E.I.
duPONT deNEMOURS
& COMPANY, Inc., Plaintiff-Appellee, v. Rolfe
CHRISTOPHER et al., Defendants-Appellants
No. 28254
UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT
431 F.2d 1012;
1970 U.S. App. LEXIS 8091;
167 U.S.P.Q. (BNA) 1;
167 U.S.P.Q. (BNA) 1;
166 U.S.P.Q. (BNA) 421
July 20, 1970
SUBSEQUENT HISTORY:
[**1]
Rehearing Denied and Rehearing En Banc Denied August 25, 1970.
JUDGES: Wisdom, Goldberg and Ingraham, Circuit Judges.
OPINIONBY: GOLDBERG
OPINION:
[*1013] GOLDBERG, Circuit Judge:
This is a case of
industrial
espionage in which an airplane is the cloak and a camera the dagger. The
defendants-appellants, Rolfe and Gary Christopher, are photographers in
Beaumont, Texas. The Christophers were hired by an unknown
third party to take aerial
photographs of new construction at the Beaumont
plant of E. I. duPont deNemours
& Company, Inc. Sixteen
photographs of the DuPont facility were taken from the air on March 19, 1969, and these
photographs were later developed and delivered to the
third party.
DuPont employees apparently noticed the airplane on March 19 and immediately
began an investigation to determine why the craft was circling over the
plant. By that afternoon the investigation had disclosed that the craft was involved
in a photographic expedition and that the Christophers were the photographers.
DuPont contacted the Christophers that same afternoon and asked them to reveal
the name of the person or corporation requesting the
photographs. The Christophers refused to
disclose
[**2] this information, giving as their
reason the client's desire to remain anonymous.
Having reached a dead end in the investigation, DuPont subsequently filed suit
against the Christophers, alleging that the Christophers had wrongfully
obtained
photographs revealing DuPont's
trade secrets which they then sold to the
undisclosed
third party. DuPont contended that it had developed a highly
secret but unpatented process for producing
methanol, a process which gave DuPont a competitive advantage over other producers.
This process, DuPont alleged, was a
trade secret developed after much expensive and time-consuming research, and a
secret which the company had taken special
precautions to safeguard. The area photographed by the Christophers was the
plant designed to produce
methanol by this
secret process, and because the
plant was still under construction parts of the process were exposed to view from
directly above the construction area.
Photographs of that area, DuPont alleged, would enable
a skilled person to deduce the
secret process for making
[*1014]
methanol. DuPont thus contended that the Christophers had wrongfully appropriated DuPont
trade secrets by taking the
photographs
[**3] and delivering them to the
undisclosed
third party. In its suit DuPont asked for damages to cover the loss it had already
sustained as a result of the wrongful
disclosure of the
trade secret and sought temporary and permanent injunctions prohibiting any further
circulation of the
photographs already taken and prohibiting any additional photographing of the
methanol
plant.
The Christophers answered with motions to dismiss for lack of jurisdiction and
failure to state a claim upon which relief could be granted. Depositions were taken during which the
Christophers again refused to
disclose the name of the person to whom they had delivered the
photographs. DuPont then filed a motion to compel an answer to this question and all
related questions.
On June 5, 1969, the trial court held a hearing on all pending motions and an
additional
motion by the Christophers for
summary judgment. The court denied the Christophers' motions to dismiss for want of jurisdiction
and
failure to state a claim and also denied their motion for
summary judgment. The court granted DuPont's motion to compel the Christophers to divulge the
name of their client. Having made these rulings, the court then granted
[**4] the Christophers' motion for an
interlocutory appeal under
28 U.S.C.A. § 1292(b) to allow the Christophers to obtain immediate appellate review of the
court's finding that DuPont had stated a claim upon which relief could be
granted. Agreeing with the trial court's determination that DuPont had stated
a valid claim, we affirm the decision of that court.
This is a case of first impression, for the Texas courts have not faced this
precise factual issue, and sitting as a diversity court we must sensitize our
Erie antennae to divine what the Texas courts would do if such a situation were
presented to them. The
only question involved in this
interlocutory appeal is whether DuPont has asserted a claim upon which relief can be granted. The
Christophers argued both at trial and before this court that they committed no
"actionable wrong" in photographing the DuPont facility and passing these
photographs on to their client because they conducted all of their activities in public
airspace, violated no government aviation standard, did not breach any
confidential relation, and did not engage in any fraudulent or
illegal conduct. In short, the Christophers argue
[**5] that for an appropriation of
trade secrets to be wrongful there must be a trespass, other
illegal conduct, or breach of a
confidential relationship. We disagree.
