Plant Industries, Inc. v. Coleman
287 F. Supp. 636, 159 U.S.P.Q. (BNA) 651 (C.D. Cal. 1968)
MEMORANDUM OPINION FOR USE IN PREPARATION OF
PROPOSED FINDINGS OF FACT, CONCLUSIONS OF LAW, AND JUDGMENT
Crary, District Judge. [*637]
Plaintiff seeks to enjoin defendants from unfairly competing with plaintiff
by the manufacturing and selling of citrus products which have been produced
by the utilizing of plaintiff's alleged trade secrets, and for damages.
In its Trial Memorandum, filed November 30, 1967, plaintiff asserts
that said trade secrets are:
"1. The entire process used by plaintiff in the preparation of sterile,
citrus peel having a long storage life, and in its preparation of citrus
peel base materials sold, which process includes and the particular elements
of which and the sequence of use of which plaintiff claims are its trade
secrets, and include the processing of citrus peel to determine the thickness
and the albedo content thereof." [*638]
"2. The debuttoning of the citrus peel to remove the button, blemishes
and other unwanted or degraded or spoiled peel."
"3. The passing of the citrus peel so debuttoned through mechanism
to separate out button fragments and other unwanted citrus peel fragments."
"4. Removing juice from the peel by washing the peel, i.e., the
juice left on the peel after the orange juice has been removed from the
"5. The fact of the use of the Toman slicer, its manner and speed
of operation and the use of water in conjunction therewith during which
the peel is sliced vertically to determine the vertical thickness of the
peel at high commercial speeds and wherein a bitterness causing precursor
is washed from the peel, and which enables the bitterness of the peel
ultimately produced to be established."
"6. The passing of the peel over a separating means to separate
the water from the peel and to further separate from the wanted peel unwanted
slivers or fragments of peel."
"7 . The particular cooking process employed by the plaintiff wherein
the peel and other ingredients such as citric acid are added to the peel,
the time of such cooking, the canning of the peel in five-gallon cans
at a particular elevated temperature after which the canned peel is placed
in storage and during which storage, due to the elevated temperature of
the peel in the cans, the processing of the peel continues."
* * * [*639] * * *
[In 1964, Plaintiff Plant Industries, Inc. had acquired California Citrus
Pulp Company, a Florida corporation ("Cal Citrus"), in order
to acquire its assets and techniques for processing citrus peel, because
"Cal Citrus was producing citrus peel unlike any [Plant Industries]
was able to find available from any other source." Defendant
Coleman, who had married the neice of one of the founder of Cal Citrus,
had been employed by Cal Citrus for twenty years, from 1946 to 1966, when
he resigned. Before August 1966, Coleman showed defendant Belk a
jar of citrus peel produced by Cal Citrus, and Belk offered to employ
Coleman if he would leave Cal Citrus, which plaintiff then owned.
One Toman, apparently an independent inventor, had patented a vegetable
slicer in 1950 ("Toman Slicer"). Since that time, Cal
Citrus used a Toman Slicer to make its citrus peel, employing water under
domestic pressure to process peel through it. Before June 1966,
Coleman bought a Toman Slicer from Toman, paying a $500 down payment provided
by Belk, and Belk paid the remaining $1,591. Before this, no one
other than Cal Citrus had used a Toman Slicer for processing citrus peel.
The Toman Slicer delivered to defendants had no provision for using
water and no cover. Before making any citrus peel, defendants received
a cease-and-desist letter from plaintiff's counsel, asking for written
assurances they defendants would protect and not use plaintiff's trade
secrets. Since May 1967, defendants produced 11,000 five-gallon cans of
sliced citrus peel for sale and entered into an agreement with a third
party to provide a sales outlet for it.]
The Toman slicer, and other equipment to process sliced citrus peel,
was set up in defendants' plant after January of 1967. As a part
of such equipment there was added to the Toman slicer a water spray which
operated under the pressure existent in the pipe line. This water
spray was installed under the direction of and by defendant Coleman.
Defendant Coleman has called upon Knott's Berry Farm and Stone Cellars
Kitchens, which were accounts of Cal Citrus, and sliced peel produced
by defendants was presented to Knott's Berry Farm and Stone Cellars Kitchens.
