Petition for Writ of Certiorari — Signatrol, Inc. v. Schulenburg

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Lint ie aan Office Supreme Court, U.S.

tn tet, We FILED

| No. 101 6] Fee 14 1966

| JOHN F. DAMS, CLERK

IN THE

Supreme Court of the United States

Ocroser Term, 1965

SIGNATROL, INC., a corporation, JOHN W. SUTPHIN,

WILLARD E. BACHMAN, JOSEPH E. McNAMARA and

WENDELL R. WALKER,

Petitioners,

V8.

EDWARD J. SCHULENBURG, EDWARD J. SCHULENBURG,

JR., HELEN E. SCHULENBURG and MARIE E. POTTEBAUM,

Co-partners doing business as TIME-O-MATIC COMPANY,

TIME-O-MATIC, INC., 2 Corporation, and E-S INDUSTRIES,

INC, ae

Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF ILLINOIS

HORACE E. GUNN

WILLIAM R. KESLER

4 North Vermilion Street

Danville, Illinois 61833

OWEN RALL

PETER M. SFIKAS

135 South LaSalle Street

Chicago, Illinois 60603

Attorneys for Petitioners

SARS TE CORT BET ETL LT NL LEI TET TE

McCORMICK & HENDERSON, INC. CHICAGO

SE ree anne | See ee ee ee ees

INDEX

PAGE

Citations to Opinions Below 2

JUTISGICHON — «...W2.....neeeee scene 2

Questions Presented | 3

Provisions of the United States Constitution Involved 4

How the Federal Questions Were Raised Below ...... 5

Statement | 6/ .

Reasons for Granting the Writ ...... 13

Conclusion “22

CITATIONS

Cases

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

254 (1964) | 3, 6, 7, 13, 15, 19, 20

‘Fiske v. Katsas, 274 U.S. 380 (1927) 13

“New York Times Co. v. Sullivan, 376 U.S. 254 (1964) 13

Schulenburg v. Signatrol, Inc., 50 Ill. App.2d 402, 200

N.E.2d 615 (July 23, 1964); 33 I11.2d 379, 212 N.E.

2d 865 (Nov. 18, 1965) 2

Sears Roebuck & Co. v. Stiffel Co., 376 U.S. 225

ED - einseccsnienrenniensesenenivetons 3, 6, 7, 18, 15, 19, 20

‘Servo Corp. of Ameria v. General Electric Co., 337 F.

2d 716 (C.A. 4, 1964), rehearing denied 342 F.2d

993 (C.A. 4, 1965) | 7,19

Smith v. Dravo, Inc., 203 F.2d 369 (C.A. 7, 1958) ...... 18

Van Products Co. v. General Welding & Fabricating

Co., 213 A.2d 769 (1965) PY 18, 20 .

\. Fg

Constitutional Provisions

PAGE

U.S. Const. Art. I, § 8 4)

U.S. Const. Art. VI, § 2. , i 5

U.S. Const. Amend. XIV, § 1 5-6, 21

Statute

Sherman Act, 69 Stat. 282, 15 U.S.C.A. § 2 (1963) ...... 21

Miscellaneous

“PRODUCT SIMULATION: A RIGHT OR A

WRONG?’’ by Daphne R. Leeds, Milton Handler,

Walter J. Derenberg, Ralph S. Brown, Jr. and Paul

Bender, 64 Columbia L. Rev., 1178, at 1189, 1203,

1208, (1964); ‘“‘THE SEARS AND COMPCO

CASES: A FEDERAL RIGHT TO COMPETE

BY COPYING’’, by Lionel Kestenbaum, 51 Amer.

Bar Journal 935, at 938 (Oct. 1965) 20fn.

lili

APPENDIX ,

a « ees. Arp, Pace

Opinion of the Illinois Appellate Court: 1

Petitioners’ Petition for Leave to Appeal in the Tili-

nois Supreme Court (Excerpts). 9

First Opinion of the Illinois Supreme Court ................ 20

Dissenting Opinion of Mr. Justice Underwood of the

Illinois Supreme Court 27

Order Denying- Respondents’ Petition for Rehearing .. 32

Order Vacating Denial of Petition for Rehearing and cy

Granting Same 39

Second Opinion of the Illinois Supreme Court ............. 33

Clarification of the Opinion of the home Supreme

Court 42fn.

Respondents’ Motion for Clarification of Opinion ...... 43

Petitioners’ Petition for Rehearing in Illinois Supreme

Court

Order on Clarification of Opinion ...... : . 54

Order Denying Petitioners’ Petition for Rehearing .... 54

IN THE

Supreme Court of the United States

% OcToBER TERM, 1965

No.

SIGNATROL, INC., a corporation, J OHN W. SUTPHIN,

WILLARD E. BACHMAN, JOSEPH E. McNAMARA and

WENDELL R. WALKER,

Petitioners,

~ Vs. age, *

EDWARD J. SCHULENBURG, EDWARD J. SCHULENBURG,

JR., HELEN E. SCHULENBURG and MARIE E. POTTEBAUM,

Co-partners doing business as TIME-O-MATIC COMPANY,

. "TIME-O-MATIC, XINC., a — and E-S INDUSTRIES,

INC., .

° - Respondents.

PETITION FOR A WRIT OF CERTIORARI

TO THE SUPREME COURT OF ILLINOIS

PETITION FOR CERTIORARI

Petitioners pray that a writ.of certiorari issue tb review .

the judgment of the Supreme Court of Illinois entered in

this case on September 28, 1965, which hecame final by the

denial of the Petitioners’ petition for rehearing on No-

- vember 18, 1965.

CeraTions TO OPINIONS BELow a ie

The unreported opinion of the trial court, 40 pages in

length, is printed in the Abstract* commencing at page

ra a ee

The opinion of the Appellate Court of. Illinois) Fourth

* District (Schulenburg v. Signatrol, Inc., 50 Ill.. App. 2d

402, 200 N.E.2d 615 (July 23, 1964)), is hs piace in the

Appendix** at page 1.

The first opinion of the titinois Supreme Court, filed ,

March 18, 1965, is unreported and is. printed in the Ap-

pendix at page 20. The second opinion of the Illinois

Supreme Court filed September 28, 1965, as revised No-

vember 18, 1965, on the denial of our petition for rehearing,

Schulenburg v. Signatrol, Inc., 33 Tll.2d 379, 212 N.E.2d

865, is printed in the Appendix at page 33. is

The revision or ‘‘clarification?? of the September 28,

1965 opinion of the Illinois Supreme Court which was made

on November 18, 1965 is indicated in the footnote on

pages 42 and 43 of the Appendix.

J URISDICTION

The judgment of the Illinois Supreme Court was entered

on September 28, 1965 (See Appendix, p. 33; Unprinted

transcript of record, p. 47). Rehearing was denied on

November 18, 1965 (See Appendix, p. 54; Record, p. 61).

The jurisdiction of this Court to entertain this Petition

for Certiorari is invoked under 28 U.S.C., Section 1257 (3).

* Page references to the “Abst.” are to the printed Abstract of ©

Record in the Illinois Appellate Court, re-covered in this Court, on

which the case was heard in the Illinois Supreme Court. Nine copies

have been filed with this Court.

** Page references to the “ Appendix” are to the separately-paged

_ appendix bound with this Petition.

QuEsTIONS PRESENTED

1. On the theory that widely-circulated drawings and

blueprints describing the parts of a simple, unpatented

electrical device were trade secrets, contrary to the un-

disputed evidence, in the record, the Illinois Supreme Court

in this case has made a serious inroad into the Federally-

protected right of copying any unpatented ‘article an-

nounced in Sears Roebuck & Co. v. Stiffel Co., 376 U.S. 225,

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

234, on March 9, 1964, while the case at bar was pending

in the Illinois Appellate Court, long before the date of

the. judgment of the Illinois Supreme Court.

2. The judgment below algo denies ‘to former employees

the freedom of copying an unpatented article which free-

dom this Court held in the above cases is a right protected

against State interference — the judgment below thus deny-

ing to the Petitioners equal protection of the Jaws and

depriving them of liberty and property without due process

9 0f law in violation of the first section of the Fourteenth

Amendment.

3. Lastly, the judgment below is monopolistic in viola-

tion of every concept of Federally-protected freedom of

commerce, inasmuch as the judgment protects an assembler

- of an unpatented article against the competition of those

most likely to compete with him — his fokmer employees.

The three questions thus presented may be formalized

as follows: | —

1. May a State, by denominating as trade secrets widely-

circulated drawings and blueprints (for the purchase and

assembly of an unpatented article which is concededly in

the publie domain) invade and restrict the Federally-pro-

tected right of all persons freely to manufacture unpatented

articles? : Ky

wee

2. May the Federally-protected right of duplicating and

selling a simple, unpatented electrical device be evaded

by a State’s declaring that widely-circulated drawings and

blueprints of the parts of the device are trade secrets

which former employees of the seller may not copy or

memorize, thereby depriving them of liberty and property

without due process of law?

3. Are Federal laws and national policy protecting the

freedom of commerce violated by a State court decree*

which enjoins, everywhere in the~world, the Respondents’

former employees from manufacturing or selling, directly

or indirectly, a simple, unpatented electrical device whose

component parts are described in widely-circulated draw-

ings and blueprints which the employees are charged with

having memorized or copied?

PROVISIONS OF THE Unrtrep States ConstTItuTIon

Here INVoLveD

Article I, Section 8:

The Congress shall have power * * * to promote the

Progress of Science and Useful Arts, by securing for

limited Times to Authors and Inventors the exclusive Right

to their respective Writings and Discoveries.’’

Article VI, Section 2: —

This Constitution, and the Laws of the United States

which shall be made in Pursuance thereof * * * shall be

* The injunction finally approved by the Supreme Court of

Illinois enjoins the Petitioners from manufacturing or selling, directly

or indirectly, flashers imitative of or operating on the same principle

as Respondents’ flasher anywhere in the world until such time as the

trial court may make a determination of the period of time in

which the Petitioners may “lawfully” duplicate Respondents’ flasher:

The manufacture and sale of parts of such flashers are similarly

enjoined. oad

the supreme Law of the Land; and the Judges in every

State shall be bound thereby, any Thing in the Constitution

or Laws of any State to the Contrary notwithstanding.

Fourteenth Amendment, Section 1:

* * * 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.

How THE FEperRAL Questions WERE RaiseD BELOW

The Petitioners raised in their Petition for Leave to

- Appeal to the Illinois Supreme Court (Appendix, pp. 9-17)

the substantial federal question that the use of State

unfair-competition law to give relief against copying of

unpatented articles conflicts with federal patent laws and

thus violates the patent clause of the United States Con-

‘stitution, U. S. Const. Art. I, § 8 and the supremacy

clause, Art. VI, § 2. The Illinois Supreme Court expressly

‘ruled on this aspect of the case by denying the Petitioners’

contention (Appendix, pp. 33, 39-40).

In the Petitioners’ Petition for Leave to Appeal to the

Illinois Supreme Court and in all other briefs filed in the

Illinois Supreme Court the substantial federal question

was raised that any judicial relief, injunctive or otherwise,

denying the petitioners the right to manufacture and sell

an unpatented article solely because the petitioners were

former employees of the manufacturer of the unpatented

article is clearly a deprivation of liberty and property

without due process of law and a denial to the petitioners

of the equal protection of the laws. U.S. Const. amend.

XIV, § 1 (Appendix, pp. 17-20, 44, 51). This contention

of the Petitioners was denied by the Illinois Supreme Court

sub silentio.

The Petitioners in their Petition for Leave to Appeal

to the Illinois Supreme Court and in all other briefs filed

in the Illinois Supreme Court raised the substantial federal

question that an injunction which enjoined the Petitioners

from copying an unpatented article ol to permit the

Respondents to enjoy monopoly control over the unpatented

article was an express violation of explicit federal policy

prohibiting monopolies (Appendix, pp. 9, 20, 44, 51, 54).

This contention of the petitioners was also denied by the

Illinois Supreme Court sub silentio.

STATEMENT

This is a petition for certiorari to the Supreme Court

of Illinois seeking review of a judgment affirming a sweep-

ing injunction against the Petitioners prohibiting them

from, among other things, manufacturing or selling any

electric ‘‘flasher’’ or ‘‘timer’’ or any component parts

thereof similar to the Respondents’ unpatented device, or

manufacturing or selling any electric flasher employing

the same principle or principles.

On a petition to review the judgment of the intermediate

appellate court, reported in 50 Ill. App. 2d 402, 200 N.E.

2d 615 (1964), affirming the trial court decree, the Illinois

Supreme Court initially, on March 18, 1965, reversed th

decree of the trial court, held that no trade secret | a

shown, and that under Sears Roebuck & Co. v. Stiffel, 376

U.S. 225, and Compco Corp. v. Day-Brite Lighting, 376

U.S. 234, the manufacture by Petitioners of flashers simi-

lar to Respondents’ unpatented flashers could not en-

joined or punished in damages (Appendix, p. 20, at p. 22).~

On rehearing, the Illinois Supreme Court struck from

its original opinion all references to the evidence dis-

proving the existence of a trade secret, and without dis-

cussing the evidence so ignored, held in general language

that the ‘‘determinations of the trial and appellate courts

on the trade secret question are affirmed’’ (Appendix, p.

42). The Court held that the Sears and Compco cases were

distinguishable because in those cases no problem of trade

secrets was present (Appendix, p. 40).

In distinguishing Sears and Compco the Illinois Supreme

_ Court relied (Appendix, p. 39) upon Smith v. Dravo Corp.,

203 F. 2d 369 (C.A. 7, 1953), based upon Pennsylvania law,

and (Appendix, p. 40) on Servo Corp. of America v. Gen-

eral Electric Co., 337 F. 2d 716 (C.A. 4, 1964), rehearing

denied with opinion, 342 F. 2d 993 (1965), which as this

Petition is written is pending in this Court on a petition

for certiorari filed on May 19, 1965 (Oct. T., 1965, No.

154). [The petition for certiorari is by Servo and relates

to patent aspects not involved in the case at*bar.]

The Respondent corporation, E-S Industries, is the suc-

cessor in interest to a corporation, Time-O-Matic Company

(TOM), which was in the business of assembling and |

selling electric flashers used primarily in the sign industry ~

to cause lights to flash on and off in such a manner as

to animate'the sign in various patterns or designs.

In 1932, Respondent Edward J. Schulenburg, Sr., went be

to work for Sangamo Electric Company at Springfield,

Illinois, as head of its flasher and timer division and held

that position until 1945 when he purchased all of the assets

of the flasher and timer division (Abst. 90) for. $2,718.61

(Appendix, p. 33). He moved the operation to Danville,

ae |

Illinois, under the name of Time-O-Matic Company. Peti-

tioner.John W. Sutphin was also an employee of Sangamo.

