# Petition for Writ of Certiorari — Sarkes Tarzian, Inc. v. Audio Devices, Inc. (No. 736) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40386420_0837%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Petition for Writ of Certiorari - **Published:** January 1, 1960 ## Text Fr | | | . | : | I: ? ve ‘ i . Supreme Court of the United States ne /*) YPTITION FOR A WRIT OF CERTIORARL TO THE “ATPED STATES COURT OF APPEAIS FOR THI NINTH CIRCUL! : * c hit ah bu a) ee — we be PRC PA aa lie 2 fa a they te eB Nas EB OTS Gis _™ . PRES AM IEI gh OM D I : LPipcianmey eng! PRO w2- oe fe Neila sd i ed INDEX : 3 Page " f a connie { _—Opinions Below «2... 6 2. 5 re kaka sees cg cet. os ES cis ink neeaknkoesees enn ans edeepaes teen 1 a Questions Presented ........ AS AEES DP re 2 I Or I ee a cdpcewcsdcensexabapee & Basis of Federal Jurisdiction ................0000006- 6 ree saree Seats ieee aed aan eats foe I, Trial Court ‘s Definition of Trade Secret— Dis- Ge Souneesaepeee 1 LR Sees eee aa eaeens 8 I]. District Court’s Erroneots Reliance on Prior — Art—What is Readily Ascertainable? ...... 14 HI. Direct Conflict of Trial Court's Holding with California Law of Trade Secrets. .... eeeeeees _18 IV. Appropriation of Alleged Trade. “Secrets—Im- ‘ proper Standard Applic by Trial Court..... 21 V. Conclusion ....... ORS OE cnewake eons . 2A - Appendix A ....... Rene As ip oii aca ead ere ee al ee i oo IN TEI ce tne) os 7 Sek aaa apna eee TABLE OF AUTHORITIES / Cases si wh Pay A. O. Smith Corp. v. Petroleum Iron Works, & Cir., 1934, 3 ae eee Ve ee ee 105.14. 15,21 Actna Building Maintenance Co. v. West, 1952, 59° Cal. ~ Te ee hs OE a ren eee eee aa ee Allen Mfg. Yo. v. Loika, 1958, 145 € onn. 909, 144A. eo eos en oc as OL OK DRE Ea DER eRe is Board of Trade of (: ity of ( iain v. Chyistie, 1911, | 198°U. S. 236, 20S. SIS Ss pani oa ek ea rca a ‘Bootli v. v. Stutz Meter C ar Co. of Ameri¢a, 7 Cir. 1922, rt el ee a eet 34 Bourns v. Edeliffe Instruments, D. C. Cal., 1954, dz nS Osc oc0e ts se ks ay Mite eo me Kea hes ee 13 By-Buk Co. v. Printed Cellophane Tape Co., 1958, 163 Cal Ape. 36 157; 000 P. 92.147 «... 2. ons cu.. 18, 28 Dr. Miles Medical Co. v. John-D. Park & Sons Co.. 1911, 220 U. S. 373, 382, 31 S. Ct. 376, 382 .....- 2 DuPont De Nemours Powder Co. v. Masland, 1917, 244 U.S .100, 37 S. Ct. D409 ua bakd paReCaneee des ceuks 4 _Extrin Foods v. Leighton: eed 28] App. Div. 772, 115 N.Y.S. 2d 429 onan Fn eter oe nt er. ae Fowle v. Park, 1889, 131 U. S. 89, 97, 9 S.Ct. 62 2D Franke vy. Wiiltschek, 2 Cir., 1953, 209 F. 24°493 . . Al, 25 _ George v. Burdusis, 1949, 21 C. 2d 1353, 130 P. 2d 399. 15 Harris Mfg. Co. v. W ‘illiams, D.. C. Ark., 1957, F. NG BU 6 oe vebluws vokas pieaeehalsacueunceys 24 Head Ski Co. v. Cia Ski Co., JIne., D. C. Md., 1958, F. Supp. 919, 923 ..... epee fees il | : : B = mn - ts PE RAN EES envi moat Bee ~ oe Awe _— ¢ © ~ SEBO CBR REPLI AD Sg aan 1 Et Se tet sD ETS pe Prag 4 eet tees oe) BB altars be a bia Butte a thos 4 Ee OTE Ot Erte RTE oe ea ° TABLE, OF AUTHORITIES—Continued Cases. ae Page Herold et al v. ‘Herold China & Pottery C o0., 6 Cir., 1919, 257 F. 911 seeels Dt aa igus dik aS eA we: 12 | Hevden Chemical Corp.'v. Burrell & Neidig, 1949, 2 N.J. Supp. 48, 64 A 2d 465 ..... ci ites teal eaves VW “L.M. Rabinowitz & Co. v. Dashe ‘r, 1948, 82 N. YS. 2d REE AEE TEN on tO Ra Mets Pe ae iy .-17, 18 Lee v, Samburr, Cal., 1952, 94 U.S.P.Q. 153 2.0.2... 21 LeVine v. E. A. Johnson & C ‘0. 1951, 107 Cal. aoe. ad ) CHARLES (. L. SMITH, |. 4 CLARENCE WILLIAM CHE SN T. . 4 ERNEST C. FRIES, eis: FREDERICK G. SCHULLER, Hi « and DOE I to DOE (C, inclusive, :: x Respondents. "3 PETITION FOR A WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS. FOR THE NINTH CIRCUIT . ? Sarkes Tarzian, Inc.. your Petitioner, prays,that a writ ., of certiorari issue to review the “judgment of the United - i } 1 6 9 States Court of Appeals for the Ninth Circuit, entered. m the above-entitled case on November 21, 1960. OPINIONS BELOW ‘The opinion of the’ District Court (R. 78- 149) is reported at 166 F. Supp. 250." The opinion of the ours a. Appeals e ¥ ea (infra, ee A, p. 26) is reported ‘at 283 F. 2s 695. : JURISDICTION The judgment of the Court of Appeals Was entered of j ’ 4 November'21, 1960 (infra, Appendix B, p. 27). No petitio. ; for rehearing was filed. The jurisdiction of this Cour |. is invoked under the provisions of 38 U.S.CLA. Seetio: 1254(1). QUESTIONS PRESENTED 1. Whether the lower courts ignored California das Pe eee: ot ahi re e of trade secrets in defining a trade seeret asa e particular og ‘form of construction of a devi iee, a formula, method o . process that ts of a character which does not occur) persons inp the trade with knowledge of the state of th art or which cannot -be~ “EVO olved by those skilled in th art from the ‘theoretical deseripti ion of the proevess. 