USM CORPORATION vs. MARSON FASTENER CORPORATION & others. [Note 1]

ABRAMS, J. The USM Corporation (USM) seeks an accounting for the alleged misappropriation of a trade secret contained in a machine used in the manufacture of blind rivets. [Note 2] In addition, USM sought relief from each of the defendants by reason of their "wrongful acts" in misappropriating confidential information.

To defeat the claim of misappropriation of a trade secret, the defendants alleged that USM had not kept its information secret. Hearings were held before a master; one of the master's conclusions was that although information embodied in the machine was "of a nature which would constitute it a trade secret if protected, [it] was not sufficiently guarded by USM to entitle USM to recover anything from the defendants." A judge confirmed the master's report, ruling that "the Master's ultimate finding with respect to the adequacy of the measures taken by USM to guard the secrecy of the USM machine is supported by the evidence before the Master, consistent with his subsidiary and other general findings and correct as a matter of law." The judge then ordered the entry of judgment dismissing the complaint with prejudice. USM appeals. We allowed USM's application for direct appellate review.

The main thrust of USM's appeal is that it did pursue a course of conduct reasonably designed to preserve the secrecy of its trade secret. USM contends that it was error to conclude from the master's subsidiary findings that its complaint should be dismissed. USM avers that in any event it was improper to dismiss the complaint since the master's report indicates that the defendants acquired the information improperly. See Restatement of Torts Section 759 (1939).

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We have reviewed the master's report and conclude that it was error for the judge to dismiss the complaint. [Note 3]

We summarize the subsidiary findings of fact on which the master and the judge based their conclusions. Since 1950, USM has engaged in the manufacture and sale of blind rivets. In 1954, employees of USM began development of a new type of blind rivet assembly machine. Development of the machine was completed in 1959.

The USM blind rivet assembly machine ("USM machine" or "machine") is able "to provide a means of reliable and rapid assembly of mandrels and rivet bodies into rivets." USM claims that the combination and relationship of various parts of the machine, along with certain features incorporated into the machine, are the trade secrets and confidential information which the defendants have misappropriated. [Note 4]

The master ultimately found that the development of the USM machine involved considerable time, effort and expense, that the development of the machine was relatively difficult, and that its "combination [of features] was unique and effective when devised and . . . did not constitute a

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matter of public knowledge or of general knowledge in the industry." Therefore, the master properly concluded that the USM machine was of an appropriate nature to qualify it as a trade secret. [Note 5]

The master also found that Joe Cooper, Irving Cooper, and Louis Lewis were the officers and directors of corporations which distributed USM blind rivets for a period of approximately one year. In 1961, after being denied an exclusive distributorship, the defendants decided to manufacture blind rivets in competition with USM, but they were dissatisfied with the performance of their own blind rivet assembly machines. Eventually, the defendants were able to construct a blind rivet assembly machine like the USM machine because the defendants hired Frank Lahnston, a former junior engineer at the USM Shelton plant and provided him with "a group of about 100 [blue] prints without identifying title blocks but which Lahnston recognized as prints of USM [parts] drawings of the USM Machine." By 1964, Lahnston had succeeded in constructing for the defendants a blind rivet assembly machine which was "substantially the same as the USM Machines."

However, the master concluded that USM was not entitled to claim trade secret protection for its machine because USM had taken inadequate precautions to preserve the

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secrecy of the USM machine. To reach this result, the master focused on the security measures taken at the USM plant in Beverly, where the USM machine was developed, and at the USM plant in Shelton, where the USM machines were in operation. We therefore summarize the master's findings relating to USM's security measures in some detail.

Between 1954 and 1959 USM carried out the development of its machine at the Beverly plant. The Beverly plant was fenced, and employees and visitors entered the plant through guarded gates. Once inside the plant, employees were expected to remain in their immediate work areas. Supervisors questioned any employee who was discovered outside the employee's work area. While employees were not to remove objects from the plant without permission, guards did not generally inspect employees' briefcases or lunch boxes as they left the plant.