When he returned from military service in World War II

he contacted Schulenburg and was employed by TOM.

He eventually, without formal title, held the post of general

manager (Abst. 53-54, 228-229).

During this period TOM manufactured a Model 3 flasher

consisting of two basic types, the first a frame type flasher

which contains either one or two electrical contacts and

the second a base plate-type flasher, used when more than

two contacts are required.

There is no contention by Respondents that the TOM

Model 3 flasher, basically the same flasher previously manu-

factured by Sangamo Electric Company, is patented or

that the flasher is a trade wecret or that the method of

assembling the flasher is a trade secret (Appendix, p. 34;

Abst. 169).

Sutphin continued in the employ of TOM until January,

1959, when he and Respondent Schulenburg had a disagree-

ment of policy concerning the operation of the company

and Sutphin resigned effective at the end of January,

1959 (Abst. 230). Sutphin thereupon made an investigation

to determine whether or not it was feasible to start a

company of his own and determined that there was an

opportunity for another company in the flasher industry

and he then, in March, 1959, organized Signatrol, Ine.

Petitioner Bachman had been employed by TOM since

» 1947 charged with the general responsibility of designing

special equipment. He also assisted in sales work. Bach-

man left TOM in the middle of March, 1959, after a dis-

agreement with Schulenburg and joined Signatrol (Abst.

308). The Petitioners McNamara and- Walker had also

been employees of TOM for several years, McNamara as

purchasing agent (Abst. 284) and Walker in the engineer-

ing department (Abst. 295). Both of them asked Sutphin

whether they could join Signatrol and in Apfil 1959 —

McNamara left TOM and joined Signatrol as its purchas-

ing agent (Abst. 284). In June, 1959 Walker left TOM and

joined Signatrol (Abst. 297).

Prior to that time TOM had virtually monopolized the

market for flashers. Approximately 85% of all flashers

in operation had been manufactured by TOM (Abst. 234).

Sutphin determined that it was necessary to manufacture

a flasher that was interchangeable with the flashers already

on the market, due to the fact that there was a large de-

mand for flashers to replace ‘those which had worn out.

There was also a large demand for replacement parts to

replace worn-out parts of flashers (Abst. 234).

The flasher itself is a simple mechanical device (Abst.

130) consisting of a metal frame approximately six inches

square having thereon a small electric motor which turns

electric switches on and off. These flashers are easily

assembled by unskilled workers who need no technical

knowledge whatsoever (Abst. 237). Neither Respondents

nor Petitioners are true manufacturers but actually buy

the motors, gears, sideplates, switches and other parts :

which they assemble, usually in the manner requested by a

customer (Appendix 33, 34).

Many of the flasher parts are regular catalog items

furnished by suppliers (Appendix 34-35). Some of the

parts are specifically manufactured for both the Respond-

ents and the Petitioners. When ordering these parts from

the manufacturer, it is the practice of both Respondents

and Petitioners and is frequently the practice of all con-

cerns dealing with suppliers, whether dealing in flashers

or not, to furnish the supplier with a blueprint of the item

desired. This shows the size, dimensions and other infor-

mation necessary to manufacture the part.

bs)

Ney

There is no better statement supporting the Petitioners’

contention that the drawings and blueprints of the Re-

spondents (used by them to purchase some of the com-

ponent parts of the flashers and to assemble these un-

patented mechanical devices) are not trade secrets than

the following language of the original opinion of the

Illinois Supreme Court (Appendix, pp. 23-24) which was

deleted from the final opinion:

‘«< * * * Tn this connection, it must be pointed out

that the blueprints were customarily submitted to sev-

eral suppliers by the plaintiffs in order to secure the

most favorable birds.for the manufacture of parts; no

effort was made by the company to keep the informa-

tion on such plans and blueprints secret; the suppliers

were never advised that the plans contained any secret

information; they were never requested to keep the

information on the plans secret; and the plaintiffs

never requested a return of the blueprints and plans

from suppliers to whom they were sent. The electrical

principle involved is well known and plaintiffs’ un-

patentable product is for sale and anyone can buy it.

Anyone reasonably skilled in the art, could, without

difficulty, duplicate plaintiffs’ flasher from an exami-

nation of the flasher itself and lawfully engage in a

competing business.”’

The undisputed evidence in the sini fully sustains

the above initial holding by the Supreme Court of Illinois.

This evidence is summarized and heavily documented in

the attached Appendix at pages 48, 49 and 50.

This initial opinion also held that no trade secret was

proved and on March 18, 1965 the court unanimously re-

versed the.judgment of the intermediate appellate court

and remanded the cause to the trial court with directions

to dismiss the complaint.

On May 19, 1965, the Supreme Court of Illinois denied

the Respondents’ petition for rehearing, but two judges

who oviginally joinedyin the unanimous opinion filed a

dissenting opinion (Appendix, pp. 27-32) and twenty-four

hours later the court on its own motion vacated its-previous

order of denial and granted the Respondents’ petition for

a rehearing. On September 28, 1965, the court filed an

opinion deleting its reference to the undisputed evidence ,

proving that A, TM was involved and held that

the Respondents” drawings and blueprints were trade

secrets, but it modified ‘‘the injunction. so as to limit its

duration to the period of time reasonably required for de-

fendants to legally produce”’ copies of Respondents’ flasher

(Appendix, p. 42fn)..

The trial judge was directed that if on remandment ‘‘the

evidence establishes that the period of time required for

reproduction of the flashers by lawful means, computed

from the date defendants [Petitioners] first commenced

production, has now expired, the injunction order should

be vacated’’. (Appendix, p. 43 fn.)

Later, on November 18, 1965, in denying Petitioners’

petition for a rehearing which is set forth in the Appendix

hereto (pp. 44-54), the court altered its opinion by provid-

ing that upon remandment the trial court should order ‘‘the

enforcement of the original injunction pending a prompt

determination—of the time required for the reproduction

of the flashers by lawful means”’ and that the ‘‘injunction

should then be modified to terminate upon the expiration of

such time period’’ (Appendix, p. 43).

The net effect of these various changes was to affirm a

sweeping injunction against the Petitioners, former em-

ployees of the Respondents, preventing them from manu-

facturing or selling unpatented electric flashers, or parts

thereof, imitative of or operating on the same principles

as Respondents’ flashers anywhere in the world until such

time as the trial court may make a determination of the

period of time in which Petitioners.might “‘lawfully’’ have

copied the Respondents’. unpatented flashers. The injunc-

tion will be found in the Abstract, pp. 28-31, and is sum-

marized in the Appendix hereto, pp. 9-11.

The remanding order also ordered a hearing on the

question of damages which had been reserved by the trial

court, but since no rule of damages was laid down by the

Illinois Supreme Court and no damages have as yet been

assessed the question of damages is not ripe for. decision

here.

The trial court, now affirmed by the Illinois Appellate

and Supreme (ourts, held that Petitioners had copied some

of the drawings and blueprints of Respondents, but that

whether copied or memorized the Respondents” drawings

and blueprints) comprised trade secrets which the Peti-

tioners could fot lawfully copy or memorize.

REASONS FOR GRANTING THE WRIT

It is Important to Determine the Extent, if at all, that the

Claim of a Trade Secret Avoids the Federally-Protected

Right to Duplicate and Sell UnpatentedDevices.

The Petitioners contend that upon the undisputed evi-

dence in this record the Respondents’ widely-circulated

drawings and blueprints were not trade secrets and that

under Sears Roebuck & Co. v. Stiffel, 376 U,S.-225_(1964), —

and Compco Corp. v. Day-Brite Lighting, 376 U.S. 234

(1964), the Petitioners cannot lawfully be enjoined from

manufacturing ahd selling unpatented devices described in

those drawings and blueprints or be punished in damages

for-doing so. We recognize that we are bound by the find-

ings of the courts below on conflictmg evidence to the ef-

fect that Petitioners either copied or memorized the Re-

spondents’ drawings,. but we are not bound by the finding

that the drawings are trade secrets when‘that unsupported

finding i is made the basis for denying a: iin i ance

- right:

New York Times Co. v. Sullivan, 376 USS. 254, 285

~ (1964);

Fiske v. Kansas, 274 U.S. 380, 385-86 (1927).

The undisputed evidence freely conceded by Respondents

(Abst. 330; Appendix, pp. 34-35) is that the assembled

‘‘flashers’’ are in the public domain, unpatented. and un-

patentable, and that they can be duplicated from an exami-—

nation of the flasher itself by anyone reasonably skilled in

the art (Respondent Schulenburg, Abst. 130-131, 167). To

evade the Sears and Compco cases, however, the Respond-

ents successfully contended that the drawings describing

the flashers were trade secrets, although the flashers were

not. se

140

The undisputed evidence is that the drawings were not:

trade secrets. The drawings of various parts of the flash-

‘ers were not kept under lock and key and were available

to all employees in Respondents’ plant (Abst..93, 132, 168,

286). No inventory’ was kept of the drawings and any —

employee could go through the drawers without being

questioned. Some of the drawings were left out on benches

over night (Abst. 166-167, 286).

None of the Respondents’ employees was ever notified

orally or in writing that the drawings and blueprints were

secret (Abst. 168, 285), and Respondents did not exact

any written agreements from employees as to Secrecy

(Abst. 132, 168, 286).

Each prospective supplier of parts received a drawing

of the part that: he was to bid on (Abst. 56, 93, 286), and»

. nothing was said about any secrecy of the plans in the

letters.of transmittal (Abst. 286-287). These drawings of

parts were submitted without any request that they be re-

turned, so there may be drawings scattered around the —

companies which have not been returned or thrown away

(Abst, 132).

Although Respondent E. J. Schulenburg, Sr. first tes-

- tidied that no complete set of drawings was sent out of the

plant (Abst. 56, 93-94), it was later admitted by him that

a complete set of sepia drawings—a type of drawing se-

lected because of the ease of reproducing a large number

-of copies therefrom—had been sent to Martin-Marietta ~

Company in Colorado which was.neither an employee nor

a supplier (Abst. 280-281, 300-301).

The above undisputed evidence shatters the theory that

the Respondents’ drawings and blueprints were secret.

. Therefore, they were not trade secrets.

15 C

-In its original opinion in this case, the Illinois Supreme

Court, on the undisputed evidence which we have listed

above, properly held (Appendix, pp. 26-27, omitted from

the final opinion:,

‘«The only permissible restriction affording injunc-

tive relief in this case is the unlawful violation of ‘a

definite trade secret. The plaintiff’s [Respondents’]

blueprinted ‘know-how’ does not qualify under the

circumstances as a trade secret. Therefore, the de-

_ fendants could not have been guilty of unfair competi-

tion for the plaintiff’s claim of trade secret does not

meet the qualifications of the law.’’

In its original opinion the Illinois Supreme Court also

said (Appendix, p. 22, omitted from the final opinion) :

‘‘The Supreme Court of the United States has held

that no State may, by laws dealing with unfair com-

‘ petition, impose damages or enjoin the copying, manu-

facturing and sale of an article which is protected by

neither a Federal patent nor a copyright. Sears, Roe-

buck & Co. v. Stiffel, 376 U.S. 225, 11 L.ed 2d 661; -

Compco Corp. v. Day-Brite Lighting, 376 U. 8. 234, 11

L. ed 2d 669.”’

At the risk of dignifying too much an opinion which the

court below itself rejected, we believe that the original

opinion correctly stated the applicable Illinois law on the

question of trade secrets as follows (Appendix, pp. 24-26,

omitted from the final opinion) :

‘‘In order to constitute a trade secret which will be pro-

tected by injunction there must be a plan, process, tool,

machine or compound known only to the owner and those

employees to whom it is necessary to confide in secret.

Therefore, a process commonly known in the trade is not

a trade secret entitled to injunctive protection, and mat-

ters which are generally known in the trade or readily

discernible by those in the trade cannot be made secret by

being so labeled. (Victor Chemical Works v. Iliff, 299 Ill.

532; Sarkes Tarzain, Inc. v. Audio Devices, Inc., 166 F.

Supp. 250, 265 (D. Cal. 1958), aff’d 283 F.2d 695 (9th Cir.

1960), cert. denied 365 U.S. 869, 5 L. ed: 2d 859.) Here

there is ample evidence in the record to show that the in-

formation conveyed to defendants was of such a nature

that it was generally known in the trade. In addition, none

of the employees were ever told that the plans weressecret

or confidential, no secrecy agreement was ever required of

any employee and no employee was required to enter into

any restrictive covenant not to engage in any competitive

business with plaintiff.

‘<The Restatement of Torts contains a comprehensive

treatment of the principles concerning liability for dis-

closure or use of others’ trade secrets. In section 757 of

the Restatement of Torts under comment b it is stated as

follows:

‘< ¢ Definition of a trade secret. A trade secret may con-

sist of any formula, pattern, device or compilation of in-

formation which is used in one’s business, and which gives

him an opportunity to obtain an advantage over competi-

tors who do not’know or use it.

: oo cd e

‘¢ ¢Secrecy. The subject matter of a trade secret must

be secret. Matters of public knowledge or of general

knowlede in an industry cannot be appropriated by one

as his secret. Matters which are completely disclosed by

the goods which one markets cannot be his secret.’

‘‘Defendants are accused of copying or memorizing nec-

essary information and using it in their manufacturing

process in competition with their former employers. The

Appellate Court quoted, with approval, the memorandum

opinion of the trial court which states: ‘By defendants’

own statement they carried away from plaintiffs mental

pictures of the plaintiffs’ drawings, and specifications, and

from that mental picture they reproduced it upon paper—

an accurate copy of the original. It was no more or less

than a copy made from the original. * * * The human eye

is but a photographic lens, and the mind is the film.

Through the lens the object is exposed to the sensitive film,

the mind. * * * These mental pictures were obtained while

in plaintiffs’ employment, and to carry them away in this

manner was a-violation of a confidence reposed in them

by their employer, as if they had made copies or photo-

graphs and carried them away.’

“The law is well settled that an employee, upon termi-

nating his employment, may carry away and use the gen-

eral skill or knowledge acquired during the course of the

employment. ‘[E]quity has no power to compel a man

who changes employers to wipe clean the slate of his mem-

ory.’ (American Cleaners and Dyers v. Foreman, 252 Tl.