Throughout his employment with Cal Citrus and plaintiff, defendant
Coleman kept a notebook . . . .
Prior to August, 1966, defendant Coleman knew of notices placed at the
entrance to the processing operations of Cal Citrus refusing admittance
. . . .
After consideration of all of the evidence, including the above referred
to stipulated facts, it appears to the Court that the principles of vacuum
packing for preservation, debuttoning of citrus peel, moving citrus peel
by mechanical device through mechanism to separate the said button fragments
and other unwanted peel fragments from the peel, washing the peel, slicing
the peel, separating water from the peel by various means, including Sweco
shaker, passing of peel over agitating screens, the moving of the peel
for various types of processing by conveyor belts and screen type conveyors,
and the use of water and cooking to eliminate bitterness, are all generally
known in the trade and industry of processing citrus peel for various
purposes, including marmalade, and are not trade secrets of plaintiff.
However, the question remains as to whether the particular manner, means
or formula and know-how, used by Cal Citrus and plaintiff to produce the
end product of the processed citrus peel was secret and confidential as
between Cal Citrus, plaintiff, and defendant Coleman. Did such process
and know-how constitute trade secrets to the extent that it constituted
a competitive advantage over competitors who did not know of the manner
in which certain steps in the processing were accomplished[?].
In determining the rules to be applied, we must first consider whether
the plaintiff seeks to protect a design secret with respect to
the modification and manner of use of water with the Toman slicer and,
if so, would such design be disclosed to anyone purchasing such a slicer.
The Toman slicer was a patented [*640] device and therefore,
as such, would not be a trade secret.
It is also important to determine whether the defendant Coleman acquired
the alleged trade secrets, as to use of water with the Toman slicer and
the formula used in cooking and processing the peel after the slicing
and dewatering operation, as a result of his own efforts while in the
service of Cal Citrus and plaintiff or by way of disclosure to him by
Cal Citrus or plaintiff while he, Coleman, was an employee.
* * * [The court discussed several relevant cases, including
Wexler v. Greenberg.] [*642] * * *
Applying the rules as set forth above, and with particular
reference to the observations of the California court and the Restatement
of the Law of Torts as adopted by the California court, to the facts presented
by the evidence in the case at bar, the Court finds:
(1) The information relative to the manner and means of the use of
water in the operation of the slicer was disclosed to defendant Coleman
by Cal Citrus and not acquired by him as a result of his testing and experiments.
The evidence also discloses that no one in the processing of citrus
peel other than Cal Citrus had used, prior to defendants' use, a Toman
slicer or water in the slicing process. The use of water in the
manner applied by Cal Citrus afforded it an advantage over competitors,
none of whom knew of such use or the benefits to be derived therefrom,
and the Court concludes that use of the Toman slicer and water was a trade
(2) The formulas, such as details for processing various citrus peel through
the cookers, as kept by defendant Coleman in his notebook, contained confidential
information which constituted trade secrets. These secrets involve
the proportions of the materials used, time for cooking, and so forth,
and was information disclosed to the defendant Coleman by Cal Citrus and
not the result of his experimentation or skill. Although the general
approach by plaintiff to the processing of citrus peel involved general
concepts which were not trade secrets, the particular manner and means
of embodiment of those concepts in certain phases of plaintiff's process,
the Court concludes, were trade secrets.
(3) The defendant Coleman, although not bound by written agreement not
to disclose trade secrets, knew that the information as to the details
of the method and know-how of processing citrus peel by Cal Citrus and
plaintiff, particularly the slicing procedure and cooking formulas for
different products and customers, was confidential and there was an implied
obligation on his part not to disclose this confidential information received
by him in trust.
(4) That Cal Citrus and the plaintiff maintained sufficient secrecy with
respect [*643] to the trade secrets referred to above to protect
the information. Not only were there several signs on entrances
to the plant and properties denying admittance thereto but Mr. Hanson,
of the plaintiff corporation, stated that he had difficulty in getting
into the plant to talk to [an employee of Cal Citrus, apparently before
the acquisition], and the fact it appears no competitor had learned of
the details of Cal Citrus' processing of citrus peel, all points to the
fact that conscientious efforts were made to maintain secrecy.