Visitors to the plant were logged in and out. They were also required to state their business and to wait in a designated reception area. At no time were visitors permitted to walk unescorted through the plant.

During the period of their development, the USM machines were located in a relatively isolated area of the Beverly plant, but USM employed no special security precautions to prevent access to the machines. At all times both during and after their development, USM treated the machines as items of factory equipment. "The term `factory equipment' defines machines and other equipment developed or adapted by USM to be used internally in production of items to be sold to others and not themselves to be sold or otherwise made available to third persons."

All drawings and blueprints of parts for the USM machines were kept in the engineering department of the Beverly plant, along with 250,000 other drawings of factory equipment. No assembly drawings were ever made for the USM machine. Whenever a print of a particular drawing was required for work being done outside the engineering department, the employee needing the print was to complete a written production order. After receiving the work

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order, engineering employees stamped the print with the work order number and the phrase "for the above only" before delivering the print to the employee. However, while some USM blueprints were stamped "confidential," no drawings, blueprints, or prints of the USM machine were stamped "confidential" prior to the filing of the complaint in this action.

After USM completed the development of the USM machine, some of these machines were installed at the USM plant in Shelton, Connecticut. With a few variations, USM security precautions at the Shelton plant were similar to those in force at the Beverly plant.

Employee entrances at the Shelton plant were unguarded, and employees did not wear badges. All doors were locked during hours when the plant was not operating, and any employee entering the plant outside of regular working hours was required to have a pass and to be logged in by the watchman. [Note 6]

Visitors to the Shelton plant were always logged in and waited in a reception room which was separated from the production area by an opaque partition. Visitors entering the production area were expected to be escorted at all times.

The USM machines at the Shelton plant were located in the production area of the plant. They were not separated from other plant operations and were visible from the shipping room doors. A set of reproducible drawings for the USM machine was kept at the Shelton plant. The drawings were located in the office of the engineering department, which was separated from the production area by a lockable door.

USM conducted occasional plant tours at Shelton. The tours, however, did not open the plant to the general public

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and were conducted for the families of employees and for distributors of USM products. [Note 7]

All supervisory, technical, and engineering employees at the Shelton plant signed nondisclosure agreements in early 1963. [Note 8] Similar agreements were signed by research personnel at the Beverly plant.

USM generally did not seek patent protection for any items of factory equipment and sought no such protection for the USM machine or for any of its components. There was also no written policy specifically prohibiting disclosure of information concerning factory equipment, and prior to November, 1963, no USM officer published a formal statement identifying the USM machine or its components as confidential information.

The master concluded that these security precautions did not entitle USM to claim trade secret protection for the USM machine, measured against a standard of conduct which required USM to "exercise a degree of eternal vigilance or pursue an active course of conduct sufficient to maintain the secrecy of the information embodied in the USM Machine."

USM argues that the master's subsidiary findings of fact establish that USM took reasonable precautions to maintain the secrecy of its information, and that such reasonable precautions are all that are required to entitle a plaintiff to claim trade secret protection for its information. Thus

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USM asserts that the defendants' use of this information constituted a misappropriation of USM's trade secrets and confidential information for which the defendants should be held liable. We agree.

One who possesses a trade secret and wishes to protect it must act to preserve its secrecy. See Peabody v. Norfolk, 98 Mass. 452, 458 (1868); Restatement of Torts Section 757, Comment b (1939). See also United States Plywood Corp. v. General Plywood Corp., 370 F.2d 500, 508 (6th Cir. 1966), cert. denied, 389 U.S. 820 (1967); Future Plastics, Inc. v. Ware Shoal Plastics, Inc., 340 F.Supp. 1376, 1382 (D.S.C. 1972); Hamilton Mfg. Co. v. Tubbs Mfg. Co., 216 F. 401, 404 (W.D. Mich. 1908); Gallowhur Chem. Corp. v. Schwerdle, 37 N.J. Super. 385, 397 (1955). Cf. Republic Sys. & Programming, Inc. v. Computer Assistance, Inc., 322 F.Supp. 619, 628 (D. Conn. 1970), aff'd, 440 F.2d 996 (2d Cir. 1971); Bristol v. Equitable Life Assurance Soc'y, 132 N.Y. 264, 267 (1892).