. App. 122; Peerless Pattern Co. v. Pictorial Review Co.,

*147 App. Div. 715, 132 N.Y.S. 37, 39.) In American Cleam-

ers and Dyers v. Foreman, 252 Ill. App. 122, the court re-

versed an injunction against defendants who were former

route drivers for a laundry and dry cleaning firm who

“ went to work for a competing laundry and solicited their

old customers whose names and addresses they had re-

membered.

‘©A 1958 federal case, Sarkes Tarzainm, Inc. v. Audio

Devices, 166 F.Supp. 250, contains an excellent statement

of the information which an employee has the right to

carry away and use in competition with his former em-

ployer: ;

‘* ‘Of necessity, whenever a change of employment of

this type occurs and former employees enter into the em-

ploy of another with whom they engage in a competitive

business, it is inevitable that some of the knowledge ac-

° quired while in the employ of the other should be made

available to the new employer. But, as already appears,

the courts will not deprive the employee of the right to

use the skill he developed through the years.

* * &

‘¢ ‘So there is agreement among the courts that, except,

where real trade secrets are involved, an employee may

compete with his former employer and with such knowl-

edge and skill as he has developed in the former’s em-

ploy.’ 29

‘The above material was entirely deleted from the final

opinion and only one case is cited therein to\justify the

complete turnabout on the question here involved, Smith

v. Dravo, Inc., 203 F.2d 369 (C.A. 7, 1953), which ‘the court

below found ‘‘most persuasive’’ (Appendix, p. 39). In

Dravo the Court of Appeals found (p. 374) that the plain-

tiff’s plans were secret and had never been disclosed to

the trade, which completely differentiates that case from

the case at bar. Furthermore, Dravo was based on a

Federal court’s determination of Pennsylvania law. The

Supreme Court of Pennsylvania has very recently spoken

on the subject of alleged trade secrets in a suit between a

manufacturer and former employees and refused to fol-

low the Dravo case, stating, Van Products Co. v. General

Welding & Fabricating Co., 213 A.2d 769 (Oct. 13, 1965)

at page 780:

‘‘We feel that the authorities holding that public dis-

closures destroy plaintiff’s right to maintain a cause

of action to preserve his trade ‘secret’ against a com-

peting former-employee who has violated a duty of

FY)

(

confidence are more sound in theory and practice than

those continuing to look ,to the relationship of the

| parties as a basis for the’action. * * * The starting

_ point in every case of this sort is not whether there

was a confidential relationship, but whether, in fact,

there was a trade secret to be misappropriated: Na-

tional Starch Products, Inc. v. Polymer Industries,

Inc., 273 App. Div. 732, 79 N.Y.S.2d°357 (1948).’’

Mr. Justice Cohen concurred specially on the ground

that Sears Roebuck & Co. v. Stiffel, 376 U.S. 225, and

Compco Corp. v. Day-Brite Lighting, 376 U.S. 234,- clearly

indicate that the field has been pre-empted by the Federal

patent law and that ‘‘state law of unfair competition is in

conflict with the patent law and in the interest of uni-

formity and unburdened competition relief by way of dam-

ages or injunction based on the state law of unfair com-

petition may not be allowed’’ (213 A.2d 769 at 781).

The Illinois Supreme Court cited Servo Corp. v. General

Electric Co., 337 F.2d 716 (C.A. 4, 1964) rehearing denied

with opinion 342 F.2d 993 (C.A. 4, 1965), Term No. 154,

October Term, 1965, for the proposition that Sears and

Compco do not apply to trade secret cases. A trade secret

was found to exist in that case. Whether the existence of

a true trade secret avoids the rule of Sears and Compco

should be decided by this Court. If-possession of a trade

secret insulates its owner from the exércise of a Fed-

erally-protected right ef others to compete with him, it is

highly desirable (as. shown by the present record) that

this Court establish criteria with which evidence of such

a trade secret must comply.

The Supreme Court of Illinois in the instant case re-

fused to follow Sears and Compco on the ground that

those cases did not deal with trade secrets. Our short

answer to this is that no trade secret is involved in this

case either, and that Sears and Compco should have been

given effect. We submit that to preserve the integrity of

the rule announced in Sears and Compco. and to avoid

evasion on the pretext that a trade secret is involved

certiorari should be granted in the instant case.

The obvious difficulty; which the Illinois Supreme Court

had with the instant case, the contrary opinion of the

Pennsylvania Supreme Court in Van Products Co., just

discussed, and the legal literature* bearing on the proper

relationship of this Court’s opinions in Sears and Compco

to trade secret cases, all indicate the desirability of a

' grant of certiorari here to delineate the extent, if any, to

which a state court may go in restricting the Federally-

protected right to duplicate unpatented devices.

If.

Certiorari Should be Granted Because this Injunction Pro-

hibiting the Duplicating and Selling of an Unpatented

Article is a Deprivation of Liberty and Property With-

out Due Process of Law and a Violation of the Equal

Protection of the Laws. :

)

In the case at bar there is no doubt that anyone (other

than the Petitioners) who wishes to duplicate the Re-

spondents’ electric flashers and sell them on the market

may do so with impunity. The lower court held that the

Petitioners’ conduct was actionable because it found that

the Petitioners gained their information (which is open

to the trade, generally) of the Respondents’ flashers while |

*“Propuct SrmuLaTion: A RIGHT or A WRonG?” by Daphne R.

Leeds, Milton Handler, Walter J. Derenberg, Ralph S. Brown, Jr.

and Paul Bender, 64 Columbia L. Rev.,.1178, at 1189, 1203, 1208,

(1964) ; “THe Sears anp Compco cases: A FEDERAL RIGHT TO

Compete sy Copyinc”, by Lionel Kestenbaum, 51 Amer. Bar Jour-

nal 935, at 938, (Oct. 1965). |

in the employ of the Respondents. The broad injunction

granted by the trial court effectually precludes the Pe-

titioners from engaging in any business activity connected

with the flasher or timer for a period of time not yet deter-

mined but which may prove to be long enough to put the

Petitioners out of business.

The mere fact that Petitioners obtained their informa-

tion regarding the Respondents’ concededly simple flasher

while employed by the Respondents is not enough to

justify the palpable discrimination against the Petitioners

which is a violation of the first section of the Fourteenth

Amendment. }

Moreover, the injunction and the decision of the IIli-

nois Supreme Court reduce the Petitioners to virtual servi-

tude in denying them their right to work in their chosen

field—in the case of Petitioner Sutphin, for example, in

the only business in which he has ever been engaged.

Il.

The State Court Judgment Violates the Concept of Fed-

erally-Protected Freedom of Commerce and Tends

Toward Monopoly.

Prior to the time the Petitioners began competing with

the Respondents in the flasher business the Respondents

‘enjoyed a virtual monopoly over this market inasmuch as

| they had manufactured 85% of all flashers in operation

_. (Abst. 234). It is clear beyond any question that this

| monopoly control flies directly in the face cf the Federal

government’s explicit policy against all forms of restraint

of trade and commerce, cf. Sherman Act, 69 Stat. 282, 15

U.S.C.A. §2 (1963).

The lower court in the instant case enjoins the Peti--

™ tioners from manufacturing or selling flashers, imitative

of or operating on the same principles as Respondents’

flashers anywhere in the world until such time as the trial

court may make a determination of the period of time in

which Petitioners might ‘‘lawfully’’ have duplicated Re-

spondents’ unpatented flasher. Although the injunction

- MImay ultimately be limited as to time, the injunction is

not limited as to geographic area: During the period of

time—indefinite in its termination but certain in its com-

mencement—that this injunction remains in effect the in-

junction again gives the Respondents monopoly control

in the flasher market, contrary to the clear Federal policy

embracing freedom of competition. If the interruption in

the Petitioners’ business which the Illinois Supreme Court —

has affirmed results in the Petitioners’ being put out of

business permanently the Respondents will have succeeded

in restoring to themselves a virtual monopoly of this in-

dustry.

CONCLUSION.

Because the judgment below imposes severe and unwar-

ranted restrictions on Federally-protected constitutional

rights and—on the pretext that a trade secret exists—has

restricted a Federal right sustained by this Court in Sears

and Compco, the writ of certiorari ought to be granted.

Respectfully submitted,

Horace E. Gunn

Wim R. Kester

4 North Vermilion Street

Danville, Illinois 61833

\. Owen Rati

Perer M. Srikas

135 South LaSalle Street

Chicago, Illinois 60603

~ Attorneys for Petitioners

- February 11, 1966

APPENDIX

On July 23, 1964, the Illinois Appellate Court, Fourth

District, filed the following opigion (Schulenburg v. Sig-

natrol, Inc., 50 Til. App. 2d 402, 200 N.E. 2d 615), which

is appended to defendants-petitioners Petition for Leave

to Appeal to the Illinois cat Court, marginal record

page 2, below:

SMITH, J.

Plaintiffs manufacture and sell devices for automatically

making and breaking electrical circuits. Such devices known

in the trade as flashers are used in display signs where

changing light patterns or a flashing effect is thought desir-

able. Plaintiffs were first in the field, at least {# were

there before defendants, all of whom are former employees

who left to form their own competing company, Signatrol,

also a defendant. For our purposes we can group defend- —

ants as one as we can the various plaintiffs. The lower

court issued an injunction re#gining defendants from the

further manufacture and sale of competing flashers, in

effect, putting them out of business and. they appeal. -

Damages, if any, are postponed pending the outcome here.

Plaintiffs say that their manufacturing ‘‘know-how”’ is __”

a trade secret which was imparted in confidence to defend-

ants while employees and that such secret has been used

by them in manufacturing a competing product. Defend-

ants deny utilization by them of any such secret, in fagt,

they deny its very existence. -All they used, they answer,

were acquired skills and such general knowledge of the

operation as the law permits them to take away.

2 7 Appendia

Plaintiffs’ trade secret, if it is, is to be distinguished

from the product itself“in which they have no property

ight, being devoid of patent protection. The electrical

principle involved is well known and plaintiffs’ product is

for sale and anybody can buy it... For that matter anybody

can duplicate it if they want to and can go into business.

Competition i is considered a very good thing (in the flasher

- business), but those who choose to go, must use fair means,

not foul. If fair means are used the field is wide open to

all comers for-the owner of a trade secret as distinguished

phen owner of a patent has no right as such to exclude

others from using it. Relief is only granted when someone

attempts to use.the secret in violation of some general duty

of faith such as an abuse of confidence. Such an abuse’

results in = competition and equity will then intervene

‘if called

ing possession of a trade secret by plaintiffs,

assuming its disclosure in confidence to defendants while

employees, assuming its profitable use thereafter by them

to plaintiffs’ financial detriment, is this unfair competition?

- Posited thusly, the answer is immediately apparent. Mis-

use of confidential information by erstwhile employees

as a weapon of attack upon their former employer is

indeed unfair competition for-it shocks one’s sense of fair

play. Even in times gone by, when the law took a less

jaundiced view, such conduct was not defended~upon the

ground that it was fair. Lord Kenyon in Nichols v. Martyn

(2 Esp 732) characterized such conduct as ‘‘not hand-

some’’, but yet for his time not. contrary to law. It is for

ours without meaning to cast aspersions on a more free- |

wheeling age. Other courts and writers‘are of this con-

census. In Franke v. Wiltschek, 209 F.2d si was stated:

‘But the tendency of the law, bo gislative and

common, has been in the direction of enforcing increas-

ingly higher standards of fairness or commercial

ae ‘

morality in trade. The tendency still persists. The

present case surely is not one where we are disposed

to attempt to reverse the trend.’’

Misuse of confidential information, because it can result

in unfair competition, is said to be violative of an implied

condition that ‘‘he will not after the service is determined

use information which he has gained while the service has

been subsisting to the detriment of his former employer’’.

_ Essex Trust Co. v. Enright, 214 Mass. 507.. To sum up—

misuse of confidential information or breach of an implied

condition are but text in the larger context of unfair com-

petition and sich competition can run afoul of the equitable

doctrines which condemn fraud and over-reaching. For

our context the rule is, that an employee lawfully entering

upon a competing business may be enjoined from using

trade secrets of his employer’s business obtained during

the course of his employment.

Obviously all, knowledge acquired by an employee does

not partake of a trade secret. His relationship to his

employer may be confidential, but not the knowledge. That

which by experience has become a part of a man’s general

knowledge cannot and ought not to be enjoined from fur-

ther and different uses. Again, in Junker v. P

67 N.E. 2d 667 (Mass. 1946) the rule is stated thusly :

‘‘The law is well settled that an employee upon

terminating his employment may carry away and mse

the general skill or knowledge acquired during the

- course of the employment. (Citing cases) But it is

equally well estabished that out of the ‘relationship of.

employer and employee certain obligations arise, in-

cluding that which precludes an employee from using,

for his own advantage or that of a rival and to the

harm of his employer, confidential information that he

has gained in the course of his employment.” ’’

‘4 | Appendia

All would agree that equity should not restrict the subse-

quent use of general skills and knowledge and this for the

reason that such use simply does not shock one’s sense of

fair play. But this line between the useable and the non-

useable is hard to draw. Overstrict, we create a monopoly

of first users—a very bad thing in our society, if we

acknowledge the desirability of encouraging individual

- business enterprise and initiative which we do. Plaintiffs

agree:

“We do wis question or dispute this right (to enter

into a competing business) in the defendants. However;

there was a legal and an illegal method open for adop-

tion by defendants in preparing to enter into such com-

peting business and producing products in competition

- with their former employer and defendants deliberately

chose the illegal method.”’

This method, they say, took the form of either copying or

memorizing their ‘‘know-how’’\on blueprints during the

time they were employed and putting it to use in manu-

facturing a competitive product.

We thus come to grips with the central question pre-

sented by this appeal. Was there a ‘‘trade secret’’? In

defining these two words we need not be concerned, as we

are elsewhere, with searching for some esoteric meaning

for none exists, though for a play on words, the informa-

tion to be ‘‘secret’’ must be ‘‘esoteric’’ in the sense of

being restricted to an inner circle. As there are two words

there are two aspects. It must be secret and the secret

must relate to business (trade). Formulae, lists, patterns /

and blueprints are examples. To be secret means that a

blueprint, for example, is not in the public domain through

_divulgence and that it is not too easily discoverable; that

is, apparent to all without too much hard work.

Appendix b.

Was plaintiffs’ blueprinted ‘‘know-how”’ a secret? Well,

they considered it a secret and attempted reasonably to

keep it so (without much success), and their intent and

attempt, we suppose, are of importance in answering the

question. It was imparted privately to a select few—

defendants among them. That the secret was spyed (sic)

out does not make,it any less a secret nor does the fact

that their finished product was on the market amount to

either a divulgence or an abandonment of such secret. In

Smith v. Dravo, 203 F. 2d 362, it was said:

‘‘But this (publicity material) was not equivalent to

a disclosure of the structural design, the engineering

‘details, of either the container as a whole or its various

working parts. This could only be obtained by careful

inspection of the article and the drawings.’’

