in the specification and equivalents

thereof. .

§ 154, Contents and term of patent

Every patent shall contain a. short title of the ‘in-

vention and a grant to the patentee, his heirs or assigns,

for the term of seventeen years, of the right to exclude

others from making, using, or selling the invention

throughout the United States, referring to the specifica- —

tion for the particulars thereof. A copy of the specifi- -_

~ eation and drawings shall be annexed to the patent and

be a part thereof.

§ 173. Term of design patent

Patents for designs may be granted for the term of

three years and six months, or for seven years, or for

fourteen years, as the applicant, in his application,

elects.

§ 283. Injunction -

The. several courts having jurisdiction of cases under

this title may grant injunctions.in accordance with the

‘principles of equity to prevent the violation of any right

secured by patent, on such terms as the court deems

reasonable. ‘

5. Sections 1338 and 1498 of the Judicial Code provide

(28 U.S.C, §§ 1338, 1498) :

§ 1338. Patents, copyrights, trade-marks, and unfair com-

petition

(a) The district courts shall have citeiess jurisdic-

tion of any civil action arising undersany Act of Con-

. gress relating to patents, copyrights and trade-marks.

‘Such jurisdiction shall be exclusive of the courts of the

states in. patent and copyright cases. 3

(b) The district courts shall have original jurisdic-

tion of any civil action asserting a claim of unfair

competition when joined with a substantial and related

_ claim under the copyright, patent or trade-mark laws.

| 5a

§ 1498.. Patent and copyright cases

(a) Whenever an invention described in and covered.

by a patent of the United States is used or manu- |

factured by or for the United States without license of

the owner thereof or lawful right to use or manu-

facture the same, the owner’s remedy shall be by action

against the United States in the Court of Claims for

' the recovery of his reasonable and. entire compensation

for such use and manufacture. 7

For the purposes of this section, the use or manu-

facture of an invention described in and covered by a

patent of the United States by a contractor, a subcon-

tractor, or any person, firm, or corporation for the

- Government and with the authorization or consent of

the Government, shall be construed as use or manu-

facture for the United States: ee

The court shall not award compensation under this

section if the claim is based on the use or manufacture

“by or for the United States of any article owned, leased,

‘used by,.or in the possession of the United States prior a

to July 1, 1918.

A Government employee shall have the right to bring -

suit against the Government under this section except

where he was in a position to order, influence, or induce

use of the invention by the Government. This section

- shall not confer a right of action on any patentee or

any. assignee of such patentee with respect to any in- |

vention discovered or invented by a person while in the

employment or service of the United States, where.

the invention was related to the official functions of

.the employee, in cases in which such functions in-

cluded research and development, or in the making of —

which Government time, materials or facilities: were

used. ;

(b) Hereafter, whenever the copyright in any work

protected under the copyright laws ofthe United States.

‘hp

shall be infringed by the United States, by a corpora-

tion owned or controlled by the United States, or bya

contractor, subcontractor, or any person, firm, or cor-

poration acting for the Government, and with the au-

thorization or consent of the Government, the exclusive

remedy of the owner of such copyright shall be by

action against the United States:in the Court of Claims.

for the recovery of his reasonable and entire compensa-

tion as damages for such infringement, including the -

minimum statutory damages as set forth in section

101(b) of title 17, United States Code: Provided, That

‘a Government employee shall have a right of action

against the Government under this subsection except

where he was in a position to order, influence, or in-

duce use of the copyrighted work by the Government:

Provided, however, That this subsection shal] not con-

fer a right of action on any copyright owner or any

assignee of such owner with respect to any copyrighted

work prepared by a person while in the employment or

service of the United’ States, where the copyrighted

‘work was prepared as a part of the official functions of

the employee, or in the preparation of which Govern-

ment time, material, or facilities were uséd: And pro-

vided further, That. before such action against the

United States has been instituted the appropriate cor-

poration owned or controlled by the United States or

the head of.the appropriate department or agency of

the Government, as the case may be, is authorized to

enter into an agreement with the copyright owner in

full settlement and compromise for the damages accru-

ing to him by reason of such infringement and to

‘settle the claim ‘administratively out of available ap-

propriations,

Except as otherwise provided by law, no recovery —

shall be had for any infringement of a copyright

covered by this subsection committed more than three

years prior to the filing of the complaint or counter-

“Ta

claim for infringement in the action except that\the

period between the date of receipt of a written claim

for compensation by the Department or agency of the.

Government or corporation owned or controlled by the \

United States, as the case may be, having authority

to settle such claim and the date of mailing by the

Government of a notice to the claimant that his claim .~

has been denied shall not be counted as a part of the

three years, unless suit is brought before the last-

mentioned date.

_ any claim arising in a foreign country.

6. Section 2304 of Title 10 of the United States Code - :

provides (10 US. C. § 2304):

§ 2304. Purchases and contracts: formal | advertising ex-

ceptions

(a) Purchases of ond sosiinaia for property or

services covered by this chapter shall be made by

formal advertising. However, the head of an agency

may negotiate such a purchase or contract, if—

(1) it is determined that such’ action is necessary

in the public interest during a national emergency

declared by Congress or the President;

(2): the public exigency will ant permit the delay

incident to advertising ;

(3) the aggregate amount involved is not more .

than $2, 500;

(4) the purchase or contract is for personal or

- professional services ;

(5) the purchase or contract is for any service

by a university, college, or other educational in-

stitution; _ .

(6) the purchase or contract is for property or

services to be a and used outside the United

| States and the Territories, Commonwealths. and —

. possessions ;

(7) the purchase or contract i is for medicine or

nedical supplies ; «

(8) the purchase or contract is for + property

for authorized resale;

(9) the purchase or contract is for perishable « or

nonperishable subsistence supplies;

(10) the purchase or contract is for property or

services for which it is impracticable to obtain —

-eompetition ; © :

_ (11) the purchase or contract is for property or

services that he determines to be for experimental,

' developmental, or research work, or for making or

_ furnishing property for experiment, test, develop-

ment, or research ;

(12) the purchase or contract is for sncaieeke or .

services whose procurement he determines ‘should

“not be publicly disclosed because of their character,

ingredients, or components ; ;

(13) the purchase or contract is for satinaent

_ that he determines to be technical equipment whose -

standardization and the interchangeability of

whose parts are necessary in the public interest

and whose proturement by negotiation: is neces-

sary to-assure that standardization and inter-’

changeability ; |

(14) the purchase or mecnteaiit is for tectinical or -

special property that he determinesto require a

substantial initial investment or an extended period -

‘of ‘preparation for manufacture, and for which he

determines that formal ‘advertising and competi-

tive bidding might require duplication of invest- ° -

- ment or preparation already made or would unduly

delay the procurement of that property; or

‘ (15) the purchase or contract is for property or

services for which he determines that the bid prices _

received after formal advertising are unreasonable,

as to all or part of the requirements, or were not

_ independently réached in open competition, and for

which (A) he has notified each responsible bidder

of intention to negotiate and given him reasonable

opportunity to negotiate; (B) the negotiated price

is lower than the lowest rejected bid of any respon-

sible bidder, as determined ‘by the head of the.

agency; and (C) the negotiated price is the lowest

_ negotiated. price offered ba any responsible sup-

plier;

(16) he Pam Tee that (A) it is in the interest

of national defense to have a plant,,mine, or

other facility, or, a producer, manufacturer, of

other supplier, available for furnishing property

or services in case of a national emergency ; or

(B) the interest of industrial mobilization in case

of such an emergency, or the interest of national

. defense in maintaining active engineering, re-

search, and development, would otherwise be sub- °

served ; or )

(17) negotiation of the -purchase or contract is

otherwise authorized by law.

(b) The data conpeeting the negotiation of each pur-

chase or contract under clauses (1) and (7)-(17) of sub-

section (a) shall be kept by the contracting agency for.

six years after the date of final payment on the contract.

(1) the negotiation of a contract to construct or

repair any building, road, sidewalk, sewer main, or

similar item, unless— .

(A) it is made under clauses (1)- (3), (10)-

(12), or (15) of subsection (a) ; or

10a

-(B) it is to be performed outside the United

States; or ‘ ;

‘ (2) the erection, resiait, or. furnishing of any

public building or public improvement.

| | (d) Whenever the head of the agency determines it

to be practicable, such advance publicity as he considers

suitable with regard to the property involved and other ©

_ relevant considerations shall be. given for a period of

at least 15 days, before making a purchase of or con-

tract for property, or a service, under clause (7) or

’ (8) of subsection (a) involving more than $10,000.

‘ (e) A report shall be made to Congress, on May 19

and N ovember 19 of each year, of the purchases and |

contracts made’ under clauses (11) and (16) of subsec-

tion. (a) during the period sincé the date of the last

— The report shall— ;

* (1) name each contractor;

(2) state the amount of each contract ; and

(3) describe, with consideration of. the national |

‘security, the ey’ and services covered by each

contract.

(f) For the purposes of. ‘the following laws, pur-

chases or contracts negotiated under this section shall

‘ be treated as if. they were made with formal advertis-

ing:

(1) Sections 35-45 of title 41.

(2) Sections 276a-276a-5 of title 40.

(3) ‘Sections 324’ and 325a of title 40.

lla.

APPENDIX B

Opinion of the Coirt of Appeals of Maryland.

'. IN THE COURT OF APPEALS OF MARYLAND

| No. 191

SEPTEMBER TERM, 1964

SPACE ‘Azno Propvcts Co., INO., ET AL.

OAL,

R. E. Danio Co., Ino. ©

Prescott, C. J.

' Hammond

Horney .

- Marbury

Oppenheimer,

JJ.

OPINION BY OPPENHEIMER, J.

| Filed: March 12,1965

This case involves the question of whether the court below

properly enjoined the defendants from using what the ap-

pellee claims to be its trade secret in the building of oxygen

breathing hoses. It also involves the scope of the injunc- ~

tion granted and other issues in connection with the conduct

of the parties and rulings of the trial judge.

The appellee, R. EK. Darling Co., Inc. ( Darling) was

founded as an individual business by Mr. Darling in 1948

and began the business of manufacturing oxygen breathing

hoses for aircraft personnel, in Bethesda, Maryland. In

1950, Mr. Darling undertook a research and development

. program in the course of. which small-bore miniaturized,

silicone flexible breathing hoses were produced; these hoses

were -sold tothe Douglas Aircraft Company and to the

Navy, beginning.in 1953; the hoses were the same general

type that are now qualified and referred to in certain

12a

military specifications, The business was subsequently in-

corporated. Four of the defendants below, Joseph A. Jack-

son; Kugene Kf. Fasano; Douglas L. Creger and William

Phillips' (sometimes collectively reftrred to as the former

employees) worked for Darling in various capacities. Each

of them had been with Darling for some years; there was no ©

formal contract of employment; each could be discharged

by Darling at any time and had the right to leave at any

time. ,

In the fall of 1960, these men decided to go into business

in competition with Darling. They sought and obtained

financial backing-from the appellants; Norris Manufactur-

ing-Company (Norris) and William Brandenburg (Brand-

enburg), the president of Norris. Norris had supplied

silicone products to Darling; but in 1959, the officers of

Darling had formed the Materials Testing Company to make

silicone compound and tubing. In late 1959 or early 1960,

the United States Navy had sent a representative to

Darling to discuss new proposed specifications for oxygen

breathing hoses of certain types of which Darling had been

_ the sole manufacturer and supplier. Thereafter, Military -

Specification H-22489 was prepared and issued in April,.

