Court Opinion

ID: 8262367
Source: CourtListenerOpinion
Date Created: 2022-10-16 15:55:52.398319+00
Date Added: 2024-06-11T16:43:13.468311
License: Public Domain

DISSENTING OPINION BY
JUDGE BIGGS.
The plaintiff is a corporation and is engaged in the manufacture and sale of drugs and chemicals. Its principal business office and factory are in the city of St. Louis. The defendant is a chemist by profession. On the fifteenth day of June, 1893, he entered into a written contract with plaintiff in which he agreed for a stipulated salary to render services as chemist in plaintiff’s factories for the period of five years. In consideration of the salary to be paid he also agreed that all new processes or discoveries made by him in compounding medicines or in making pharmaceutical preparations, etc., should be the exclusive property of the plaintiff, and that he would not at any time use such secret processes or others belonging to plaintiff, or impart information thereof to others. The defendant also contracted that he would not for the period of six years after his employment engage in selling or manufacturing any of the,articles then being manufactured by the plaintiff within the United States. The present action is in equity to enjoin the breach or violation of the foregoing special covenants. The court sustained a general'demurrer to the bill. The plaintiff has appealed.
The portions of the contract concerning the covenant first above referred to are contained in the second, third and seventh clauses, to wit:
Second. “That said Eudolph Nemnieh shall at all times during said term fulfill and keep the lawful and rea*18sonable commands and directions of said corporation and its officers, and that said Rudolph Nemnich shall, neither during said term nor at any time afterwards, disclose the same or the secrets of his employment, or any of the processes, plans, operations, business dealings, or transactions of said corporation to any person or persons whatsoever.”
Third. “That all the discoveries, inventions, and improvements which said Rudolph Nemnich during said term may use, apply or make in any chemicals, pharmaceutical preparations, medicines, compounds, machinery, apparatus, or articles of any kind whatsoever, or in the several processes of manufacturing or compounding the same, whether they are patentable or unpatentable shall become, be, and remain the property of said corporation, and said Rudolph Nemnich hereby and herewith sells, assigns, and transfers to said corporation the full and exclusive right to use and apply the same, said corporation to have the full and exclusive right to obtain and take out letters patent thereon.
Seventh. “That said Rudolph Nemnich shall at no time, whether during said term of employment or afterwards directly or indirectly, with and by himself, or with and to any other person, firm or corporation, utilize, impart, or apply the knowledge or information acquired by him during his said employment by said Mallinckrodt Chemical Works regarding any secrets, discoveries, inventions, or improvements in making, using, applying, or compounding any chemicals, pharmaceutical preparations, medicines, compounds, machinery, or apparatus, or regarding any discoveries, inventions, improvements, or secrets in the processes, art and science of manufacturing and compounding said articles, it being well understood that all such discoveries, inventions, improvements or secrets made or acquired by said Rudolph Nemnich during his said employment are and shall always remain the exclusive property of said Mallinckrodt Chemical Works.”
*19As to the breach of this portion of the contract the petition after alleging that in 1898, the defendant had (in the city of St. Louis) engaged in the manufacture and sale of drugs (on his own account) of the same kind and character as those manufactured by the plaintiff and was then so engaged, continued as follows, to wit:
“During defendant’s stay in plaintiff’s service he had full and free access to the working departments of plaintiff’s manufactory, and acquired knowledge of many of the processes of manufacture in use by plaintiff and its employees for the manufacture of drugs and chemicals. Defendant during said service also obtained information of the names of many of plaintiff’s regular customers and of parties who purchased drugs and chemicals of plaintiff in various sections and states of the United States. Defendant in the manufacture and sale of chemicals and drugs (as aforesaid) is utilizing and applying for his own use the said knowledge and information so acquired and obtained by him while in plaintiff’s employ.”
The petition contains this further allegation, to wit:
“Plaintiff’s business of manufacturing drugs and chemicals is, moreover, to a great degree scientific in its nature. It requires a large measure of skill in the adoption and use of various processes for the manufacture of the drugs and chemicals sold by plaintiff as aforesaid, and many of the processes followed byfits employees in the plaintiff’s said manufactory are the products of discoveries, inventions, and improvements by the officers and employees of plaintiff, belonging to the plaintiff, and constitute valuable property of plaintiff.”