Certainly this secret was one connected with business.

In manufacturing their flashers, plaintiffs used an assem- -

bling process. The component parts were secured from

suppliers and then put together. For each part there are

very precise drawings or blueprints showing the dimensions

and metallurgical specifications. These are furnished the

suppliers. We agree with the court below that the infor-

mation, measurements, designs, and material specifications

contained on these blueprints or drawings and used in the

manufacturing process qualify as a trade secret in view of

the fact they were kept confidential. We have thus an-

swered our first question—plaintiffs .were possessed of a

trade secret.

We arrive at the final question of use by defendants,

which like our first query, has two points. Were the blue-

prints copied or memorized, and if so, did defendants

utilize such knowledge in producing a competitive product.

First off, let it be said that the question of means, whether

copied or memorized, is immaterial to a proper conclusion

OG Appendia A

as distinguished from irrelevant. Ejther is a taking. In

logic why should plaintiffs be enti to less protection if

their gecret was memorized rathef than copied? The ques-

tion answers itself. Copying has obvious advantages since

memory does play tricks, but if enough is remembered it

will certainly do. In this voluminous record there is ample

evidence of copying, very good evidence indeed, and there

is even better evidence, almost aul agreement, that defend-

ants did memorize the salient details. There is likewise sub-

stantial evidence that they drew on both in making up

their blueprints and that such were used by them in the

same manner as plaintiffs used them. This is enough for

injunctive relief. The court below, in: an excellent memo-

randum opinion, said this:

7g “By defendants’ own statement they carried away

. ftom plaintiffs’ mental pictures of the plaintiffs’ draw-

/ ings, and specifications, and from that mental picture

they reproduced it upon paper—an accurate copy of

the original. It was no more or less than a copy made

from the original. . . The human eye is but a photo-

graphic-lens, and the mind is the film. Through the

lens the object is exposed to the sensitive film, the

mind. .. . These mental pictures were obtained while

in plaintiffs’ employment, and to carry them away in

. this manner was a violation of a confidence reposed

in them by their employer, as if they had made copies

4 or photographs and carried them away.’’

, Nor does it make any difference that defendants need

not have taken the course they did in getting their business

going. The fact of the matter is, they did use plaintiffs’

secret and thus gained a distinct advantage. For defend-

ants to have manufactured an identical flasher minus plain-

tiffs’ secret would have been a laborious and expensive

process, There would have been need for a metallurgical

analysis, precise measuring, and doubtless after that, a \ a

Appendix : Be

period of trial and error. We quote from an analogous

situation in Tabor v. Hoffman, 118 NY 30, 23 NE -12,

involving molding patterns:

‘‘The pump consists of manly different pieces, the.

most of which are made by running melted brass or

iron in a mold. The mold is formed by the use of

patterns, which exceed in number the separate parts

of the pump, as some of them are divided into several

sections. ... The size of the patterns cannot be dis-

covered by merely using the different sections of the

‘ pump, but various changes must be made and those

changes can only be ascertained by a series of experi-

ments, involving the expenditure of both time and

money. Are not the size and shapes of the patterns,

therefore, a secret which the plaintiff has not published

« and in which he still has exclusive property? Can it

be truthfully said that this secret can be learned from

the pump when experiments must be added to what can

be learned from the pump before a pattern of the

proper size can be made? As more could be learned

by measuring the patterns, than could be learned by

measuring the component parts of the pump, was there

not a secret that belonged to the discoverer until he

abandoned it by publication, or it was fairly discovered

by ancther?’’

The lugubrious chore of duplicating ii part from a an

was sys by defendants with copies of plaintiffs’

blueprints in hand. That defendants could have traveled

a legal route, is beside the point. They chose a short cut

and in doing so are accountable in equity. Franke v.

Wiltschek, 209 F. 2d 493, 495, noted above, is apropos:

‘‘Defendants argue ‘that the heart of plaintiffs’

process was revealed by an expired patent, and that

the improvements thereon were unpatentable applica-

tions of mechanical skill. This totally misconceives the |

nature of plaintiffs’ right. Plaintiffs do not assert, in-

deed canhot assert, » property right in their develop-

Dao

8 | Appendin

ment such as would entitle them to exclusive enjoyment

against the world._ Theirs is not a patent,but a trade

secret. The essence of their action is not infringement,

but breach of faith. It matters not that defendants

could have gained their knowledge from a study of the

lred patent and plaintiffs’ publicly marketed prod-

ct. The fact is that they did not. Instead they gained

it from plaintiffs’ via their confidential relationship,

and in so doing incurred a duty not to use it to plain-

tiffs’ detriment. This duty they have breached.

| And again in Vitrp Corporation of Americe-v. Hall Chemi-

cal Co., 254 F. 2d 787, at page 793:

‘‘The fact that Hall’s trade secrets could have been

' discovered just as he discovered them, by extensive and

painstaking experimentation, which led from known

factors to an ascertainable result, does not destroy the

value of the discovery“nor eliminate the liability of

Vitro.’’

The short cut used by’defendants enabled them to com-

pete with plaintiffs on equal terms by sparing them the

necessity of spending time and money in acquiring the

‘‘know-how’’. Competition is a desideratum in our eco-

nomic system, but it ceases to serve an economic good when

it becomes unfair. The concept of fair play should not be.

shunted aside on the theory that competition i in any form

serves the general good. Only fair competition does that.

Unfair competition is not competition at all in the truest

sense of the word. We see no good purpose in condoning

defendants’ conduct by lifting the injunction. If defendants

are now out of business they can only blame themselves.

They were not born that way but got that way on their

own, It may be that in getting there, they did not know

of the consequences, of the duty equity would impose on

them, but this is a mistake of law. Defendants’ action,

therefore, cannot be excused, nor can it be condoned, as we

have said. We therefore hold that the use by defendants

Appendia — ug

of plaintiffs’ trade secret, whether copied or memorized,

made known only to them as employees in the furtherance

of plaintiffs’ business may not now be used by them in a

competing business of their own.

The injunction is indeed drastic, but they always are.

We do not see how we can make it any less sweeping

and yet give to plaintiffs their just due. The order

appealed from is accordingly affirmed. |

AFFIRMED. i

Crow, P. J. and Spivey, J. concur.

1 On September 15, 1964, the Petition for Lenie to

: Appeal was filed in the Illinois Supreme Court on be-

half of Signatrol, Inc., a corporation, John W. Sutphin,

Willard KE. Bachman, Joseph E. McNamara and Wen-

- del R. Walker, defendants-petitioners.

2 Following are excerpts from defendants-petitioners’

Petition for Leave to Appeal referring to the substan-

tial federal questions in this lawsuit: :

2.*4 The Trial Court’s Decree and its Affirmance by the

Appellate Court Violate the Constitution and Pat-

ent Laws of the. United States.

The decree in this case is not limited to depriving

the defendants of the right to use plans allegedly

@opied (which is denied) but enjoins them forever,

without limit in time or geographical area, from doing

- the following:

(a) The sale, manufacture or ‘production of any flash-

er or timer or any of the component parts of any

_ flasher or timer, machine or-device canara Seny sim-

*The decimal refers to the internal ‘shied of. the

Petition -_ Leave to Appeal.

—

‘10

2.5

Appendia

ilar to the Signatrol Model No. 30 (Abst. 28). As

the Signatrol. Model No. 30 is substantially similar

to both TOM [plaintiff Time-O-Matic] Model No. 3

and the competitive McMahon flasher, and is neces-

sarily similar to any flasher. that can be sold to fit

standardized sign brackets, it is obvious that if this

decree stands the defendant Sutphin, for example, can

never again engage in the only business in which he is

trained and qualified.

(b) Paragraph B-2 of the Decree (Abst. 28) goes

one step further and enjoins the defendants from ever

selling, manufacturing or producing a flasher or timer

using the same principle or principles employed or

used in the Signatrol Model No. 30 or TOM Model No.

3. It is undisputed that the only principle involved in

these flashers is the mere opening and closing of an

electric switch actuated by an electric motor which is‘a

basic principle which has been used for many decades

in the electrical industry, almost since the use of elec-

tricity became common. Yet these defendants are en-—

joined by-the decree forever and perpetually from even

selling a device operating on this principle, namely,

that of the opening and closing of an electric switch

by an electric motor.

joins the defendants from the sale, manufacture or

production of flashers which possess and use any parts

which are substantially the same as parts represented

by a series of 36 drawings and blueprints listed in the

decree. This portion of the injunction enjoins not the

use of the plans and blueprints but the manufacture,

sale and production of any parts similar to those »

shown in the drawings and blueprints offered in evi-

Appendix ct

dence by the plaintiffs. This bars the defendants from

even acting as salesmen or dealing in of flashers

for other companies. |

(d) Provision B-4 of the decree (Abst. 30) enjoins

the defendants from use of plaintiffs’ plans, drawings

and sketches and of any information contained thereon

or therein. However, this paragraph also goes further

and deprives the defendants of use of ‘‘like drawings,

_. plans or sketches for any purpose’’ and any informa-

2.6

tion contained thereon or therein. This proyision is

not limited to plaintiff’s plans and sketches “but. it is

so broad as to prohibit the defendants from submit-

ting plaintiff’s unpatented devices to a‘completely ii- |

dependent engineering firm who had no previous con-

nection or knowledge or association of any kind with

the plaintiffs and thereby independently securing.

plans, sketches and drawings. Such drawings inde-

pendently prepared fall within the bar of the decree

because they would in describing plaintiff’s unpatented

~ devices of necessity be “‘like’’ the drawings, plans and

sketches from which the plaintiff assembles the un-

patented..devices. ; ‘

(e) Paragraph B-5 of the decree (Abst. 30-31) bars

the defendants from using any information the defend-

ants’ obtained in confidence while employees of the

-plaintiff. The decree does not specify what information

_is confidential, what information is not confidential and

what information tlie defendants had prior to their

employment by the plaintiff. It is so vague and in-

_ definite as te be clearly erroneous.

This decree clearly violates Section 8 of Article I of

the Constitution of the United States, the patent clause,

which states that ‘‘The Congress shall have power

Appendia

** * To promote thé Progress of Science and Useful

Arts, by securing for limited Times to Authors and

- Inventors the exclusive Right to their respective Writ-

ings and Discoveries’’.

‘The decree therefore, also violates the supremacy

clause providing in part:

‘‘This Constitution, and the Laws of the United

States which shall be made in Pursuance thereof

* * * shall be the supreme law of the Land; and the

Judges in every State shall be bound thereby, any

Thing in the Constitution or Laws of any State to

the Contrary notwithstanding.’’

The Supreme Court of the United States has held

that no State may by laws dealing with unfair com-

petition: (which is precisely the ground asserted by the

plaintiffs here) enjoin, or impose damages, for the

‘manufacture and sale of unpatented articles. We sub-

mit that this holding puts an end to the present case.

On March 9, 1964, the United States Supreme Court

decided two companion cases involving the Illinois

law of unfair competition as it relates-to the copying

of another’s products. Sears, Roebuck & Co. v. Stiffel,

376 U.S. 225, is the first of these cases. Stiffel had

perfected a pole lamp which stretched between the

floor and the ceiling of the room to which pole three

lamps with swivel brackets were connected. Stiffel

was very successful in selling this lamp on the market ~

and. thereafter Sears manufactured a substantially

identical lamp which was sold in competition with

Stiffel.. Stiffel had obtained a patent on its pole

- lamp prior to putting the same on the market. Stiffel

then brought suit against Sears on the basis both

~ of patent infringement and unfair competition. Sears

° as

ev TN ee Ae eate Ae cee we net ne -

Apyendia na “18

answered that the-patents in the suit were invalid and

that Sears was not guilty of unfair competition. The °

district court decided that the patent was invalid but —

found that there was unfair competition by Sears in

selling an identical lamp in competition with Stiffel.

The Court of Appeals for the Seventh Circuit af-—

firmed the trial court’s judgment on the basis of unfair

competition. Stiffel Co. v. Sears, Roebuck & Co., 313

F.2d 115.

Upon certiorari to the gusiutis Court of the United

States the judgment of the Court of Appeals was re-

versed. Mr. Justice Black, speaking for a unanimous

court, summarized the basic issue of the case as follows

376 U.S. at p. 225): 3

‘‘The question in this case is whether a State’s

unfair competition law can, consistently with the .

federal patent laws, impose liability for or pro-

hibit the copying of an article which is protected ©

by neither a federal patent nor a copyright.’’

The opinion then reviewed in detail the history of

the federal patent laws and the constitutional provi-

sions concerning patents and then said (pp. 230-232) :

‘‘Thus the patent system is one in which uni-

form federal standards are carefully used to pro-

mote invention [231] while at the same time pre-

serving free competition.” Obviously a State could

not, consistently with the Supremacy Clause of |

the Constitution,® extend the life of a patent be-

purpose of Congress to have national uniformity

d copyright laws can be inferred from such

which vests exclusive jurisdiction to hear

yright cases in federal courts, 28 U.S.C.

ind that section of the Copyright Act which

§ 1338(a),

expressly saves state protection of unpublished writings but —

does.not include published writings, 17 U.S.C. § 2.

“U.S. Const., Art. vi.” :

‘14

2.9

Appendia a

yond its expiration date or give a patent on an

article which lacked the level of invention required

for federal patents. To do either would run coun-

ter to the policy of Congress of granting patents

only to true inventions, and then only for a lim-

ited time. Just as a State cannot encroach upon

the federal patent laws directly, it cannot, under

some other law, such as that forbidding unfair

competition, give protection of a kind that clashes

with the objectives of the federal patent laws.

‘*In the present case the ‘pole lamp’ sold by

Stiffel has been held not to be entitled to the pro-

tection of either a mechanical or a design patent.