1960. Darling began the study and work to qualify hose

under the new specifications. On December 14, 1960, the

appellant, Space Aero Products Co., Inc. (Space Aero).

was incorporated by the former employees, who had re-.

signed from Darling’s employ between December 9 and

December 23, 1960. Space Aero commenced businéss opera-

tions in Hyattsville, Maryland, in January, 1961. The first

hose built by it was the same as the Darling hose and was

built by some of the same people who had built-the hose for -

—— Space Aero qualified its. _— under » “Military

1 Phillips did not aie from the orders of the lower court. At

the trial, he testified for Darling. Phillips had left the employment. —

of Space Aero Products Co., Inc. but was still one of its stock- —

holders. ; aa

18a

Specification H-22489 in the middle of January, 1961; it

‘ . was submitted to the Navy on February 20,1961. Darling :

‘ did not submit any hoses for qualification under this specifi-

cation until April 25, 1961. The Navy accepted Space

_ Aero’s hose in May, 1961.

- Darling filed its suit on February 27, 1961. The appel-

lants:filed answers denying that the appellee had a cause of

action against any of them: No preliminary injunction was

issued. After the.protracted taking of testimony,? Judge

Pugh filed an opinion on May 27, 1964 in which, after

reviewing what he regarded as the salient features of the

testimony, he found from the evidence that the former |

- employees ‘‘learned the know-how to set up.a competing

business which knowledge was gained by them while in the

employ of the plaintiff.’’ He further found that the former

employees owed the duty of fidelity and trust to their

employer while they were employed and had breached that

duty. He found further: ‘‘that other hose manufacturers

in this Country have endeavored to produce an oxygen

‘breathing hose which would compete successfully with the

plaintiff’s but had failed to do so despite their knowledge

and experience but the defendants were able to do so im-

mediately and within twenty days after. the charter was

granted to its corporation,. all because: of the knowledge.

they had gained during their employment by the plaintiff.’’

Brandenburg and. Norris, the court found, had illegally

entered into a conspiracy to cause the former employees

to cease working for Darling. Other findings of the lower

‘ court will be referred to in the discussion which follows.

On June 10, 1964, the lower court entered an order which

permanently enjoins and restrains the appellants ‘‘from

further manufacture and/or sale’? of oxygen breathing

hoses ‘‘of like or similar construction to hose _assemblies

6 2'The trial, held largely im camera, took 38 trial days. .The ex-

hibits of both sides exceeded 150. The record abstract before this

‘Court vonsists of over 2000 printed pages.

l4a

manufactured to the requirements of United States

Military Specification Mil H-22489.’? The court further

ordered the appellants: ‘‘to immediately deliver up to this |

- Court for destruction any and all drawings, manuals,

documents and other materials in their possession which

describe or disclose the equipment, components, methods or

techniques utilized in the manufacture of~ those hose

assemblies.”? The defendants were ordered to j pay the costs,

and the court retained jurisdiction for the purposes of

determining Darling’ S rights to an accounting and for

damages.

On June 10, 1964, the date of the injunction, the United

States. filed a statement as amicus curtae, in which it

requested the court to consider the interest of the United

States in the scope of the injunction to be entered, as set

- forth in the affidavit of Rear Admiral W. T. Hines,

attached to and made a part of the statement. This

affidavit states, in part: ‘‘[I]t affirmatively appears that

the National Defense interest would be adversely affected.

in the delay resulting from any inability of Space Aero ©

‘Products Co., Inc. to deliver:vitally needed products under

Contracts N383-85726A, N383-86598A, and ASO-82299A.”’ .

~The United States asked that an injunction in the case

should exclude the performance of the. contracts referred

to in Rear Admiral Hinés’ affidavit. On June 17, the -

appellants filed#a petition for modificatién of the injunc- -

tion, to which the appellee filed an answer. On June 30,

‘the court below, without a hearing, signed an | order denying

the petition for modification.

The appellants appealed both the orders of June 10 and

June 30, 1964. After the appeals, through proceedings _

in this Court and the lower court; the injunction was

stayed upon the giving of a bond for damages.

The appellants contend that the evidence did not support

a finding that the former employees violated: their duty

of loyalty and trust in setting up a company to go into

| lida,

competition with Darling ; that the evidence did not support

findings that the appellee did in fact possess trade secrets’

or knowledge proprietary to it and that the appellants -

wrongfully misappropriated such trade secrets or ‘pro-

prietary knowledge; that the broad scope of the injunction

was improper; that the evidence required a finding that

Darling had ‘‘unclean hands’’ and should therefore be

denied the aid of an equity court; and that the lower court

committed reversible error in several of its rulings. We

. Shall consider these contentions in a somewhat ‘different

order. | a

The Existence of a Trade Secret

A trade secret is described in Restatement, Torts, § 757,

‘-comment b, as follows: . : 7

‘‘A trade secret may consist of any formula, pattern,

device or compilation of information which is used in

one’s business, and which gives him an opportunity to

obtain an advantage over competitors who do not know

or use it. It may be’a formula for a»chemical com-

pound, a process of manufacturing, treating or pre-

serving materials, a pattern for a machine or other

device, or a list of customers.’’.

~-*In an excellent treatise by Turner on. The Law of Trade

‘Secrets (London 1962), which considers the American as

well-as the English cases on the subject, the learned author

states: : ras

‘The subject-matter capable of protection may be

an industrial secret like a secret machine, process, or

formula, or it may be industrial know-how (an :in-

creasingly important ancillary of patented inventions) ;

‘it may be information of any sort; it may be an idea

of a scientific nature, or of a literary nature (such as:

the plot of a story or the theme of a television series),

or it may be a slogan or suggestion for a method of

advertising; lastly, the subject-matter may be the

product of work, or expenditure of money, or of trial

16a

_and error, or the expenditure of time. Secrecy is not

necessarily a constituent of a protectable subject-

matter, but.when it is, different ps egrees of imperfect »

secrecy are sufficient in different. circumstances ‘to

make subject-matter capable of. protection.’’ p. 4.

Whether or not there is a trade secret and, if there ‘is,

whether its’ owner will be . protected against persons

aceused of using it unlawfully, has been considered ‘in’

numerous cases: in federal and state jurisdictions, and in ~

England, as well as by text writers. See inter alia the

cases cited in Mycalex Corporation of America_v. Pemco —

Corporation, 159 F. 2d 907, 918 (4th Cir. 1947). The -

legal principles are not in dispute ; it is their, application —

to the particular facts on which, in general, the decisions -

turn. — ei

As has been done in other cases, we shall summarize

what we regard as the salient facts but will not set them

out in such detail as to disclose the alleged trade secret,

which it is the purpose of this litigation to protect. Head

Ski Company v. Kam Ski Company, 158 F. Supp. 919

(D.C. Md. 1958). See also annotation, In Camera Trial of

Hearing and Other Procedures to Safeguard Trade Secret

or the Like Against Undue Disclosure in Course of Civil

Action Involving such Secret, 62 A.L.R. 2d 509, 530-532,

and cases therein cited. In reviewing the testimony, it is

to be remembered that’ Maryland Rule 886 (a) provides

‘ that, when an action has been tried by the lower court

‘without a jury, the judgment of the lower court will not

be set aside on the evidence unless clearly erroneous.

_ Wood v. Wood, 227 Md. 211, 176 A. 2d. 229- (1961). Hf

there is substantial evidence.to support the lower court’s

factual conclusion, that finding must be reviewed in the

. light most favorable to the prevailing party- below..

Goodwin v. Luwmbermens Mut. Cas. Co., 199 Md. 121, 128,

85 A. 2d 759 (1952). The conclusions of law based upon

the facts, however, a are reviewable by this Court. wy lyler

17a |

v. Secretary of State; 230 Md. 18, 20, 185 A. 2d 385 (1962).

. See Moran v. Moran, 219 Md. 399, 401, 149 A. 2d 399 (1959).

There was substantial testimony on behalf of Darling

that its manufacture of the hoses involved approximately

thirty different steps. Admittedly, some of these steps

consisted of simple manual operations and the use of

devices 5 uncomplicated machinery which in themselves

were known to the industry. It is not any one of the steps

but their selection, order and conjunction which ‘Darling

contends is its trdde secret. In general, and without going

into the details of the testimony, it is the application of

‘the silicone rubber to produce the desired result which

_ Darling claims is its own unique secret, based on research

and experimentation and embodying the result of years of

trial and error béfore the requisite ‘know-how’ was

achieved. It is the requisite strength and delicacy of the

‘. ,oxygen breathing: hose for pilots which necessitates the

_- numerous paren: Sr techniques which Darling has used.

The court below referred to Darling’s “know-how.” A

knowledge of the particular process, method, or material

which is most appropriate to achieve the desired result

may itself be a trade secret. Head Ski Company v. Kam

Skt Company, supra, 158 F. Supp. at 923; Manos v. Malton,

358 Mich. 500, 100 N.W. 2d 235 (1960); By-Buk Company |

v. Printed Cellophane Tape Company, 163 Cal. App. 2d

157, 329 F. 2d 147 (1958); éf. Mycalez Corporation of

America v. Pemco Corporation, 64 F. Supp. 420 (D.C. Md:

' 1946) affirmed 159 F. 2d 907. See Turner, op. cit., at

35-37. : 4 .

One of. Darling’s. witnesses, Rothermel, a chemical _

engineer experienced in the manufacture of flexible hose,

had been employed by the’ Dayton Rubber Company from —

1936 until 1960. He became a technical superintendent of

one of the plants of the Dayton Rubber :Company (now

the Dayco Corporation) ; later he became Vice-President

and General Manager. of Strato Safety, a wholly owned

subsidiary’ of Dayton. Rubber Cuapias in California.