However, where a plaintiff has actively sought to protect its trade secret, the question then becomes whether the protective measures are reasonable. "Reasonable precautions against predatory eyes we may require, but an impenetrable fortress is an unreasonable requirement, and we are not disposed to burden industrial inventors with such a duty in order to protect the fruits of their efforts." E.I. duPont deNemours & Co. v. Christopher, 431 F.2d 1012, 1017 (5th Cir. 1970), cert. denied, 400 U.S. 1024 (1971). See Greenberg v. Croydon Plastics Co., 378 F.Supp. 806, 813-814 (E.D. Pa. 1974); Allen Mfg. Co. v. Loika, 145 Conn. 509, 516 (1958); RTE Corp. v. Coatings, Inc., 84 Wis.2d 105, 115 (1978). Cf. Structural Dynamics Research Corp. v. Engineering Mechanics Research Corp., 401 F.Supp. 1102, 1117 (E.D. Mich. 1975); Dior v. Milton, 9 Misc. 2d 425, 439 (Sup. Ct.), aff'd, 2 App. Div. 2d 878 (N.Y. 1956). See also R. Ellis, Trade Secrets Section 41 (1953) ("A course of conducting business which necessarily implies a desire on the part of the employer that the information in question is to be kept secret is sufficient"). See generally Hutter, Trade Secret

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Misappropriation: A Lawyer's Practical Approach to the Case Law, 1 W. New England L. Rev. 1, 17 (1978); R.M. Milgrim, Trade Secrets Section 2.04 (1978).

No general rule may be established to determine whether the security precautions taken by the possessor of a trade secret are reasonable. [Note 9] "Relevant factors to be considered include (1) the existence or absence of an express agreement restricting disclosure, (2) the nature and extent of security precautions taken by the possessor to prevent acquisition of the information by unauthorized third parties, (3) the circumstances under which the information was disclosed . . . to [any] employee to the extent that they give rise to a reasonable inference that further disclosure, without the consent of the possessor, is prohibited, and (4) the degree to which the information has been placed in the public domain or rendered `readily ascertainable' by the third parties through patent applications or unrestricted product marketing." Kubik, Inc. v. Hull, 56 Mich. App. 335, 356 (1974). Additionally, a court should consider the relationship and the conduct of the parties. We think it appropriate to balance a plaintiff's conduct in maintaining its security measures against the conduct of a defendant in acquiring the information. See Restatement of Torts Section 757, Comment b (1939) ("a substantial element of secrecy must exist,

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so that, except by the use of improper means, there would be difficulty in acquiring the information").

The master's subsidiary findings reveal that the information which USM seeks to protect is embodied in certain features of the USM machine, including the internal configuration and arrangement of various component parts. Because this information relates to the machine itself, the marketing of the blind rivets produced by the machine would not disclose the information which USM seeks to protect. Disclosure of this information requires either extended access to the machine itself or access to the detailed parts drawings. [Note 10]

USM required supervisory, technical, and research personnel, including the defendant Lahnston, to sign nondisclosure agreements. See note 8, supra. While the nondisclosure agreements did not list the particular information which USM considered secret, such specificity is not required to put employees on notice that their work involves access to trade secrets and confidential information. See Eastern Marble Prods. Corp. v. Roman Marble, Inc., 372 Mass. 835, 840 (1977); R. Callmann, Unfair Competition, Trademarks and Monopolies Section 53.3, at 390 (3d ed. 1968 & Cum. Supp. 1978). Accord, Kodekey Elecs., Inc. v. Mechanex Corp., 486 F.2d 449, 455 (10th Cir. 1973) (nondisclosure agreements a "primary and essential precaution"); S. Jarvis Adams Co. v. Knapp, 121 F. 34, 40 (6th Cir. 1903); Ultra-Life Laboratories, Inc. v. Eames, 240 Mo. App. 851, 866 (1949).

