Opinion
April Term, 1896.
Walter S. Hubbell, for the appellant.
Richard E. White and C.M. Allen, for the respondents.
No specific findings of fact were made by the learned justice before whom this cause was tried at the Special Term, and it, therefore, becomes necessary to carefully examine the record in order to ascertain just what the evidence tends to establish. Such an examination discloses the fact that there is really but little conflict between the testimony of the plaintiff and his witnesses and that of the defendants. The latter, it is true, do not in express terms admit all that is testified to by the former, but, nevertheless, the evidence which they furnish tends, as a whole, to strengthen all the material allegations of the plaintiff; and we think that it may, in consequence, be safely asserted that the following facts are clearly established, viz.:
In 1885 the plaintiff began experimenting with a view to manufacturing typewriter ribbons. At that time he knew nothing of the way in which they were made, but he employed an expert chemist, Dr. Lattimore, of the University of Rochester, to assist him, and, after long and laborious study, accompanied by thousands of experiments, in the course of which he expended large sums of money, he at last perfected a ribbon which was different from any other which was then being manufactured, and which proved a most valuable discovery, and one which enabled him to carry on a large and lucrative business. He associated with him a Mr. Bettys, whom he knew to be an expert machinist, and who aided the plaintiff in perfecting his invention, and has since exercised a general supervision over the business. The processes, appliances and formulæ which were employed to produce the results obtained in this business were some fifteen in number, and care was taken to keep their character and the manner in which they were used a profound secret.
The defendant Gallus was employed by the plaintiff in 1883, and prior to his engaging in this particular business, and the defendant Bostwick entered his service in 1892. They were both young men, the former being but fourteen years of age and the latter nineteen, when entering upon such employment, and in consequence their labors at first were only such as might be required of persons of their immature age, but as they gained in years and experience the work performed by them became more important and delicate in its character, and the defendant Gallus was ultimately promoted to the position of foreman. They were frequently informed and admit that they well understood that the processes employed by the plaintiff in manufacturing his goods were his own invention; that they were to be kept secret, and that the different ingredients employed in compounding these various processes were given peculiar names in order that no one who might by chance see them should know of what they really consisted. They likewise understood that the plaintiff confided in them and permitted them to obtain complete knowledge of the different processes and formulæ he was using in his business, in reliance upon their fidelity as his confidential servants.
In 1894 the defendants Gallus and Bostwick left the plaintiff's employ, the former having been discharged, and they thereupon associated with themselves other parties, organized the "Rochester Ribbon and Carbon Company," and proceeded to manufacture typewriter ribbons of the same character and after the same manner as those manufactured by the plaintiff. The evidence tends to show that while in the plaintiff's service Bostwick had obtained a copy of every formula which was in use, and Gallus admits that, even before his discharge, he contemplated manufacturing ribbons on his own account; and he testified that when "I commenced this work of starting a company on the knowledge I had, it was what I had gained while with Mr. Little. * * * I proposed to start a company upon the knowledge I had when I left Mr. Little's employ. * * * I considered myself competent to make the dope on July 20th, 1894 (date of his discharge), if I could get the colors, * * * because of the knowledge I had gained while with Mr. Little. * * * Certainly it was knowledge I had gained there that I proposed to use more or less in the new factory in regard to the mixing of the compounds as well as the finishing of the ribbons. * * * The manner of making the ribbon as Mr. Little made it was all the way I knew of making ribbons. What I knew in regard to colors and formulæ, and the dope which I proposed to use in the new company, was all acquired while I was with Mr. Little." And the defendant Bostwick testified: "The way Mr. Little made them (ribbons) was the only way I knew how to make them, and, so far as I knew, that was the source of Mr. Gallus' knowledge, so upon what I had learned there I was going into the business for myself."