The appellee has filed no brief, hence the views of the learned trial judge are matters of conjecture. As to this branch of the case I assume that he was of the opinion that the petition was bad in that it failed to disclose what particular processes, inventions or discoveries, were being wrong*20fully utilized by tbe defendant, or what particular drugs or medicines were being manufactured or sold by him in violation of his contract. In the respects indicated-the petition is faulty, but defendant’s remedy was by motion to make it more specific or definite and not by general demurrer. Cockerill v. Stafford, 102 Mo. 57. If the defendant was uncertain as to the specific matter# relied on by plaintiff to establish the alleged breaches, it was his privilege and remedy to call for a bill of particulars. The foregoing ground is the only one conceivable for sustaining the demurrer, for it is well-established- law that one entering the employment of another engaged in manufacturing, may obligate himself not to make use of the secret methods, processes or inventions, belonging to his employer, and not to divulge the same to others. Such contracts are in nowise in restraint of trade, and they are good without limit as to time or space. The basis of the ruling is that the employer has a property interest in his secret trade processes or inventions, and that he has the unqualified right to protect such interest by contract with those entering his service. Thus the supreme court of Massachusetts (Peabody v. Norfolk, 98 Mass. 458), in treat ing of this subject said, that if one “invents or discovers, and keeps secret, a process of manufacture, whether a proper subject for a patent or not, he has not indeed an exclusive right to it as against the public, or against those who in good faith acquire knowledge of it; but he has a property in it, which a court of chancery will protect against one who, in violation of contract and breach of confidence undertakes to apply to his own use, or to disclose it to third persons.”
Of the same subject it was said by the chancery court of England (Leather Cloth Co. v. Lorsent, 39 Law Journal Rep. loc. cit. 90) that the law was well settled “that a man may bind himself not to communicate that process (secret process) to anybody else, that he should not communicate that secret anywhere under any circumstances in any part of *21tbe world to anybody. But how would it be possible to enforce sucb a covenant as tbat not to communicate tbe process, if be were at tbe same time to be at liberty to carry on tbat same trade with tbe same processes in sucb a way tbat they would have to-be communicated to every servant and workman engaged by kini in trade.”
Pollock in bis work on tbe Principles of Contract, p. 367, says: “A contract not to divulge a trade secret need not be qualified, and a man who enters into such a contract may to tbe same extent bind bimself not to carry on a manufacture which would involve disclosure of tbe process intended to be kept a secret.”
Under tbe foregoing authorities it is clear to my mind tbat tbe petition as to tbis alleged breach of tbe contract, was not subject to general demurrer.
Tbe second covenant above referred to is contained in tbe sixth clause of tbe contract, to wit:
Sixth. “Tbat be, tbe said Eudolpb Nemnich, agrees and covenants and herewith binds bimself tbat, for and within tbe period of six years after be has left tbe service of said corporation, and within tbe territory of tbe United States, be, tbe said Eudolph Nemnich, will not, in any manner or form, directly or indirectly, either by bimself or with others, engage in tbe selling, dealing or manufacture of any of tbe articles now or then being manufactured, sold, or dealt in by said Mallinekrodt Chemical Works.”
As to tbe alleged breach of tbis covenant tbe bill charges tbat “after tbe expiration of said term, defendant left tbe service of plaintiff, and at a more recent date heretofore, in tbe year 1898, in tbe city of St. Louis, defendant entered upon and is now engaged in tbe manufacture and sale of chemicals, drugs and other articles of tbe same kind and character as those manufactured, sold and dealt in by tbe plaintiff at tbe present time (as well as dealt in at tbe time when said contract was entered into); tbat said acts on *22defendant’s part are a breach of the obligation imposed by his agreement aforesaid as part of said contract.”