An unpatentable article, like an article on which

the patent has expired, is in the public domain

and may be made and sold by whoever chooses

to do so. What Sears did was to copy Stiffel’s

design and to sell lamps almost identical to those

sold by Stiffel. This it had every right to do un-

der the federal patent laws. That Stiffel orig-.

inated the pole lamp and made it popular is im-

material. ‘Sharing in the goodwill of an article

unprotected by patent or trade-mark is the exer-

cise of aright possessed by all—and in the free

exercise of which the consuming public is deeply

interested.’ Kellogg Co. v. .National Biscuit Co.,

<~""supra, 305 US. at 122.. To allow a State by use

of its law of unfair competition to prevent the

copying of an article which represents too slight

an advance to be patented would be [232] to per-

mit the State to block off from the public some-

thing wHich federal law has said belongs to the

public. The result would ‘be that while federal

law grants only 14 or\17'years’ protection to gen-

uine 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.’

pao (15

In concluding to reverse the judgment of the Court

of Appeals the Supreme Court stated (p. 232) that

doubtless a State may yequirg labelling to prevent

customers being misled as to the Source but added

(pp. 232-233) :

“But because of the federal patent laws a State

may not, when the article is unpatented and un-

copyrighted, prohibit the [233] copying of the ar-

ticle itself or award damages for such copying.

Cf. G. Ricordi & Co. v. Haendler, 194 F.2d 914,

916 (C.A. 2d Cir. 1952). The judgment below did

both and in so doing gave Stiffel the equivalent of

a patent monopoly on its unpatented lamp. That

’ was error, and Sears is entitled to a judgment“in

its favor.’

2.10 The other case dealing with the Illinois law of un-

fair competition decided by the Supreme Court on the

same day, March 9, 1964, was Compco. Corp. v. Day-

Brite Lighting, 376 U.S.°234. Compeo had copied a

fluorescent light fixture made and sold by Day-Brite.

This fixture contained a reflector having cross-ribs

which Day-Brite claimed gave both strength ‘and at-

tractiveness to the fixture. As in the Sears case, Day-

Brite sought relief on the grounds: ‘both of patent in-

fringement and ‘unfair competition. “ “ Day-Brite had

procured ‘a designed patent on the fixture which the

trial court held to be invalid. ®

The federal district court adjudged Compco guilty

of unfair competition under Illinois law in the sale of

its fixtures which the Supreme Court found to be, ‘‘the

_ same, to the eye of the ordinary observer, as the over-

all appearance of Day-Brite’s reflector, which em-

bodied the design of the invalidated patents.’? The

trial court ordered an accounting for dened s and ~

entered a permanent injunction. ;

Appendia

The Court of Appeals for the Seventh Circuit af-

firmed the district court’s finding of unfair competition

on the ground that there was substantial evidence in

the record to support the finding of likelihood of con-

fusion and that this finding was sufficient under IIli-

nois law to support the finding of unfair competition.

Reversing both courts below, the Supreme Court of

the United States unanimously held, per Mr. Justice

Black (376 U.S. at p. 235):

‘‘As in Sears, Roebuck & Co. v. stifel Co., 376

U.S. 225, the question here is whether the use of

sae unfair competition law to give relief against

copying of an unpatented industrial design con-

flicts with the federal patent laws.”

211 After discussing the evidence, the opinion of the

court stated” (PP: 237-238) :

‘‘Notwithstanding the thinness of the evidence to

support findings of likely and actual confusion

among purchasers, we do not find it necessary in

this case to determine whether there is ‘clear |

error’ in these findings. They, like those in Sears,

Roebuck & Co. v. Stiffel Co., supra; were based

wholly on the fact that selling’ ‘an article which is

an exact copy of another unpatented article is

likely to produce and did in this case produce con-

_ fusion as to the source of the article. Even ac-

cepting the findings, we hold that the order for an

accounting for damages and the injunction are in

conflict with. the federal patent laws. Today we

have held in Sears, Roebuck & Co. v. Stiffel Co., .

supra, that when an article is unprotected by a

patent or a copyright, state law may not forbid

others to copy that article. To forbid copying

would interfere with the federal policy, found in

Art. I, §8, cl. 8, of the Constitution and in the

aN implementing federal statutes, of .allowing free

: access to copy whatever the federal patent.and

Appendix a

Day-Brite’s fixture had been held not to be en-

titled to a design or mechanical patent. Under

the federal pat-[238]ent laws it i is, therefore, in the

public domain and can be copied in every detail by

whoever pleases.”’

The decree in the present case enjoins the copying

of plaintiff’s unpatented electric flashers which con-

cededly are in the public domain (Abst. 131, 345-346;

Appellate Court opinion, Appendix, p. 2). The decree

reserves the-right to assess damages against the de-

fendants (Abst. 31). The. decree is affirmed by the

» Appellate Court on the basis of the Illinois law of un-

fair competition (Appendix, pp. 3, 9). - The Supreme

Court of the United States has decided that no State

may rely upon such law to punish in damages or pro-

hibit the copying of an unpatented article. This Court

should therefore grant leave to appeal and 1 reverse the

decree of the trial court in toto. |

2.12 The Appellate Court Ruling Violates the Basic Right ° ,

Guaranteed to. Free Men to Pursue the Occupation

of Their Own Choosing. :

The Appellate Court erred in. affirming a dseree of

the trial court which enjoins the -individual defend-

ants from pursuing their chosen occupation by per-

petually enjoining these defendants from lawfglly

producing and selling an unpatented product which is

widely used and. distributed throughout the county.

The effect of this decision is that. it destroys the de-

fendants’ freedom to work and tends to reduce them

to,a-condition of industrial servitude and it deprives

these defendants of. the right to engage in a business -

' that is open to all other citizens of: this country.

18 | Appendia -

2.13 Here the injunction is so broad that its effect is to.

bar defendants engaging in the flasher business open

to all persons, no matter how innocent and blameless

their future action may be.

The injunction entered by the Trial Court is not lim-

ited to prevent the improper use of plaintiff’s blue-

_ prints or alleged confidential information but is so

broad.and all-inclusive that it permanently (for the

lifetime of the deferidants) bars them from selling or

manufacturing a flasher or timer similar to the plain-

2.14 tiff’s unpatented’ fasher. The defendants are even

7 permanently enjoined from selling or making any of

the unpatented component parts of an unpatented .

flasher similar to the plaintiff’s even though many

of such parts are standard catalog items sold by sup-

pliers. Moreover, the defendants. are enjoined from

selling or manufacturing flashers or timers using the

same principle of operation as plaintiff’s flashers.

Bearing in mind that there are several flasher manu-

facturers selling flashers in the United States market,

all of which flashers operate on the same basic prin-

ciple, fit the same. sign brackets and, in fact, must

necessarily be similar to-even be saleable, it becomes

obvious that the injunction, in effect, excludes the de-

fendants from the flasher business for life. They not

only can never build and sell their own flasher but

can never again even act as salesmen for other flasher.

companies already established in the flasher business.

They cannot become salesmen or manufacturers of

parts for others in the flasher business if any of the

parts are similar to’ parts used in plaintiff’s ’s flasher

(as they must be to be saleable); |

; ‘ Appendia 9

Uuider the provisions of the décree the defendants

cannot even have a new flasher designed and/ built

for them by independent engineers who have never

known or had any contact with plaintiff’s business.

As flashers similar to plaintiff’s flasher are an ex-

-tremely simple, unpatented mechanical device, the ef-

. fect of the injunction is to prohibit forever the de-

fendants from engaging in lawful activities freely

available to all of the other one hundred ninety mil-

lion people in the United States. In other words*’the

injunction is so broad that no matter how legal, ethical

and blameless their future conduct might be, they

would be in violation of the broad provisions of this

2.15 injunction and subject to harassment and penalties at

the instance of the plaintiffs, their competitors.

2.21 The Appellate Court erred here in affirming the de-

cree which enjoins the individual defendants from pur-

- suing their chosen occupation inasmuch as the decree

has the effect of perpetually enjoining these defend-

ants from lawfully producing and selling a product

which is widely used throughout the country. The

effect of this decision is to destroy the defendants’

freedom to follow a lawful occupation and affécts not

‘only the individual defendants here involved but, if

this decision is applied in the future to other em-

2.22 ployees, it would have a profound effect upon the

entire economy of our State. If it is not reversed, all

persons hereafter will be fearful of leaving their

present employment because of the possibility that they

would be forever enjoined from ‘thereafter engaging

in the same business. If this decision. stands no

lawyer will be safe in advising an employee that he

may safely compete with his employer if he wishes to

produce a similar product, for no one can erase com-

$20

Appendia

pletely from his mind the sort of information which

the courts below have held to be trade secrets. A

more serious threat of monopoly can hardly be ima-

gined.

If employees of all well-run, profitable companies |

are prohibited from going into a competing business

unless they can erase from their memories all plans

and blueprints used therein there can be no element of

free enterprise in our economy. The judgment of

the Appellate Court is a serious threat to individual

‘freedom to compete and should be reversed.

2.43 The decree below is wrong because it grants a mon-

opoly on an unpatented article in violation of the fed-

eral constitution and patent laws enacted pursuant

thereto, because it reduces the defendants-to virtual

industrial servitude, and because it is based on a com-

2.44 pletely erroneous finding that the plaintiff’s plans

and blueprints alleged to have been remembered or

copied by defendants were trade secrets.

.On January 15, 1965, Oral Argument for. the de-

fendants-petitioners and plaintiffs - a cama was

made. : !

On March 18, 1965, the following opinion of. the

Supreme Court.of Illinois was filed. a

Docket No. 38849—Agenda 19—January, 1965

Edward J. Schulenburg; et al., Appellees, v. Signatrol,

Inc., et al., Appellants. |

Mr. Justice Sotrissure delivered the opinion of the

court: ;

(

(\ — Appendia 1

This case involves the questions of trade secrets,

unfair competition and injunctive relief. Plaintiff E-S .

Industries, Inc., successor to Time-O-Matic,-manufac-

tured and sold certain devices commonly called flashers

-and used primarily in the sign industry to cause lights .

to flash in suchya manner as to animate the sign in

various patterns or designs. The individual defend-

ants were all former employees of said plajntiff who

eft to form their own competing company to manufac-

_ture and sell flashers. Plaintiffs filed suit against the

defendants charging unfair oman by violation of

a trade secret and requesting injunctive relief and

\ damages. The trial court found the jésues fdr the

laintiffs and issued an injunction resfraining the de-

endants from the further manufacture and sale of

competing flashers. © * The question of damages was

postponed pending appeal. The Appellate Court af-

firmed (50 Ill. App. 2d 402), and we granted leave

to appeal.

In 1932 the plaintiff Edward J. Schulenburg, Sr.,

went to.work for Sangamo Elegtric Company at

Springfield, Illinois, as head of its flasher and timer

division and held that position until 1945 when he

purchased all of the-assets of the flasher and timer

division for the sum of $2,718. 61. He moved the oper-

ation to Danville, Ilinois; under the name of Time-

O-Matic Company. Defendant J. W. Sutphin had been

an employee of Sangamo-.and when he returned from

military service in- 1945 he was employed by Time-O-

Matic. Sutphin continued in the employ of Time-O- »

Matic to January, 1959 when he and the plaintiff Schu-

lenburg had a disagreement of policy concerning the

operation of the company and he resigned. Signatrol,

Inc. was organized by defendant Sutphin in March,

1959, to manufacture and sell flashers.

- , Appendia

The defendant Bachman had been employed by Time- -

O-Matic since 1947, designing special equipment and

assisting in sales work. Bachman left ‘Time-O-Matic

in the middle of March, 1959, after a disagreement with

Schulenburg and joined ‘the new corporation with

Sutphin. The defendants McNamara and Walker had

also been employees of Time-O-Matic for several years,

McNamara as purchasing agent and Walker in the

engineering department. Both of them asked Sutphin

whether they could join his organization and in April,

1959, McNamara left Time-O-Matic and joined Signa-

trol as its purchasing agent and the following June,

Walker also joined Signatrol.

The flashers produced by the plaintiffs are not pat-

ented nor is there any contention that the flasher itself

or the method of assembling the flasher is a trade

* secret. Indeed, neither the plaintiffs nor defendants

are true manufacturers but actually buy the motors,

- gears, side plates, switches and other parts which they

assemble. Many of these parts are regular catalogue

items furnished by suppliers and can be ordered by

anyone. For that matter, anyone may legally duplicate

the plaintiffs’ product and go into business in com-

petition with the plaintiffs in the manufacture and sale

of, electric flashers. The Supreme Court of the, United

States has held‘ that no State may, by laws dealing

with unfair competition, impose damages or enjoin

the copying, manufacturing and sale of an article which

is protected by neither a Federal patent nor a copy-

right. Sears, Roebuck & Co..v. Stiffel, 376 U.S. 225,

11 L. ed. 2d 661; Compco Corp. v. Day-Brite —*

376 U.S. 234, 11 L. ed. 2d 669.

spa

-- Appendia : 123

Plaintiffs allege, however, that their manufacturing

‘‘know-how’’ is a trade secret which was imparted in

confidence to defendants while employees and that such

secret has been used by them in manufacturing a com-

, peting product. Defendants deny utilization by them of

any such secret, in fact they deny its very existence.

The trial and Appellate courts held that the informa-

tion, measurements, designs and material specifications

. contained on plaintiffs’ blueprints or drawings and

used in the manufacturing process qualified as a trade

secret. They further found that defendants copied or

memorized the information contained on these blue-

' prints and drew on such knowledge in making up their

own blueprints to be used in the manufacture of their

product.

The three issues anata by this appeal are (1)

: Was there a trade secret? (2) Did the defendants

violate a trade secret? and (3) Was the injunctive re-

lief appropriate? |

_ The trial and ‘Appellate courts concluded that the

manufacturing ‘‘know-how’’ contained on the plain-

tiffs’ blueprints: or drawings were trade secrets in

view of the fact that they were kept confidential and oe

that plaintiffs considered such as a secret and at-

tempted reasonably to keep it so. In this connection,

it must be pointed out that the blueprints were cus-

tomarily submitted to several suppliers by the plain-

tiffs in order to secure the most favorable bids for the

manufacture of parts; no effort was made by the com-

pany to keep the information on such plans and blue-

prints secret; the suppliers were néver advised that

the plans contained any secret information; they were

never requested to keep the information on the plans '

secret; and the plaintiffs never requested a return of

Appendia

, the blueprints and plans from suppliers to whom they

were sent. The electrical principle involved is well

known and plaintiffs’ unpatentable product is for sale

and anyone can buy it. Anyone reasonably skilled

in the art, could, without difficulty, duplicate plaintiffs’

flasher from an examination of the flasher itself and

lawfully engage in a competing business.

_ In order to constitute a trade secret which will be

protected ‘by injunction there must be a plan, process,

tool, machine or compound known only to the owner

and those employees to whom it is necessary to confide

in secret. Therefore, a, process commonly known in

the trade is not a trade secret entitled to injunctive

protection, and matters which are generally known. in

the trade or readily discernible by those in the trade

cannot be made secret by being sd labeled. (Victor

Chemical Works v. Iliff, 299 Til. 532; Sarkes Tarzain,

Inc. v. Audio Devices, Inc., 166 F.Supp. 250, 265 (D.