It seems, therefore, too plain for controversy that the plaintiff was the owner of a process or invention which possessed great value and which he had secured at the cost of much time, trouble and expense; that the defendants Gallus and Bostwick, occupying a confidential relation toward the plaintiff, gained a knowledge of the processes and formulæ employed by him in conducting his business; that they well understood the nature of the business, their relations to it, and the care which was used to keep the same secret; and that notwithstanding the knowledge thus obtained, and in violation of the faith and confidence reposed in them, they surreptitiously made memoranda of these formulæ, and are now using the same, as well as all other knowledge obtained while in the plaintiff's service, to start and operate a rival establishment.
The only question, therefore, to be determined upon this state of facts is whether or not they shall be permitted to carry out their intentions. It is contended by the plaintiff that his case is brought directly within the rule laid down in that of The Eastman Kodak Company v. Reichenbach (79 Hun, 183), recently decided by the General Term in the fifth department. And the defendants, while conceding that the law of the case is there correctly stated, insist that the facts do not warrant its application here.
We find ourselves unable to concur in the view thus taken and which was carefully elaborated upon the argument by the learned counsel for the defendants.
The facts of this case differ somewhat from those of the Reichenbach case, in that there was no written agreement entered into between these parties by which the employees undertook to give to their employers exclusive right in or control over any inventions discovered by or disclosed to the former, but we are unable to see how this strengthens the defendants' contention. In the case cited there happens to be an express contract, but, nevertheless, it is asserted in the opinion of the court, and such is unquestionably the correct rule, that the law raises an implied contract that an employee who occupies a confidential relation towards his employer will not divulge any trade secrets imparted to him, or discovered by him in the course of his employment, and we do not see why the defendants, Gallus and Bostwick, are not under just as strong an obligation to observe and keep sacred the trust reposed in them as they would be had they reduced the contract which the law implies to writing; nor does the fact that they entered the plaintiff's service while minors, and at first performed duties comparatively unimportant in their character, relieve them from a faithful observance of their obligation. Gallus, at least, was ultimately advanced to a position of great responsibility, and both of them had attained their majority before attempting to take improper advantage of the knowledge imparted to them while in the plaintiff's employ, and their present experiments are not in the direction of legitimate competition, but involve a breach of trust which, we think, the court should prevent.
For these reasons we are of the opinion that the judgment appealed from should be reversed and that a new trial should be granted.
All concurred, except GREEN and WARD, JJ., dissenting.
There was no agreement in writing between these parties, nor is there any evidence tending to show that at the time these defendants, or either of them, entered the employment of plaintiff, he informed them of the necessity of keeping secret the knowledge they might acquire in the performance of their duties, or that their relations were of a confidential character; though the plaintiff testifies that shortly after Gallus entered his employment, and on several occasions thereafter, he was cautioned to keep secret from others what he might learn of the processes of manufacture, and that he promised to do so; also that Bostwick was given to understand that his employment was to be considered as one of a secret and confidential character. It appears that Gallus received only the ordinary wages of a boy engaged in ordinary labor, until he was made superintendent of the ribbon department, and then only such wages as one who had qualified himself for that position would receive. Nor does it appear that Bostwick received anything more than wages commensurate with the nature and character of the labor or duties he was called upon to perform. Consequently there existed no special consideration to support the express or implied promise of these defendants to abstain from applying to practical uses, and for their own benefit or advantage, the knowledge they may have acquired in the course of their employment. Plaintiff bases his claim for an injunction upon the ground of an agreement, express or implied, to keep secret any knowledge Gallus and Bostwick might respectively acquire as such employees, in the course of manufacturing or in assisting the plaintiff in his experimental investigations. Plaintiff's contention appears to be that, by experimental investigations, he discovered or invented a secret formula or process of manufacture of certain articles, and devised certain appliances and machinery; that the defendants, Gallus and Bostwick, by reason of their employment and duties, and while engaged in assisting him in mixing the ingredients, and in other ways, acquired knowledge of such secret process, formula and machinery; that the employment was of such a confidential character that the law will infer or imply an agreement, even though none may in fact exist, on the part of the employees that they will not disclose or divulge the knowledge or information so acquired, or put it to practical use in opposition to their employer; and that to do so constitutes such a violation of contract and breach of trust and confidence that a court of equity will enjoin.