The foregoing covenant being unlimited as to space is one in general restraint of trade, and unquestionably under the letter of the earlier decisions both in England and in this country, covenants of that character are void. The reasons which led the English courts to repudiate and denounce such contracts were based on the early conditions in England before the building of railroads and the discovery and use of the telegraph. Under such conditions the courts declared that it was oppressive for an obligee to contract with his obligor for the latter not to engage in a particular business or follow a particular trade within the entire realm. When the cases are examined, however, it will be found that the ruling rests on the supposed unreasonableness of such covenants. The object and advantage sought by such a stipulation is the avoidance by the obligee of competition in his own business. Under the then conditions of the country, that is, before distances were annihilated by railroads and the telegraph, the courts declared that an obligee could derive no possible advantage by compelling his obligor not to carry on a similar business or trade at a point so far distant that competition between the two could not possibly arise, hence the rulings that such contracts were necessarily oppressive and unreasonable, and consequently void. This being the reason of the rule it is necessarily a variable one depending upon the means of commercial communication. What would at one time and under primitive conditions have been an unreasonable, oppressive and useless restriction, would not be so under modern conditions. Looking at the question in this way the later and better considered cases both in England and in the United States have denied that a covenant in general restraint of trade, that is a restriction extending over the entire Kingdom, State or United States, is *23ipso facto unreasonable and void, but that tbe question of tbe reasonableness or unreasonableness of such a covenant must be determined by the facts and circumstances of each particular case. Thus the chancery division of the high court of justice of England decided in the case of Roussillon v. Roussillon (1880), 14 Chan. Div. loc. cit. 356, that “the question of extent is really a question of reasonableness, and the reasonableness must vary with the facility of the means of communication. If a trade is carried on over a wide extent either through a whole country or through a whole continent, there is nothing unreasonable in the restraint being equally extensive.”
In Leather Company v. Lorsent (1869), L. J. Oh. loc. cit. 90, James, vice-chancellor, in discussing the earlier cases on the subject said: “The covenant, no doubt, is expressed in very large words, and it is insisted that the mere fact that the covenant is ‘not to carry on nor allow to be carried on in any part of Europe,’ is in itself what is' called a' general restraint of trade, and that what is called a general restraint of trade is a restraint of trade throughout the United Kingdom, and that in that form a restraint of trade extending throughout the United Kingdom is upon the face of it bad; that something short of 'it may be allowable, provided the. circumstances justify it. I do not read the eases as having laid down that unrebuttable presumption which was insisted upon with so much power by Mr. Cohen. The truth is that all the cases, when they come to be examined, according to my view of it, establish this principle, that all restraints upon trade are bad as being in violation of public policy unless they are natural and not unreasonable for the protection of the parties dealing legally with some subject-matter of contract, and that the .principle is this; public policy requires that every man should be at liberty to work for himself, and should not be at-liberty to deprive himself or the state of his labor, skill, or talent by any contract that he enters into. *24On the other hand, public policy requires this; that where a man has by skill or any other means obtained something which he wants to sell he should be able to sell it in the most advantageous way in the market, and in order to enable him to sell it advantageously in the market it is necessary that he should be able to preclude himself from entering into competition with the purchaser, that then the same public policy which enables him to do that, does not restrain him from alienating that which he wants to alienate, and therefore enables him to enter into any stipulation however restrictive it is, provided that restriction in the judgment of the court is not unreasonable, having regard to the subject-matter of the contract.”
In Herreshoff v. Boutineau, 19 Atlantic Rept. 712, the supreme court of Rhode Island reviewed the English and American decisions on the subject, and rightly concluded that the rulings that contracts in general restraint of trade were void, were based, not on the universality of the covenants as to space, but upon their actual unreasonableness under the facts of the cases. The following extract from the opinion fully expresses the opinion of the court: “Courts should be slow to set aside as unreasonable a restriction which has formed a part of the consideration of a contract; yet, when it is a restriction upon individual and common rights, which only oppresses one party without benefiting the other, all courts agree that it should not be enforced. In determining the reasonableness of a contract, regard must be had to the nature and circumstances of the transaction. For example, if one has sold the good-will of a mercantile enterprise, receiving pay for it, upon an agreement not to engage in the same business in the same state, for a certain time, such a stipulation would stand upon quite a different footing from the similar stipulation of a mere servant in an ordinary local business. In many undertakings, *25•with modern methods of advertising and facilities for ordering by telegraph or mail, and sending goods by railroad or express, it would matter little whether- one was located at Providence or Boston or some other place. In such cases a restriction embracing the state, or even a large territory, could not be said on that account to be unreasonable; for without it the seller might immediately destroy the value of what he sold and was paid for. But it is unreasonable to ask courts to enforce a greater restriction than is needed. So it has been uniformly held that restrictions which go too far are void.”