From September 1, 1958 until February 1, 1960, his ore

assignment was to produce hose that was equivalent or -

equal’ to Darling’s hose, which would be accepted by: the

customers on an equal basis: Rothermel was directed by

. the president of the Dayton Rubber Company; he had the

” full facilities of the laboratory and the knowledge of the

suppliers of that company and could draw on all of its

-_ equipment. To the best. of Rothermel’s. knowledge,

Darling was the sole manufacturer of the hose here in

question in 1956 and thereafter; hose of that type, as far

as he knew, was not built by anyone other than Darling:

He had hoses manufactured by Darling but, in his opinien,

it was not possible to produce the hose by, just having a

sample of it, except, perhaps, after several years of trial .

and error. He did not have Military Specification H-22489

at the time he was working to‘ reproduce. the Darling hose,

although he had the specificatiqns within the three ‘months

prior to trial, but, in his opinion, he could not have produced

the hose even if he had had the specifications. There was

other testimony to the effect that these specifications only

- gave the details of the particular results’ which were

required in the oxygen breathing hose and did not explain

how those results were to be obtained. Rothermel testified

further that he had difficulty in finding proper silicone

rubber compound, in putting in communication wires and

other matters necessary for the proper manufacture. of the -

. desired product.

Opper, a Witness called for the defendants, was alieiaies

‘by the Dayco Corporation since 1950; from 1959 he has

-been manager for the Strato Safety Equipment Division;

he worked for several years on oxygen breathing hose and

obtained a contract from the Navy for the building of

small-bore hose from the Military Specification H-22489 on .

June 7, 1961, although the company did not qualify until

April ef 1963. The hoses produced under Opper’s direction .

had different dimensions from those made by Darling and

oak

19a

_ Space Aero but the specifications under which the Strato

Safety hose was manufactured were identical.

The appellants contend that Rothermel chose to duplicate

the Darling hose unassisted and, as a result, the compound

he used refused to stay in place. They produced experts

_of their own, including Muller, Director .of Engineering

of H. K. Porter Company, one of the. largest industrial ©

manufacturers in the country, who visited the Space Aero

plant and testified that each of the elements he saw and

the manner in which’ each step was being performed were

__substantially the same as one or another of the processes

with which he had_been familiar in the industry. The

defendants also offered Professor Charles Alfred Shreeve,

head of the mechanical engineering department of the

University of Maryland, an expert in mechanical engineer-

ing. He testified to the same effect as Muller and. stated

further that’ the trade secrets he heard described by Mr.

Darling on the stand were neither new, novel or unknown ©

‘ but were all obvious mechanical processes. Darling con- .

tends that Muller: was unable to recall or describe much ~

of the equipment ‘and many of the process steps utilized

at Space Aero; and that Shreeve could not remember many

steps and: techniques used in the Space Aero process.

None of the appellants’ expert witnesses, other , than

Brandenburg, testified he could have: reproduced the °

_ Darling hose wthout having seen it in actual manufacture.

Brandenbur®, a research chemis. and maiiefasharer of

silicone products, testified he was thoroughly familiar with

the Darling hose building process, which he had helped

develop, and that éach of the steps was common knowledge

in the industry. He admitted,-however, that there were no

other companies building the hose. .

., Fhe finding: of the court. that other os oliiibaitiiins

in. this country have endeavored to produce ‘an oxygen

breathing hose which would compete snecessfully with

¢ a

20a

Darling’s but (at least until 1963) have failed to do so, is

clearly supported by the testimony.

The testimony as to whether Darling’s inetionin and

processes were unique,.and, as a composite result, known

only to it, or whether they were’ generally known and. in ©

the pablis domain, is voluminous and ‘conflicting. The

record, as a whole, convinces us that the trial judge was not

cn exret in his implicit finding that Darling’s ‘‘know-how”’

“in the manufacture of its hoses was the subject matter of

a trade secret. © _ :

‘ This holding does not extend. to the male disconnect,

referred to at length in the evidence. This disconnect is

attached to the hose, and is fitted to a female connector in

the plane which leads to the oxygen supply. The testimony

shows that. the drawings of the male disconnect, bearing

' standard military specification numbers, were originally

obtained from Douglas Aircraft "Company, “which had

developed them, and then recopied under Darling’s name..

The disconnect could be ordered asa complete unit merely

by using the military specification and order numbers.

Several companies listed these numbers in published .

catalogues. The male disconnect shown in the drawings —

ean be purchased on the open market. Darling shortened .

the part as shown in the drawings by half an inch, added —

some knurling and rounded the end of the insert portions.

- These changes are visible on inspection of the part. None’

of the elements of a trade secret is present in respect of -

the male disconnect, nor does the testimony support any

design rights of Darling therein. A tradesecret as to the ©

manufacture of the hoses themselves can exist apart from

the disconnect attached to them.

Even though a process or method may be the subject of

‘-. a trade secret, a substantial element of secrecy must exist

~ before the owner ‘of the method is entitled to judicial pro-

tection. Absolute secrecy is not essential but a substantial

i element of secrecy must exist sO _ that there would be

/ |

. me !

21a :

difficulty in, othérs. properly acquiring ‘the information. |

Mycalex Corporation of America v. Peméa>Corporation, |

64 F. Supp. 420, 423 (D.C. Md. 1946); Excelsior Steel —

, Furnace Co. v. Williamson Heater Co., 269 Fed. 614, 616

(6th Cir. 1920) ; Turner, op. cit., 71-98; Callmann, Unfair °

Competition and Trate-Marks, §53.3 (e); Ellis, Trade

Secrets, §§ 26, 53. A tradésecret owner, however, does not: —

- abandon his secret by a limited public publication for a

restricted purpose. Abernethy v. Hutchinson, 1 H. & T. W.

28, 3 LJ. (0. 8. ) (Ch.) 209 (1824).

The Restatement ‘sets forth some ’ telaana to be con-

sidered in determining whether given information i is one’s

trade secret. These factors are: ‘‘(1) the extent to which —

the information i is known outside of his business; (2) the

extent to which it is known by employees and others in-

volved in his business; (3) the extént of measures taken

' by him to guard the secrecy of the information; (4) the

value of the information to him and fo his competitors;

(5) the. amount of effort or money expended by him in

developing the information; (6) the ease or difficulty with

which .the information could be properly. acquired or

_ duplicated by’ others.” *? ~ Restatement, Torts, § 757 -b.

@The. testimony was uncontradicted that the Darling

process was. the result of years of experimentation’ and

research ;. approximately a quarter of a milliqn dollars

went into the development of the processes and methods.

The value of the information gained in the development

of:the hoses to Darling is clear. From a small business in

1948, Darling has. grown to a point where in excess of

two hundred: persons are employed and where. it is manu-

facturing one hundred or more different types of hoses,

with. a, gross of nearly five million dollars a year. The

value which the information would have had to other com-

panies, if they could have been successful in making a

similar type of hose, i is evident if only from the efforts of.

‘Dayco Corporation which tried for years to duplicate the

peor method and, — its resources, was unsuccessful

ors. " ;

ie Darling methods were aera gp and indeed had to +

_ be known, to some of its employees, including its former

employees who formed Space Aero. The extent of

measures taken Bb Darling to guard the secrecy of the

ee is in “dispute. As evidence of the requisite

secrecy, Darling points t to the “testimony that, during the’

initial stages of the development of the hoses, the activities _

* and process were kept secret even from Darling’s em-

ployees. The Instruction Gnide iggued for. training,

offered in evidence, states that the me and processes

and the manner in which materials“were used must be con-

sidered as trade secrets, and that to divulge this informa-

tion to any individual outside of the company would

- provide’ others with knowledge and’ information detri-

mental to the existence of the company. A. lock box was

Maintained in the plant for blueprints and a list of

authorized«personnel with kéys was carefully maintained.

The traidgig of the company’s employees was in a separate

area and, according to Darling’s witnesses, the trainees

were frequently told that the company had ee of

which no one else in the world new.

' The appellants’ testimony presented a quite different

picture. A former supervisor ed that she and other .

employees were never cautioned,to hold the method of

manufacture in confidence. The mutable Phillips testified -

that, while he knew there was no one else in the United

States making hoses in a method similar to that of Darling, —

he did not recall being admonished not” to discuss the

| product. |

The Darling methods’ were also known to Brandenburg

who, through Norris, was involved in Darling’s business.

‘Norris did not manufacture oxygen breathing tubes, but

_ its sales of its silicone products to Darling increased from -

a volume i a few hundred dollars in 1953 or’ 1954 to

- 23a

. *. about threé hundred thousand dollars in 1960. During the

years of the relationship, Brandenburg made many visits.

to the. Darling plant, and testified that he was familiar

“ with each step of the process of makingsthe hoses and had |

' been of material help in the entire development. On the -

latter point, however, there was conflieting testimony on

behalf of Darling, to the effect that Brandenburg had only _

been consulted “in the area of the compounds which he |

furnished. Judge Pugh, in his opinion, while making no ..

express findings of. fact, referred to the evidence that

Brandenburg” had: full and complete knowledge of the

- operation of the Darling plant. and that, independently of

- this knowledge, Brandenburg had the know-how to build

the hose. Whether or not the testimony would have'justified ¢ :

a finding to this effect, the relationship of the parties is

‘pertinent. Darling and Norris. were working together, as

manufacturer and supplier, in what: was, to some extent

at least, a joint enterprise. Brandenburg testified, in —

answer to a question by the court, that it was not the policy 7

of ‘his company to ‘‘go around telling other people what

some one else is doing.’’ ‘‘There was a certain amount of. -

ethics involved.”’ - By Brandenburg’s own testimony, there

was some element of confidence and trust in the relation, .

ship. ‘Under all.the circumstances, Brandenburg’s knowl-

edge of the process, however complete, did not negate the

substantial element of secrecy necessary to the existence |

of a trade secret. Saco-Lowell Shops v. Reynolds, 141.

F. 2d 587 (4th Cir. :1944); International Industries v.

Warren Petroleum Corp., 99 F. Supp. 907 (D.C. Del. 1951).

See Chun King Salesw. Oriental Foods, 136 F. Supp. 659,

662 (D.C. S.D. Cal. 1955).. Cf. Mycalex Corporation of

‘America v. Pemco Corporation, 159 F. 2d 907 (4th Cir.

-1947) ; and Messler v. siitiatad Bros., 52°F. Supp. 812 alia

Mass. 1942)..° -

There was much testimony as to tours aia the plant

and particularly as to a public demonstration of hose-

building for the Greater Washington Industrial Council,

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during which small groups of guests were given , detnonistra-

: tions of hose-building and other techniques. The appeHants — :

. point, inter alia, to the testimony that two overhead garage -

' doors to the street were left open and that workers were

ns free to have visitors. while they were assembling the hose.

Darling’s yan was located not in one of the country’s ©

‘great industrial centers, but in a rélatively small, if grow-

. ing community, -The testimony, taken as a whole, convinces

". us that Darling took precautions, to guard the secrecy of.