Cal. 1958), aff’d 283 F.2d 695 (9th Cir. 1960), cert.

denied 365 U.S. 869, 5 L. ed. 2d 859.) Here there is

ample evidence in the record to show that the informa-

tion conveyed to defendants was of such a nature that

it was generally known imthe trade. In addition, none -

of the employees were ever told that the plans were

secret or confidential, no secrecy agreement was ever

required of any employee and no employee was re-

quired to enter into 4ny restrictive covenant not to

engage in any competitive business with plaintiff.

The Restatement of Torts contains a comprehensive

treatment of the principles concerning liability for dis- —

closure or use of others’ trade secrets. In section 757

of the Restatement ‘of Torts under comment b it is

stated as follows:

Appendia | (25

5 “‘ Definition of a trade secret. 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.

‘* * bi

“Secrecy. The subject matter of a trade secret must

be secret. Matters of public. knowledge or of: general

knowledge in an industry cannot be appropriated by

one as his secret. Matters which are completely dis-

closed: by the goods which one ares cannot be his

secret. ”

Defendants are accused of copying or memorizing ,

| necessary information and using it ‘in their mana

. facturing process in competition with their former em-

' ployers. The Appellate Court quoted, with approval,

‘the memorandum opinion of ‘the trial court which

states: ‘‘By defendants’ own statement they carried

away from plaintiffs mental pictures of the plaintiffs’

drawings, and specifications, and from that mental pic-

ture they reproduced it upon paper—an accurate copy

of the original. -It was no more or less than a copy

made from the original. * * * The human eye is but a

7 photographic ‘lens, and the mind is the film. Through

the lens the object is exposed to the sensitive film, the

mind. * * * These mental pictures were obtained while

in plaintiffs’ employment, and to carry them away in

this manner was a violation of a confidence reposed

in them by their employer, as if they had made copies

or photographs and carried them away.’’

The law is well settled that an employee, upon termi-

_ nating his employment, may carry away and use the

general skill or knowledge acquired during the course

of the employment. ‘‘[E]quity has no power to compel ~~

| Appendia

a@ man who. changes employers to wipe clean the slate

of his memory.’” (American Cleaners and Dyers v.

Foreman, 252 Ill. App. 122; Peerless Pattern Co. v.

‘Pictorial Review Co., 147 App. Div. 715, 132 N.Y.S.

-37, 39. ) In American Cleaners and Dyers v. Foreman,

'.- 252 Ill. App. 122, the court reversed an injunction

against defendants who were former route drivers for

a laundry and dry cleaning firm who went to work

for a competing laundry and solicited their old custo-

mers’ whose names and addresses they had remem-

bered. :

‘A 1958 federal case, Sarkes Tarzain, Inc. v. Audio

Devices, 166 F. Supp. 250, contains an excellent state-

‘ment of the information which an employee has the

right to carry away and use in competition with his

former employer: .

“‘Of necessity, whenever ‘a change of employment of

this type occurs and former employees entér into. the

employ of another with whom they engage in a com-

petitive business, it is inevitable that some of the

knowledge acquired while ia the employ of the other

should be made available to the new employer. But,

as already appears, the courts.will not deprive the

employee of the right to use the skill he developed

through the years.

a * _ *

‘‘So there is aireement among the courts that, ex-

cept, where real trade secrets are involved, an em-

ployee may compete with his former employer and

with such knowledge and skill as he has developed in

the former’s employ.”’

The only permissible restriction affording injunctive

relief in this case is the unlawful violation of a definite

-——=

_ Appendia Vy. “OT

trade secret. The plaintiff’s blueprinted ‘‘know-how’’

does not qualify under the circumstances as a trade

secret. Therefore the defendants could not have been

guilty of unfair competition, for the plaintiff’s claim

_of trade secret does not meet the qualifications of the

law.

Since we have held that defendants are not guilty of

wrongfully using a trade secret, we need not pass upon

the scope of the injunction. However, we feel it fitting

to note that the injunction.granted is unlimited either

as to time or geographic area. It amounts to a per-

petual injunction from engaging in the electric flasher

business and affords more relief than even a patent or

restrictive covenant could have afforded under the law.

Such an injunction even in an appropriate case would

_ be far too broad.

For the reasons stated, the judgment of the Appel-

late Court is reversed, and the cause is remanded to

the trial court, with directions to dismiss the complaint.

Reversed and Remanded, with directions.

Dissenting Opinion of Justice Underwood filed upon

denial of Petition for Rehearing May 19, 1965 (Justice

Schaefer joins in the dissent).

-Mr. J USTICE UnvErwoop, dissenting:

tionships, metallurgical qualities and other specifica- |

tions of plaintiffs’ products contained in various blue-

prints, plans and drawings do not constitute trade

secrets and are not-entitled to protection as such is a

holding with which I cannot agree.

That the tli tolerances, positions and rela-

23 ee . .., Appendia

The controlling definition of a trade secret in Illinois

is supplied’ by Victor ‘Chemical Works v. Iliff, 299 Tl.

. 932, 540, where this court said that it is ‘‘[A] secret

plan or process, tool, mechanism or compound known

only to its owner ‘and those of his employees to whom

=x, it is necessary to confide it.’? (Emphasis added.) The

initial requirement that the plan, too, etc., be regarded

as a secret has been found to exist by both the trial

and appellate courts herein. There is ample evidence

‘in the record to support these findings, and they should

not be disturbed here. Hence, the only question pre-

_ sented to this court is whether, notwithstanding the

19 Tact that the parties treated the information contained

in the blueprints as containing confidential material,

it nevertheless does not amount to a trade secret.

In Smith v. Dravo Corp., 203 F. 2d 369, 7th Cir. 1953,

decided under the law of Pennsylvania and relied upon

by both the trial and appellate courts herein, it was

held that information contained in blueprints and pat-

terns did qualify as a trade secret, even though the

finished product was on the market (and could, as

plaintiffs concede here, be copied by legal means), and

literature had been distributed to the industry par-

tially disclosing the product’s design. The reasoning

of that opinion is, in my judgment, most persuasive

here. .

The majority cite Sears, Roebuck & Co. v. Stiffel, 376

U.S. 225, 11 L. ed. 2d 661, 84 S. Ct. 784, and Compco

Corp. v. Day-Brite Lighting, 376 U.S. 234; 11 L. ed. 2d

669, 84 S. Ct. 779, for the proposition ‘‘that no state

may, by laws dealing with unfair competition, impose

damages or enjoin the copying, manufacturing and sale

of an article which is protected by neither a Federal

patent nor a copyright.’’ In a proper case, I would

Appendix : 29

have no trouble with this statement. However, reading

of Sears and Compco clearly indicates that they are

inapposite here. There, the defendants had copied the

plaintiffs’ unpatentable products by legal means. No

problem concerning trade secrets was present. Plain-

tiffs here readily concede that their finished products

may be copied by legal means, (such as acquiring one

of the finished products and measuring and analyzing

it, until a copy can be produced), but maintain that

employees in positions of confidence may not sur-

reptitiously copy plaintiffs’-blueprints while in their

employ and subsequently use them to establish a com-

peting business. Sears has in fact been distinguished

on this very basis, .in Servo Corporation of America

v. General Electric Co. (4th Cir., 1964), 337 F.2d 716.

It was there held that one could not take. advantage

of a confidential relationship and pirate another’s trade

secrets without responding in damages—even though

the finished product was unpatentable and could be

copied by legal means.

A holding that the confidential information contained

in these blueprints does not constitute a trade secret

is, I believe, incompatible with the practical problems

inherent in attempting to copy a product from exami-

nation of the product itself. The measurements, toler-

ances, quality of material, efc., cannot ordinarily be

discovered by these means without expensive and time-

consuming analyses. Plaintiffs have gone through this

process by trial and error and have preserved the in-

formation thus acquired in ‘working drawings and

blueprints. Defendants, however, have chosen to cap-

italize upon their positions of trust—to clandestinely

acquire the blueprints and reproduce them exactly.

Appendiza

(There is evidence in the record indicating that when

some of defendant’s drawings are superimposed over

plaintiffs’ corresponding one, they match exactly—

even to the positioning of_the lettering thereon. Bet-

ter evidence of copying would be hard to obtain. In

fact, defendants have even copied some of plaintiffs’

mistakes. )

It is clear that an employee may take with him, at

the termination of his employment, general skills and

knowledge acquired during his tenure with the former

employer. It is equally clear that the same employee

may not take with him confidential particularized plans

or processes developed by his employer and disclosed

to him while the employer-employee relationship ex-

ists, which are unknown to others-in the indust

which give the employer advantage over his com-

petitors. The facts and circumstances in a particular

case sometimes necessitate the drawing of a fine line of

distinction in determining which rule should properly

apply. Suffice it to say here that, in my judgment,

the facts and circumstances indicated herein fall well

within the contemplation of the latter rule.

It should, moreover, make no difference whether the

information contained in the blueprints, if it qualifies »

as a trade secret (which in my judgment it does), has —

been pilfered by tracing the blueprints themselves (as

some testimony herein indicates or has been memo-

rized by someone with a photographic memory, or has

been committed to memory by constant exposure to

the prints while in the employ of plaintiffs. This

record is replete with evidence leading to but one con-

_ clusion, #.¢., that these defendants have surreptitiously

taken the particularized information contained in

re)

Appendix ae

plaintiff’s blueprints and have employed it to establish .

a competing business. Even today’s ‘‘morals of the

market place’? are more demanding than this, and

should not be relaxed by this court, I would affirm the

judgments of the trial and appellate courts on the

trade secret question. .

The bothersome aspect of the trial and appellate

court decisions is the scope of the injunction that has

been issued. It does not restrict its application as

to time or geographical area. Defendants have, in

effect, been put out of business for all time, everywhere.

This is ¢learly not necessary to make plaintiffs whole

as it is conceded by them that their products may

legally be copied by competitors. Since defendants

might have reproduced plaintiffs’ flasher in this fash-

ion, \it is difficult to justify prohibition of such repro-

duction for a period of time longer than that required

to duplicate the product by lawful means. The rec-

ord contains no indication of the time so required, but

such fact should be readily ascertainable since a Min-

nesota firm did legally copy plaintiffs’ product. I

would accordingly deem it appropriate to modify the

injunction so as to limit its duration to the period

of time reasonably required for plaintiffs to legally

produce such copies, and remand the cause for a deter-

mination thereof, as well as the question of damages

reserved by the trial court for future consideration.

If the evidence established that the period of time re-

quired for reproduction of the flasher by lawful means,

computed from the date defendants first commenced

production, has now expired, the injunction order

should be vacated. |

S Appendia

_ I would, therefore, affirm the trial and appellate

courts’ determinations on the trade secret issue and

remand for a consideration of the questions as to dam-

ages and modification of the injunction.

22-28 On April 1, 1965, there was filed in the Illinois

Supreme Court’ a motion of Lllinois Manufacturer’s

Association for leave to file a brief as amicus curiae

with regard to the plaintiffs-respondents’ petition for

rehearing and an order entered by Mr. Justice Waltey«

V. Schaefer granting Illinois Manufacturers’ Associa-

tion leave to file its brief as amicus curiae.

29-30 On April 1, 1965 the brief of the Illinois Manufac-

turers’ Association as amicus curiae was filed in the

Illinois Supreme Court.

31-32 On April 2, 1965 the petition for rehearing of the

plaintiffs-respondents was filed in the Illinois Supreme

Court. oo

On May 19, 1965 the Illinois Supreme Court denied

the plaintiffs-resporidents’ petition for rehearing in

this cause.

On May 20, 1965 the Illinois Supreme Court on its -

own motion vacated the order denying the plaintiffs-

respondents’ petition for rehearing and allowed the

petition for rehearing.

35-36 On June 4, 1965 defendants-petitioners filed with

the Illinois Supreme Court an answer to plaintiffs-

respondents’ petition for rehearing.

37-38 On June 9, 1965 plaintiffs-respondents filed in the

Illinois Supreme Court a reply to the defendants-peti-

tioners’ answer.

Appendia ‘33

On sleptinaes 28, 1965’ the Illinois Supreme Court

_ filed the following opinion:

Docket No. 38849—Agenda 28—May, 1965. /

Kdward J. Schulenburg et al., Appellees, v. Signatrol,

Inc., et al., Appellants.

Mr. Justice Soirispure delivered the opinion of the

court:

This case involves the questions of trade secrets,

unfair competition and injunctive relief. Plaintiff ES .

Industries, Inc., successor td Time-O-Matic, manufac-

tured and sold certain devices commonly called flash-

ers and used primarily in the sign industry to cause

lights to flash in such a manner as to animate the

defendants were all former employees of said plain-

tiff who left to form their own competing company

to manufacture and sell flashers. Plaintiffs filed suit

against the defendants charging unfair competition

by violation of a trade secret and requesting injunc-

tive relief and damages. The trial court found the

issues for the plaintiffs and issued an injunction re-

straining the defendants from the further manufacture

and sale of competing flashers. The question of dam-

ages was postponed pending appeal. Thé appellate

court affirmed (50 Ill. App. 2d 402), and we granted

leave to appeal.

In 1932.the plaintiff Hdward J. Schulenburg, Sr.,

went to wom for Sangamo Electric Company at

Springfield, Illinois, as head of its flasher and timer

division and held that position until 1945 when he pur-

chased all of the assets of the flasher and timer divi-

sion for ‘the sum of $2,718.61. However, this amount

Appendia:

is unimportant for since that time many blueprints,

plans, specifications and drawings have been revised

or added over the years by the plaintiff to perfect the

flasher. In fact, ‘there now are approximately 15,000

drawings of various types. He moved the opefation

to Danville, Illinois, under the name of Time-O/Matic

Company. Defendant J. W. Sutphin had been an em-

ployee of Sangamo and when he returned from mili-

tary service in 1945 he was employed by’ Time-O-Matic

until January, 1959, when he and the plaintiff Schu-

lenburg had a disagreement of policy concerning the

operation of the company and he resigned. Signatrol,

Inc. was organized by defendant Sutphin in March,

1959, to manufacture and sell flashers.

The defendant Bachman had been employed by Time-

O-Matic since 1947, designing special equipment and

assisting in sales work. Bachman left Time-O-Matic in

_ the middle of March, 1959, after a. disagreement with

Schulenburg and joined the new corporation with Sut-

phin. The defendants McNamara and Walker had.

also been employees of Time-O-Matic for several years,

McNamara as purchasing agent and Walker in the en-

gineering department. Both of them asked Sutphin

whether they could join his organization and in April,

1959, McNamara left Time-O-Matic and joined Signa-

‘trol as its purchasing agent and the following June,

Walker also joined Signatrol.