The doctrine upon which courts of equity proceed in cases of this character, and the scope and limits of that doctrine, require an examination of the adjudications pertaining to that subject.
In Newberry v. James (2 Mer. 446) Lord ELDON refused an injunction against imparting, in violation of an agreement, a secret for the manufacture of a medicine, and the sale of such medicine. "The only way by which a specific performance could be effected would be by a perpetual injunction, but this would be of no avail, unless a disclosure were made to enable the court to ascertain whether it was or was not infringed, for if a party comes here to complain of a breach of injunction, it is incumbent on him first to show that the injunction has been violated." In Williams v. Williams (3 Mer. 157) the court said it did not think it ought to struggle to protect this sort of secrets in medicine; that whether a contracting party is entitled to the protection of the court in the exercise of its jurisdiction, to decree the specific performance of agreements by restraining a party to the contract from divulging the secret he has promised to keep, was a question requiring very great consideration.
In Deming v. Chapman (11 How. Pr. 382) ROOSEVELT, J., refused an injunction to restrain defendant from divulging or teaching the secret art or invention according to the method which the plaintiff had taught him, and which he had agreed not to divulge. "How then can the courts, in effect, secure an invention without a patent, and for a period of indefinite duration, instead of the limited time of fourteen years? * * * Can the State tribunals then assume the same functions after the general government has acted upon the subject? But how is a decree, if made, to be enforced? * * * A question of identity arises for the court to determine, and how is the identity of two given things to be investigated if we are not permitted to inquire what the given things are? But the moment the investigation takes place the secret vanishes, its exclusiveness is gone, and with the exclusiveness of the subject of the action the action itself disappears." (Citing Newberry v. James, 2 Mer. 446, and Williams v. Williams, 3 id. 160.)
In Yovatt v. Winyard (1 Jac. W. 394) it was agreed that the employee should not be taught the mode of composing the medicines, but he surreptitiously copied the receipts and was selling the medicines, with printed instructions for administering them, which were almost literal copies of those composed by the plaintiff. An injunction was granted on the ground that there was a breach of trust and confidence.
In Green v. Folgham (1 Sim. Stu. 398), upon a trust admitted, an account was decreed against the party to whom the secret had been divulged.
In Morison v. Moat (9 Hare, 241), relied upon by appellant, an injunction was granted to restrain the use of a secret in the compounding of a medicine, and to restrain the sale of such medicine, by a former co-partner, who acquired a knowledge of the secret in violation of the contract of the party by whom it was communicated, and in breach of trust and confidence. The defendant claimed that, for two months, he superintended the business in common with his two co-partners, and during that time saw the mode and manner of compounding the medicines and the ingredients thereof, and the proportions in which such ingredients were used, and acquired a complete practical knowledge of the mode of compounding and mixing them, and he insisted that he had a right to use that knowledge. Said the court: "Undoubtedly, if the facts thus stated by the defendant be proved, if the defendant * * * with the knowledge and concurrence of the partners * * * was permitted to acquire, and did acquire, a full knowledge of the mode of compounding these medicines, and of the secret process in the manufacture of them, it would be difficult for any of those partners afterwards to restrain him from using any knowledge so acquired or any secret so disclosed. They would, I think, in such a state of circumstances, be considered to have waived any right to preserve the secret for their separate benefit. * * * The defendant admits that the secret was communicated to him by Thomas Moat. His allegation that he acquired a knowledge of it by acting as partner in the concern is disproved, and it is shown that, if he did acquire such knowledge, he did so surreptitiously. * * * It was clearly a breach of faith and of contract on the part of Thomas Moat to communicate the secret." It was not disputed that James Morison was the inventor and the sole depository of the secret in question. Lord CRANWORTH in the same case, when on appeal (21 L.J. [N.S.] Eq. 248), observed that: "There is no doubt whatever that where a party, who has a secret in a trade, employs persons under contract, express or implied, or under duty, express or implied, those persons cannot gain the knowledge of that secret and then set it up against their employer."