_ its process. which, under the circumstances, were reason-

- ably sufficient. In its particular community and environ-

ment, it may well ‘be ‘that’ Darling. considered ‘that ‘too |

elaborate efforts: at concéalment would call attention ‘to |

what was being concealed, as in Poe’s ‘‘Purloined Letter.’’

In any event, as the lower court emphasized in its opinion, ‘ :

no one else succeeded. in making hoses according to the

Darling process. Until the formation of Space Aero by

Darling’s former employees, Darling’s efforts at secrecy,

- . like the process itself, met the basic. criterion of success.

Upon consideration of all the testimony i in the light of the

applicable legal principles, we are convinced that Darling’s

“processes and methods in~ manufacturing its: oxygen ~

breathing hoses (apart from the male disconnect atine).

constituted. a trade secret.

‘The Inability of the Former Employees

The development of the law of trade secrets ‘is a result

of’ balancing two conflicting elements essential to our

society. There is a strong policy favoring frée competi-

tion; an employee is entitled to use the skill and knowledge -

__ of his trade or profession which he has learned in the course

of his employment, for the benefit of himself and the public,

if he does not violate a contractual or fiduciary obligation .

in doing so. C-E-I-R, Inc. v. Computer-Corporation, 229

Md; 357, 366, 183 A. 2d 374 (1962); Ritterpusch v. Litho-

- graphic Plate Service, Inc., 208 Md. 592, 595, 119 A. 2d 392

e A TT

., 2a

(1956) ; Sistatenend, Torts, $8708 and 757, gonimnent a;

Herbert Morris Ltd. v. Saxelby, 1 A.C. 688 (1916) ; Sir ~

'W. C. Leng & Co. v. Andrews, 1 Ch. 763-77% (1909). On

the other hand, in order to promote the progress of science

and the. useful arts, the law provides certain protections

to-an originator. Among these protections are the patent -

and copyright statutes and the law. of, torts prohibiting

unfair competition. The law ao trade: secrets is

another protection. . *®

The basis of the law-as to trade . sant apast from

breach of contract, is abuse ‘of confidence ‘or impropyiety

.in the means of procurement. ‘Justice Holmes stated the

‘ legal principle in Du Pont Powder Co. v. Masland, Sages U. 8.

100 (1917), as follows: | :

‘The word paeiiiely as applied to tradeuiarks ‘al .

trade secrets is an unanalyzed expression of certain _

secondary consequences ‘of the primary fact that the

‘law makes some rudimentary requirements of good ©

faith. Whether the plaintiffs have any valuable

secret or not the defendant.knows the’facts, whatever ,°;,%"

they are, through a special.confidence that he accepted. \..

The property may be denied but the confidence cannot .*’*

be. ‘Therefore the. starting point for the present

- matter is not property or due process of law, b@t that -

the defendant stood in confidential relations with the

plaintiffs, or one of them. These have-given place to

| hostility, and the first-thing to be made sure of is

' ——~that the defendant shall _not-fraudulently—abuse the ——_—__-

trust reposed in him. It is the usual incident of con- ~

fidential relations. If there is any disadvantage in the

* fact that he knew the plaintiffs’ secrets he’must take

the burden with the good. wate 244 Uz S. at.102, -

The Restatement summarizes the doctfine enunciated in

_the case law as follows: ‘‘One who discloses or. uses

*another’s trade secret, without a privilege te do so, is

liable to the other if * * * * (b) his disclosure or use con-

_ stitutes a breach of confidence reposed in him by the other

in disclosing the secret to him.’’: Restatement, Torts, § 757.

26a

See also Carter Products, Inc. v. ra eld

- 130 F. Supp. 557, 571-75 (D.C. Md. 1955).

Judge Pugh points out in his opinion that the jun-

contradicted | evidence shows that. each ‘of the former . ’

employees was an employee of Darling from,November 1,

@ = 1956 to ‘the month. of December; 1960, and that each of

_.* them had an important position with the plant in the

building of oxygen breathing hoses. After setting forth

the nature of their assignments, Judge Pugh states that ©

‘‘in their respective positions these defendants knew the

» hose business, each having learned an there. was to know

from the plaintiff.”’. He then ‘stated : Des

‘‘While in the employ of the plaintiff, the, defendants

at the instigation of Jackson, discussed going into the

‘ hose business fr Ori September, 1960; to early in

December, 1960, and such discussions led to the making.

of plans, financial and otherwise, to go in the business .

' of manufacturing the same, kind of oxygen breathing ~

hoses manufactured by the plaintiff.. The incentive to: —

go in business was to submit bids to the United States’

_ Navy.under its Military: Specification H22489, which

was open to the public in the month of April,. 1960. All

individual Gtaents knew .of the existence of this.

_.. Military Specification which came to.the knowledge of

the individual defendants who were employees of the

plaintiff by virtue of their employment with the plain- ©

_ the charter. was granted to the defendant corporation

when it submitted a hose to the Nayy on February 20,

- 1961. The rapidity with which this was done is only

_ attributable to the fact that the individual defendants,

except William Brandenburg and Norris Mannfactur-

ing Company, had gained the knowledge to set up a

business and manufacture the hose under the military

specifications, which came to their knowledge while

they. were employed b; by | the _— ee cate ,

The ] processes used by. Space Aero were the same as those

used by Darling. - While Darling did not qualify under the

military specification until several months after Space

A EE

tiff. * * * * It was only twenty-nine-{29) days ‘gier ee

. 27a |

Aero had submitted its hose to the Navy, Datling contends

that information which would have accelerated Darling’ Ss

qualification had been obtained by J ackson, one of. the |

appellants, while still in Darling’ s employ, and: was inten- ~

tionally withheld and secreted by him. This claim is dis-

puted’ by the appellants, but, in any event, the dispute on

_this issue goes to whether. or not Darling is entitled to

_damages for loss on the Navy contracts by reason of the

appellants’ breach of their duty of “fidelity, and not to

-whether that duty had-been violated. The testimony amply

es supports the findings of fact of the court below. - 7

While nore of the former employees ‘had. signed a con-

tract. with Darling in which” they formally agreed not to

use the information acquired by them, and while they were

free to leave their employment at will, Judge Pugh found 7

that they owed the duty of, fidelity to their employer while -

they were employed. We re C-E-I-R, Inc. v. Computer

Corporation, supra, 229° Me

Much. of ‘the siti eiisineil the ‘ses of various

drawings and other material from Darling’s ‘plant by some ©

of the former employees before they left the company’s

employ and the subsequent ' stops taken by Darling to

endeavor to gain repossession of the drawings. The court

—below found as a fact that some of the former employees

had in their possession, after leaving Darling’s employ-

ment, certain sketches of oxygen breathing hoses’ which .

they had taken while they were employed by Darling, with-

‘out Darling’s knowledge. One of the former. ‘employees,

J om, instructed his wife over the —" when he

at. 366; Ritterpusch v. Ittho- .

graphic. Plate Service, Inc., supra, 208 Md. at 602. That

C-E-I-R and Ritterpusch involved the improper solicitation |

by’ employees of their employer’s custémers, rather than’

the improper use of the employer’s trade secret, does not .- ~

make. the principle | for which those" -eases stand less. '

; appliéable. It is the breach of the confidential relationship _

rather than the form whieh that breach takes which is deter-

+ minative.

ere

was in California after severing his; “connection with

Darling, to burn the drawings in his possession in. his

home. Wilkinson; another former employee, ‘burned some

of the drawings which J ackson hail given him. The court

below also found that there were some of Darling’s

drawings on. the drawing-board in. the. home: of- another

of the former employees which were copies of Darling’s

drawings. Judge Pugh found that it was doubtful as to

‘whether or not the drawings were in fact the drawings of

, Darling; but that the evidence. clearly showed they were . .

in fact Darling’s property. During’ the argument of this

appeal, counsel for the appellants admitted that the taking

of these drawings was wrongful.’ Judge Pugh also found ; ae

that other records of Darling’s, such as. copies of its

Security. and Quality Control | Manuals, were in possession

of some of the former employees after they had severed

_their_employment.. The testimony ‘strongly indicates that

_ all the drawings to which reference has been made were |

-in -effeet public property or were drawings or copies

-thereof sent to Darling by the Douglas Aircraft Company.

The appellee does not contend it had trade secrets in’ these

> drawings. The testimony does not show, in.our opinion, ©

t these drawings were necessary for. the prodtction of -

the oxygen breathing hosé by Space Aero and the individual

appellants, or the securing of the Navy contracts. As

Judge Pugh infers in his opinion, however, the actions. of

the former employees in respect of the drawings _

strengthens. the conclusion. that, in availing themselves of |

_Darling’s trade secret concerning the manufacture of the —

oxygen’. breathing: hose, the former employees knew that

they, were. acting wrongfully in’ violation of their con-

fidential relationship and their ‘duty of loyalty. na

‘We agree with the court below that the former employees:

violated the. duty of fidelity and trust which they’ owed to

3 Tt was stated without eenteadiation that these acts by some’ of

the former employees took — before they were represented by .

counsel. |

Darling in respect of the trade secret and that their UZ

- eondiact was ‘such as to entitle sani ‘to the — a

. Ofa court of equity. . ;

The Liability of Brandenburg and Norris .

The evidence is undisputed that Norris, through: Deandea”

burg, its president, had-¢onferred with the former em-

ployees before they left Darling’s employment and that

Brandenburg advanced $1000 towards the formation of

_the new enterprise, a few days before the’ lease for the

Space Aero plant in Hyattsville was entered into. Addi-

tional advances or investments totaling $7000 were made

in 1960, and still further advances were made in the first

- months ef 1961 totaling in excess of $90,000. Norris now

~ owns 49% of Space’Aero’s stock. . ihe

_ The judge below excepted. Bienieabere and Norris from.

‘his finding that the defendants could not have gone into a -

competing business without the knowledge gained at

Darling’ s plant. “ He -found, however, that Brandenburg

and orris, through Brandeaburg as its president and

nt, illegally entered into a conspiracy to cause the

er employees to terminate -, employment with

‘Darling. . pee.

The appellants contend that the former weed had

decided to leave Darling whether or not Brandenburg and

Norris gave them financial: backing. They contend further

that Brandenburg had independent knowledge. in respect

of the manufacture of the hose by the process used by

Darling. It is undisputed that neither Brandenburg nor

Norris was under any express contract with Darling i in

- Fespect of the hose process. It is also undisputed that

while Norris had been a large ‘supplier of material to re

Darling, Norris and Brandenburg were apprehensive that

. _ the subsidiary being formed by Darling might take away

‘ much of Norris’ sales to. the parent company.

. There is no question of the right of a supplier to a

—-9 to become interested i in the Sormeticn: of wenn,

\ t

de ; : c . 30a : 7 fe, Eugene

company to. which he expects diss to sell his supplies.