07 compilation or @mpendia of information or knowledge” thus: (a) applying an erroneous test in determininy the’ Petitioner had no protectible tradé seeret in its. éerta manufacturing process, and (b) arriving at the erroneous conclusion that the process for, manufacture of a Although Petitioner is not contending that the trial cour was unaware of the existence in the law of this basic dis tinction, it is a fact that the trial court introduced con fusion into the law by announcing a concept which it termed ‘‘diseovery’’ which, for ‘all practical purposes, incorpe- kates the mechanical improvement test applicable to pat entsThe trial court's definition of a trade secret led g Se ee Pen ae ee ee to state dogmatically i in its opinion that: ‘ ‘‘[T here is no discov ery Ww hen one skilled in the art : develops a process. for effecting certain desired. re | sults.”’ _ AR. 100) : 3 ~ 7] 4 In sharp contrast the Court of Appeals for the Sixth Cir 4 cuit in A. O. Smith Corp. v. Petroleum Iron Works, 6 Cit. : If the definition of trade secret ‘sealed by the District _ Court is allowed to stand, there can be ro trade secret, | except in matters which are patentable or which ayproach\ ; the novelty one would normally associate with invention. That this would be the practical, if not the intended re, sult of the District Court’s statement of the law is cleft - from its approach to the instant ease. The court virtually ignored the facts which stand of record that Audio De- | vices, Inc. had no previous experience’ in the manufacture of rectifiers of any sort, that mee Audio nor any of the individual defendants exceptA@leksy had any previon~ experience with silicon, that, a (rough Audio spent a con- | siderable sum in initiating its rectifier division in Califor- ° nia, the expenditures were for plant and equipment ani eae oA. A aR Dahlen ee eso > Piet Lt et ee eee ‘4 ie I NIE Chee REY SRT catlaicats oad as RR WNitabeermlwie: 4 TS RRA MRA a a Rae SN tk AO 15 not research and development; and that in late’ 1957, the - critical date, Petitioner alone had a’ successful process for . the manufacture of silicon rectifiers of the radio and tele- vision type. Overlooking these undisputed facts, the Court held that, on the basis of a prodigious amount of so-called prior art references introduced into evidence, Respondents “ had established that the process here involved was readily ascertainable ta the trade. In so holding, the trial edurt . . could not have been aware that Respondent Audio expended vastly more effort, time and money in the research inci- dent to this trial than incident to its initiation of a silicon rectifier business. «a Reliance on a mass of evidence of so-called prior art in trade secret cases has repeatedly been: rejected by the eourts. In Sun Dial Corp. vr: Rideout, 1954, 29 NJ. Supp. - 361, 102 A. 2d 90, 93-94, the court, in referring to such evidence, stated: . ‘The fact that individual process steps are known to industry and the further fact that every product used by plaintiff . . . can be boughp in the open market ‘loes not weaken the conclusion-we reach. Williams was able to devise a combination of products | and methods which resultgd in_preeminently finé dial and panel work—much like a fine chef who achieves an outstanding culinary product by a sequence of biending ingredients and by timing achieved through a long period of trial and error.”’ | In refusing to give weight to evidence which indicated . Seneral trade knowledge of individual process steps, it is interesting to note that the court in the Sun Dial case also alluded to the concept of discovery as enunciated in wl. O. Smith, supra. However, the court correctly deter- tuined that the use of a well-known, proprietary paint product in.an unorthodox manner, along with a combina- — 16 tion of a number of well-known process steps, still amounted-to trade’ secret. In contrast, the trial court. be- low and the Court of Appeals, by adopting the trial court's opinion, held that this Petitioner had no trade secret be cause, in their estimate: “Whether a method is or is not unorthodox does not determine its validity as a secret. It is whether it is unique and unknown in the trade that is important, or whether fhete is discovery in selecting between alternative steps.’’ (R. 112) The Court apparently intended, by this statement, to hold that unorthodox combinations of individually well-known process steps could not be secret. By so holding, it de- termined that unless the processes invol¥ed were propri- etary and unique in the inventive sense, there can be no trade secret.’ This is just not-the law: * 3. The trial court, in so concluding, chose to find something damaging in what it termed an admission by Petitioner’s: expert which developed in the following colloquy, (R. 930): . “The Court: These various processes which, you have described for us are recognized methods in thé art of achieving the things that we have in mind? For instance, the pulling of crystals is a recognized method of transmuting the multipoly crystal-. line to a _uni-crystal by the method of what has becn called etching. Etching is a method of cleaning metals and there are various methods of achieving that end either by polishing or running them through various compounds, the qualities of which are known to chemists and persons in the field. “Every step in this process is a recognized process in the par- ticular industry, is it not? “The Witness: That is a very general question. I believe the answer to that would be, yes, there are very few processes that are used which are not used ih some other way. Certainly we etch lamp bulbs—lamp bulbs, for example, are etched. “Crystals of synthetic quartz are nowadays. “The Court: And what you have outlined as you say is the uniqueness of the process as practiced, was that they used what you call unorthodox methods of arriving at certain results. Isn’t that true? “The Witness: Well, this is certainly true—sovme of the proc- esses that are used—in fact, sevéral of the processes which are used there are in direct conflict with the overwhelming prepon- derance of processes that are outlined in the literature. “The Court: As.applied to this particular art? - “The Witness: Yes, that is right.” The above colloquy was quoted by the trial court in its opinion at R. 142. ; ox « oe. el ee Sin) 04a ses cee ee ie RIA tice pte acs cane ee te oe ee a a er ee ee <= ee ee ——s or remem ~~ a el BN EAE Serie OOS Shep" . pane LF ; Evidence. of prior art was similarly given little weight in the ease of Heyden Chemical Corp. v. Burrell & Neidtg, 1949, 2 N.J. Supp. 48, 64 A. 2d 465, which involved alleged trade-seerets in processes for the manufacture of formal- dehyde and pentaerythritol. The New Jersey court in that ease held that. evidence of the prior art consisting of _ some 800: to 1000 references dealing with the produetion of formaldehyde and 500 to 600 dealing with the produc. — tion of pentaerythritol did not support the defendant's contention that the claimed processes were part* of ‘the general knowledge of the trade: The court observed that the processes of manufacture of both chemicals consisted of a number of integrated steps known to the trade; that the basie ingredients were well-known to the chemical pro- fession, and that there existed numerous articles, patents and treatises relating to the manufacture of the chemicals. The court pointed out, however, that (64 A. 2d at 467).: {Only a person who knew the Heyden proeess [claimed secret} could make the selection of literature references which were offered in evidence.’ | It is equally clear in the present casé that only -by be- ing :ware of the Tarzian process for manufacture of recti- fiers could defendants. select the literature references to be put in evidence in support of.their contention that the Tarzian process was well-known to the trade. For this reason, courts have repeatedly held irrelevant literature showing only general non-definitive steps or parts of a process or product or showing only isolated fragments of a process or product.t See L. M) Rabinowitz v.' Dasher, —_. 4. Counsel for the Respondent indicated the approach followed by Respondent in the presentation of a conglomerate of prior art references in the following statement (R. 1346): . ; ‘[W]e have never represented that this patent. teaches every Step in the art. We have used it to illustrate that it teaches one or two of the steps, but not every.step.” ~ By knowledge of the Tarzian process the Respondents could assuredly locate patent references to the individual steps. - ie , ‘.