Case Name: Adelbert P. Little, Appellant, v. Alfred W. Gallus and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1896-04
Citations: 4 A.D. 569
Docket Number: 
Parties: Adelbert P. Little, Appellant, v. Alfred W. Gallus and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 4
Pages: 569–584

Head Matter:
Adelbert P. Little, Appellant, v. Alfred W. Gallus and Others, Respondents.
Trade secrets — a confidential employee cannot employ secret processes in the interest of another corporation for the manufacture of typewriter ribbons.
In an action brought to restrain the defendants from using or disclosing secrets of trade or manufacture belonging to the plaintiff, it appeared that in 1885 the plaintiff began to experiment in the manufacture of typewriter ribbons, and after some yevars of study perfected a valuable ribbon, the processes of the manufacture of which were kept secret. The defendants, when minors, entered the service of the plaintiff, and finally, after becoming familiar with the manufacture, they left the employment of the plaintiff, organized the Rochester Ribbon and Carbon Company, and began the manufacture of typewriter ribbons of the same character and in the same manner as those manufactured by the plaintiff, not bringing to the manufacture any new processes.
Held, that the plaintiff was entitled to the injunction asked for ;
That the law raised an implied contract that an employee, who occupied a confidential relation towards his employer, would not divulge any trade secrets imparted to him, nor any discovered by him in the course of his employment;
Tkat:it wás a "breach ot trust for the defendants to organize a rival corporation' •; and to. employ-in its behalf trade secrets which they had learned while in the employment of the plaintiff. ... .
Green and Ward, JJ., dissented.
■ Appeal by the plaintiff, Adalbert P. Little, from a. judgment of-the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Monroe on the 7th. day of March, 1895, upon the decision of the .court, rendered after a trial át the Monroe Equity Term, dismissing the plaintiff’s complaint upon the merits.
■ The action was brought to restrain the defendants from using or disclosing secrets of trade or manufacture which .'belonged to thp plaintiff,: and which the defendants Gallus and Bostwick became-possessed of. while in his employ.
: It Is alleged in the complaint that defendant. Gallus was cautioned not to disclose any information of plaintiff’s formulae, processes,, appliances or machinery, and that he agreed not, to do so, excepting to such employees as was necessary to properly carry on the .business ; that, by reason of the position • he. occupied, it was necessary he should become familiar with the processes, appliances and formulae, and that it was impossible to conceal from him some information in regard to such formulae. An allegation to the same effect is made in respect to Bostwick, and that théy both acquired, by virtue of their employment, considerable information in regard to such formulae. Evidence was given tending to show - that .plaintiff coim menced .¡the manufacture - of typewriter ribbons at Bochester in 1885,. when he had no knowledge as to the processes used in the manufacture of ribbons or carbon, paper; that, the art was then in its infancy arid that there were in - this country only two known manufacturers- of typewriter ribbons; that plaintiff experimented and expended large sums of money and a great deal of time in making experiments, devising and making machinery and establishing the business; that since lie engaged in this enterprise the business has .grown to large proportions and the number engaged in the manufacture of these ribbons has' 'increased from two to upwards óf twelve; that every, formula, process and machine used by him were •discovered, invented or devised by- him or by his superintendent, Mr. Bettys ; that defendant Gallus, being then fourteen or fifteen years of age, was, in 1886 br T887, engaged by plaintiff tó' work in his factory. He was émployed' in “doing up ribbons” andat general work for a time, and was afterwards made superintendent of the ribbon department, where he continued for several" years 'and until "his discharge. During the time of his employment he assisted plaintiff in.making experiments, and thus acquired all the knowledge he had of that business. He says: “ I considered myself -competent from the knowledge I had gained in Mr. Little’s factory to make typewriter ribbons.” Defendant Bostwick, when eighteén years of age, was employed in the factory. He continued for two years, and claims to have learned, wdiile'engaged in stick: employment, all he knew of the manufacture of typewriter ribbons and carbon paper. ' Bostwick was discharged in February, when he Was still a minor, and Gallus in July following, at which time lie was. in the twenty-second year of his age. Thereupon these defendants began the organization of a company for the purpose of manufacturing typewriter ribbons and carbon paper.' In December, 1894, the defendant' company was incorporated, Gallus and Bostwick constituting twm of the incorporators, directors and stockholders of the Company, the principal place of business of which is ’at Rochester, where the plaintiff’s manufactory is located.. The corporation was fowled for the purpose of manufacturing ánd selling typéwriter ribbons and supplies, and was so engaged to the timé of the trial. Gallus and ' Bostwick are the only ones connected with the defendant company who are acquainted with the process of manufacturing typewriter ribbons.
Walter S. Hubbell, for the appellant.
Richard E. White and C. M. Allen, for the respondents.

Opinion:
Adams, J.:
Hó specific findings of fact were made by the learned justicé before whom this cause was tried at the Special -Term, and it, therefore, becomes necessary to carefully éxamine 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 betw'een 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, he 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 Bochester, to assist him, and!,' after long and laborious study, accompanied by thousands of expertments, 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. Be ttys, 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 formulae 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 manlier 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 were7 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 formulae 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 ivith 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 wlich 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 formulae, 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 formulae 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, arid in violation of the faith and confidence reposed" in them, they surreptitiously made memoranda of these formulae, 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 Compamy 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 tlipt there was qo written agreement entered .intq" 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, Gall us 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 dutjes 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 adyantage of the knowledge imparted to them while in the .plaintiff's enaploy, and their present experi ments 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.