In the work environment at USM, where employees are on notice that their work may involve access to trade secrets and confidential information, there can be little question

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that the USM employees knew or should have known that detailed parts drawings and blueprints for factory equipment were considered confidential by their employer. [Note 11] "[I]t is well settled that detailed manufacturing drawings . . . are prima facie trade secrets." A.H. Emery Co. v. Marcan Prods. Corp., 389 F.2d 11, 16 (2d cir.), cert. denied, 393 U.S. 835 (1968). See Schulenburg v. Signatrol, Inc., 33 Ill.2d 379, 386-388 (1965), cert. denied, 383 U.S. 959 (1966). It is not fatal that the blueprints and parts drawings were not labeled "confidential" or "secret" or that USM had not expressly informed its employees that these part drawings were considered secret `by USM. See A.H. Emery Co. v. Marcan Prods. Corp., supra; Affiliated Hosp. Prods. v. Baldwin, 57 Ill. App. 3d 800, 808 (1978). Cf. Nucor Corp. v. Tennessee Forging Steel Serv., Inc., 476 F. 2d 386, 392 (8th Cir. 1973).

Similarly, the plant security precautions taken by USM were sufficient to exclude the general public from the production areas of USM's plants, thereby denying access to USM factory equipment, including the USM machine. The fact that USM conducted escorted tours for employees' families and USM product distributors, including certain defendants, does not militate against a finding that USM denied public access to the USM machine. Compare Plant Indus., Inc. v. Coleman, 287 F. Supp. 636, 643 (C.D. Cal. 1968) (tours by women's clubs and customers' representatives do not constitute failure to maintain secrecy) and Franke v. Wiltschek, 209 F. 2d 493 (2d Cir. 1953) (defendant's tour of plant while negotiating to sell plaintiffs' products does not destroy secrecy), with Motorola, Inc. v. Fairchild Camera & Instrument Corp., 366 F. Supp. 1173, 1186 (D. Ariz. 1973) (security inadequate where competitors toured plant, operated "secret" machine and "observed

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its `secret' process in a separate microscope placed there for this purpose") and Hamilton Mfg. Co. v. Tubbs Mfg. Co., 216 Fed. 401, 404 (W.D. Mich. 1908) (public generally not excluded from production area). See Watercolor Group v. William H. Newbauer, Inc., 468 Pa. 103, 111-112 (1976). See also Junker v. Plummer, 320 Mass. 76, 78 (1946); L.M. Rabinowitz & Co. v. Dasher, 82 N.Y.S.2d 431, 437-438 (Sup. Ct. 1948).

We do not require the possessor of a trade secret to take heroic measures to preserve its secrecy. [Note 12] Rather, "if the person entitled to a trade secret wishes to have its exclusive use in his own business, he must not fail to take all proper and reasonable steps to keep it secret. He cannot lie back and do nothing to preserve its essential secret quality." J.T. Healy & Son v. James A. Murphy & Son, 357 Mass. 728, 738 (1970). See Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 841 (1972). The question whether a plaintiff has taken "all proper and reasonable steps" depends on the circumstances of each case, considering the nature of the information sought to be protected as well as the conduct of the parties. See Hutter, Trade Secret Misappropriation: A Lawyer's Practical Approach to the Case Law, 1 W. New England L. Rev. 1, 17-18 (1978); 10 Z. Cavitch, Business Organizations Section 233.01[3](5), at 233-27 (1978). Cf. Jet Spray Cooler, Inc. v. Crampton, 361 Mass. 835, 840 (1972).

