CHOMERICS, INC. vs. JOHN E. EHRREICH & another. [Note 1]

GOODMAN, J. The plaintiff, Chomerics, Inc. (Chomerics), appeals from a judgment of the Superior Court dismissing an action brought against Ehrreich, its former employee, and Ercon, Inc. (Ercon), a corporation in which Ehrreich is now a principal. The defendants appeal from the dismissal of their counterclaim. The complaint alleged misappropriation of trade secrets and confidential information relating to electrically-conductive plastics and gaskets made therefrom; the counterclaims were for malicious prosecution and unfair competition. The case was tried before a master (facts final), [Note 2] who concluded that the allegedly misappropriated information was not protectible as trade secrets but that some of the items of the information, though "they do not rise to the status of trade secrets," were protectible as what the master characterized as "confidential information." [Note 3]

The trial judge, after hearing, struck "the master's conclusion as to the protectibility of the plaintiff's information as confidential data [because it was] not supported by the subsidiary facts in the report . . . ." He also sustained objections to various portions of the master's report "so far as they are directed to the face of the report and challenge the implied ultimate finding that the information was protectible." [Note 4]

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Our examination of the master's report likewise convinces us that, in context, the references to "confidential information," "confidential know-how," and similar expressions to which the trial judge alludes, are merely conclusions of law that certain matters are protectible. Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. 254, 277-278 (1980). Van Prod. Co. v. General Welding & Fabricating Co., 419 Pa. 248, 263 (1965). See Laughlin Filter Corp. v. Bird Mach. Co., 319 Mass. 287, 290 (1946) ("The vague adjective `confidential,' expressive at most of a conclusion not supported in this case by the particular facts alleged, does not constitute by implication an allegation of some set of subsidiary facts that would support the conclusion for which the plaintiff contends"). Thus they were properly struck. Sprague v. Rust Master Chem. Corp., 320 Mass. 668, 677 (1947). Smigliani v. Smigliani, 358 Mass. 84, 87 (1970).

The judge adopted the report, as modified, concluded on the face of the report that no relief was justified, and dismissed the complaint. Our review is likewise directed solely to determining whether any relief is justified on the factual findings of the master as appearing on the face of the report. National Hearing Aid Centers, Inc. v. Avers, 2 Mass. App. Ct. 285, 286 (1974). Jones v. Gingras, 3 Mass. App. Ct. 393, 395-396 (1975). [Note 5]

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The plaintiff argues that information appropriated by the defendants was protectible both as trade secrets and as confidential information. The defendants argue that they are entitled to recommittal of the report in connection with their counterclaim for malicious prosecution.

1. Facts in the master's report. We summarize the background facts from the master's report: Chomerics was founded and organized in 1961 by a small group of engineers and scientists, including Ehrreich, who became its director of research, vice president and a member of its board of directors. It engaged in developing and perfecting electrically-conductive plastic materials for the electronics and other industries; plastics were rendered electrically-conductive by metal particles embedded in a plastic matrix. Chomerics obtained a patent on gasketing material using silver particles which did not fall below 10% by volume. Chomerics' effort in this field was pioneered largely through Ehrreich's inventions and research from 1961 until he left Chomerics' employ. As the master found, "he was responsible for the research program at Chomerics and was personally actively involved in all of the inventions and discoveries made at Chomerics concerning conductive plastics . . . ." The master further found that the effort in conductive plastics "was peculiarly his [Ehrreich's] almost private domain at Chomerics," and that even at the trial, many years later, he "showed himself . . . to have a very detailed memory of all phases of the work . . . ."

Ehrreich, as employee, signed an employment agreement with Chomerics, as employer, which included, under the heading "Inventions and Confidential Technical Information," a provision (par. 6[a]) giving Chomerics exclusive rights in "all inventions and improvements made or conceived . . . while in the employment of the Employer . . .

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and also those made or conceived within one year after the termination of his [Ehrreich's] employment if resulting from or suggested by said employment" (emphasis supplied). It also contained a two-year noncompetition provision. [Note 6] The clause of the contract (par. 6[c]) which Chomerics claims was violated provides that the employee will not "at any time disclose or use any trade secret, formula, process, method of manufacture or any confidential record, data or information of the Employer or any subsidiary (whether developed by the Employee or not) . . . ."