The flashers produced by the plaintiffs are not pat-

ented nor is there any contention that the flasher itself

or the method of assembling the flasher is a trade |

secret. Indeed, neither Phe plaintiffs nor defendants

are true manufacturers, but actually buy the motors,

gears, side plates, switches and other parts which they

assemble. Many of these parts are regular catalogue

om - | $35

items iene by suppliers and can be ordered by

anyone. For that matter, anyone may legally dupli-

cate the plaintiffs’ product and go into business in

competition with the plaintiffs in 1 the meneneNyer and

sale of electric flashers.

Plaintiffs allege, however, that their manufacturing

confidence to defendants while employees ‘and that

such secret has been used by them in manufacturing

a competing product. Defendants deny utilization by

them of any such secret, in fact they deny its very ex-

istence. The trial and appellate courts held that the

information, measurements, designs and material spe-

cifications contained on plaintiffs’ blueprints or draw-

ings and used in the manufacturing process qualified

as a trade secret. They further found that defend-

ants copied or memorized the information contained

on these blueprints and drew on such knowledge

in making up their own blueprints to be used in the

manufacture of their product.

The trial judge in his memorandum opinion stated

the issues involved in the following language:

‘‘Signatrol, Inc. was organized by the foregoing -de-

fendants in March 1959, and by the latter part of June,

1959, were (sic) engaged in the production of electric

flashers. Their product was to serve the same pur-

pose as plaintiff’s (sic) product, and was very similar

to the product of the plaintiffs. However, similarity of

‘products is not the controlling test which is deter-

minative of the issues in this case, but is a factor to

be considered. The question of infringement of pat-

ents.is not involved. The real question is whether

or not the individual defendants, or some of’ them,

“Appendia

either . om copied or ‘reproduced Time-O-Matic

plans, drawings, prints, wee or carried away in

_ their minds information as to the same’ so that they~’

could reproduce them from their memory, provided .. .

further that such: information was:such as would be

classed as a ‘tradé ‘secret’.”? The determinative ques-

tion here is, how did the defendants go about repro-

ducing the plaintiffs’ flasher? Did they violate the

confidence reposed by their employer by appropriating,

in an unlawful manner, the trade secrets of the plain~

tiffs?

th,

The. trial ‘indies has woxvedily stated the ‘ein th. i

volved, and, of course, there is another issue in this ap-:: ~

peal, and that i is whether, the injunctive relief granted yi,

was appropriate.

The trial and the appellate courts concluded that the

manufaéturing ‘‘know-how”’ contained in the plain-

tiffs’ blueprints and drawings were trade secrets in

view of the fact that they were kept confidential and

-that plaintiffs considered such as secret and attempted

reasonably to keep it so. The memorandum opinion

of the trial judge is forty pages in length, contains

a detailed analysis of the evidence, makes certain find-

ings hereinafter mentioned, and contaitis a very com-

petent analysis of ‘most of. the cases in the United

States concerning trade secrets and the method where-

* by the use of such. trade secrets is acquired either

legally or illegally. The abstract of evidence is 240

pages in length, and it would unduly extend this “Opin-

ion to review in detail all the evidenge. Several of

-the more salient findings ,of the trial court are:

‘“‘The Defendants insist that they made their draw-

ings directly from the parts themselves. by measuring,

App 2ndia - - 37

é xcept ile they drew them from their memory of

Time-O-Matic’s drawings. However, their expert wit-

ness, Dale Beck, a skilled engineer, looked with con-

siderable askance (sic) upon the ability of any engin-

eer to make accurate drawings of many of the delicate

parts merely by measurements of the parts. This was

Z particularly true as to those parts where the measure-

ments were to a 10/1000 of an inch. And to come

up with the identical measurement, tolerances, ete.,.

as appear upon Time-O-Matic drawings were (sic)

almost. impossible.’’

“tian a marked similarity between the drawings

and sketches of Signatrol and those of ‘Time-O-Matic,

in other’ respects. The data is too often too alike to

be jus accidental. The placement of the data on the

. drawing is almost universally the same. ‘s

stthhe likenesses and similarities ocenr so often, with

such exactness, that it seems most unlikely that they

should so occur, if, as claimed by defendants all their

drawings were made from the torn down flasher parts,

and without reference to any drawings or sketches or

specifications of Time-O-Matic.’’

‘*Tt is to be i i that at no time did the Defend-

ants seek to produce a new and improved flasher.

They advanced no‘‘new novel’ improvements. a

‘ only sought to reproduce the identical basic flasher

of the Plaintiffs.’’

“From the diabtater of the Defendants’ own evi-

dence, their admissions, the very nature of their pro-

‘eedure in entering into this competing business, their

evasive attitude, one cannot but conclude that here

was a carefully’ designed scheme and plan to repro-

duce from their employer’s trade secrets, the product |

-—

38 Appendia

of their employer. This conclusion is emphasized by

Sutphin’s testimony that he anticipated he would be

sued. He had sought the advice of an attorney, then

anticipating a suit he preserved a large number of his

sketches. Why would he anticipate being sued, if he

only intended to copy the product from the product

itself, and did not intend to resort to the use of his

employer’s trade secrets?’’

‘* After hearing all the evidence, and having observed

the Defendants as witnesses, and their manner of tes-

tifying, this Court is convinced that this was a well

planned scheme upon the part of the Defendants. This

Court believes that the very nature of all the occur-

rences confirms the testimony of Mrs. Bachman rela-

tive to copying Plaintiffs’ plans, drawings and spe-

cifications in Bachman’s home. This Court also be-

lieves that, just as the defendants admit, they had

over the years actually memorized Plaintiffs’ plans

and drawings, and the information upon them; that

they actually, had a mental picture of these trade

secrets, was no\different than having a copy or picture

on paper. These mental pictures were obtained while

in Plaintiffs’ employment, and to carry them away in

this manner was a violation of a confidence reposed

in them by their employer, as if they had made copies

or photographs and carried them away. This was

not using the skill they had obtained, it was a question

of copying and carrying away the actual trade secrets

of Plaintiffs.’’

The trial judge also stated ‘‘it is of the very essence

of things to see to it that the stringent and clamorous

voice of self interest does not drown out the still,

44 small voice of duty and conscience.’’

Appendix “39

After having considered the entire record in the

trial court, including the transcript of the evidence,

and the trial judge’s opinion, we have determined,

as did the appellate court, that the evidence supported

the findings of the trial court.

. The controlling definition of a trade secret in Illinois

is supplied by Victor Chemical Works v. Iliff, 299 Tl.

532,540, where this court said that it is a secret plan

or process, tool, mechanism or compound known only

to its owner and those of his employees to whom it

is necessary to confide it. The initial requirement that

the plan, tool, etc., be regarded as a secret has been

found to exist by both the trial and appellate courts

herein. There is ample evidence in the record to sup-

port these findings, and they should not be disturbed

here. The more difficult question presented to this

court is whether notwithstanding the fact that the

parties treated the information contained in the blue-

prints as containing confidential material, it neverthe-

less does not amount to a trade secret.

In Smith v. Dravo Corp. 203 F.2d 369, 7th cir. 1953,

decided under the law of Pennsylvania and relied upon

by both the trial and appellate courts herein, it was

held that information contained in blueprints and

’ patterns did qualify as a trade secret, even though

the finished product was on the market (and could, as

plaintiffs: concede here, be copied by legal means), and

literature had been distributed to the industry par-

tially disclosing the product’sdesign. The reasoning

of that opinion is most persuasive here.

The defendants cite Sears, Roebuck & Co. v. Stiffel,

376 U.S. 225, 11 L. ed. 2d 661, 84 S. Ct. 784, and Comp-

co Corp. v. Day-Brite Lighting, 376 U.S. 234, 11 L. ed.

Appendia

2d 669, 84 S. Ct. 779, for the proposition ‘‘that no state

may, by laws dealing with unfair competition, impose

damages or enjoin the copying, manufacturing and

sale of an article which is protected by neither a Fed-

eral patent nor a copyright.’’ In a proper case, we

would concur with this statement. However, a read-

ing of Sears and Compco clearly indicates that they

are inapposite here. There, the defendants had copied

the plaintiffs’ unpatentable products by legal means.

No problem concerning trade secrets was men

Plaintiffs here readily concede that their finished prod-

ucts may be copied by legal means (such as acquiring

one of the finished products and measuring and analyz-

ing it, until a copy can be produced), but maintain that

employees in positions of confidence may not surrep-

titiously copy plaintiffs’ blueprints while in their em-

ploy and subsequently use them to establish a com- ’

peting business. Sears has in fact been distinguished

on this very basis, in Servo Corporation of America

v. General Electric Co. (4th cir., 1964,) 337 F. 2d 716.

It was there held that one could not take advantage

of a confidential relationship and pirate another’s

trade secrets without responding in damages—even

though the finished product was unpatentable and

could be copied by legal means. It is readily apparent

that the Sears and Compco cases do not cover a situa-

tion of industrial espionage by employees who plan to

organize a competing company and thereafter do that

very thing.

A holding that the confidential information contained

in the blueprints does not constitute a trade secret

would be incompatible with the practical problems

inherent in attempting to copy a product from exami-

nation of the product itself. The measurements, tol-

Appentix 41

erances, quality of material, efc., cannot ordinarily

be discovered by these means without expensive and

time-consuming analyses. Plaintiffs have gone through

this process by trial and error and have preserved the

information thus acquired in working drawings -and

blueprints. Defendants, however, have chosen to cap-

italize upon their positions of trust—to clandestinely

acquire the blueprints and reproduce them exactly.

There is evidence in the record indicating that when

some of defendant’s drawings are superimposed over

plaintiffs’ corresponding ones, they match exactly—

even to the lettering thereon. Better evidence of

copying would be hard to obtain. In fact, defendants

have even copied some of plaintiffs’ mistakes.

It is clear that an employee may take with him, at

the termination of his employment, general skills and

knowledge acquired during his tenure with the former

employer. It is equally clear that the same employee

may not take with him confidential particularized plans

or processes developed by his employer and disclosed

to him while the employer-employee relationship ex-

ists, which are unknown to others in the industry and

which give the employer advantage over his competi-

tors. The facts and circumstances in a particular case

sometimes necessitate the drawing of a fine line of

distinction in determining which rule should properly

apply. Suffice it to say that the facts and circum-

stances indicated herein fall well within the contem-

plation of the latter rule.

It should, moreover, make no difference whether the

information contained in the blueprints, if it qualified

as a trade secret (which in our judgment it does), has

been pilfered by tracing the blueprints themselves, as

some testimony herein indicates, or has been memo-

42 Appendia

rized by someone with a photographic memory, or has

been committed to memory by ger wen exposure to

the prints while in the employ of] plaintiffs. This

record is replete with evidence leading to but one con-

- clusion: that these defendants ‘have surreptitiously

taken the particularized information contained in plain-

tiffs’ blueprints and have employed it to establish

a competing business. Even today’s ‘‘morals of the

market place’’ are more demanding than this, and

should not be relaxed by this court. The determinations

of the trial and appellate courts on the trade secret

question are affirmed.

The bothersome aspect of the trial and appellate

court decisions is the scope of the injunction that has

. been issued. It does not restrict ue application as

to time or geographical area. Defendants have, in

effect, been put out of business for all time, every-

where. This clearly is not necessary to make plaintiffs

whole as it is conceded by them that their products

may legally be copied by competitors. Since defend-

ants might have reproduced plaintiffs’ flasher in this

fashion, it is difficult to justify prohibition of such

reproduction for a period of time longer than that re-

quired to duplicate the product by lawful means. The

record contains no indication of the time so required,

but such fact should be readily ascertainable since a

Minnesota firm apparently did legally copy plaintiffs’

product. *[ Accordingly, we believe that the injunc-

* The language contained in the brackets was on November 18,

1965. substituted for the following language contained in the opinion

filed September 28, 1965: “Accordingly, we deem it appropriate

to modify the injunction so as to limit its duration to the period

of time reasonably required for defendants to legally produce

Appendia 43

tion should have been limited in duration to the period

of time reasonably required for defendants to legally

produce such copies. Since the original injunction

has been stayed pending the determination of this

appeal, we believe that justice will be served upon

remand by an order of the trial court ordering the

enforcement of the original injunction pending a

prompt determination of the period of time required

for the reproduction of the flashers by lawful means.

The injunction should then be modified to terminate

upon the expiration of such time period.]

The trial and appellate court determinations on the

trade secret issue are affirmed and the cause is re-

manded to the trial court with instructions to consider

the question of damages and modification of the in-

junction in accordance with the views expressed herein.

Affirmed in part and reversed in part and

remanded, with directions.

49-51 On October 2, 1965 a motion by the plaintiffs-re-

spondents was filed in the Illinois Supreme Court for

clarification of the opinion of the Supreme Court of

linois.

such copies, and remand the cause for a determination thereof,

as well as to consider the question of damages reserved by the

trial court for future consideration. If the evidence establishes that

the period of time required for reproduction of the flasher by lawful *

means, computed from the date defendants first commenced pro-

duction, has now expired, the injunction order should be vacated.”

The changed language contained in the brackets was incorporated

in the opinion after the plaintiffs filed on October 2, 1965 a motion

for clarification of opinion and the défendants filed an

the motion for clarification of opinion. This change wag made on

the .date the defendants’ petition for rehearing was deni

44 | Appendia

52-57 On October 13, 1965 an answer to the motion for

clarification of the opinion was filed in the Illinois

Supreme Court by the defendants-petitioners.

58-59 On October 13, 1965 the defendants-petitioners filed

in the Illinois Supreme Court a petition for rehearing

as follows:

~ 59.*1 The defendants in the above entitled cause, who are

Court to grant a rehearing ofthis case for the follow-

ing reasons:

59.2 1. The judgment of this Court violates the Con-

stitution and statutes of the United States. concerning

patent monopolies.

References:

Appellants’ Petition for Leave to Appeal, pp. 4-11;

Additional Brief of Appellants, pp. 8-14;

Appellants’ Answer to Appellees’ Petition for

Rehearing, pp. 10-12. 2

The latest opinion of this Court, the one filed Sep-

tember 28, 1965, recognizes that under the Constitu-

tion and patent statutes of the United States ‘‘no state

may, by laws dealing with unfair competition, impose

damages or enjoin the copying, manufacturing and

sale of an article which is protected by neither a Fed-

eral patent nor a copyright’? (Sears, Roebuck & Co.

v. Stiffel, 376 U.S. 225; Compco Corp. v. Day-Brite

Lighting, 376 U. S. 234) but the Court finds those

cases to be inapposite here because they do not in- .

volve a question of trade secrets. It is true that in

the cited cases the ground on which.unfair competition —

* The decimal refers to the internal pagination of the

- defendants-petitioners’ petition for rehearing.

