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Heatbath Corp. v. Ifkovits

DECEMBER 1, 1969.




Appeal from the Circuit Court of DuPage County, Eighteenth Judicial Circuit; the Hon. WILLIAM C. ATTEN, Judge, presiding. Judgment modified, and as modified, affirmed.


Rehearing denied January 15, 1970.

Heatbath Corporation brought suit to obtain injunctive relief and an accounting from the defendants. Defendants appeal from the final order entered January 24th, 1969, enjoining defendants from: (a) communicating "any knowledge of plaintiff's confidential formulas and processes and the identity of its customer"; (b) selling any products ". . . substantially similar to" plaintiff's; and (c) soliciting 12 named customers. The order also granted an accounting of prior sales.

The complaint alleged that Heatbath had developed many trade secrets concerning its chemical blending business in which it sold products for use by others in the manufacture and treatment of metals; that it had developed trade secrets concerning its business which it had tried to keep in confidence, but that it had to reveal them to a trusted, high-ranking employee, William Ifkovits, for use in his work; that after learning these secrets Ifkovits left the employ of Heatbath and used such secrets to compete with Heatbath in direct violation of his fiduciary duty to maintain such secrets and confidence.

Defendants, answering the complaint, admitted that Ifkovits had begun work with Heatbath without knowledge of the chemical business and had accumulated extensive detailed knowledge of Heatbath's business, including knowledge of its formulas and processes, and that immediately after leaving Heatbath Ifkovits organized defendant Deveco Corporation as a competing business. Defendants also offered an affirmative defense which in substance alleged that Ifkovits acquired no special knowledge, unique or secret information during his employment with the plaintiff; that all of the plaintiff's formulas could be found in books that are available to the public; that the customers he called upon could be secured from the telephone directory and other directories showing which companies are interested in these kinds of products. Defendants also allege that other competitors sell similar compounds in the same market.

Ifkovits testified that he began working for Metal Finishing Research Corporation (MFR) as plant manager in 1956 after being hired by a Mr. Walen, the president of Heatbath. Prior to this time he had no experience in chemical blending, but had been a carpenter, with no prior chemical background. His duties included overseeing other employees, preparation of formulas and formula cards, buying, blending and shipping chemical products, entirely for Heatbath Corporation. Heatbath owned all the formulas he was dealing with, some of which were patented. Ifkovits prepared the products sold to the 12 companies named.

In about November of 1963 Ifkovits began to work for Heatbath as a salesman. He was supplied with a list of customers which included the 12 customers with whom he worked for MFR, and he sold the 12 customers and others the products which he had blended for them at MFR.

In November of 1965, after a dispute over the cutting of his base salary, Ifkovits left Heatbath. Prior to leaving and without Heatbath's knowledge or approval, Ifkovits wrote down formulas for all 12 customers. He also made copies of other records, such as product comparison charts and price lists.

Immediately after leaving Heatbath, Ifkovits formed the defendant Deveco Corporation and immediately called upon the 12 customers, receiving one or two orders from them in December of 1965, and orders from all 12 within 4 or 5 months after starting business for himself. He continued to sell the 12 customers Deveco products which were the same sort that Heatbath sold. Some were exactly the same in composition and use as those sold by Heatbath to the same customers.

In his testimony Ifkovits admitted that it would be difficult to say how long it would have taken to obtain the customers without the information he already possessed, but that it would take at least a year to get a new customer with no experience in sales. He admitted that he told the customers that if they gave him an order he could "ship it tomorrow," and that this was partially because he had the formulas. He testified that he did not sell any of the patented formulas of Heatbath. He admitted that he had signed a contract with MFR in 1960 agreeing to maintain secrecy in connection with methods, processes and systems employed.

Ifkovits testified repeatedly that Heatbath and he had no secret formulas and that all the formulas he used were generally known in the industry. *fn1

Ifkovits was asked the question:

Q. "And in your position as plant manager, did you not accumulate a thousand and one bits of information about Heatbath's ...

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