N either Norris nor, Brandenburg” was “under: an express

contractual obligation to Darling in respect of the non-use

of Darling’s trade secret..; We do not reach the question |»

-of whether Brandenburg and Norris were liable to Darling

. forthe. breach of an implied agreement.* We agree with

the court below that by their actions in respect of the

formeremployees and the formation of Space Aero as a

competing company for the procurement of ‘Navy’ con-

tracts under the Military Specification H-22489 through the

a use of Darling’s trade secret, repre. and Norris

! became: liable'to Darling.

In Conmar Products Corp. v., Universal Slide Petene.

172 F. 24150 (2d Cir. 1949), Chief Judge Learned Hand —

enunciated the principle which we believe is here appliéable: :

‘Courts. have been accustomed to speak of trade

secrets as ‘property,’ and at times to deal with them

' ‘as if they. were. That may be permissible and to some

extent desirable, when the question is whether the

wrongdoer has got access to them by some wrongful

means, like breaking -into a factory, or copying

formulae or blue prints. When, however, the dispute .

turns, as it does here, upon whether the wrongdoer

has ‘acquired .a secret from the employee : who has him-

self acquired it lawfully, the wrong consists in inducing

- him to break his contract, or to. be disloyal to a

confidence reposed in him; and in either case it is a

species of the tort—recognized now for over a century

—of inducing an obligor to default upon an er "

172 F. 2d at 155.

See also McKinzie v. Cline, 197 Or. 184, 252 P. 2d 564

(1953); Restatement, Torts, § 757, Comment on i

(a) h.

_ The evidence amply satan ‘the finding of the court

below that Brandenburg and Norris encouraged the former .

employees to do what they did do while they were ‘still i in

‘See cases cited at page 17 of this opinion [p. 28a of this

Petition]. |

Darling’s emplpy. Even though. Brandenburg and Norris

, may have had the knowedge and the ability to form a

and ‘without.the use in any way of any knowledge they may

.» have acquired from their dealings with Darling, what they

did was, knowingly -arid for their own interests, to help

_ the former employees in their illegal action. This was °

Sufficient to make them liable to* Darling: . See Knicker-

* bocker Co. v. Gardiner Co., 107 Md. 556, 559-60, 69 Atl. 405

- (1908) ; and Restatement, Agency, § 312 comment d. _

_ The Contention of “Unclean Hands”

' The appellants contend that Darling acted improperly

in procuring a search warrant and in having the’ police

department of. Montgomery: County enter the home of

Wilkinson, one of: the former employees, and take. from r

his home certain drawjp#$, when no criminal charge;had —

been filed against. Wilkinson. They-also contend that

Darling improperly harassed Brandenburg by having a

number of detective agencies calling his family atid

__ business associates, and in other ways. They argue further

_ that Darling acted improperly in sending over one. hundred

letters to various concerns asking if they were doing ,

_.- business with Space Aero.’ They object to meetings

‘between officers of Darling and the defendant, Phillips,

during the trial; and -claim that Darling lacked the

_ required candor before the lower court. Because of these

actions, the appellants claim that Darling’s suit should .-

have been dismissed because it did- not come into court.

witheleanhands. - pe Seahieees

In the argument on this appeal, counsel for. the appel-

lants admitted that some of Darling’s drawings were

improperly taken by various of. the former: employees

while they were still in Darling’s employ. The question

of whether or not the search of Wilkinson’s house on the’ —

_ warrant obtained by Darling was legal or illegal does not

fe . *

82a. : .

go" ‘to any of the issues which, in our opinion, are deter.

minative of this case. The various telephone calls’ and —

eortespondence to which the appellants object were not on

their face unreasonable in the protection of what we have

found to be Darling’ s legal. interest in its trade secret.

During the trial, Phillips, one of the defendants. elon

who. has not appealed, called Darling’s counsel for the

purpose of arranging a meetifig with one of Darling’s

principals. The meeting. took place without the presence

-of counsel for either side and without the knowledge or.

- eonsent of. Phillips’ counsel. According to Phillips, it was

at this: meeting that‘ he turned over certain physical

evidence to Darling and agreed to state the true facts when

called as a witness... At the trial, Phillips gave testimony

inconsistent, with his pre-trial deposition. and, with the

Phillips and proceeded to attempt to impeach his testimony.

Irrespective of the impropriety of an attorney arranging

a meeting between parties to pénding litigation, without

notice to other counsel of record,’ it was for the trial court,

sitting without a. jury, to determine for itself the credibility

‘of Phillips’ testimony on thes witness stand, and, in so

doing, to consider what had taken place before the testimony

was given. :

The clean hands doctrine is one resting in the soynd

discretion of the court; it is applied, not for the protection

of the parties, but for the court’s own protection. Ner

- ¥ Hanson, 217 Md. 298, 309, 142 A, 2d 798 (1958). , Thamas |

ins Witiaenes do not belong to either side of the controversy ; they

* ean be interviewed by counsel for any party, in civil as Well as in

criminal cases..\See State v. Papa, 32 R.I. 453, 80 Atl. 12, 15 (1911)

and Mathews v. State, 44 So. 2d 664 (Sup. Ct. Fla. 1950). When

,a witness is also one of the parties, however, and is represented by

counsel, a lawyer for the other side should not in any way com-

municate with him withdut the knowledge and’ gonsent of the «

party’s own counsel. See Canon 9, Canons of Professional Ethics

of the American Bar. Association and Drinker, Legal: Ethics, p. 201.

me he nah laa aR BUT tre te gt amet

v. Klemm, 185 Md. 136, 142, 43 A, 24 193 (1945): The court |

‘below heard, voluminous testimony as to all of the matters

raised in connection with this issue and refused to bar

'- Darling from the’ relief. to which the court found it was

entitled, . We do not find that the court’s refusal to. apply

the doctrine was an abuse of its discretion. )

Objections to Rulings of the Court

The appellants contend that three of Darling’s exhibits

were improperly admitted in the trial below over timely

"" . objection. These exhibits were drawings obtained by the

-~ he?

Montgomery Cownty police as a result of the search and

' seizure to which reference ‘has beén made. The court

’ “below granted the appellants’ motion to exclude the draw-

ings as to Wilkinson but denied the motion as to.the other

_ appellants.’ We do not find it necessary to decide whether

or not these exhibits’ were improperly admitted for, even

if they were, any error in connection with their admission

was ‘not prejudicial. We have found that the. drawings

were nat part of Darling’s trade: secret but they were

Darling’s property and several of: the former employees

admitted on the stand that the drawings had been taken

before the employeés had terminated their ‘employment. .

.The impropriety of the taking of the drawings was

_ admitted by the appellants’ counsel. Apart from the draw-’

ings themselves, the circumstances under which they were .

taken was admissible evidence which tended to show that

the former employees meant to breach their confidential

relationship ‘and duty of loyalty in improperly using

Darling’s trade secret to compete with it. The court below

~ found that.the drawings were of use to the defendants in

setting up their competitive business, but there was ample

testimony other than the actual drawings which supported

this finding. The introduction of the drawings themselves

was only cumulative and unessential.

NA :

The appellants also contend that the lower court com. _

mitted prejudicial error in refusing to have several of their

. >

”)

34a :

expert -witnegses . ‘presnt during the taking of testimon

' im camera unless they took an oath of secrecy as to all ‘the

matters testified to. Darling, at all times, claimed that its

manufacturing process was a trade secret. The court stated

that'‘‘by the very nature of the case secrecy is an essential

factor.’’? Maryland Rule 546 provides that the court may -.

on its own motion exclude witnesses other than parties

from the courtroom until calied upon to testify, but

excludes from the operation of the Rule an expert witness

who is to render an opinion based on the testimony given

. at the trial. This Rule, however, is not a contravention

of the general principle that in taking testimony on matters

in whith, by the nature of the case, such as the one here

involved, secrecy is an essential factor, the trial court has

discretion to permit expert witnesses to remain in the court-

- room only under reasonable conditions imposed to maintain

secrecy. Annot., supra, 62 A.L.R. 2d 509, at pages 513-525

and 527-529 and cases, therein cited.

_ At the trial, the court suggested that the expert wit- :

nesses take an oath of secrecy similar to the oath of

secrecy the Grand Jury takes. One of the appellants’

witnesses, Shreeve, took the oath and remained during the

in camera proceedings. Other expert witnesses of the

appellants, because of their positions, refused to take the

oath. As to those witnesses, the appellants proceeded by

' asking them what they had seen at the Space Aero plant

and whether those methods were generally known. It is

true that, from the appellants’ point of view, it would have

‘present during the m camera proceedings; their witness, —

Shreeve, who took the oath of secrecy, was:so present. The

other witnesses, however, testified from their examination

of the processes and methods used at the Space Aero plant

that these mthods and processes were virtually the same

as those used by Darling. The fact that the appellants’

expert witnesses, other than Shreeve, because of their.

Pad

nett tins Arte PMs 5d Ob Lent Sie

| 35a |

employment, felt they could not take the oath of secrecy,

is understandable but of itself did not give the appellants

the right to have those witnesses present during the m

‘Camera proceedings without taking the oath.. The trial

court was of:the opinion that to permit these witnesses to:

attend the in camera proceedings without taking the oath

might seriously prejudice Darling’s rights. For the same

reason, the court refused to permit the appellants’ counsel

to review the in camera testimony with the: experts who had

‘been excluded. Under all the circumstances, we can not

find that these. rulings constituted an abuse of discretion. ’

The esi of the Injunction |

The order of the lower court, filed. June 10, 1964,

permanently enjoins the former employees, Space Aero,

Brandenburg and Norris from further manufacture or sale

of high or low pressure hose assemblies utilized in oxygen,

air and pressure suit systems ‘of like of, similar con-

struction to hose assemblies manufactured to the require-

ments of United States Military Specification H-22489, and __

from. advising any person, firm or corporation as to the

means for or method of . manufacture of. such hose

assemblies. : oe

There ‘is no provision in the order for the termination

of the injunction if and when Darling’s trade. secret

becomes generally known to the public; nor is there any

provision with reference to the interest claimed by the

United States i in the scope of the injunction.

Injunction is a proper equitable remedy to protect the

interest of the proprietor of a trade secret against the

wrongful use of that secret in breach of a fiduciary duty.

. Franke v. Wiltschek, 209 F. 24 493 (2d Cir. 1953) ; Restate-

_ ment, Torts, §757 (e); Callman, op. cit., § 59.1; note,

Protection and. Used Trade Secrets, 64 Harv. L. Rev., 976,

(36a

982 (1951). The authorities differ, however, as to whether

an injunction issued to protect a trade secrét should ter-

-minate after the secrecy ends.