-% caer 1948, 82 N.Y.S. 2d 431, 438, Schattoir v. American Rr- bonded Leather. Co., 1926, 104 Conn. 042, 133 Atl. ds2; Extrin ‘Foods. v. Leighton, 1952, 281 App. Div. 772, 115 _N.Y.S. 2d 429; Monsanto. Chemical Co. v. Miller, me Utah, 1958, 118 U.S.P.Q. 74; Head Ski Co. v. Kam Ski Co., Inc., D.C. Md., 1958,°158. F. Supp. 919, 923; Allen _ Mfg. Co. v., Loika, 1958, 145 Conn. 509, 144 A. 2d 306; — Stone v. Goss, 1903, 635 N.J. Eq. 756, 55 Atl: 736; Minne. sota Mining & Mfg. Co. v. Technical Tape Corp., NX. Y.. 1959, 123 U.S.P.Q. 96. ay III. Direct Conflict of Trial Court's Holding With Cali- fornia Law of Trade Secrets. On the basis of the trial court's definition of ** discovery” which incorporated the mechanical skills test of the patent law and which led the trial court to false reliance on prior art references, the courts’ below completely ignored the applicable California law. The decision by the California Appellate Court in By-Buk Co. v. Printed Cellophane - Tape Co., 1958, 163°Cal. App. 2d 157, 329 P. 2d 147 (rehear- ing denied September 12, 1958; petition for hearing denied Qetober 22, 1958) is the most recent and illuminating discus- sion of that law. The case was decided subsequent to the de- cision of the trial court, but prior to the affirmance of the lower court’s holding by the Court of Appeals. It repre- sents a definitive restatement of the accepted law of trade F secrets of the State of California which the courts below chose to ignore; but which, having been decided while . this case was sub judice, was binding en the lower.courts. See Vandenbark v. Owens-Illinois Glass Co., 1940, 311 U.S. 538, 51S. Ct. 347. In the By-Buk case, the plaintiff was a manufacturer of masking dises and die cut masks of pressure sensitive tape ~ ‘ oie sr oe et Se $i ie Po Fo . », hw gare re LY “i S epedec ak dail ge ae OA cen otras He sd CLR BM Aitges etre ate ti ak ° _¢ : arr ee eco pate stb tie ee Lone Ni biisic eesti yale ie ees ESS EES Sgitatirad $ hash abegee 19 for use in shielding industrial apparatus from abrasives . or paint. The machines and processes to manufacture such — products were in use by an Eastern competitor, but plain- tiff had been unable to purchase mathinery and know-how © to affect this production. It, therefore, undertook tnde- pendent eXperiments to develop its own machines and processes. Plaintiff was successful in developing. machin- ery to secure the desired results, but, subsequently, one of its employees terminated employment and went to work for a competitor, who immediately entered business in com- petition with plaintiff using similar machinery and, meth- ods. The California Appellate Court held that the plaintiff had a protectible trade secret and that an injunction against appropriation by defendant was proper. ' The California Appellate Court held that although it had been stipulated at trial that all component parts of the machines developed by plaintiff were standard parts — procurable on the open market, defendant's contention that the machines made of such standard parts could not be unique or unusual was properly rejected. The court pointed out that in making this assertion, the defendants _’ Miscone:.ved the elements of a trade secret. The court noted: ‘It is not neeessary in order that a process of: manu- facture be a trade secret that it be patentable or be something that could not be discovered by others by their own labor and ingenuity. Restatement, - Torts,. Volume 4, Section 757, Comment B, Page 5, defined the term as follows:‘A trade secret may consist of any formula, patent, device or compilation of informa- tion which is nse_ in one’s business, and which gives: him an opportunity to obtain an advantage over com- petitors who do not know or use it. * * * Generally. ‘torelates to the production of goods. as. for example, a machine or formpla for the prodnetion of an article.” ’ «The character of the secret if it is important to thé business is not material but it must, as the term im- plies, be kept secret by the one who claitms it. Riess v. Sanford, supra, 48 Cal. App. 2d 244, 246, 117 P. 2d 694, Restatement, Torts, Volume 4, Section 79%, Com- ment B, pp. 5, 6.”’ After thus stating the definition of a trade secret, the California Appellate Court held that plaintiff's machines were trade seerets. It was apparént to that court that plaintiff's technique’ of combining, through a systeri of” trial and error, various parts, which were apparently known to the trade, in order. to produce the results he desired. bore fruition in a protectible trade seeret -embodied in the machines which cree -had developed. The court went on to say: a is’ undoubtedly true that if Tape Company [de- fendant | had used ‘the same thought, labor and ingenu- ity which were used by plaintiff it might have been able to secure the same results that plaintiff did. But. - this faet does not destroy plaintiff’s right not to have its processes wrongfully disclosed to others and used to its detriment.”’ The ruling of the Court in the By-Buk ease could never obtain under the decision of the trial court in this ease. According to the trial court, the mere fact that an eastern competitor had achieved the desired result (a combination of known, standard products) from its study of the kuow!- edge in the art, and that there was, indeed; enough in- formation in the art to guide thé plaintiff as a_ skilled mechanic in arriving at the desired cae ae have de- feated any elaim of trade secrecy.:The plaintiff ‘in the’ By-Buk ease did not ‘*discover*’* anything in the: manner suggested by the trial court but, by a patient system of 7 : | 7 = me seco totais Vat * would consider t v “ee 21 | trial and error, he combined various parts from known processes and devices to achieve a_ protectible trade secret. In & sense this is discovery and ‘this concept of “diseovery"', as applied by the California court in the By-Buk case, parallels: the true concept of discovery as set forth.in the A. O. Smith case, supra.” As stated in the A. 0. Smith case,(73 F. 2d at 538): ‘The mere fact that the.means by which a discovery is made afe obvious, that expeaimentation which leads from known factors to an ascertainable but presently the value of the diseoveyy to one who makes it; or advantage the competitor whe by unfair means, or ‘sired Knowledge without himself paying the price in _ labor, monex, or machines expended by the discov- erer.’? (Kmphasis added.) « ‘ = "Thus, the courts below have not only’ ignored complete-. ly the governing California law, they have also created _ a precedent which will engender great-doubt aid confusion ~ : as to the nature of a protectible trade seéret-under the laws ef California: and generally. . es | IV. Appropriation of Alleged Trade Secrets—Improper Standard Applied by Trial Court. _ 5. A previous decision by a California trial iit Judge eats = Lee Vv. Samburn, 1952, 94 U.S.P.Q. 153 paralleled the By-Buk dis: cussion of the law af trade secrets in California. Judge Praeger noted at there were few California cases on trade secrets, other than s»- called customer e list cases. He relied heavily on the general law. The trial court, when referred to this decision, stated that althoug', he he case he was not bound by the holding. (R. 1270.) unknown result may be simple, we think cannot destroy us the beneficiary of a broken faith, obtains the de-_ The courts below, in addition, have provided a defense. - fo wrongful appropriation which has no possible basis -’ . . ° % a s . - “under California law. Respondent. Audio Devices, Inc. had e . -- Gk ; ¢ never previously engaged in the manufacture: of. any recti- ‘fier device and had never worked ‘with silicon. Yet, within one month after. establishing its plant in California,’ was producing rectifiers in competition with Petitioner. There was no evidence and no finding that Audi® Devices independently developed its own process; the only finding in this regard is that Audio Devices spent great sums of ‘money to devélop their new division. Initial investmynt by Audio was $800,000 for % plant to house its new division (RB. 102). An additional $200,000 was expended for equip. ment; there i is tio indication that any money was expended * for researeh and, indeed, there was no time allowed } which to conduct: research prior to Audio’s entry ae competition with Petitioner.’ Minor variations were intro- duced in the Audie process, but these minor-changes would not support the District Court’s conclusion that there was 0 appropriation of the Tarzian process. The trial court’s approach to this question Andicat that it had already determined that there was no trade seeret in the“Parzian Processe »beeaust of a lack of **di- voyery’’. [ts review of the so-called differences betw: the Audic and Tarzian processes Was thus immaterial wa unnecessary to its final conelusion; and was accomplished: without regard to applicable jaw. Indeed, the trial court states in its opinion, which was adopted by the Court of Appeals that: - ; {The differences between the two processes. under discussion here appear as the conscious attempt by former employees, nof to infringe upon whatever «l-- - ment of selectivity between alternative ‘procedure: there may have been in the Tarzian process.’* (A! R. 128) ie ia