This is a very comprehensive statement indeed, and is cited by plaintiff's counsel and relied upon as sustaining his position, but it is mere dictum, and must necessarily be limited to the facts and circumstances presented for decision.
In Fralick v. Despar (165 Penn. 24) the employee, in consideration of an increase of wages, agreed not to reveal the secrets of his employer's trade, which were revealed and thoroughly explained to him, but in violation thereof he manufactured and sold the product and represented it to be the same axle grease manufactured by the plaintiff.
In Peabody v. Norfolk ( 98 Mass. 452) the case came up on demurrer, and all the allegations of the bill were admitted, viz., that the invention and process was a secret and was confidentially imparted to him; that the salary was a part consideration of the agreement not to disclose the secret, and that there was a violation of contract and breach of confidence.
So, also, in Hammer v. Barnes (26 How. Pr. 174), cited by appellant's counsel, all the allegations of the complaint were admitted by the answer.
The general doctrine is well stated in Watkins v. Landon (19 Law. Rep. Ann. 236 [Minn.]), that any person lawfully acquiring a knowledge of the composition of any article not patented has the legal right to manufacture and sell the same, if, by reason of the manner in which such knowledge is acquired, that would not constitute a breach of confidence or good faith.
In Chadwick v. Covell ( 151 Mass. 190; 6 Law. Rep. Ann. 839) the court observed that "Dr. Spencer had no exclusive right to the use of his formulas. His only right was to prevent any one from obtaining or using them through a breach of trust or contract. Any one who came honestly to the knowledge of them could use them without Dr. Spencer's permission and against his will."
The court, in Tabor v. Hoffman (41 Hun, 5), says: "The courts have uniformly restrained all persons in his employ, who necessarily become possessed of the formula in the manufacture of the article, from subsequently engaging in its manufacture or from imparting it to others." This is an extra judicial utterance not required by the facts of the case.
The statement is not strictly accurate; it is too broad, and it is not warranted by any judicial decision that has come to my notice.
The element of secrecy on the part of the employer and the existence of a confidential employment and a breach of trust or confidence are eliminated.
Upon appeal ( 118 N.Y. 30) the court said that "because this discovery may be possible by fair means, it would not justify a discovery by unfair means, such as the bribery of a clerk, who in course of his employment had aided in compounding the medicine and had thus become familiar with the formula." There was no relation of master and servant in this case. Still it cannot be true as a general proposition that the knowledge acquired by an employee in the course of manufacturing or in assisting the employer in experimental investigation, is acquired by unfair means.
In Baldwin v. Van Micheroux ( 5 Misc. Rep. 387) the employee invented certain compounds for flavoring tobacco with materials furnished by the firm, with the understanding that the processes by which such substances were concocted should belong to the firm and remain trade secrets, and it was held that the firm became owner and proprietor of such processes. It was remarked that if the employee had not been engaged to make the inventions, the firm would not have acquired any ownership therein. To this effect, also, is Hapgood v. Hewitt (11 Biss. 184; 119 U.S. 233).
In Eastman Kodak Co. v. Reichenbach (79 Hun, 192) the defendants were expert chemists employed at large salaries, and it was agreed, in writing, that they should assign to plaintiff all inventions, discoveries and improvements in photography which they might make, discover or invent.
There was also evidence to the effect that they should regard their relations as strictly confidential, and should not disclose or make improper use of any secrets of the business.
This case is relied upon by plaintiff as establishing the doctrine applicable to the case at bar. The conditions existing in the case last cited are entirely wanting in the one under consideration. In the former there was an agreement, in writing, that the employees should receive large salaries, and, in consideration thereof, should assign to the employer the results of their labors. The employees were expert chemists and capable of protecting their interests and appreciating fully the obligations and covenants made when they entered the employment. In the case at bar there was no written contract. There is no evidence showing, or tending to show, that Gallus and Bostwick ever agreed, or that it was understood by this plaintiff, that they should not in the future use for their own benefit the information gained by them in the course of their employment, while they were endeavoring to learn a business which should enable them in the future to earn their livelihood. There was no extra compensation for the extra obligation which plaintiff claims rested upon them. There is nothing in the evidence showing that this obligation of refraining from themselves using the knowledge acquired in their employment was pressed upon them, or that plaintiff considered them so obligated.
