Court Opinion

ID: 9855099
Source: CourtListenerOpinion
Date Created: 2023-09-24 06:19:29.586056+00
Date Added: 2024-06-11T09:23:40.422924
License: Public Domain

Connor, Judge:
The action was one for intentional interference with contractual rights, misappropriation of trade secrets, and breach of contract. Muckenfuss appeals the denial of his motions for directed verdict and for judgment notwithstanding the verdict on the trade secrets cause of action. He and Energen both appeal the issuance of a five-year injunction prohibiting them from selling certain products in Charleston County. Carolina Chemical Equipment Company, Inc. also appeals the issuance of the injunction, and the denial of its motions for a new trial nisi additur, new trial absolute, and judgment notwithstanding the verdict on the misappropriation of trade secrets cause of action. We reverse and remand.
FACTS/
Energen and Carolina Chemical both sell industrial cleaning equipment and supplies. Muckenfuss was one of three shareholders of Carolina Chemical from 1982 until 1989. In August 1989, the other two shareholders voted Muckenfuss out. Muckenfuss sold his stock back t'o Carolina Chemical under the terms of a Stock Redemption Agreement. This agreement included a covenant not to compete and a cove-nant not to disclose trade secrets. In order to comply with the agreement, Muckenfuss refrained from selling cleaning equipment and supplies from August 1989 until March 1991, when he went to work for Energen.
Energen had been selling industrial cleaning supplies in competition with Carolina Chemical since Energen’s inception in 1976. Carolina Chemical claims Muckenfuss disclosed trade secrets to Energen. In June 1991, Carolina Chemical obtained a preliminary injunction prohibiting Muckenfuss and Energen *292from divulging trade secrets or from selling products made from those secrets to anyone who was not a customer of Energen’s prior to March 15, 1991.
This case has been tried by a jury twice. Both times the jury returned a verdict for the Carolina Chemical but awarded no damages.1 After the second verdict, the judge instructed the jury to either find some amount of damages, or find in favor of Energen and Muckenfuss. They then awarded Carolina Chemical $37,500 for violation of trade secrets, and $37,500 for breach of contract. They found for Muckenfuss and Energen on interference with a contract. Thereafter, the trial judge enjoined Muckenfuss and Energen from selling four products in Charleston County for five years.
ANALYSIS
Muckenfuss first argues the trial judge erred in denying his motions for a directed verdict and for judgment notwithstanding the direct on the breach of contract cause of action because in this instance the covenant not to disclose trade secrets is really a covenant not to compete.
When reviewing the denial of motions for directed verdiet or judgment notwithstanding the verdict, we must consider the evidence in the light most favorable to the non-moving party. Brady Dev. Co. v. Town of Hilton Head Island, 312 S.C. 73, 439 S.E. (2d) 266 (1993). A directed verdict or judgment notwithstanding the verdict should not be granted unless only one reasonable inference can be drawn from the evidence. Id.
At early common law, any agreement in restraint of trade was void as against public policy. Standard Register Co. v. D.C. Kerrigan, 238 S.C. 54, 119 S.E. (2d) 533 (1961). The agreement at issue in Standard included the following covenant not to compete:
The sales representative further agrees, for a period of two years after leaving the employment of the Company, that he will not engage, directly or indirectly, in competition with said Company in selling to the accounts or in the *293territory in which he has been performing his duties as such sales representative.
Id. at 58-59, 119 S.E. (2d) at 536. Our Supreme Court upheld this restriction as reasonable, noting the evolution of the law:
“Such [noncompetition agreements] were regarded with high disfavor under the old common law. And they are so regarded, in general, by modern courts, though apparently with some amelioration of the ancient disfavor. Modern courts have usually, in passing on these contracts, employed tree criteria: (1) Is the restraint, from the standpoint of the employer, reasonable in the sense that it is no greater than is necessary to protect the employer in some legitimate business interest? (2) From the standpoint of the employee, is the restraint reasonable in the sense that it is not unduly harsh and oppressive in curtailing his legitimate efforts to earn a livelihood? (3) Is the restraint reasonable from the standpoint of a sound public policy?”
Id. at 60, 119 S.E. (2d) at 536 (citations omitted). Noncompetition agreements, which must be supported by valuable consideration, will be critically examined and construed against the employer. Rental Uniform Service of Florence, Inc. v. Dudley, 278 S.C. 674, 301 S.E. (2d) 142 (1983); Oxman v. Sherman, 239 S.C. 218, 122 S.E. (2d) 559 (1961).
