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Velsicol Corp. v. Hyman

OPINION FILED JANUARY 18, 1950

VELSICOL CORPORATION, APPELLANT,

v.

JULIUS HYMAN, APPELLEE.



APPEAL from the First Division of the Appellate Court for the First District; — heard in that court on appeal from the Superior Court of Cook County; the Hon. ULYSSES S. SCHWARTZ, Judge, presiding.

MR. JUSTICE SIMPSON DELIVERED THE OPINION OF THE COURT:

Rehearing denied March 20, 1950.

The Appellate Court reversed a decree of the superior court of Cook County in favor of appellant, Velsicol Corporation, and against appellee, Julius Hyman. Leave to appeal was granted.

The suit involves four applications for patents pending in the United States Patent Office and all applications for letters patent filed in foreign countries corresponding to said four applications and all patents which may issue thereon. It seeks a decree requiring appellee to assign the applications to appellant, and for an injunction restraining appellee from using or from disclosing the processes, formulas, methods and products covered by said applications to anyone other than appellant, and from using or revealing any other processes, formulas, methods or products discovered by or disclosed to appellee while in the employ of appellant. The pleadings are sufficient to cover all the issues presented and no question on them has arisen.

The complaint was filed October 15, 1946. The cause was referred to a master who filed his report January 23, 1948, recommending a decree as prayed. Objections and exceptions to the report were overruled and a decree entered May 27, 1948, approving the report and ordering that appellee forthwith assign and transfer to appellant the four applications in question designated, respectively, as serial No. 607078, filed by appellee July 25, 1945, serial No. 643759, filed by him January 26, 1946, and serial Nos. 648204 and 648205, filed by him February 16, 1946. It also orders that he assign and transfer to appellant all applications for letters patent filed in foreign countries corresponding to the aforesaid applications for United States letters patent, and all patents which have issued or which may issue on any of said applications; that upon proper assignments being executed and delivered appellant must pay appellee moneys actually and necessarily disbursed by him for filing fees and legal fees relating directly to the filing of said applications.

The decree enjoins appellee, his assigns, attorneys and agents from using the processes, formulas and products covered by said applications and from disclosing said processes, formulas and products to anyone other than appellant and from assigning said applications to, or permitting the use of said processes, formulas or products by, anyone other than appellant, and from using or revealing any processes, formulas or products and methods and technique of manufacture discovered by, or made known to, appellee while he was in the employ of appellant or which he has learned from any other person now or formerly in the employ of appellant.

The decree was reversed by the Appellate Court because two of the judges considered it against the manifest weight of the evidence. (338 Ill. App. 52.) The other member of that court took a different view and filed a dissenting opinion. The record is voluminous and contains a large number of exhibits with much oral testimony. There are sharp conflicts on material points and yet many of the facts are not controverted.

Appellee holds a B.S. degree from the University of Chicago and a degree of Doctor of Philosophy from the University of Leipzig, having finished his work in the latter school during August, 1924. He is especially well qualified in chemistry. After finishing school he was variously employed, but from May, 1928, to October, 1930, he served as a research chemist for the Pure Oil Company.

Appellee had an inventive turn of mind and by November, 1930, had gained some ideas which he thought were patentable. Not having the necessary capital to provide a research laboratory in which his ideas could be furthered, exploited and expanded, he sought financial assistance through certain of his cousins. The first one he approached, Henry Degginger, could not assist him in a financial way. He then called upon his cousin Joseph Regenstein, and, after explaining his ideas, which were then embodied in two certain applications for patents having to do with polymers, a waste product derived from the refining of petroleum, it was decided that a research laboratory would be essential, and through Regenstein a corporation was formed January 16, 1931, which established and owned such laboratory. The capital of this corporation in the beginning was small, being $20,000, $8000 of which was furnished by Transo Envelope Company of which Joseph Regenstein was president and principal stockholder, F.P. Schneider being the next largest stockholder therein; $8,000 by Arvey Corporation of which said Regenstein was also president and chief stockholder. The other $4000 was furnished by appellee after that sum had been paid to him by the new corporation for an assignment or sale to it of his two applications for patent as aforesaid.

While the capital of the corporation was small, the money expended by it in connection with research matters, the hiring of expert chemists, the purchase of materials, etc., ran into large sums. The money was furnished by the Transo and Arvey companies through the influence of Joseph Regenstein. The first corporate name was Varnoil Corporation, which about a year later was changed to Velsicol Corporation. At the time appellee severed his connection with Velsicol in 1946, and for a number of years prior thereto, that company was indebted to Transo Envelope Company and Arvey Corporation in the aggregate sum of $528,000 for money advanced and used in connection with the research laboratory and in the production of some of the products manufactured under protection of patents issued upon inventions worked out in the laboratory. Appellee was employed by Varnoil-Velsicol, but part of his work was to improve the product of the Transo Envelope Company.

January 31, 1931, appellee signed an agreement with Transo Envelope Company referred to in the record as plaintiff's exhibit 91, reading as follows:

"THIS AGREEMENT, Made and entered into between the undersigned and TRANSO ENVELOPE COMPANY, a Delaware corporation, hereinafter called the "Company"; WITNESSETH THAT:

Whereas, the undersigned has been or is about to be employed by VARNOIL CORPORATION and as a part of his employment will be engaged in discovering, developing and inventing processes, formulas and methods relating to window envelopes manufactured by the Company and relating to the manufacture and production of such window envelopes and in connection with his employment there will from time to time be imparted and disclosed to the undersigned secret processes and formulas used in connection with such window envelopes.

Now, Therefore, in consideration of said employment and of the salary from time to time paid to the undersigned, the undersigned hereby agrees as follows:

1. That any and all inventions, improvements, discoveries, formulas or processes relating to window envelopes or relating to the manufacture thereof, invented, discovered or learned by the undersigned during the term of his said employment will at once be fully disclosed by the undersigned to the President of the Company and will be the sole and absolute property of the Company and the Company will be the sole and absolute owner of all patent and other rights in connection therewith and the undersigned at all times, both during his employment and after the termination of his employment, will keep all of the same secret from everyone except the Company and will disclose the same to no one except the President of the Company unless the undersigned is otherwise authorized by writing signed by the President of the Company.

2. The undersigned hereby agrees that at all times, both during his employment and after the termination of his employment he will keep secret all processes, inventions and formulas made known to him by the Company or Varnoil Corporation, or any of the officers or employes of the Company or Varnoil Corporation, or learned by him while so employed, and that he will not disclose or make known any of the same or anything relating to the same to any person, firm or corporation except when authorized so to do by writing signed by the President of the Company.

3. This agreement shall be binding upon the undersigned, his heirs, executors, administrators and assigns and shall inure to the benefit of the ...


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