Cal Citrus had allowed the members of one or more women's clubs and children
to walk through its plant and representatives of two or three of their
customers had been through to check on the product they were purchasing
but these facts are not considered as constituting failure to maintain
secrecy as to the trade secrets here involved.
(5) The trade secrets and confidential information were of substantial
value to the plaintiff and Cal Citrus and to competitors, as the evidence
discloses that the plaintiff was unable to obtain processed citrus peel
of the quality and likeness of that produced by Cal Citrus and, in order
to learn how to make such a product, purchased the assets of Cal Citrus.
It is also to be noted that the defendant Belk very frankly stated
that he was aware that the process used by Cal Citrus was of a confidential
nature and that he employed defendant Coleman because of the slicer that
Coleman said he had built. This slicer turned out to be a Toman
slicer with water attachment so that water could be used under ordinary
pipe pressure in connection with the operation of the slicer, similar
to the arrangement as used by plaintiff.
It appears that the peel enters the slicer used by Cal Citrus and plaintiff
from a funnel type piece of equipment placed on an angle to the slicer,
whereas the peel in the defendants' process enters the slicer from a horizontal
(6) With respect to the ease or difficulty with which the information
could be properly acquired or duplicated by others, the Court concludes
that one skilled in the trade of processing citrus peel and familiar with
the equipment used therein could in due time discover plaintiff's formulas,
its means and know-how, with respect to the processing of citrus peel
through a slicer using water for a propellent and, if desired, for debittering
the peel in the process.
It appears to the Court that one skilled in the trade would be able to
learn of the Toman slicer and plaintiff's use thereof through checking
patents on fruit slicers, inquiring of patentees of such slicers, and
by inquiry of persons knowledgable with respect to slicers and their capabilities,
including Mr. Toman as a patentee. Information as to dimensions
of the peel and the amount of albedo left on processed peel was available
by examination of plaintiff's peel as contained in its products in which
the peel in its various dimensions was an ingredient.
Mr. Roy, an employee of Cal Citrus from 1939 to 1951, testified that
water was applied to the slicers used by Cal Citrus from shortly after
he was employed by that company, for the purpose of moving the peel through
the slicer so as to avoid the need of putting hands near the whirling
blades of the slicer when the peel piled up in front of or clogged the
machine. In the first instance the use of water was not to eliminate
bitterness but to avoid the need for employees to put their hands near
the slicer blades. Mr. Roy stated that on two occasions prior to
the application of water, employees had suffered injuries to their hands
from the slicer blades. It does not appear that any substantial
length of time was involved in finding that water under normal pipe lines
pressure would accomplish this desired result.
Mr. Higby, for many years a research chemist with Sunkist Growers and
chief chemist at the Exchange Orange Products Company, testified relative
to the problems that would be involved in [*644] trying to determine
how to process citrus peel, particularly Valencia and Navel orange peel,
to obtain a product similar to plaintiff's. He said that the major
problem would be to get the peel sliced thin. He thought he would
have a fifty per cent chance of working out a process in, say a year.
That would be the laboratory process and would not include developing
machinery for handling the peel or packaging the peel. Mr. Higby
also observed that if working with mature Valencia oranges, the laboratory
work would be less important because bitterness is a minor factor in mature
As noted above, the thickness of the citrus peel produced by Cal Citrus
and plaintiff, and its length as used in different products, such as marmalade,
and the thickness of the albedo left on the peel, could readily be determined
by examination of the products in which plaintiff's peel was used and
this information did not constitute a trade secret.
The Court does not find that Cal Citrus, when first applying water, used
it through the slicer to eliminate precursors, limonin or oils in the
peel. As noted above, the water, at that time and since, was for
the purpose of avoiding recurrence of accidents which had involved the
mangling of fingers.
The Court concludes that the removal of the bitterness by the water operating
into the slicer is the result of the precursor oils or other chemicals
in the albedo and flavedo being soluble in the water or being removed
in part by the force of the water. The use of water as applied by
Cal Citrus was not the result of long experiments or testing to accomplish
the debittering result obtained. It was the natural consequence,
opportunely discovered by Cal Citrus. This fact does not keep it from
being a trade secret if the information meets the other tests noted above.