In Bristol v. Equitable Life Ass. Society ( 132 N.Y. 267) the court uses this language: "Without denying that there may be property in an idea, or trade secret or system, it is obvious that its originator or proprietor must himself protect it from escape or disclosure. If it cannot be sold or negotiated, or used without a disclosure, it would seem proper that some contract should guard or regulate the disclosure, otherwise it must follow the law of ideas and become the acquisition of whoever receives it." (Citing Peabody v. Norfolk, 98 Mass. 452.)
It is evident from these decisions that it cannot be laid down as a general rule or doctrine of law that every employee impliedly agrees, even without any special consideration, to keep secret the knowledge of the processes of manufacture that he may acquire in the usual and ordinary course of his employment, and to abstain from putting this knowledge to such practical uses and purposes as he may see fit, for his own benefit or advantage, in opposition to his employer and to his prejudice.
The remedy here sought is an injunction, perpetually restraining these defendants from carrying on the business in which they are now engaged, and from employing the experience and knowledge gained by years of labor. It is an important remedy, and the evidence that plaintiff is entitled to it should be clear and satisfactory. The chief subject in respect to which an injunction is asked is the formulæ of plaintiff. There is no definite evidence showing what those formulæ are, nor what are the particular formulæ in use by defendants. So that the court is unable to ascertain and determine with any clearness or satisfaction to itself whether they are identical or to what extent or in what particulars they may agree. If the process and formulæ are not clearly and definitely disclosed, how can the court ascertain whether there is any infringement? How could it enforce an injunction upon such evidence?
An injunction is granted only where the rights sought to be protected are clear or at least free from reasonable doubt. ( Snowden v. Noah, 1 Hopk. Ch. 347.)
It is not to be granted where the legal right is disputed and is doubtful. ( Amoskeag Mfg. Co. v. Spear, 2 Sandf. 599; Wolfe v. Goulard, 18 How. Pr. 64; Corwin v. Daly, 7 Bosw. 222.)
An injunction was refused because it appeared that the contract was not fair and equal, and the court could not ascertain whether it had been performed, because it related to the use of a secret process of manufacture. ( Barnes v. McAllister, 18 How. Pr. 534.)
Injunctions are not to be granted except with great caution and in cases where the right and necessity are clear. ( Roberts v. Mathews, 18 Abb. Pr. 199.)
The court in granting the injunction must not do irreparable injury to the other party nor create a greater wrong than it was intended to remedy. ( McSorley v. Gomprecht, 30 Abb. N.C. 412.)
The evidence, circumstances and conditions here presented fail, under the established rules, to entitle this plaintiff to an injunction.
There is, however, another objection to granting the relief demanded by plaintiff.
It appears that defendants Gallus and Bostwick were under the legal disability of infancy when they entered plaintiff's employ; that Bostwick's disability continued to the time of his discharge, and Gallus was in his twenty-second year when his employment ceased, after having served the plaintiff for a period of eight years.
Assuming that these defendants, or one of them, as plaintiff testifies, expressly agreed to keep secret what he might learn or be taught in the business of manufacturing or in assisting in making experimental investigations, is such a contract enforcible either at law or in equity? Upon what principle of law or doctrine of equity may an infant be enjoined from using the knowledge he may have acquired in his master's business? From using the fruits of his industry or the results of his intelligence and observation gained in a mechanical art? Such a contract would be highly prejudicial oppressive and unjust to the infant.
An infant is incapable of depriving himself of using or applying the knowledge of the art or manufacture he may honestly and fairly acquire in the course of his employment, even though it may result in injury to his employer. He cannot contract not to compete with his employer in the same business.