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Applying this standard, we denied trade secret protection in Healy because the plaintiff had made a conscious policy decision to do nothing to safeguard the confidentiality of its manufacturing processes. J.T. Healy & Son v. James A. Murphy & Son, supra at 736-738. In Healy, the employees were never informed that any of the manufacturing processes were considered secret; employees were not required to sign nondisclosure agreements; the plant was not partitioned into sections; and employees engaged in other work could plainly see the two "secret processes" in operation. Id. at 736-737. The plaintiff in Healy, other than excluding the general public from the manufacturing plant, took no security precautions whatever. See id. at 738-739.

By contrast, in Eastern Marble Prods. Corp. v. Roman Marble, Inc., 372 Mass. 835 (1977), [Note 13] trade secret protection was afforded a plaintiff who not only enforced a separation of the manufacturing area of the plant from the public area but also required all manufacturing employees "to sign an agreement not to disclose the methods and procedures involved in the [plaintiff's] manufacturing processes." Id. at 840. While the nondisclosure agreements did not specifically refer to the particular manufacturing processes claimed as trade secrets, we observed that "this agreement by its terms included all the proprietary and secret information involved in the manufacturing process. Such an agreement cannot be disregarded as an empty formality. At the very least it put the employees on notice that secrets were involved." Id.

We think that, considering the character of the information which USM sought to protect, the steps taken by USM to preserve the secrecy of its trade secret were reasonable. Accord, Eastern Marble Prods. Corp. v. Roman Marble, Inc., supra. Until the defendants acquired a set of USM

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machine parts drawings and a former USM employee, [Note 14] the defendants' efforts to construct a satisfactory blind rivet assembly machine had been unsuccessful. [Note 15] In short, USM's "efforts at secrecy, like the process itself, met the basic criterion of success." Space Aero Prods. Co. v. R.E. Darling Co., 238 Md. 93, 112, cert. denied, 382 U.S. 843 (1965). See Restatement of Torts Section 757, Comment b (1939).

Since we have concluded that USM took sufficient reasonable steps to preserve the secrecy of the information embodied in the USM machine, and that USM is entitled to claim this information as a trade secret, the judge's dismissal of the complaint in this action must be reversed.

We think it necessary to comment on the judge's action in dismissing the complaint without ruling on the master's finding that Cooper had utilized improper means to procure information about the USM machine. Although we need not base our conclusion on the master's finding of impropriety on the part of Joe Cooper, we will not condone such conduct by our silence.

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A plaintiff who may not claim trade secret protection either because it failed to take reasonable steps to preserve its secrecy or because the information, while confidential, is only "business information," may still be entitled to some relief against one who improperly procures such information. The law puts its imprimatur on fair dealing, good faith, and fundamental honesty. Courts condemn conduct which fails to reflect these minimum accepted moral values by penalizing such conduct whenever it occurs. Seismograph Serv. Corp. v. Offshore Raydist, Inc., 135 F.Supp. 342, 354-355 (E.D. La. 1955), modified on other grounds, 263 F.2d 5 (5th Cir. 1958) ("It is simply the difference between right and wrong, honesty and dishonesty, which is the touchstone in an issue of this kind"). See Restatement of Torts Section 759 & Comment b (1939); McDonald's Corp. v. Moore, 243 F.Supp. 255, 258 (S.D. Ala. 1965), aff'd, 363 F.2d 435 (5th Cir. 1966) (holding defendants liable for the "improper acquisition and copying of the [plaintiff's] operational manual"). See also Crocan Corp. v. Sheller-Globe Corp., 385 F. Supp. 251, 254-255 (N.D. Ill. 1974) ("improper means used to gain information is a separate basis of liability, regardless of whether the information constitutes a technical trade secret"). Accord, Dr. Miles Medical Co. v. John D. Parks & Sons, 220 U.S. 373, 402 (1911); Board of Trade of Chicago v. Christie Grain & Stock Co., 198 U.S. 236, 250 (1905). [Note 16]

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The judgment is reversed. This action is remanded to the Superior Court for further proceedings consistent with the master's report and with this opinion. [Note 17]

So ordered.