Schulenburg v. Signatrol
33 Ill. 2d 379, 212 N.E.2d 865, 147 U.S.P.Q. (BNA) 167 (1965),
cert. denied, 383 U.S. 959, 86 S.Ct. 1225, 16 L.Ed.2d
302 (1966)
Solfisburg, J.:
[*865] This case involves the questions of trade secrets, unfair
competition and injunctive relief. Plaintiff E-S Industries, Inc.,
successor to Time-O-Matic, manufactured and sold certain devices commonly
called flashers and used primarily in the sign industry to cause lights
to flash in such a manner as to animate the sign in various [*866]
patterns or designs. The individual defendants were all former employees
of said plaintiff 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 injunctive
relief and damages. The trial court found the issues for the plaintiffs
and issued an injunction restraining the defendants from the further manufacture
and sale of competing flashers. The question of damages was postponed
pending appeal. The appellate court affirmed, and we granted leave
to appeal.
In 1932 the plaintiff Edward J. Schulenburg, Sr., went 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 for the sum of $ 2,718.61. However,
this amount 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 operation to Danville, Illinois,
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 until January, 1959, when he and the
plaintiff Schulenburg 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 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 Signatrol as its purchasing
agent and the following June, Walker also joined Signatrol.
The flashers produced by the plaintiffs are not patented 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 competition with the plaintiffs in the manufacture and
sale of electric flashers.
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 competing 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 information, 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 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:
"* * * [*867] The question of infringement of patents is not involved.
The real question is whether or not the individual defendants, or
some of them, either traced, copied or reproduced Time-O-Matic plans,
drawings, prints, designs, 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 ‘trade
secret.' The determinative question here is, how did the defendants
go about reproducing the plaintiffs' flasher? Did they violate the
confidence reposed by their employer by appropriating, in an unlawful
manner, the trade secrets of the plaintiffs?"
The trial judge has correctly stated the issues involved, and, of course,
there is another issue in this appeal, and that is whether the injunctive
relief granted was appropriate.
The trial and the appellate courts concluded that the manufacturing "know-how"
contained in the plaintiffs' 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 findings hereinafter
mentioned, and contains a very competent analysis of most of the cases in
the United States concerning trade secrets and the method whereby 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 opinion to review in detail all the evidence. Several of the
more salient findings of the trial court are:
"The Defendants insist that they made their drawings directly from the
parts themselves by measuring, except when they drew them from their memory
of Time-O-Matic's drawings. However, their expert witness, Dale
Beck, a skilled engineer, looked with considerable askance (sic) upon
the ability of any engineer to make accurate drawings of many of the delicate
parts merely by measurements of the parts. This was particularly
true as to those parts where the measurements were to a 10/1000 of an
inch. And to come up with the identical measurement, tolerances,
etc., as appear upon Time-O-Matic drawings were (sic) almost impossible."
* * *
"The likenesses and similarities occur 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."
"It is to be observed that at no time did the Defendants seek to produce
a new and improved flasher. They advanced no ‘new novel' improvements.
They only sought to reproduce the identical basic flasher of the
Plaintiffs."
* * * [*868] * * *
"This Court believes that the very nature of all the occurrences
confirms the testimony of Mrs. Bachman relative to copying Plaintiffs'
plans, drawings and specifications in Bachman's home. This Court
also believes 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,
which 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, small voice of duty and conscience."
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 . . . 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 support 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 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
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 partially
disclosing the product's design. The reasoning of that opinion is
most persuasive here.
The defendants cite Sears, Roebuck & Co. v. Stiffel, 376 U.S. 225,
84 S.Ct. 784, 11 L.Ed.2d 661, and Compco Corp. v. Day-Brite Lighting,
Inc., 376 U.S. 234, 84 S.Ct. 779, 11 L.Ed.2d 669, 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,
we would concur with this statement. However, a 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. Plaintiffs
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 surreptitiously copy plaintiffs' blueprints
while in [*869] their employ and subsequently use them to establish
a competing business. Sears has in fact been distinguished on this
very basis . . . . * * * It is readily apparent that the Sears
and Compco cases do not cover a situation 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 examination of
the product itself. The measurements, tolerances, quality of material,
etc., 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 capitalize 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
exists, which are unknown to others in the industry and which give the
employer advantage over his competitors. 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 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 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 memorized 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 conclusion: that these defendants have surreptitiously
taken the particularized information contained in plaintiffs' 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
its application as to time or geographical area. Defendants have,
in effect, been put out of business for all time, everywhere. 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
defendants 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 required 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 [*870]
did legally copy plaintiffs' product. Accordingly, we believe that
the injunction 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 remanded to the trial court with instructions
to consider the question of damages and modification of the injunction
in accordance with the views expressed herein.
Affirmed in part and reversed in part and remanded, with directions.
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