_» The sixth and seventh Federal Circuit Courts of Appeals

hold that,‘once a person has obtained a disclosure through

a breach of confidence while the disclosure: was still secret,

contrary to the obligations of a confidential or contractual

relationship, he cannot thereafter use the subject matter

of the disclosure which he has wrongfully used, even

though members of the public can do so. Shellmar Products

v. Allen-Qualley Co., 87 F. 2d 104 (7th Cir. 1936), cert.

denied 301 U.S. 695; A. O. Smith Corp. v. Petrolewm Iron

Works Co., 73 F. 2d 531 (6th Cir..1934). These cases deal

with information subsequently patented but the rationale

has been applied to trade secret cases, even where no

patent is involved. The‘ doctrine enunciated in this line of

authorities is sometimes referred to as the Shellmar rule.

The Second Circuit Court of Appeals and some other

jurisdictions hold to the contrary. Conmar Products Corp.

v. Universal Slide Fastener Co., supra; Carter Products,

Inc. v. Colgate-Palmolive Co., supra, 130 F. Supp. at 575.

The holding of these cases is sometimes referred to as the

Conmar rule. The American cases which follow the

Shellmar and Conmar ‘rules respectively, are analyzed it in

Turner, op. cit., at 442-454.

The reasoning of the Conmar rule is that the trade secret

is protectible only because of the fiduciary relationship

of the discloser to the disclosee. Once the secret is public,

the confidence would end in any event. An injunction is

issued only when damages are not adequate compensation

and once a trade*secret becomes public, its original owner

‘ean no longer be irreparably harmed by the use of the

former secret by persons who originally used it wrong-

fully, because the rest of the world is also using it. Under

this rule, a distinction is made between the use of an

37a

3 injunction to protect proper lawful interests and its use -

:. as a penalty. >

<The rationale of the pe rule is that a person

wronged has an action for breach of confidence entitling -

him to a perpetual injunction against the person who

breached it of which the owner of the trade secret can

not. be deprived by an intervening publicity of the dis-

closure. The wrongdoer has deprived himself of the oppor-

tunity, open to the rest of the Leica by his own violation.

of confidence.

_ Inherent in this judicial dichotomy | is the weighing of

the two conflicting. social and economic philosophies,

reference to which has been made in the discussion of the

existence of a trade secret—the balancing of the protection

of rights in a proprietary knowledge gained by research

and initiative against the interests in free competition and

the use of ;an individual’s skill for his ‘own benefit and the

benefit of the general public. ,

Our Court has had oceasion to consider. the balancing

of these interests in a different aspect of the. employer- —

employee relationship but one in which the decision is~

ss hl tothe considerations involved in the present case.

In Tawney v. Mutual System of Maryland, 186 Md. 508, 47

A. 2d 372 (1946), the appellee, a:small loan company, with

another company, filed a bill for an injunction and account-

ing against two former employees and others, alleging that

the employees had entered into employment contracts under

which they agreed, inter alia, to keep secret the names

of any past, present or prospective borrowers and

customers of their employers; to refrain from using any

information relative to such borrowers and customers, and

to keep this information secret and refrain’ from using it

for a period of three years from the date of termination

of their employment. We held that these provisions of

the contract of employment were valid and enforceable,

38a

but that other provisions requiring the employees to

refrain from competition in the Baltimore City trading

area for a period of two years from the date of termina- ~

tion were not enforceable. In holding the latter provisions

illegal, Judge Henderson, for the Court, said:

‘‘We think this goes beyond what is necessary to -

protect the good will of the employer, and works an

undue hardship upon the employees, who would: be

excluded from engaging in the business for which they

are specially fitted by long training and experience.

Moreover the effect of enforcing the clause (M) would

be to stifle competition, in a field where the existence

“« er 7 is clearly in - the public interest. og ad

at 521

Our holding in the Tawney case rested ‘upon the in- .

validity of a portion ef an express contract between em-

ployer and employee rather than upon a breach of an’

‘implied duty of loyalty which the employee owes the

employer ; however, in the portion of the opinion which has

been quoted, we indicated our realization of the importance —

of protecting the legal interests: of the employer to the’

extent necessary, without working an undue hardship upon *

the’ employee. The reference to thé desirability of com-

petition in a field where competition is clearly in the public

interest is particularly relevant to the present case where

the oxygen breathing hoses, which are the subject of oil |

tion, are important to the national defense.

We agree with the Conmar rule. Our conclusion that

this rule should be applied to the present case is fortified

_-by the specific and important public interest here involved.

The injunction should be modified so that it may be ter--—

minated if and when the methods and processes used by:

Darling in the manufacture of its oxygen breathing hoses

become generally known to the public, without contribution

in any way to such public knowledge through disclosures

by the appellants.

39a

: “We ate ahi agree with the appellants that the inijungtion *

should be_restricted to the use of the processes rather than.

prohibiting the manufacture of the product. Darling’ s

- trade secret consists too largely of the ordered relationship

‘ and combination of various steps and devices, some in

themselves quite. simpte in nature, to make a prohibition

of specific. steps or processes practical. It is the period of

. the injunction, rather than its subject matter, which, under

the circumstances, we find too broad.

There -is, however, one aspect of the cians of

the injunction which should be modified. We have found

that the male disconnect attached to the hoses is not a part *

of D _Darling’s trade secret and that the secret as to the

“manufacture of the hoses can be protected without inclusion

of this attached fitting.. The injunction should be restricted:

so as to exclude from its operation and effect the male dis-

| connect under Military Specification, H-22489,

— and Norris contend that, in any event, they:

should-not be enjoined from manufacturing any hose ‘‘like

or similar’’ to Military Specification H-22489, because

Brandenburg had the know how to build the hose,

independently of any knowledge he acquired from_ the. :

former employees. Even if Brandenburg knew how to

build the hose, however, neither he, nor Norris, for whom —

he acted, had ever built such hose commercially. Branden-

burg as an individual and Norris, as a company, actively

helped Space Aero in producing the hose for which Space

. Aefo obtained the Navy contracts. It is an implicit premise

of the injunction that Darling’s interests in its trade’

‘ secret could not be adequately protected unless Branden-

burg and Norris, as well as Space Aero and the former

employees with whom they cooperated, were’ enjoined.

There is a reasonable inference from the testimony that

the practical knowledge which Brandenburg and Norris °

obtained from their association with the former employees

in building the hose added to the tia which they .

My .

formerly had.. It would be difficult to separate the results

of such practical experience from any independent knowl-

edge formerly ‘possessed. In view of all the circumstances,

the court below was justified in enjoming Brandenburg

and Norris, in order adequately to protect Darling. The _

harm to Darling and any hardship of the injunction upon

Brandenburg and Norris sprang from the situation to whose -

making Brandenburg and Norris wrongfully contributed.

See Wicklein v. Kidd, 149 Md. 412, 424, 131 Atl. 780 (1926) ;®

‘and Restatement, Torts, §.941 comment b.

The appellants contend not only that the injunction is

. too broad, but that’ it is invalid, because the United States .

was not made a party to the proceedings. . The injunction

affects the United States in that Space Aero is enjoined

from performing and bidding on contracts with the Navy,

and therefore, the appellants argue, the decree cannot bind |

the government.

The answer to this contention is that the United States

- did not ask to be made-a party to the proceedings, the

appellee did not name it as a party defendant, and the

appellants did not take any timely steps, in the court

below, to have it joined as.a necessary party. The state-

ment of the United States as amicus curiae requested the

lower court to consider ‘its interest.in the scope of the in- -

junction to be entered, but the affidavit of Rear Admiral

Hines attached thereto expressly disclaimed, on behalf of

. the Navy, the taking of any part in any dispute between:

the parties. The United States had ample notice of the

pending litigation, and its failure to apply for joinder as

a, party is to be accepted as a disclaimer of any rights to

that status. Reddick v. State, 213 Md. 18, 30, 130 A. 2d 762

( 1957). The sig a did not raise ™ defense of want

"ees [When one of two persons must siffer loss by action of a

- third person, the losg should fall on him who has enabled the

third person to occasion such loss’’ * * *,

‘of a necessary party by way of motion under Maryland —

Rule 323' or by a dilatory plea under Rule 341.

The United States,’ however, by its statement as amicus

_ curiae and the supporting affidavit filed on June 10, 1964,

the date that the decree was signed, requested the court

to consider the interest of the government in the scope of

the injunction to be entered. The statement specifically

requested that the injunction should exclude the per-

formance of designated contracts between the Navy and .

Space Aero. The affidavit of Rear Admiral’ Hines, which .

was made a part of the statement, also referred to sub-

contracts between Space Aero and certain Navy prime con-

7 tractors. The affidavit stated:

‘‘While there is reason to believe that delays i in sub-

contract performance will curtail Navy scheduling, we |

are not immediately in a position to substantiate this -

view. It is respectfully requested that the Court grant

leave to revise any injunction which may issue in the

- event affirmative data supports a demonstrable adverse -

interest to the National Defense.’’

_ On June 30,: the court signed an order denying the peti-

tion for modification of the injunction, without hearing,

and, so far as the record discloses, without affording the

' United States an opportunity to show, as it had claimed,

that the extent of the injunction would ee a serious

impact upon the Navy’s military needs.

_ * “Courts of equity may, and frequently do, go much

the public interest than they are accustomed to go where

only private interests are involved.’’ Virginia Ry. v. Fed--

. eration, 300 U.S. 515, 552 (1937). See also Yakus v. United

States, 321 U.S. 414, 441 (1944). A court of equity can

_ mold its decree to grant relief suitable to the peculiar

nature of the case.’ McKeever v. Realty. Corp., 183 Md. |

216, 224, 37 A. 2d 305 (1944). :

. The operation of the injunction. issued below was stayed :

by the — of a bond and it appears _— the last, comple- ;

tion’ date of the: three contracts between the N avy and.

Space Aero specifically referred to in the statement of the

United States Navy was in November, 1964. We do not

_~ know, however, whether these contracts have actually been

-eompleted. In the interest of the national defense, the

government must be given the opportunity to show whether

all the work required under*these contracts has been per-

formed; if not, the scope of the injunction should be

limited to permit completion. The Uitited States must also”

be accorded the. opportunity, by appropriate proceedings

-in the lower court, to seek further to:limit the scope of the

injunction te permit the completion of Space Aero’s sub-

contracts with the prime Navy contractees referred to in

Rear Admiral Hines’ affidavit, if it is determined that the

‘ prohibition of the completion of these subcontracts has a

demonstrable adverse effect on the national defense. The

_ damages, if any, sustained by Darling as the result of Space

Aero’s completion of its contracts can ‘be determined in -

| -subsequent proceedings.

Order Affirmed in Part, Reversed in Part, and Case. -

_ Remanded for the Passage of an Order and. for

Further Proceedings if Necessary in Conformity —

with this Opinion; Costs of this Appeal to be Paid

One-half by the Appellants in Equal Shares and. .

One-half by the Appellee.

43a

| APPENDIX c .