Appendia £45

was based was a slavish imitation of unpatented ar-

ticles resulting in confusion. ~¥ source. Here the al-

leged ground of unfair compeftftion is that the defend-

ants violated trade secrets of the plaintiffs. The sweep-

ing language of the Supreme Court of the United

States makes no differentiation between the kind or

gradation of ‘‘unfair competition’’. which a state is

prohibited from using as a ground of disregard of the

Constitution and statutes the” United States relating -

to patent monopolies. Both the trial court and the

Appellate Court entered sweeping injunctions against

the defendants on the ground that the defendants

had been guilty of unfair competition. It is a little

late to reclassify the alleged wrongs committed by the |

59.3 defendants just in order to avoid the rights given to

the defendants by the Constitution and patent laws of

the United States freely to assemble and sell unpat-

ented flashers and timers in competition with the plain-

tiffs.

This Court now relies upon Servo Corporation of

America v. General Electric Co. (C.A. 4, 1964), 337

F.2d 716, which was first injected into the present case

by the brief of the Illinois Manufacturers Association

as indicating in the language of this Court’s opinion

‘‘that the Sears and Compco cases do not cover a sit-

uation of industrial espionage by employees who plan

to organize a competing company and thereafter do

that very thing.”’

_ Servo Corp. did not involve in any respect a con-

troversy between an employer and former employees,

and the present case does not involve, notwithstand-

ing the use of the loaded term in the brief of the

Illinois Manufacturers Association, any ‘*industrial

we oe:

46 Appendia

Plans which were freely shown to the defendants

while they were in-the employ of plaintiffs and which

were widely disseminated in the trade simply cannot

be the subject of. ‘‘industrial espionage’’ and it is a

play upon words—loaded words at that—to attempt

to differentiate the Sears and Compco cases on any

theory that industrial espionage is excluded from the

sweep of those cases and that the defendants are

guilty of industrial espionage here.

Since the only ground for refusing to Sait the

Sears and Compco cases to the present situation is

the claim that the defendants have stolen trade secrets

of the plaintiffs, we come back again to the proposi-

tion that drawings and specifications which were wide-

_ ly disseminated without any claim of secrecy cannot

employer who has a virtual monopoly of an industry

wishes to be freed of competition from former em-

ployees.

59.4 2. The drawings and specifications of the plaintiffs

in the instant case were freely circulated among em-

ployees, bidders and customers of the plaintiffs with- ’

out the imposition of any secrecy and this widespread

publication prevents the drawings and specifications

from being trade secrets. Y

References:

Appellants’ Petition for Leave to Appeal, pp. 22-

. 8;

Additional Brief of Appellants, pp. 20-31;

Appellants’ Answer to — — for Re-

hearing, pp. 3-8. |

59.5

( Appendix P47

In the then-unanimous opinion of this Court filed

March 18, 1965, which was prior to the receipt by this

Court of the inflammatory and uninhibited brief of the

Illixfois Manufacturers Association, this Court | _Cor-

rectly stated (pp. 2-3):

‘*The trial and Appellate courts concluded that

manufacturing ‘know-how’ contained on the.

plaintiffs’ blueprints or drawings were trade se-

crets in view of the fact that they were kept con-

fidential and that plaintiffs considered such as a

secret and attempted reasonably to keep it so. In

this connection, it must be pointed out that the -

blueprints were customarily submitted to several —

suppliers by the plaintiffs in order to secure the

most favorable bids for the manufacture of parts;

no effort was made by the company to keep the

information on such plans and blueprints secret;

the suppliers were never advised that the plans

contained any secret information; they were never

requested to keep the information on the plans

secret; and the plaintiffs never requested a re-

turn of the blueprints and plans from suppliers to

whom they were sent. The electrical principle in-

volved is well known and plaintiffs’ unpatentable

product is for sale and anyone can buy it. Any-

one reasonably skilled in the art, could, without

difficulty, duplicate plaintiffs’ flasher from an ex-

amination of the flasher itself and lawfully -en-

gage in a competing business.

‘Tn order to: constitute a trade secret which wi

be protected by injunction there must be a plan,

process, tool, machine or compound known only

to the owner and those employees to whom it i

necessary to confide in secret. Therefore, a proc-

ess commonly known in the trade is not a trade

secret_entitled to injunctive protection, and_ mat-

ters which are generally known in the. trafle or

readily discernible by those in the trade cannot

Appendia

be made sécret by being so labeled. (Victor Chem-

ical Works\v: Iliff, 299 Ill. 532; Sarkes Tarzain,

Inc. v. Audio. Devices, Inc., 166 F.. ‘Supp. 250, 265

—_(D. Cal. 1958)), aff’d 283 F.2d 695 (9th cir. 1960),

cert. denied. 365\U.S. 869, 5 L. ed. 2d 859.) Here

there is ample evidence in the’record to show that

information conveyed to defendants was of such

a nature that it was xenerally known in the trade.

In addition, none of the employees were ever told

-that the plans were. secret or .confidential, no

- secrecy agreement was ever required of any em-

ployee and no employee was\required to enter into

“any restrictive covenant not to engage in any

' competitive business with plaintiff.’’ |

Further, on pages 3 and 4 of that opinion, the Court

quoted from The Restatement of Torts the following:

“Secrecy. The subject matter of\a trade secret

must be secret. Matters of public knowledge or

of general knowledge in an industry cannot be

_» appropriated by one as-his secret. Matters which

“== are completely disclosed by the. goods Which’ one

tnarkets~cannot be his $ecret.’’

The facts in this record and the law have not been

_ ¢hanged since that opinion was filed and it is obvious .

_ that in the intervening period the Court has inad-

vertently overlooked the undisputed evidence in the

record supporting the quoted portion of the. Court’s

original opinion: We therefore repeat a summary of

evidence on this point which will be.found on pages

5 and 6 of our Answer to Appellees’. Petition, for Re-

hearing, which has apparently been overlooked by the .

Court:

59.6 Plaintiff Schulenburg, Sr. bought the assets of the

Sangamo Electric Company’s flasher and timer divi-

sion, including‘all sheeted for the sum of $2,718.61

Appendix ® As

(Plaintiffs’ Ex. 11, R. 1157). There is no evidence

that at that time the Sangamo drawings were secret.

Defendant Sutphin was in the employ of Sangamo

Electric Co. from 1936 until he went into military

service in World War IT (Abst. 52) and was thorough-

ly familiar with all of the drawings and blueprints

making up the component parts of the flashers manu-

factured by Time-O-Matic prior to his entering Time-O

Matic’s employ (Abst. 54). He did not lose this prior

knowledge or the right to use it by thereafter entering

into plaintiffs’ ‘(Time-O-Matic’s) employ.

None of the plaintiffs’ employees was ever notified

orally or. in writing that the drawings and blueprints

were secret (Abst. 168). |

Plaintiffs did not have any written agreements with

any employees as to secrecy (Abst. 132, 168).

The plans of the various parts were not kept under

lock and key and the plans and blueprints were avail-

able to all'employees in the plant. (Abst. 93, 132, 168,

286). ~~

Any employee could go up and go through the draw-

ing drawers without being questioned, some of the

drawings would be left out.on the benches overnight,

and there was no method of controlling the drawings

‘such as an accurate inventory accounting of the draw-

ings (Abst. 166-167, 286).

Drawings of parts were submitted to manufacturers

for bids on supplying the parts without any request

that the drawings be returned, so there may be draw-

ings scattered around the country which have not been

returned or thrown away (Abst. 56,-93, 131-132, 286,

292).

50 Appendiz

59.7 Each prospective supplier of parts received a print

of the part that he was to bid on (Abst. 286). The

letter forwarding these prints said nothing about se-

crecy of the plans or prints sent along with the re-

quest for price quotations (Abst. 286-287).

~The plaintiffs in the Answer to the Petition for

Leave to Appeal admitted the et of the above

statements as follows (p. 5):

**As T.O.M. would order a part from a supplier

the drawing or blueprint for that particular part

containing the necessary information relative to

shape, design, dimensions, and metallurgical speci-

fications of that particular part would be sent to

the supplier for use in the production of that

part’’.

Similar admissions that plaintiffs’ blueprints were

circulated in the trade to suppliers and prospective

suppliers will be found on pages 6, 20, and 27 of the

Plaintiffs’ Answer to Petition for Leave to Appeal.

Although Plaintiff E. J, Schulenberg, Sr. first tes-

tified that no complete set of drawings was sent out of

the plant (Abst. 93-94), it was later proven without

dispute, and admitted by Schulenburg, that a complete

set of sepia drawings, af type that could be used to

make a large number of copies, of a model 3 timer,

Style 361-S1, had been sent to Martin-Marietta Com-

pany in‘Colorado which was neither an employee nor

a supplier for the plaintiffs (Abst. 280-281, 299-301).

The above undisputed facts shatter the theory that

the plaintiffs’ drawings and blueprints were secret.

Therefore, they were not trade secrets.

We ask the Court to consider the above facts; which

we again call to the Court’s attention.

Appendia BL

59.8 3. The opinion and judgment violate the constitu-

tional freedoms of the defendants, encourage monop-

oly, and produce intolerable confusion as to the rights

of employees to compete with former employers.

References:

Appellants’ Petition for Leave to Appeal, pp.

12-22;

Additional Brief of Appellants, pp: 14-20;

Appellants’ Answer to Appellees’ Petition for

Rehearing, pp. 8.9.

The contents of this Court’s opinion indicate that

in reversing the original opinion filed on March 18,

1965, this Court has been moved too strongly by the

inflammatory arguments* contained in the brief of the

Tilinois Manufacturers Association.

On May 19, 1965, the Court denied the plaintiffs’

Petition for Rehearing, but on the same date the dis-

senting opinion of Mr. Justice Underwood was filed

adoring the main the arguments made by ‘the’ Illi-

nois M acturers Association to which at that date

* Among the terms used by the Illinois Manufac-

turers Association in its brief to describe the defend-

ants: ‘‘fraudulently’’, ‘‘surreptitiously’’, ‘‘bad faith’’,

‘‘secrecy’’, ‘‘connivance’’, ‘‘fraud’’, ‘‘breach of good

faith’’, ‘‘stealth’’, ‘‘espionage’’, ‘‘piracy’’, ‘‘ predatory

practices’’, and ‘‘industrial espionage and piracy’’.

Any conduct which could possibly justify the above

characterization cannot possibly be the same conduct

referred to in this Court’s original opinion which we

have quoted.above. The facts in this record have not

changed since that opinion was:filed.

Appendia

the defendants had had no opportunity to reply. With-

in 24 hours after the denial of the Petition for Rehear-

ing the Court on its own motion vacated the order of

denial and granted the Petition for Rehearing.

59.9 In adopting the arguments made by the Illinois

ae,

Manufacturers Association in the latest opinion the

Court has overlooked the fact that while the Associa-

tion denominates itself a ‘‘friend of the Court’’ it

actually is a friend of the employer who has a vested

interest in preventing competition from employees and

former employees. It is even more accurate to say

that the members of the Association are not simply

friends of employers—they are employers.

After being soundly and properly defeated by the

opinion of this Court filed on March 18, 1965, Plain‘i

Schulenburg, who is a member of the Lllinois Manu-

facturers Association, obviously scurried around to

get help from the Association which resulted in it

filing—even before the plaintiffs’ petition for rehear-

ing was filed—a brief amicus curiae in support of the

petition for rehearing filed thereafter. The unfair-

ness of permitting this tardy brief to be filed (over

our strenuous objection) is highlighted by the fact that

the oral argument in this case occurred in January,

- 1965, and no opportunity was given on the oral argu-

ment to meet the new matters later injected into this

case by the Illinois Manufacturers Association. The

Association, not being a party to the case, obviously

was not inhibited by all the facts appearing of record

from making an inflammatory and distorted argument

which, unfortunately, has induced this Court to reverse

a well-considered and temperate opinion.

| Appendix ' §3

The distortion in the Association’s brief is so great

that we feel it essential to particularize the points

where the brief goes farthest afield. We therefore

point out the following specific areas of error in the

brief :

1. The record will not support a finding that Sut-

phin and others left Time-O-Matic for the purpose of

59.10 organizing a competing company. On the contrary,

®)

the evidence was clear that the plaintiff Schulenburg

was not liked by the defendants and they left his em-

ployment only because of personal differences with

him and with his policy of running the plant [Abst.,

pp. 230, 285, 297, 307].

2. They made no mention of the fact that the plain-

tiffs’ plans and drawings were circulated on a nation-

wide basis without restriction of any kind.

3. The brief assumes that the plaintiffs’ plans and

drawings contained secret information and there is no

reference whatsoever as to any reason why the in-

formation should be classified as a legally protectible

trade secret.

4. They ignore the overall effect of the evidence

but attempt only to pinpoint the much-controverted

testimony of the disgruntled ex-wife of the defendant

Bachman.

5. The brief attempts na nvinee this Court that

the defendants’ plans and drawings were exact copies

of the plaintiffs’ plans, but an nance of the ex-

hibits will clearly show otherwise. 7

The present opinion and judgment of this Court

violates the public policy of this State in promoting

monopoly, in infringing upon the human and consti-

54 Appendiz

tutional freedom of employees who are now required

by the opinion of this Court to erase their memories

of widely circulated drawings, and in violating the

Constitution and statutes of the United States in re-

spect of patent monopolies. Such an opinion ought

not to be permitted to stand, and we respectfully re-

quest the Court to re-examine the record and find, as

it originally did on the identical evidence now before

it, that the plaintiffs had no trade secrets in drawings

and specifications which were known throughout the

industry, and that the defendants were entirely within

59.11 their rights in using such knowledge to buy assembly

parts for unpatented flashers.

Since in this case the Court has been willing to act

on its own motion, we respectfully request that our

Petition for Rehearing should be granted and that on

the Court’s own motion the case should be reset for

oral argument.

60 —-Qn November 18, 1965 the Illinois Supreme Court

ordered that the plaintiffs-respondents’ motion for

clarification is disposed of by the action taken by the 5

court on the petition for rehearing. [See the footnote

on page 42 for an explanation of the ‘‘clarification’’

made. |

61 On November 18, 1965 the Illinois Supreme Court

—denied the defendants-petitioners’ petition for re-

hearing.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.