It is true, as the Christophers assert, that the previous
trade secret cases have contained one or more of these elements. However, we do not think
that the Texas courts would limit the
trade secret protection exclusively to these elements. On the contrary, in
Hyde Corporation v. Huffines, 1958, 158 Tex. 566, 314 S.W.2d 763, the Texas Supreme Court specifically adopted the rule found in the Restatement
of Torts which provides:
"One who
discloses or uses another's
trade secret, without a privilege to do so, is liable to the other if
(a) he discovered the
secret by improper means, or
(b) his
disclosure or use constitutes a breach of
confidence reposed in him by the other in disclosing the
secret to him * * *."
Restatement of Torts
§ 757 (1939).
Thus, although the previous cases have dealt with a breach of a
confidential relationship, a trespass, or other
illegal conduct, the
[**6] rule is much broader than the cases heretofore encountered. Not limiting
itself to specific wrongs, Texas adopted subsection (a) of the Restatement
which recognizes a cause of action for the
discovery of a
trade secret by any
"improper" means.
The defendants, however, read
Furr's Inc. v. United Specialty Advertising Co., Tex.Civ.App.1960, 338 S.W.2d 762, writ ref'd n.r.e., as limiting the Texas rule to breach of a
confidential
[*1015] relationship. The court in
Furr's did make the statement that
"The use of someone else's idea is not automatically a violation of the law. It
must be something that meets the requirements of a 'trade secret'
and has been obtained through a breach of
confidence in order to entitle the injured party to damages and/or injunction.
338 S.W.2d at 766 (emphasis added).
We think, however, that the exclusive rule which defendants have extracted from
this statement is unwarranted. In the
first place, in
Furr's the court specifically found that there was no
trade secret involved because the entire advertising scheme claimed to be the
trade secret had been completely
divulged to the public. Secondly,
[**7] the court found that the plaintiff in the course of selling the scheme to the
defendant had voluntarily
divulged the
entire scheme. Thus the court was dealing only with a possible breach of
confidence concerning a properly discovered
secret; there was never a question of any
impropriety in the
discovery or any other improper conduct on the part of the defendant. The court merely
held that under those circumstances the defendant had not acted improperly if
no breach of
confidence occurred. We do not read
Furr's as limiting the
trade secret protection to a breach of
confidential relationship when the facts of the case do raise the issue of some other wrongful conduct
on the part of one
discovering the
trade secrets of another. If breach of
confidence were meant to encompass the entire panoply of commercial
improprieties, subsection (a) of the Restatement would be either surplusage or persiflage, an
interpretation abhorrent to the traditional precision of the Restatement. We
therefore find meaning in subsection (a) and think that the Texas Supreme Court
clearly indicated by its adoption that there is a cause of action for the
discovery of a
trade secret by any
"improper means.
[**8]
"
Hyde Corporation v. Huffines, supra.
The question remaining, therefore, is whether
aerial photography of
plant construction is an improper means of obtaining another's
trade secret. We conclude that it is and that the Texas courts would so hold. The Supreme
Court of that state has declared that
"the undoubted tendency of the law has been to recognize and enforce higher
standards of commercial
morality in the business world."
Hyde Corporation v. Huffines, supra 314 S.W.2d at 773. That court has quoted with approval articles indicating that the
proper means of gaining possession of a
competitor's
secret process is
"through inspection and analysis" of the product in order to create a duplicate.
K & G Tool & Service Co. v. G & G Fishing Tool Service, 1958, 158 Tex. 594, 314 S.W.2d 782, 783, 788. Later another Texas court explained:
"The means
by which the
discovery is made may be obvious, and the experimentation leading from known factors to
presently unknown results may be simple and lying in the public domain. But
these facts
[**9] do not destroy the value of the
discovery and will not advantage a
competitor who by unfair means obtains the knowledge
without paying the price expended by the
discoverer."
Brown v. Fowler, Tex.Civ.App.1958, 316 S.W.2d 111, 114, writ ref'd n.r.e. (emphasis added).
We think, therefore, that the Texas rule is clear. One may use his
competitor's
secret process if he
discovers the process by reverse engineering applied to the finished product; one may
use a
competitor's process if he
discovers it by his own independent research; but one may not avoid these labors by
taking the process from the
discoverer without his permission at a time when he is
taking reasonable
precautions to maintain its
secrecy. To obtain knowledge of a process without spending the time and money to
discover it independently is
improper unless the holder voluntarily
discloses it or fails to take
[*1016] reasonable
precautions to ensure its
secrecy.