Mandate of the Court of p ee of Maryland

e MANDATE

_ Courr or APPEALS OP MaryLanp

No. 191, September Term, 1964 -

~ Space AERO Propvets Co., Inc., er ab.

, a e. ¥ | e.

eae R. E. Dazuive Co., Inc.

’ Appeal from the Circuit Court for Montgomery County.

Filed: July-30, 1964.

August 28, 1964: Motion and objections of —_ to

sureties on supersedeas bond.

September 4, 1964: Answer to above motion filed.

September 18, 1964: Order of Court, filed declaring s super- |

sedeas bond null and void, etc.

September 29, 1964: Motion ta stay effect of aii filed.

October 5, 1964: Appellee’s answer to above motion filed.

October 7, 1964: Motion of — to: safeguard trade

‘Inowledge filed. .

October ‘10, 1964: Answer.to above motion filed.

October 12,1964: Order of — filed re ee effective

: ordex; etc.

. October 12, 1964: Order of + Court filed granting motion to

a safeguard trade knowledge.

October 16, 1964: Motion of appellants for tether exten-

. sion of time, ete., filed. Temporary extension Se siranae

ete.

October 21, 1964: Appice 5 answer to above motion filed.

October 22, 1964: Order filed granting motion for time to

_ file supersedeas bond ; ete.

. November 18, 1964: Petition filed ‘requesting order to

-make briefs, ete. available to United States Depart- .

ment of Navy, : ete.

.November 24,. 1964: _ Answer to above petition’ filed by

appellee.

December 7, 1964: Petition re briefs ‘to. > Department of

: Navy; ete., , denied. * Se

March 12, 1965: Order afiriined ‘i in. part, reversed in hart:

and case remanded for the passage of an order and

for further proceedings if necessary in. conformity

“with this opinion; costs of this appeal to be ‘paid’ one- °

half by thé appellants in equal shares and one-half by

thle —- Opinion by Oppenheimer, J. |

- April 7, 1965: Motion for modification of opinion and for

reargument filed. Motion for stay. of mandate filed.

April 12, 1965: Appellee’ 8 reply t to above motion ae modi-

fication of opinion filed. ‘

“April: 12, 1965: Motion for hatninined denied ; sail?

>" affirmed in-part and reversed in part and: case re-

manded for further proceedings as provided in opinion

. filed herein on March: 12, 1965, and as supplemented

_ by this opinion. “Per Curiam Opinion filed.

- Srare or Maryuann, Sct:

I do hereby certify that the foregoing is truly taken from

the record and proceedings of the said Court of Appeals.

In testimony ‘whereof, I have hereunto ‘set my hand as °

Clerk and affixed the seal of the Court of eri this

, — si of April A. D. 1965.

° J. Lxovp Youre

. Clerk of the Court of aenes ., Maryland

. 45a

| ; APPENDIX D 1 |

; Oytaton and Order of the Court of Appeals of Maryland

marie Motion for Modification of Opinion and

" * for ‘Reargument

IN THE COURT OF APPEALS OF MARYLAND

No. 191

September: Term, 1964 |

SPAcE Azno Propucts en, ‘Inc yp BE AL.

R. E.. Danuta Co, Inc. |

Prescott, C. J.

' Hammond,

a ' * ‘Horney,

Marbury:

‘ a daca

a ‘aa

Per Curiam Opinion On Appellants’ Motion For

- Modification of Opinion and for Reargument..

# - Filed: April 12, 1965

PER CURIAM OPINION ON APPELLANTS’ MOTION

| FOR MODIFICATION OF OPINION AND FOR

> REARGUMENT

‘In the opinion filed herein on March 12, 1965, we ¢on-

“sidered the statement of the United States as amicus

curtae and the supporting affidavit of Rear Admiral Hines

requesting the court below to consider the interest of the

government in the scope ofthe injunction to be entered.

We.held that, in the interest of the national defensé, the

United States must be given the ‘opportunity to show

whether all the work required under the contracts referred

to las been performed and, if not, that the scope of the

injunction should ‘be limited to permit’ completion. We

ordered the scope of the injunction modified in this respect,

46a

not only as to the-contracts specifically referred to in

the statement of the United States, but also as to the sub-

contracts referred to in the affidavit of Rear Admiral

Hines as to which the United States did. not specifically

request modification of the injunction. In their motion,

the appellants ‘now state that other departments and

agencies of the United States have entered into contracts

with Space Aero other than those referred to in the state-

ment of the United States and the affidavit of Rear Admiral

Hines: This allegation is supported by an affidavit of

Rear Admiral E. R. Eastwold, assigned as Deputy Chief,

Bureau of Naval Weapons, Department of the Navy. Rear

Admiral Eastwold’s affidavit states. that, in addition to the

contracts and sub-contracts to which reference has heen.

made, the Navy has other prime contracts let to Space

Aero and that the Navy’s Aviation Supply Office has two

uncompleted contracts with Airborne Research and De-

velopment Corporation, Sun Valley, California, which in-

volved the same basic military specification and that this

company has sub-contracted to Space Aero a significant

segment of the work required by the contracts. The: only

other Navy-approved source for the oxygen air hoses, it is

stated in the affidavit, is the Darling Company, the ap-

. pellee. The affidavit states that in the event Space Aero

is unable to complete the work on these additionalgeontracts -

and sub-contracts, a substantial amount of additional time

will be required to complete them, with a consequent:dis-

Yuptive effect upon the delivery of urgently required

breathing hoses essential for pilots’ safety in the opera-

tion of the Navy’s first line fighter and attack aircraft.

Rear Admiral Eastwold asks that, in the interest of the —

national defense, the scope of exceptions to the order of

injunction be further broadened pursuant to the attitude

expressed in the opinion.

The appellants’ motion <slieite that there was nothing in

the record on appeal regarding the additional contracts

and sub-contracts referred to in Rear Admiral Eastwold’s

~”

47a _ * e

affidavit. Apparently, some of these additional contracts

or sub-contracts were awarded after ‘the litigation had be-

gun and even after the injunction of the lower court was

issued but. was‘ stayed pursuant to orders of: this Court

and the posting of a supersedeas bond. Nevertheless, for

the reasons set: forth-in the opinion, we deem it necessary,

in the interest. of the national defense, that the injunction

_be further modified to direct the lower court, upon remand,

to accord the United States of America, and any of its

departments and agencies, an opportunity to demonstrate

any adverse effect upon the .national interest of any pro-

hibition of the completion of any contracts or sub-contracts

entered into by Space Aero under-the designated military

specification to the date of this Court’s opinion. The -

failure of the United States and of the Navy to bring these

additional contracts or sub-contracts to the attention of

the lower court, or to our attention, can not be allowed to

affect the safety of our military personnel. As was stated —

in our opinion, the damages, if any, sustained by Darling.

as a result of Space Aero’s completion of its contracts or

its sub-contracts, if it is determined by the lower court

_that the prohibition of the completion thereof has a demon-

strable adverse effect upon the national defense, can be

determined in subsequent’ proceedings. If any such com-

‘pletion is so permitted, it is for the lower court to de-

termine whether the amount of the supersedeas bond should

be raised and° whether any ‘part of the purchase price to

be paid by the United States of America and any of its

departments’ and agencies should be ordered withheld

pending the ascertainment of the damages, if any, to Dar- |

ling by reason of the completion of the work, - |

We note the statement in Rear Admiral Eastwold’s

affidavit that steps have been taken to insure that no fur-.

ther work will be given Space Aero of. the kind which it

is enjoined from performing. ;

In our opinion, we considered the scope of the injunction

only as it affected the appellants. No request for modifi-

F eX,

—

48a,

cation of the injunction as it affected employees of Space

Aero, other than the appellants, was made in the court

below, or in the briefs or arguments on appeal. The dis-

tinction, however, is impliedly raised for the first time in

the motion now before us. - We deem it proper that the-

injunction should be further-modified so as:to make it clear

that any employees or agents of Space Aero, or of any of

the! individual appellants, other than the appellants them-

selves are not to be prohibited from using their skills and

from working for any other company in the manufacture

or sale of pressure hose assemblies, if such hose assemblies

‘have a construction different from that used by Darling

and if such manufacture or sale does not use Darling’s

trade secret methods and processes.

The other contentions raised in‘ the appellants’ motion .

_have been considered. by us in reaching the determinations

set forth in the opinion and in respect thereto we adhere

to the conclusions which we have set forth.

Motions For REARGUMENT DENIED; OrDER AFFIRMED

IN-ParT AND REVERSED IN Part AND Case REMANDED

. FoR FurTHER PROCEEDINGS AS PROVIDED IN OPINION

' Firep Herern on Marcu 12; 1965, anp as SuppPLe-

MENTED BY THIS OPINION.

49a

APPENDIX E

Opinion of the Circuit Court for Montgomery County,

| Maryland _

IN THE CIRCUIT COURT FOR MONTGOMERY COUNTY, MD.

SITTING AS A COURT OF EQUITY:

No: 24002 Equity

R. E. Daruine Co., Inc., Plaintiff,

. Spacz-Agro Propucts Co., Inc. zr AL., Defendants,

| (Filed May 27, 1964)

In this case the plaintiff, R. E. Darling Co. Inc. has filed

its Bill of Complaint in equity against the defendants,

Space-Aero Products Co., Inc., a corporation, Space-Aero |

Products Development Corporation, Inc., Joseph ‘A. Jack-

son, William Phillips, Douglas L, Creger, Eugene E. Fas-

ano, Gloria Rines Creger, Mary B. Quinter, William H.

Wilkinson, Norris Manufacturing Company, a corporation,

William Brandenburg, John Doe and Jane Doe, seeking ~

(a) a permanent injunction restraining them from using

'. arty part of certain trade secrets claimed to be owned by it,

(b) a permanent injunction restraining them from making .

false statements concerning the plaintiff’s products and

_ from interfering with the plaintiff’s employees, (c) for an

_ accounting and damages and (d) that they be required

to deliver up for destruction by the Court documents

owned by the plaintiff. There is also a prayer for costs |

and a reasonable counsel fee to the plaintiff’s solicitors.