The fact that the precursors and limonin in citrus peel were soluble in
water was not a trade secret, since Mr. Higby, in 1938, had written an
article widely distributed in chemical circles entitled "The Bitter Constituents
of Navel and Valencia Oranges", in which this fact is discussed.
The Court concludes that plaintiff was possessed of trade secrets and
confidential information consisting of:
1. The use and the manner and means of the use of a Toman slicer
and application of water thereto, including the amount of water, pressure
used and where and how applied in the processing of citrus peel by plaintiff.
2. Formulas for the cooking of peel. This does not include
the use of citric acid, which was well known in the trade, but
does include the measure of ingredients and other data relative to cooking
the peel taken to defendant Belk Fruit Packers, Inc., by defendant Coleman.
The Court further concludes that the trade secrets were divulged to defendant
Coleman by Cal Citrus on a confidential basis and have been so maintained
by plaintiff. It appears to the Court that defendant Coleman did
disclose the said trade secrets of plaintiff to defendants in violation
of a confidential relationship between Mr. Coleman and plaintiff and that
the trade secrets are now being unfairly used by defendants in competing
An obligation not to disclose confidential information may arise from
circumstances other than communications in confidence to the employee
by the employer. It may also rest upon an express or implied agreement.
An implied agreement not to disclose could well have arisen from
the efforts of Cal Citrus to maintain secrecy and defendant Coleman's
knowledge that Cal Citrus' methods of processing citrus peel were not
to be disclosed.
No one else in the field of processing citrus peel had obtained plaintiff's
result in processing such peel. Therefore, we [*645] should
assume that had Coleman worked for other processors he would not have
acquired the knowledge he now asserts the right to use.
It does not appear that the means of keeping the peel for a period of
years in vacuum packed containers was the discovery of Cal Citrus. Vacuum
packing was not a trade secret. Cal Citrus did solve the problem,
although by chance, of eliminating the precursors and limonin from the
albedo and certain oils and chemicals from the flavedo which allowed the
peel to be vacuum packed without the bitterness and off-flavor which normally
developed in the fresh peel within about seven days.
The fact water was sprayed into an item of equipment used in the processing
of the peel was apparent to one passing through the plant, but the slicer
was covered and the fact the water was sprayed into a slicer or that the
slicer was a Toman slicer was not apparent to one passing through the
plant, by reason of the covering of the slicer and the approaches thereto
as evidenced by plaintiff's Exhibit 26-G.
It is true that Cal Citrus had developed a process whereby it obtained
a result not yet discovered by others. [Plaintiff] had endeavored
to find a product like the peel processed by Cal Citrus, both in the United
States and abroad, but the evidence does not disclose what, if any, efforts,
by way of tests or research, [were] made or accomplished to duplicate
Samples of the peel, both before and after processing by Cal Citrus and
plaintiff, being available, the Court concludes that one skilled in the
trade of processing citrus peel could, with concerted effort, discover,
by research and tests that his experience would dictate, the chemical
and mechanical process to duplicate the end result of plaintiff's processed
peel. In considering this point, we must, of course, keep in mind
the volume of information available in this field to the public as noted
above and by . . . testimony.
Plaintiff's process would be classified as "simple" by modern science
and industry. Mr. Higby, the expert research chemist, believed the
slicing of the peel to so thin a dimension would be the biggest problem.
To a mechanical engineer experienced in the field of slicers of
various kinds, it should not present an insoluble problem. Mr. Higby
was of the opinion that the processing from a chemical standpoint did
not present a serious problem.
Considering all of the evidence in the case, the Court concludes that
a reasonable period of time which should be allowed for discovery of plaintiff's
trade secrets is 18 months from the date of this Opinion.
For the reasons noted hereinabove, plaintiff is entitled to an injunction
against defendants, their agents and representatives, enjoining their
use of trade secrets and confidential information as described herein
and from disseminating any information with respect thereto for a period
of 18 months to run from the date of this Opinion . . .
Plaintiff is entitled to Judgment for damages, if any, suffered to date
as a result of defendants' use of its trade secrets, and costs of the
The Court does not conclude that there was deliberate wrong or fraud on
the part of defendants in the appropriation of plaintiff's trade secrets.
* * *