The decision of the New York court of appeals in Diamond Match Company v. Roeber, 106 N. Y. 473, contains an exhaustive and intelligent discussion of the question. There the restraint extended over the United States, except the states of Nevada and Montana. The court upheld the contract as one only in partial restraint of trade, but in the discussion the court successfully answered all possible objections to contracts unlimited as to space, provided the facts and circumstances of the particular case justified such a restriction. The court said: “When the restraint is general, but at the same time is co-extensiv.e only with the interest to be protected, and with the benefit meant to,be conferred, there seems to be no good reason why, as between the parties, the contract is not as reasonable as when the interest is partial and there is a corresponding partial restraint. And is there any real public interest which necessarily condemns the one and not the other? It is an encouragement to industry and to enterprise in building up a trade, that a man shall be allowed to sell the good-will of the business and the fruits of his industry upon the best terms he can obtain. If his business extends over a continent, does public policy forbid his accompanying the sale with a stipulation for restraint co-extensive. with the business which he sells? If such a contract is permitted, is the seller any more likely to become *26a burden on the public than a man who having built up a local trade only, sells it, binding himself not to carry it on in the locality ? Are the opportunities for employment and for the exercise of useful talents so shut up and hemmed in that the public is likely to lose a useful member of society in the One case and not in the other? Indeed, what public policy requires is often a vague and difficult inquiry. It is clear that public policy and the interests of society favor the utmost freedom of contract, within the law, and require that business transactions should not be trammelled by unnecessary restrictions. ‘If said Sir George Jessell, in Printing Company v. Sampson (19 Eq. Cas. L. R. 462), ‘there is one thing more than any other which public policy requires, it is that men of full age and competent understanding shall have the utmost liberty of contracting, and that contracts when entered into freely and voluntarily shall be held good and shall be enforced by courts of justice.’ It has sometimes been suggested that the doctrine that contracts in general restraint of trade are void, is founded in part upon the policy of preventing monopolies, which are opposed to the liberty of the subject, and the granting of which by the l>ing under claim of royal prerogative led to conflicts memorable in English history. But covenants of the character of the one now in question operate simply to prevent the covenantor from engaging in the business which he sells, so as to protect the purchaser in the enjoyment of what he has purchased. To the extent that the contract prevents the vendor from carrying on the particular trade, it deprives the community of any benefit it might derive from his entering into- competition. But the business is open to all others, and there is little danger that the public will suffer harm from lack of persons to engage in a profitable industry. Such contracts do not create monopolies. They confer no special or exclusive privilege. If contracts in general restraint of trade, where the trade is general, are void as tend*27ing to monopolies, contracts in partial restraint where the trade is local, are subject to the same objection, because they deprive the local community of the services of the covenantor in the particular trade or calling, and prevent his becoming a competitor with the covenantee. We are not aware of any rule of law which makes the motive of the covenantee the test of the validity of such a contract. On the contrary we suppose a party may legally purchase the trade and business of another for the very purpose of preventing competition, and the validity of the contract, if supported by a consideration, will depend upon its reasonableness as between the parties.”