In 1965, Ehrreich left Chomerics; and in 1967, after the expiration of his two-year noncompetition agreement, he and one Reti founded and became the principals of Ercon, a corporation the purpose of which was research and consulting to develop items for licensing. Their early endeavors were in the field of conductive plastics and were directed to obtaining gaskets with a minimal silver content. They succeeded in developing a product containing less than 10% silver in contrast to the 10% minimum achieved by Chomerics. Their gaskets also contained considerably greater compressibility than earlier products. The inventions embodying these features and the method of achieving them were patented by Ehrreich and Reti, who assigned the patent to Ercon. Ercon licensed Technical Wire Products, Inc. (Technical), [Note 7] to use the patent and furnished it with further technical information. Technical thereupon marketed a gasket containing those features under the name CONSIL. The plaintiff claims that various "concepts," found by the master to be "phrases describing ideas" which (with one exception) "can be at least generically read on CONSIL," were misappropriated by the defendants. The issue as

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posed by the plaintiff is whether these concepts [Note 8] are protectible as either trade secrets or confidential information.

2. Protectibility of the information. Whether information is protectible "in each case depends on the conduct of the parties and the nature of the information." Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972) (Jet Spray I). See Jet Spray Cooler, Inc. v. Crampton, 377 Mass. 159, 168 (1979) (Jet Spray II). In the context of the employer-employee relationship those two factors are interrelated. [Note 9] We therefore look both to the nature of what Ehrreich acquired and the circumstances under which he acquired it.

To begin with, it cannot be said that this is "information acquired from another." Jet Spray II, 377 Mass. at 165. Compare Junker v. Plummer, 320 Mass. 76, 78-80 (1946), and Jet Spray I, 361 Mass. at 840-844, with Wexler v. Greenberg, 399 Pa. 569, 572 n.1, 575-576, 577-578 (1960), and Amoco Prod. Co. v. Lindley, 609 P.2d 733, 745 (Okla. 1980). See also 2 Callman, Unfair Competition, Trademarks and Monopolies Section 54.2(a), at 420 (2d ed. 1965). The master found that this area of research was Ehrreich's "almost private domain at Chomerics" and that at the time of trial he had a "very detailed memory of all phases of the work." [Note 10]

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The issue is then whether Ehrreich was guilty of reprehensible conduct (Restatement of Torts Section 757, Comment b [1939]) in using the knowledge with which he left Chomerics or whether that use was the exercise of his "right to use [his] general knowledge, experience, memory and skill." J.T. Healy & Son v. James A. Murphy & Son, 357 Mass. 728, 740 (1970), quoted in Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. at 267. [Note 11] See Restatement (Second) of Agency Section 396, Comment b (1958). Reed, Roberts Assoc., Inc. v. Strauman, 40 N.Y.2d 303, 309 (1976).

With respect to the nature of the information as described in the master's report, it belies the master's conclusion of law that there was "a clear crossing of [the] line" and a taking of protectible information. The master's report shows that while Ehrreich was at Chomerics the concepts were mere possibilities ("vague mental conceptions . . . ." Lamson v. Martin, 159 Mass. 557, 565-566 [1893]) which might result in a more economical gasket containing less than 10% silver. The master's report characterizes them as "laboratory indications of possibly useful results . . . ." But it is clear that these possibilities, in Ehrreich's exclusive area of research, were conceived by him and it was he who experimented on the basis of those possibilities, which did not go beyond (as put by Professor Alfred North Whitehead in a

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somewhat different context) the "state of imaginative muddled suspense which precedes successful inductive generalisation." Whitehead, Science and the Modern World 8 (Pelican Mentor ed. 1948). The experiments, however, were unsuccessful; they "did not result in any commercial products of plaintiff through the time of Ehrreich's employment by Chomerics." Indeed, the experiments were regarded as valueless by Chomerics. [Note 12] The master found that there was no "convincing proof that (1) plaintiff, during Ehrreich's employment at Chomerics, ever regarded or treated the concept[s] (even though in locked-up notebooks [Note 13] as of any trade value whatsoever or that plaintiff ever regarded these preliminary laboratory experiments as proving anything of real technical or trade value; (2) the [plaintiff] fail[ed] to overcome the strong presumption that plaintiff did not so regard the same [as shown] by the lack of follow-up of the experiments, the lack of expenditure of effort or funds thereon, the failure to attempt to make a commercial grade product from the same or to consider such a possibility or even the marketing of any such product; and (3) [there was a] complete absence in the record of convincing evidence that plaintiff regarded [these] not only as valuable to its own business, but of any value to potential competitors." [Note 14]