The knowledge he may have gained by the secret process or formula was a necessary incident of his employment. The law would not imply or infer such a contract on the part of an infant. The fact that Gallus continued in plaintiff's factory about nine months after he became of age does not amount to a ratification of the contract alleged, that he shall not disclose the secrets of manufacture acquired during infancy. It is beyond all reason for the court to infer or imply a contract of such a character as is here claimed on the part of these infants. The evidence is insufficient to warrant such a contract or agreement as claimed. All it amounts to is this: That a couple of boys working for a manufacturer are enjoined not to tell anything they may learn of the secrets of manufacture, the knowledge of which they may acquire in the performance of their work, and they answer that they will not. From this the court is requested to infer or presume that these infants contracted that they would not, after leaving or being discharged from their employer's service, disclose to any one the knowledge they gained by observation and experience in the business, or put it to practical uses for their own benefit or advantage. Such a promise made by such youths, and upon such circumstances or conditions, may justly be restricted to the time of their service, and it would be unwarrantable to construe it as a contractual engagement not to enter into the business in opposition and to the prejudice of their employer. A promise of that character lacks one of the essential elements of a contract; there was no special consideration to support it. It would be going far indeed for the court to draw the contract inferentially or by presumption. Then, too, the defendants were discharged, and were they not, therefore, relieved from their promise? Were they rightfully discharged? Was the plaintiff under no obligation by reason of this contract? Was it for his advantage alone? So, it seems, the plaintiff construes it. Under this construction no rights thereunder were secured to the other parties to the contract, but it inured solely to the benefit of the plaintiff. We do not consider such testimony, if believed, would be sufficient to warrant the finding of a contract, for it is improbable that there was any intention by either party to enter into a contract of the nature and to the extent here claimed. Nor would the court be justified in so finding as matter of fact. The supposed contract or agreement is of greater import and of larger scoper than the simple promise of the boys not to tell. It is a rule of law that a matter arising ex contractu, though infected with fraud, cannot be changed into a tort in order to charge the infant by a change in the remedy. The principle is, that where the action rests on promises, the plaintiff cannot, by changing the form of the action, make a person liable who would not have been liable on the promise. Thus, an action on the case cannot be maintained against an infant for false and fraudulent warranty of the unsoundness of a horse sold by him; nor for loss of goods through negligence as bailee. ( Campbell v. Perkins, 8 N.Y. 440. )
So, an infant who hires a horse, and an injury happens by reason of his unskillfulness, want of knowledge, discretion and judgment, is not liable upon the implied promise to use due care and skill, nor can he be held liable in tort. ( Campbell v. Stakes, 2 Wend. 137; Moore v. Eastman, 1 Hun, 578.)
"The alleged contract is the substantive ground of, or the inducements to, the cause of action; for if there was no contract, then there could be no fraud in the making of it, and disproving the contract defeats the action. Therefore, as decided in all the cases above cited, infancy is a bar." (See Hewitt v. Warren, 10 Hun, 560; Heath v. Mahoney, 7 id. 100.)
In all the cases upon this subject it will be found that the courts profess to hold infants liable for positive substantial torts, but not for violations of contract merely, although, by construction, the party claiming redress may be allowed by the general rules of pleading to declare in tort, or contract at his election.
An infant is liable in an action ex delictu for an actual and willful fraud, only in cases in which the form of action did not suppose that a contract existed; but, where the gravamen of the fraud consisted in a transaction that really originated in contract, the plea of infancy is a good defense. (See Nash v. Jewett, [Vt.] 4 Law. Rep. Ann. 561.)
I do not believe it will ever be established law in this enlightened age and country that, under all the circumstances existing in this case, an employee, whether infant or adult, would not have a perfect legal right to put in writing all the information he may honestly and fairly acquire in the course of his employment in the matters he is employed to perform, so as to fix it in his memory, even to copy formulæ, processes and the measures and dimensions of appliances, so long as he does not in a surreptitious and clandestine manner possess himself of this knowledge. Certainly, upon the record here, a case has not been made that will justify the court in interfering with the business of these defendants and enjoining them from further prosecution of the same.
The judgment should be affirmed, with costs.
WARD, J., concurred.
Judgment reversed and a new trial ordered, with costs to abide the event.