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04/28/88 Televation v. William Saindon Et Al.

April 28, 1988

TELEVATION TELECOMMUNICATION SYSTEMS, INC., PLAINTIFF-APPELLEE

v.

WILLIAM SAINDON ET AL., DEFENDANTS-APPELLANTS



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

522 N.E.2d 1359, 169 Ill. App. 3d 8, 119 Ill. Dec. 500 1988.IL.628

Appeal from the Circuit Court of Du Page County; the Hon. John Teschner, Judge, presiding.

APPELLATE Judges:

JUSTICE UNVERZAGT delivered the opinion of the court. DUNN and WOODWARD, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE UNVERZAGT

Plaintiff, Televation Telecommunication Systems, Inc. (Televation), filed suit against William Saindon, Timothy Rex, and Digital Systems Research, Inc., for the misappropriation and use of its trade secrets. The complaint, filed on April 2, 1987, was in three counts and sought injunctive relief, damages, and an accounting. The trial court expedited trial on the claim for injunctive relief and, on September 9, 1987, entered an injunction prohibiting the defendants from manufacturing or selling their product or otherwise using or disclosing plaintiff's trade secrets for a period of three years. Defendants have taken an interlocutory appeal from that order.

John Regan and Robert Groetzenbach established Televation in 1978 to develop an electronic product which could add features to an existing in-house phone system without having to replace the PBX. Televation developed its first product, the PEP 100, over a period of about two years. The PEP 100 is "an automatic wake-up system," designed primarily for hotels and motels. The system's primary function, although it has others, is to automatically place recorded wake-up calls over the hotel's PBX system, at designated times, to up to three rooms simultaneously. Televation's second product, the Reveille, is a less expensive automatic wake-up system that can place simultaneous calls on two lines. The Reveille took about one year to develop and was first marketed in late 1982. Televation's Echodyne system is a recorded announcement system that can answer up to 192 incoming calls simultaneously with a recorded message. It can also be programmed to deliver different announcements on different groups of lines. The Echodyne system is much larger than the PEP 100 and Reveille systems, but it contains circuitry that was originally designed for those products. The first Echodyne system was sold in late 1983.

Each of Televation's products contains two distinct types of electronic circuitry -- analog and digital. Both types of circuitry are necessary to allow an electronic product to perform the functions which Televation's products perform. Televation's analog circuitry, which is the subject of this dispute, was designed exclusively by John Regan.

William Saindon worked as Televation's production and quality control manager from March 1983 until April 1984 and had complete access, during that time, to the schematics, or blueprints, of Televation's electronic circuitry. In October 1984, Saindon collaborated with Timothy Rex and Janusz Dobrowolski to establish Digital Systems Research, Inc. (Digital). From October 1984 until April 1987, when this suit was filed, Digital developed its own automatic wake-up system, the Prelude, to compete with Televation's systems. Prelude's analog circuitry, which Saindon claims to have designed, is virtually identical to analog circuitry designed by Regan and contained in some or all of Televation's products. The only differences between the two are attributable to changes made to Televation's circuitry after Saindon's employment terminated. Prelude's digital circuitry, which was designed by Dobrowolski, is substantially different from Televation's digital circuitry and even allows the Prelude to perform some functions which Televation's machines do not perform.

Regan and Groetzenbach first became aware of the Prelude machine early in 1987, when they were contacted by one of their suppliers, Magnetic Components, Inc. (Magnetic), which informed them that Digital had attempted to order a transformer specially designed by Regan and manufactured by Magnetic only for Televation. Televation then ordered a Prelude machine through a third party, examined its circuitry, and filed this action. The Prelude unit ordered by Televation was the first, and only, unit Digital sold.

After a complete evidentiary hearing on plaintiff's claim for injunctive relief, the trial court concluded that Televation's schematics of its analog circuitry and the manner in which its analog circuitry interfaces with its digital circuitry are trade secrets. It concluded that defendants misappropriated those secrets from plaintiff and incorporated them into their own product. It entered a "preliminary and permanent injunction" prohibiting defendants, for a period of three years, from: (1) manufacturing, marketing, constructing, or selling the Prelude or any similar product which incorporates plaintiff's trade secrets; (2) using any of the analog circuitry depicted in the exhibits (some of which the court itemized by name); and (3) selling, transferring, or disclosing plaintiff's trade secrets. The order also affirmatively required defendants to return any of Televation's schematics or copies of them in its possession, as well as any component parts taken from Televation.

Defendants argue that the trial court erred in finding Televation's schematics to be trade secrets. They claim that the information which Saindon remembered and incorporated into Prelude was simply knowledge he gained in the course of his employment with Televation, which he was entitled to use. They contend that Televation's schematics do not qualify as trade secrets, because their confidentiality was not adequately protected, and because the circuitry is well known in the trade.

Illinois courts will afford injunctive relief to a plaintiff-employer against a former employee only if the plaintiff can demonstrate that it has a protectable business interest. (Hayden's Sport Center, Inc. v. Johnson (1982), 109 Ill. App. 3d 1140, 1146; Lincoln Towers Insurance Agency v. Farrell (1981), 99 Ill. App. 3d 353, 355.) An employer has a recognized business interest in protecting trade secrets disclosed in confidence to the employee during the course of his employment (see, e.g., Schulenburg v. Signatrol, Inc. (1965), 33 Ill. 2d 379, 386-87; Victor Chemical Works v. Iliff (1921), 299 Ill. 532, 546-48), even where, as here, there is no enforceable restrictive covenant between the parties. (Smith Oil Corp. v. Viking Chemical Co. (1984), 127 Ill. App. 3d 423, 427.) The plaintiff must establish that the information was a trade secret affording it a competitive advantage, that it was disclosed to the employee in confidence, and that it would be unjust under the circumstances to permit the employee to disclose or use the information. (Victor Chemical Works v. Iliff, 299 Ill. at 548.) The courts recognize that conflicting social and economic concerns must be accommodated in delineating the protection afforded to alleged trade secrets. On one hand, the court should protect the employer's investment of time, money and manpower in developing secret advantages from misappropriation by former employees who occupied a position of trust. On the other hand, the court must recognize that in a mobile society based on competition, the individual has a fundamental right to pursue the occupation for which he is best suited and to make use of the knowledge and skills he has acquired through experience. ILG Industries, Inc. v. Scott (1971), 49 Ill. 2d 88, 93-94; see also Brunswick Corp. v. Outboard Marine Corp. (1980), 79 Ill. 2d 475, 478 (identifying as an additional concern the public interest in the free use of ideas and goods not protected by a valid patent).

A trade secret is generally defined as "a plan or process, tool, mechanism, compound, or informational data utilized by a person in his business operations and known only to him and such limited other persons to whom it may be necessary to confide it." (ILG Industries, Inc. v. Scott, 49 Ill. 2d at 92; Hayden's Sport Center, Inc. v. Johnson, 109 Ill. App. 3d at 1146.) The definition is necessarily inexact, because a wide variety of things, depending upon the particular circumstances involved, may qualify as trade secrets. (ILG Industries, Inc. v. Scott, 49 Ill. 2d at 92.) The supreme court has identified six factors to be considered in determining whether information or materials constitute trade secrets: (1) the extent to which the information is known outside the employer's business; (2) the extent to which it is known to employees and others involved in the employer's business; (3) the extent of measures taken by the employer to guard the secrecy of the information; (4) the value of the information to the employer and its competitors; (5) the money or effort ...


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