Opinion ID: 2286678
Heading Depth: 1
Heading Rank: 2

Heading: The Liability of the Former Employees

Text: The development of the law of trade secrets is a result of balancing two conflicting elements essential to our society. There is a strong policy favoring free competition; an employee is entitled to use the skill and knowledge of his trade or profession which he has learned in the course of his employment, for the benefit of himself and the public, if he does not violate a contractual or fiduciary obligation in doing so. C-E-I-R, Inc. v. Computer Corporation, 229 Md. 357, 366, 183 A.2d 374 (1962); Ritterpusch v. Lithographic Plate Service, Inc., 208 Md. 592, 595, 119 A.2d 392 (1956); Restatement, Torts, §§ 708 and 757, comment a; Herbert Morris Ltd. v. Saxelby, 1 A.C. 688 (1916); Sir W.C. Leng & Co. v. Andrews, 1 Ch. 763-777 (1909). On the other hand, in order to promote the progress of science and the useful arts, the law provides certain protections to an originator. Among these protections are the patent and copyright statutes and the law of torts prohibiting unfair competition. The law protecting trade secrets is another protection. The basis of the law as to trade secrets, apart from breach of contract, is abuse of confidence or impropriety in the means of procurement. Justice Holmes stated the legal principle in Du Pont Powder Co. v. Masland, 244 U.S. 100 (1917), as follows: The word property as applied to trade-marks and trade secrets is an unanalyzed expression of certain secondary consequences of the primary fact that the law makes some rudimentary requirements of good faith. Whether the plaintiffs have any valuable secret or not the defendant knows the facts, whatever they are, through a special confidence that he accepted. The property may be denied but the confidence cannot be. Therefore the starting point for the present matter is not property or due process of law, but that the defendant stood in confidential relations with the plaintiffs, or one of them. These have given place to hostility, and the first thing to be made sure of is that the defendant shall not fraudulently abuse the trust reposed in him. It is the usual incident of confidential relations. If there is any disadvantage in the fact that he knew the plaintiffs' secrets he must take the burden with the good. 244 U.S. at 102. The Restatement summarizes the doctrine enunciated in the case law as follows: One who discloses or uses another's trade secret, without a privilege to do so, is liable to the other if    (b) his disclosure or use constitutes a breach of confidence reposed in him by the other in disclosing the secret to him. Restatement, Torts, § 757. See also Carter Products, Inc. v. Colgate-Palmolive Co., 130 F. Supp. 557, 571-75 (D.C. Md. 1955). Judge Pugh points out in his opinion that the uncontradicted evidence shows that each of the former employees was an employee of Darling from November 1, 1956 to the month of December, 1960, and that each of them had an important position with the plant in the building of oxygen breathing hoses. After setting forth the nature of their assignments, Judge Pugh states that in their respective positions these defendants knew the hose business, each having learned all there was to know from the plaintiff. He then stated: While in the employ of the plaintiff, the defendants at the instigation of Jackson, discussed going into the hose business from September, 1960, to early in December, 1960, and such discussions led to the making of plans, financial and otherwise, to go in the business of manufacturing the same kind of oxygen breathing hoses manufactured by the plaintiff. The incentive to go in business was to submit bids to the United States Navy under its Military Specification H22489, which was open to the public in the month of April, 1960. All individual defendants knew of the existence of this Military Specification which came to the knowledge of the individual defendants who were employees of the plaintiff by virtue of their employment with the plaintiff.    It was only twenty-nine (29) days after the charter was granted to the defendant corporation when it submitted a hose to the Navy on February 20, 1961. The rapidity with which this was done is only attributable to the fact that the individual defendants, except William Brandenburg and Norris Manufacturing Company, had gained the knowledge to set up a business and manufacture the hose under the military specifications, which came to their knowledge while they were employed by the plaintiff. The processes used by Space Aero were the same as those used by Darling. While Darling did not qualify under the military specification until several months after Space Aero had submitted its hose to the Navy, Darling contends that information which would have accelerated Darling's qualification had been obtained by Jackson, one of the appellants, while still in Darling's employ, and was intentionally withheld and secreted by him. This claim is disputed by the appellants, but, in any event, the dispute on this issue goes to whether or not Darling is entitled to damages for loss on the Navy contracts by reason of the appellants' breach of their duty of fidelity, and not to whether that duty had been violated. The testimony amply supports the findings of fact of the court below. While none of the former employees had signed a contract with Darling in which they formally agreed not to use the information acquired by them, and while they were free to leave their employment at will, Judge Pugh found that they owed the duty of fidelity to their employer while they were employed. We agree. C-E-I-R, Inc. v. Computer Corporation, supra, 229 Md. at 366; Ritterpusch v. Lithographic Plate Service, Inc., supra, 208 Md. at 602. That C-E-I-R and Ritterpusch involved the improper solicitation by employees of their employer's customers, rather than the improper use of the employer's trade secret, does not make the principle for which those cases stand less applicable. It is the breach of the confidential relationship rather than the form which that breach takes which is determinative. Much of the testimony concerned the taking of various drawings and other material from Darling's plant by some of the former employees before they left the company's employ and the subsequent steps taken by Darling to endeavor to gain repossession of the drawings. The court below found as a fact that some of the former employees had in their possession, after leaving Darling's employment, certain sketches of oxygen breathing hoses which they had taken while they were employed by Darling, without Darling's knowledge. One of the former employees, Jackson, instructed his wife over the telephone, when he was in California after severing his connection with Darling, to burn the drawings in his possession in his home. Wilkinson, another former employee, burned some of the drawings which Jackson had given him. The court below also found that there were some of Darling's drawings on the drawing-board in the home of another of the former employees which were copies of Darling's drawings. Judge Pugh found that it was doubtful as to whether or not the drawings were in fact the drawings of Darling, but that the evidence clearly showed they were in fact Darling's property. During the argument of this appeal, counsel for the appellants admitted that the taking of these drawings was wrongful [3] Judge Pugh also found that other records of Darling's, such as copies of its Security and Quality Control Manuals, were in possession of some of the former employees after they had severed their employment. The testimony strongly indicates that all the drawings to which reference has been made were in effect public property or were drawings or copies thereof sent to Darling by the Douglas Aircraft Company. The appellee does not contend it had trade secrets in these drawings. The testimony does not show, in our opinion, that these drawings were necessary for the production of the oxygen breathing hose by Space Aero and the individual appellants, or the securing of the Navy contracts. As Judge Pugh infers in his opinion, however, the actions of the former employees in respect of the drawings strengthens the conclusion that, in availing themselves of Darling's trade secret concerning the manufacture of the oxygen breathing hose, the former employees knew that they were acting wrongfully in violation of their confidential relationship and their duty of loyalty. We agree with the court below that the former employees violated the duty of fidelity and trust which they owed to Darling in respect of the trade secret and that their conduct was such as to entitle Darling to the protection of a court of equity.