In Gibbs v. Baltimore Gas Company, 130 U. S. 396-409, the supreme court of the United States had under discussion the ancient common-law rule as to the contracts in general restraint of trade. The court said: “The decision in Mitchell v. Reynolds, 1 P. Wms. 181; s. c., Smith’s Leading Cases [7 Eng. Ed.], 407; [8 Am. Ed.] 756, is the foundation of the rule in relation to the invalidity of contracts in restraint of trade; but as it was made under a condition of things, and a state of society, different from those which now prevail, the rule laid down is not regarded as inflexible, and has been considerably modified. Public welfare is first considered and if it be not involved, and the restraint upon one party is not greater than protection to the other party requires, the contract may be sustained. The question is, whether, under the particular circumstances of the case and the nature of the particular contract involved in it, the contract is, or is not, unreasonable. Roussillon v. Rousillon, 14 Ch. D. 351; Leather Cloth Co. v. Lorsent, L. R. 9 Eq. 345.” This ruling was affirmed in the more recent case of Fowle v. Park, 131 U. S. 88.
The above quotations are in accord with the recent utterances of the courts of other jurisdictions so far,as my investigation has gone, and the intimation of our own su*28preme court are along the same lines. Thus in Pelz v. Eichele, 62 Mo. 1717, the contract was that defendant would not “enter into the manufacture of matches at this (city of St. Louis) or any other place for the term of five years,” etc. The supreme court held that the contract was divisible and decreed its enforcement as to the city of St. Louis, it appearing that it was 'reasonable to that extent. In further discussion of the question the court said: “Contracts of this character are not now regarded by the courts with so jealous an eye as formerly, and it is not at all apparent that-any of the mischievous consequences sought to be prevented by the adoption of the early rule on this subject would ensue if the entire contract in thjs case were held to be valid.
The facts in the case of Presbury v. Fisherm, 18 Mo. 50, did not call for a decision of the question, but the court remarked in substance that the doctrine of the common law that contracts in general restraint of trade were void, was regarded with less favor than formerly, because the reasons in which it had its origin had in a measure ceased.
In Long v. Towl, 42 Mo. 545, Judge Baker, in delivering the opinion of the court stated that “a contract prohibiting one of the parties from carrying on any specific trade or business without limit as to time or place, is doubtless void.” This was an obiter dictum, for it was expressly stated in the opinion that the covenant in question was “not a restriction of trade according to any proper construction of the rule.”
Believing as I do that a stipulation in a contract in general restraint of trade does not afford an unrebuttable presumption of its unreasonableness, it follows that in my opinion the judgment on the demurrer as to this branch of the case can not be upheld on the doctrine of the early cases as to the effect of such stipulations.
If the restriction in the contract is no larger or wider than is necessary for the protection of plaintiff, then the covenant is a reasonable one. This is a matter of law, and *29the remaining question on the demurrer is, are the averments in the bill sufficient to invoke the judgment of the court as to this essential matter. To raise this question it was necessary to aver that plaintiff’s trade is coextensive with the United States, or that it is world-wide. The averments as to this are not full and explicit, but it is to be fairly inferred that the pleader so intended to charge. Under our statute (R. S. 1889, sec. 2074), and the decision of the supreme court construing it (Stillwell v. Hamm, 97 Mo. 579), a pleading is not to be construed most strongly against the pleader, but “its language should be taken in its plain and ordinary meaning, and such an interpretation given it as fairly appears to have been intended by its author.” Now it is charged in the petition that “the business of plaintiff is extensive;” that “at, and for some years prior to, the time when plaintiff made the contract with defendant, the commercial operations of the plaintiff included numerous transactions for the sale of its manufactured drugs and chemicals, not only with persons in the city of St. Louis, but also in very many other parts of the United States of America, in a large number of the different states and territories thereof, and in the Dominion of Canada, in the Republic of Mexico, and in several of the countries of Europe, and of Asia and of Australasia.” * * * “The drugs and chemicals manufactured by plaintiff have for many years past been extensively used in various parts of the United States for compounding medicinal prescriptions for scientific experiments, and in many other ways wherein drugs and chemicals of a high order of purity are required. Plaintiff believes that the said products of its manufactory enjoy a good reputation for purity and efficiency in the drug trade throughout the United States, and in said other countries into which its business extends,” etc. Adopting a liberal construction of the pleading T think that it can be fairly said that the plaintiff intended to charge and did in effect charge *30that its trade extended substantially over the entire territory of the United States.
Eor the foregoing reasons I dissent from the conclusion reached by my associates.