In the instant case the Christophers deliberately
[**10] flew over the DuPont
plant to get pictures of a process which DuPont had attempted to keep
secret. The Christophers delivered their pictures to a
third party who was certainly aware of the means by which they had been acquired and who
may be planning to use the information contained therein to manufacture
methanol by the DuPont process. The
third party has a right to use this process only if he obtains this knowledge through his
own research efforts, but thus far all information indicates that the
third party has gained this knowledge solely by taking it from DuPont at a time when
DuPont was making reasonable efforts to preserve its
secrecy. In such a situation
DuPont has a valid cause of action to prohibit the Christophers from improperly
discovering its
trade secret and to prohibit the
undisclosed
third party from using the improperly obtained information.
We note that this view is in perfect accord with the position taken by the
authors of the Restatement. In commenting on improper means of
discovery the savants of the Restatement said:
"f.
Improper means of
discovery. The
[**11]
discovery of another's
trade secret by improper means subjects the actor to liability independently of the harm to
the interest in the
secret. Thus, if one uses physical force to take a
secret formula from another's pocket, or breaks into another's office to steal the
formula, his conduct is wrongful and subjects him to liability apart from the
rule stated in this Section. Such conduct is also an improper means of
procuring the
secret under this rule. But means may be improper under this rule even though they
do not cause any other harm than that to the interest in the
trade secret. Examples of such means are fraudulent misrepresentations to induce
disclosure, tapping of telephone wires, eavesdropping or other
espionage. A complete catalogue of improper means is not possible. In general they are
means which fall below the generally accepted standards of commercial
morality and reasonable conduct." Restatement of Torts
§ 757, comment f at 10 (1939).
In taking this position we realize that
industrial
espionage of the sort here perpetrated has become a popular sport in some segments
[**12] of our
industrial community. However, our devotion to free wheeling
industrial competition must not force us into accepting the law of the jungle as the
standard of
morality expected in our commercial relations. Our tolerance of the
espionage game must cease when the protections required to prevent another's spying cost
so much that the spirit of inventiveness is dampened. Commercial privacy must
be protected from
espionage which could not have been reasonably anticipated or prevented. We do not mean
to
imply, however, that everything not in plain view is within the protected vale,
nor that all information obtained through every extra optical extension is
forbidden. Indeed, for our
industrial competition to remain healthy there must be breathing room for observing a
competing industrialist. A
competitor can and must shop his competition for pricing and examine his products for
quality, components, and methods of manufacture. Perhaps ordinary fences and
roofs must be built to shut out incursive eyes, but we need not require the
discoverer of a
trade secret to guard against the unanticipated, the undetectable, or the unpreventable
methods of
espionage now available.
In the instant
[**13] case DuPont was in the midst of constructing a
plant. Although after construction the finished
plant would have protected much of the process from view, during the period of
construction the
trade secret was exposed to view from the air. To require
DuPont to put a roof over the unfinished
plant to guard its
secret would impose an enormous expense to prevent nothing more than a school boy's
trick. We introduce here no new or radical ethic
[*1017] since our ethos has never given moral sanction to piracy. The market place
must not deviate far from our mores. We should not require a person or
corporation to take unreasonable
precautions to prevent another from doing that which he ought not do in the
first place. 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.
"Improper" will always be a word of many nuances, determined by time, place, and
circumstances. We therefore need not proclaim a catalogue of commercial
improprieties. Clearly, however, one of its commandments does
say
"thou shall
[**14] not appropriate a
trade secret through deviousness under circumstances in which countervailing defenses are
not reasonably available."
Having concluded that
aerial photography, from whatever altitude, is an improper method of
discovering the
trade secrets exposed during construction of the DuPont
plant, we need not worry about whether the flight pattern chosen by the Christophers
violated any federal aviation regulations. Regardless of whether the flight
was legal or illegal in that sense, the
espionage was an improper means of
discovering DuPont's
trade secret.
The decision of the trial court is affirmed and the case remanded to that court
for proceedings on the merits.
ON PETITION FOR REHEARING AND PETITION FOR REHEARING EN BANC
PER CURIAM:
The Petition for Rehearing is denied and no member of this panel nor Judge in
regular active service on the Court having requested that the Court be polled
on rehearing en banc, (Rule 35
Federal Rules of Appellate Procedure; Local Fifth Circuit Rule 12) the Petition
for Rehearing En Banc is denied.