The Stock Redemption Agreement underlying this litigation contains a paragraph titled “Covenant Not to Divulge Trade Secrets,” which reads, in part:
[Muckenfuss] agrees to not divulge any trade secrets of the Corporation. Trade secrets means any knowledge or information concerning any process, product, or customer of the Corporation and more generally any knowledge or information concerning any aspect of the business of the Corporation which court, if divulged to a direct or indirect competitor, adversely affect the business of the Corporation, its prospects or competitive position. Seller shall not use for his own benefit any trade secret of the Corporation in any manner whatsoever.
Despite its designation as a “Covenant Not to Divulge Trade Secrets,” this section would substantially restrict Mucken*294fuss’s competitive employment activities. Because it basically has the effect of a covenant not to compete, we must subject it to the same scrutiny as a covenant not to compete. Using those criteria, the restraint is unlimited in time and territory, and is far greater than necessary to protect any legitimate business interest. See Cafe Assocs., Ltd. v. Gerngross, 305 S.C. 6, 406 S.E. (2d) 162 (1991) (enforcing five-mile radius and five-year time restraint on activities of former owner of restaurant); Sermons v. Caine & Estes Insur. Agency, Inc., 275 S.C. 506, 273 S.E. (2d) 338 (1980) (holding covenant restraining solicitation of existing customers “at any time” unenforceable as a matter of law); Eastern Business Forms, Inc. v. Kistler, 258 S.C. 429, 189 S.E. (2d) 22 (1972) (noncompetition agreements, while not favored, will be upheld if the territorial extent of the restraint and the period for which it will be imposed are reasonable); Oxman v. Sherman, 239 S.C. 218, 122 S.E. (2d) 559 (1961) (statewide restraint on competition held unenforceable where employee’s solicitations had been in only two counties during his employment). An employer has no legitimate commercial interest in prohibiting competition in itself. Almers v. South Carolina Nat’l Bank of Charleston, 265 S.C. 48, 217 S.E. (2d) 135 (1975).
Moreover, the restraint is harsh and oppressive in curtailing the legitimate efforts of Muckenfuss to earn a livelihood. Muckenfuss, a high school graduate, has worked in the industrial chemical business since he completed high school. At a matter of fact, he began assisting his father, Bernard Muckenfuss, one of the original owners of Carolina Chemical, on a part-time basis while still in high school. When an employee leaves a job, he is entitled to take the skills and general knowledge he has either acquired or increased during his employment with him:
[T]he right of an individual to follow and pursue the particular occupation for which he is best trained is a most fundamental right. Our society is extremely mobile and our free economy is based upon competition. One who has worked in a particular field cannot be compelled to erase from his mind all of the general skills, knowledge and expertise acquired through his experience. These skills are valuable to such employee in the market place for his ser*295vices. Restraints cannot be lightly placed upon his right to compete in the area of his greatest worth.
ILG Industries v. Scott, 49 Ill. (2d) 88, 273 N.E. (2d) 393, 396 (1971). The clause at issue here, if enforced, would prevent Muckenfuss from using the general skills and knowledge he acquired at Carolina Chemical.
Finally, the restraint is not reasonable from the standpoint of sound public policy because of its effects on both the employee and the competitive business environment. Accordingly, the trial judge erred in denying Muckenfuss’s motions for a directed verdict on the breach of contract claim.2
Muckenfuss and Energen also argue the trial judge erred in denying their motions for directed verdict and for judgment notwithstanding the verdict because there was no evidence they used or disclosed any trade secret of Carolina Chemical under the common law definition of “trade secret.” The threshold issue in any trade secrets case is not whether there was a confidential relationship or a breach of contract or some other kind of misappropriation, but whether there was a trade secret to be misappropriated. Lowndes Prods., Inc. v. Brower, 259 S.C. 322, 191 S.E. (2d) 761 (1972). Prior to the South Carolina General Assembly enacting the Uniform Trade Secrets Act in 1992, South Carolina courts had already approved the broad definition of trade secrets found in the Restatement (First) of Torts § 757 cmt. b. (1939):
A trade secret may consist of any formula, pattern, device or compilation of information which is used in one’s business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. It differs from other secret information in a business in that it is not simply information as to single or ephemeral *296events in the conduct of the business. ... The subject matter of a trade secret [must have]... a substantial element of secrecy... so that, except by the use of improper means, there would be difficulty in acquiring the information.