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Thus when Ehrreich left Chomerics he took with him nothing but possibilities and goals which had hitherto proved impossible to bring to fruition. That he had worked on these possibilities and goals [Note 15] for Chomerics or that they occurred to him while at Chomerics does not make them (aside from misconduct, USM Corp. v. Marson Fastener Corp., 379 Mass. 90, 104 [1979], which is not present here [Note 16]) any the less a part of his experience and development

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as a scientist which he was entitled to use, as put by the master, "to design around the 10% silver limitation of Chomerics patent protection. . . ." [Note 17] In this respect, this case is much like Vendo Co. v. Stoner, 105 Ill. App. 2d 261 (1969), where the defendants, after leaving the plaintiff's employ, had produced a vending machine containing features which the plaintiff had been attempting to develop. In ruling that no trade secrets were involved, the court said, "If Vendo had discovered the means of achieving its goal, we might well have had a different view as to whether Vendo had a trade secret. . . . We know of no authority for the proposition that an ultimate goal or purpose, as distinguished from the means of achieving it, can be classified as a trade secret" (emphasis original). Id. at 278. Gabriel Co. v. Talley Indus., 137 U.S.P.Q. 630, 633 (BNA) (D. Ariz. 1963) (protection only for a "perfected product or process"). Packard Instr. Co. v. Reich, 89 Ill. App. 3d 908, 916 (1980) (protection only for "particularized plans and processes").

Nor does the employment contract help the plaintiff. In the circumstances, here, where all the parties regarded the information as of no value, it can hardly be said that the contract alerted the defendant Ehrreich to a duty to keep the information secret. Compare USM Corp. v. Marson Fastener Corp., 379 Mass. at 99, and material cited. Moreover, fair dealing between the employer and employee negates such a duty in this case and makes par. 6(c) of the contract imposing such an obligation unenforceable as to these concepts.

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Dynamics Research Corp. v. Analytic Sciences Corp., 9 Mass. App. Ct. at 277-278.

Further, as the trial judge pointed out, the "confidential information" referred to in par. 6(c) of the contract means "developed" information, something more than the achievement of "a preliminary indication." Such protection as there may be for "laboratory indications of possibly useful results" is found not in par. 6(c) but in 6(a), with which it must be read (Ucello v. Cosentino, 354 Mass. 48, 51 [1968]; Avant, Inc. v. Tech Ridge, Inc., 4 Mass. App. Ct. 568, 574 [1976]), and which grants Chomerics the right to "all inventions and improvements made [by Ehrreich] . . . within one year after the termination of his employment if resulting from or suggested by said employment" (emphasis supplied). Thus, as the trial judge concluded, "[t]he reference in subparagraph (c) to `any trade secret, formula, process or any confidential record' . . . must, in our judgment, be taken to mean information that has gone beyond the mere `laboratory indications of possible useful results . . . .'" The type of information for which Chomerics here seeks protection is "more properly the subject matter of a covenant not to compete" (Cudahy Co. v. American Labs., Inc., 313 F.Supp. 1339, 1345 [D. Neb. 1970]) which the contract provided and with which Ehrreich complied. Koehring Co. v. E.D. Etnyre & Co., 254 F.Supp. at 339, 340. See Textile Rubber & Chem. Co. v. Shook, 243 Ga. 587, 591-592 (1979).

3. The defendants' counterclaim. This requires no extended discussion. The master found that "[t]he elements of malicious prosecution have not in any sense been shown." The defendants' argument that they ultimately prevailed (compare Cloon v. Gerry, 13 Gray 201, 202 [1859]) is of no help to them since nothing in the master's report or elsewhere in the record negates the plaintiff's "reasonable belief in the possibility that the claim [might have been] held valid." Hubbard v. Beatty & Hyde, Inc., 343 Mass. 258,

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261 (1961). Prosser, Torts Section 120, at 854 (4th ed. 1971). Our appraisal of the case, as we have considered it, leads us to the same conclusion. [Note 18]

Judgment affirmed.