In the answer of all defendants except the defendant, Wil-

liam Brandenburg and Norris Manufacturing Co., a gen-

‘ eral denial has been entered. These defendants further

answer the plaintiff’s Bill of. Complaint alleging in sub-

stance, (1) that they were generally versed in the art or

‘thanufacture of the plaintiff’s products, that they were

not bound to any secrecy agreements with’ plaintiff, that

they .all as a result of working together in the plaintiff’s

50a

business established a social relationship among themselves

and that they all became dissatisfied with their employ-

‘ment by the plaintjff, (2) that they did. formulate a plan

to go into business similar to the plaintiff’s and did secure *

financial backing from the defendant, William Branden-

burg, (3) that they did in ‘fact receive the financial-backing_

of the defendant, William Brandenburg, and they did enter

‘into an ‘agreement with him for such financial backing of |

a newly formed corporation known as Space-Aero. Prod-

ucts Co. Inc., (4). that the drawings the plaintiff alleges

- - were copied by them were unlawfully copied by the plain-

tiff from the drawings of Douglas Aircraft Company and

that the plaintiff’s manufacturing processes and techniques

were known to others in the industry and that the silicone

compound used ’°to make the product . (oxygen breathing

hoses for use in high flying pilots in aeroplanes) was the

seeret of the defendant, Norris Manufacturing Co., (5)

that they deny any conspiracy to maliciously or wantonly

_ injure the plaintiff in the conduct. of its business. The

defendant, William Brandenburg, filed a separate pleading,

a combined. demurrer and answer. The answer of this de-

feudant is a general denial to all material allegations of

the Bill of Complaint pertaining to him. The defendant,

Norris Manufacturing Company, also filed a separate

pleading combined answer and demurrer. Its answer is a

general denial to all material allegations of the Bill of Com-

plaint pertaining to it. 7

Suit was filed in February, 1961. At the outset the plain-

tiff made a request of this Court for a preliminary or

pendente lite injunction against all defendants. This re-.

quest submitted to another. Judge of this Court was not

granted. Numerous requests for a preliminary injunction

were made but at: no time granted. There were many

pleadings filed after the suit was instituted. The case was

specially assigned to this member of the Court in the.early

‘part of the year 1963. On the 26th day of March, 1963,

-testimony in open Court was started. Thereafter, due to

—_—

—~*Sla

| illness, court assignments and other. proper reasons, the

taking of testimony was interrupted for intervals of -sev-

eral months, weeks and days, none of which delays were

the fault of any of the litigants. It is also to be noted that

there appears to be no lack of diligence on the part of any

of the parties to- prosecute or defend the case. The delays

~~were all within the realm of legitimate excuse. Before the

testimony in the case was begun, this Court, pursuant to

Rule 501 of the Maryland Rules of Procedure, confined the -

trial to the issue of whether or not an injunction should.be

granted. There were no objections to this manner of pro-

ceeding except the plaintiff called to the attention of the

Court that it was not agreeing to the trial of that issue

alone if it meant a waiver of one of the grounds for the

issuance of dn injunction, in that some element of damage

must be shown if an injunction were to issue and that the

plaintiff would proffer to show substantial damage. On

the proffer, the Court proceeded to hear the testimeny.

The taking of the testimony in open Court consumed more

than eighteen (18) weeks. This Court did not have the

benefit of a, Master’s findings or recommendation as no

rule of this-Court would permit a reference to a Master,

‘and furthermore, neither side suggested reference ‘to a.

Master or a Referee, both apparently being satisfied: for'a

Judge to hear the matter. Much, if not practically all, of

the testimony was taken in camera. The plaintiff intro-

duced seventy (70) exhibits, five (5) of which were .intro-

duced in=camera. Twenty-one (21) of the plaintiff’s ex-

hibits were either withdrawn or ruled out by the Court.

The defendants introduced ninety-two (92) exhibits,

twenty-two (22) of which were introduced in camera. One

_ of the defendants’ exhibits was only identified (Exhibit 44)

and one (Exhibit 21) was ruled out by the Court. All wit-

nesses were excluded from the Court Room at all times.

The Court did not rule on the demurrer of William

Brandenburg and Norris Manufacturing Company. As

has been the custom in this Court for many years, when

52a ax

a defendant demurs and answers, the Court hears the evi-

dence in the case and decides all‘ issues of law and fact

- at the close of the case. No objection has been made to —

this procedure.

At the conclusion of the testimony the Court instructed

solicitors for both parties to submit to it at the conclusion

of the argument, findings of fact ‘and conclusions of law.

‘The argument was heard by the Court approximately five .

(5) weeks after the close of all the testimony. . The findings

of fact and conclusions of law: have been very helpful to -

the Court. Solicitors have been diligent and alert. The

Court has been very lenient in admitting evidence in order

for all parties to present their theory of the litigation. The

record is voluminous, there are some repetitions but this

‘has ‘been caused by the length of time needed to sauety try

the case before the Court.

The uncontradicted evidence in the case shows that the

individual defendants, Joseph A. Jackson, William Phil- —

lips, Douglas L. Creger, Eugene E. Fasano, Gloria Rines

Creger, Mary B. Quinter and William H. Wilkinson were

employees of the plaintiff corporation over the period from

November 1, 1956, to the month of December, 1960; that

the defendant, William Brandenburg as President of the y

defendant Norris Manufacturing Company and Norris

Manufacturing Company were the principal suppliers of a«

compound known as silicone (sometimes referred to as

silicone rubber) ; that the plaintiff was engaged in the busi-

ness of manufacturing oxygen breathing hoses for use of

pilots in aeroplanes; that in April, 1960, the United States

Navy. Department. formulated a certain specification known

as Military Specification H 22489 which was a specification

for. a high altitude breathing hose to be used by pilots in -

both to the aeroplane and to an oxygen tank on the pilot

and into the pilot’s flying mask. The purpose of the. hose

is to furnish the pilot with oxygen at high altitudes while

_ 88a

flying the abba: and in the event he is pampieal to *

ejected from the plane. ‘Each of the individual defendants

except William. Brandenburg had important positions with

the plaintiff in the building of oxygen breathing hoses.

Jackson was the security officer of the plaintiff and he

obtained all of his knowledge and experience in the build-

ing of such hoses from the plaintiff during the time he was

employed from Noveniber, 1956, to December 9, 1960. He

' was the most. trusted employee and therefore he had the

responsibility of approving drawings, traveled to investi-

gate hose failures, discussed problems ‘with customers, con-

tact@d the aeroplane companies, and was in charge of all

drafting and supervision of the plaintiff’s drawings. The

defendant, Fasano, was the Production Supervisor and as

such was responsible for the efficiency of the factory oper-

ation. The defendant, Phillips, was the Chief of Quality

Control.. The defendant, Creger, was foreman of one of

the shops. Creger’s wife was a hose builder. The defend-

ant, Quinter, was chief “bookkeeper. In their respective

positions these defendants knew the hose business, each

having learned all there was to know from the plaintiff. '

The defendant, Norris Manufacturing Company furnished

practically all of the basic ingredient, the silicone com-

pound to build the hose, although it did not build such a

hose. itself. While in the employ of the plaintiff, the deé-

fendants at the instigation of Jackson,liscussed going into

the hose business from September, 1960, to early in De-

cember, 1960, and such discussions led to the making of _

‘plans, financial and otherwise, to. go in the business of

manufacturing the same kind of oxygen breathing. hoses

manufactured by the plaintiff. The incentive to go in

business was to submit bids to the United’ States Navy

. under its Military Specification H 22489, which was open

to the public in the month of April,-1960. All individual

defendants knew of the existence of this Military Specifi-

cation which came to the knowledge of the individual de-

fendants who. were ane of the _— by virtue of

54a

their employment with the plaintiff The defendaut,

Brandenburg, became aware of such specification by virtue

of his contact with the plaintiff as a supplier of silicone

rubber. The plaintiff, as late as December, 1960, had not

submitted any hoses to the Navy under this Military Speci-

fication. The meetings held by the defendants were with-

out the knowledge of the plaintiff and were in secret. It .

was in early December, 1960; that the leader of the idea

to go into a competitive business, defendant Jackson, told

his employer, the plaintiff, that he and some of the other

employees of the plaintiff were going into the oxygen

breathing hose business. The individual defendants termi-

nated their employment with the came in the following

order:

Joseph A. Jackson on Tecomben 8, 1960 .

Gloria Rines Creger on December 9, 1960 |

Douglas L. Creger on December 16, 1960

Eugene E. Fasano on December 19, 1960

William Phillips on December 21, 1960 —

Mary B. Quinter on December 23, 1960

William H. Wilkinson on December 23, 1960 |

Thereafter the individual defendants organized the de-

fendant corporation, Space-Aero Products Company, Ine,

the charter being granted on January 2, 1961. The de- |

‘ fendants started manufacturing oxygen breathing hoses

under the Military Specification H 22489 immediately. .A

hose without fittings, was submitted by the defendants to

the Navy on February 20, 1961, and it was accepted by the

its suit onthe 27th day of February, 1961. No preliminary

injunction was issued, as heretofore stated.- Some of the

individual defendants, except William Brandenburg, had

in their’ possession, after each. left the employment of the

plaintiff, certain sketches of oxygen breathing hoses which

they had taken from the plaintiff while they were employed .

by the plaintiff and without the plaintiff’s knowledge.

| 55a

‘Other 1 ee were in the possession of the defendants such

as the security manual and the quality control manual.

"The defendant, J: ackson, instructed his wife over'the tele-

phone when he was in California after he had severed his

connection with the plaintiff, to destroy and burn the

drawings (which were the property of the plaintiff) in-his

possession in his home. There were drawings of the plain-

tiff’s on a drawing board in the home of one of the defend- |

- ants which were copies of the plaintiff’s drawings. The

defendants testified that while these drawings were taken

from the plaintiff, they were in turn copied by the plaintiff -

’ from drawings of the Douglas Aircraft Co. and therefore

‘they had a right to have and copy them. The evidence is - |

doubtful as to whether or not the drawings were in fact

the drawings. of the plaintiff but the evidence clearly shows :

that the drawings that the defendants took from the plain-

_., tiff were in fact the property of the plaintiff. The Court :

finds that even though these drawings may have been -

copied from the Douglas Aircraft Co. drawings, they were

the property of the plaintiff and the defendants had no

right to take them. The defendants contend that they did

not use these drawings, because they were not needed.

This Court does not believe that the defendants made no

use of these drawings in setting up their competitive busi-

ness. If such drawings were of no use, then why did. the

defendant, Jackson, order a large quantity of them burned. -

and destroyed? This Court finds from the evidence that

the defendants (except William Brandenburg. and. Norris

.Manufacturing Company) while employed by the plaintiff.

secretly met for the sole purpose of forming a corporation

to go in business in competition with the plaintiff and that

their incentive was to submit hoses to the Navy under Mili- -

tary Specification H 22489. The secrecy: of their meetings

and the taking of drawings and other important documents

permitted them to immediately get the business going.

The authorities are uniform in the principle that an em-

_ ployee owes the duty of fidelity and trust to his employer.

ie ee

- No employee has the right to use his position as such to

the detriment of his employer. An emoployee . cannot

‘*feather his own nest at the expense of his employer while |

he is still on the payroll.” Sanitary Farm Dairies vs. Wolf, .

112 N.W. 2d 42:48. ‘*No man can serve two masters for

_ either he will hate the one or love the other, or else he will

stand by the one and despise the oth

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