Id.; see generally Richard E. Day, Protection of Trade Secrets in South Carolina, 42 S.C.L. Rev. 689 (1991). However, this is not to say all business ideas are trade secrets. A trade secret must be secret. Restatement (First) of Torts § 757 cmt. b. In determining whether something is a trade secret, one must consider the extent to which the information is known outside of his business and the ease or difficulty with which the information could be properly acquired or duplicated by others. Id. Trade secret protection is limited. For instance, even matters that can be disclosed by reverse engineering3 may not be protected as trade secrets. SI Handling Systems, Inc. v. Heisley, 758 F. (2d) 1244 (3d Cir. 1985).
The contractual provision at issue here does not identify any specific trade secrets; rather, it defines trade secrets so broadly that virtually all of the information
Muckenfuss acquired during his employment would fall within its definition. See Service Centers of Chicago, Inc. v. Minogue, 180 Ill. App (3d) 447, 129 Ill. Dec. 367, 372, 535 N.E. (2d) 1132, 1137 (1989) (“By defining confidential information as essentially all of the information provided ... the confidentiality agreement amounts ... to a post-employment covenant not to compete which is completely unrestricted in duration or geographical scope.”); cf. AMP Inc. v. Fleischhacker, 823 F. (2d) 1199 (7th Cir. 1987) (noting the risk plaintiffs run by producing long lists of general areas of information which contain unidentified trade secrets instead of identifying specific trade secrets). Therefore, the contract provision here is unenforceable as a matter of law.
Carolina Chemical alleges a combination of the following as evidence of misconduct: knowledge of the identity of Carolina Chemical’s customers; knowledge of Carolina Chemical’s pricing; and misappropriation of four product formulae (paint *297thinner, bilge cleaner (coldwash), degreaser/safety solvent, concrete remover). Carolina Chemical does not claim Muckenfuss took actual customer lists, pricing lists, or formula cards with him. Rather, it alleges the misappropriation occurred in using knowledge he acquired during the 17 years he was employed with Carolina Chemical.
Viewed in the light most favorable to Carolina Chemical, the following evidence exists: Six months after the expiration of the noncompetition period under the Covenant Not to Compete, Muckenfuss began competing with Carolina Chemical. He contacted some of Carolina Chemical’s non-exclusive customers. He made sales to some of these customers, and others, of products that were similar to products sold by Carolina Chemical. One of the products, paint thinner, is manufactured by neither Carolina Chemical .nor Energen. The remaining three products are “built” by purchasing the raw materials, and then mixing, packaging, and selling them. Formulae for these three products are readily available from the suppliers of raw materials. Carolina Chemical’s chemical expert analyzed and compared the products, finding them similar but not identical. Finally, there was also evidence Energen sold its similar products at lower prices than Carolina Chemical did. None of these acts, however, constitute misappropriation of a trade secret. See AMP Inc. v. Fleischhacker, 823 F. (2d) 1199 (7th Cir. 1987) (summarizing Illinois law and noting where former employee might be able to recollect pricing information, or where other than the exact formulae were used, no trade secret cause of action lies). Accordingly, the trial judge erred in failing to grant Muckenfuss’s and Energen’s motions for directed verdict and for judgment notwithstanding the verdict because no evidence was presented they used or disclosed any trade secret of Carolina Chemical.
Based on this disposition, we need not reach Muckenfuss’s, Energen’s, or Carolina Chemical’s remaining issues on appeal. On remand, the trial judge is instructed to enter directed verdicts in favor of Muckenfuss and Energen, vacate the permanent injunction, and vacate the award of attorney fees.
Reversed and remanded.
Howell, C.J., concurs.
Cureton, J., dissents in separate opinion.

 Following the first trial, the court granted Carolina Chemical a new trial absolute, holding the verdicts inconsistent because the jury was required to find damages if it found in favor of Carolina Chemical.

 We note the Stock Redemption Agreement contained a separate Covenant Not to Compete, which restrained Muckenfuss from selling cleaning equipment or chemicals for a period of one year. It is undisputed Muckenfuss abided by this clause. All of the activities complained about here took place well after the end of the noncompetition period.

 Reverse engineering means starting with a known product and “ ‘working backward to divine the process which aided in its manufacture.’” SI Handling, 753 F. (2d) at 1255 (citation omitted).