The opinion of the court was delivered by: ELFVIN
This is an action seeking equitable and non-monetary redress for a wrongful misappropriation of "trade secrets" allegedly belonging to plaintiff Zimmern and pertaining to the design and manufacture of single-screw compressors.
Zimmern had licensed his accumulated knowledge of single-screw compressors to companies in various parts of the world. Plaintiff Monovis, Inc. ("Monovis") is Zimmern's exclusive licensee in the United States and it, in turn, has entered into sublicense agreements with companies in this country. Defendant Aquino was an employee of such a sublicensee company and, through his employment, was exposed to and worked with Zimmern's claimed trade secrets and, allegedly, is subject to a continuing duty not to disclose them. Aquino and another -- Ewan Choroszylow -- formed defendant Aurora Technology Corporation ("ATC") in 1987 and have endeavored to engage in the business of designing, manufacturing and selling single-screw compressors and their parts.
The Complaint for trade secret misappropriation and for breach of the duty of non-disclosure was answered by the defendants who asserted counterclaims sounding in unfair competition and antitrust and have moved for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. Such motion was based in part on Aquino's sworn affidavit that he had designed a single-screw compressor prior to the time that his then employer, the Worthington Group, a division of McGraw-Edison Company ("Worthington" or "McGraw-Edison"), had received any of Zimmern's alleged proprietary trade secrets.
After the serving and filing of said motion Dresser-Rand Company ("Dresser-Rand"), a successor in title and in interest to Worthington, moved to intervene, arguing that any invention or innovation devised by Aquino during his employment by Worthington and Dresser-Rand is the property of Dresser-Rand by virtue of assignments he had executed. Over the defendants' opposition, Dresser-Rand was granted leave to intervene.
This Court, after the case had been reassigned, issued an Order consolidating the hearing of a motion by the plaintiffs for a preliminary injunction with the trial on the merits of the prayer for a permanent injunction.
The trial was lengthy and oft-interrupted and was followed by proposed findings of fact and proposed conclusions of law and supporting briefs
and oral argument.
Worthington was awarded a single-screw compressor contract by the Navy in November of 1983 and Aquino was named the manager for the project, known as "the Star Project."
Worthington eventually entered into a sublicense agreement with Monovis. Worthington and its employees (including Aquino) who were to be exposed to Zimmern's information agreed to hold it in confidence. Zimmern's advice and knowledge were received by Worthington in due course and as work on the Star Project proceeded. Numerous meetings were held from 1983 through 1986 at which Zimmern and/or his representatives discussed all aspects of single-screw technology with Worthington's employees; Aquino was often present at such meetings.
Worthington's Buffalo plant closed in 1987 and work on the Star Project was transferred to a facility of the new owner Dresser-Rand in Painted Post, N.Y.
Choroszylow, a Worthington employee and Aquino's associate-to-be in ATC, resigned from employment with Dresser-Rand August 24, 1987 (effective as of September 4th). Plaintiff's Exh. 302. Ten days earlier and while Aquino was still associated with Dresser-Rand, Aquino and Choroszylow however had travelled to Cooper Industries's Gardner-Denver Industrial Machinery Division in Quincy, Ill. ("Cooper") to discuss the possibility of their providing single-screw technology to Cooper. Following his resignation from Dresser-Rand, Choroszylow began setting up ATC which was formally incorporated that October. He commenced actively marketing the new company's claimed expertise in single-screw compressor technology and capability. Such marketing efforts were directed toward Cooper and numerous other companies.
Aquino was offered a job at Dresser-Rand in Painted Post when the Buffalo plant closed, but he rejected the offer. Aquino (3/27/91) 565-567. Instead, Aquino entered into a "Consultant Agreement"
with Dresser-Rand in early June of 1987 for the purpose of inculcating its engineers with his own accumulated knowledge of the Star Project. See Plaintiffs' Exhs. 28, 29.
Aquino was considered "the expert" on single-screw compressors in the company. Aquino (3/25/91) 156-157. The Consultant Agreement contains an assignment-of-inventions clause, pursuant to which Aquino agreed to assign to Dresser-Rand any inventions he conceived which related to his duties thereunder.
Aquino worked as a consultant for Dresser-Rand through October 1987. Aquino (3/29/91) 879.
Within a month of the announcement of the Worthington plant's closing, Brown had secured a position as Director of Engineering at Cooper.
He testified that his background in single-screw compressors at Worthington was surely a factor in Cooper's decision to hire him,
inasmuch as Cooper had an interest in developing such a machine. Brown (9/11/91) 92-93. Around the time Brown left Worthington he advised fellow employees Ralph Coleman and George Safford that Cooper was hiring and that, if they were interested, they should apply. Once at Cooper, Brown had the ability to hire people into his department, which fluctuated in number from fifty to eighty employees. Id. at 79. Coleman and Safford applied for positions with Cooper and offers of employment were extended to and accepted by them in short order. See Plaintiffs' Exhs. 46, 47 (letters dated April 24, 1987 from Brown extending offers on Cooper's behalf to Coleman and Safford, respectively); Plaintiffs' Exhs. 48, 49 (letters from Coleman and Safford, dated May 6 and May 1, 1987, respectively, accepting the offers).
Aquino commenced working at ATC November 2, 1987, following his work at Dresser-Rand under the Consultant Agreement. On November 4, 1987 Choroszylow wrote Coleman at Cooper, providing him with detailed cost estimates of the manufacturing tool ATC proposed to use to fabricate the rotor of a single-screw compressor. Aquino claims he had conceived of such manufacturing device and method on November 2 or 3, 1987.
A key point of contention in this case is the quantitative and qualitative significance of the work done by Aquino on the Star Project prior to the issuance to Worthington of the Monovis sublicense and its receipt of Zimmern's "Know-How book." It is the defendants' position that Aquino had designed a single-screw compressor during the Summer and early Fall of 1983
and before receiving any information or other assistance from Zimmern, other than reverse-engineering a single-screw compressor which Worthington had for such purpose purchased from Mitsui-Seiki Company ("Mitsui"), a Zimmern licensee, early in 1983. Aquino claims to have accomplished this feat "using publicly available information, knowledge gleamed [sic] from examining the Mitsui single screw compressor, and consultations with Navy personnel." Defendants' Memorandum, p. 38. The evidence concerning Aquino's efforts prior to Worthington's -- and his -- receipt of the Zimmern Know-How must be examined in detail.
By June of 1981 Aquino had prepared a "preliminary examination." Therein he recommended that "Zimmern compressors should be pursued for HP [high pressure] and LP [low pressure] Navy compressors ***." Plaintiffs' Exh. 9, at 1. Such preliminary evaluation was based upon information obtained in a meeting or meetings with individuals at the Navy's "David Taylor Research Center"
, upon a 1977 Navy report
on various types of compressors including Zimmern's single-screw compressor and upon the masters degree thesis of Navy engineer Thomas Bein which he had presented at Purdue University in 1979. Id. at 2, 4.
Aquino testified that, before writing his preliminary evaluation, he "visited" with Navy personnel and conversationally received some data which "was not 100% correct but qualitatively was correct"; he claims that such information enlightened him as to the "trends" of the Navy's work. Aquino (4/15/91) 898. Aquino also testified that he reviewed Bein's thesis.
Aquino (4/15/91) 822. He pointed out at trial the conclusion in Bein's thesis that the single-screw compression process can be modelled as an "isentropic" process.
Aquino further testified that, before preparing his preliminary evaluation, he reviewed that portion of Bein's thesis which describes the "supercharging effect" that occurs at a single-screw compressor's intake -- Aquino (4/15/91) 833 -- and that he understood that Zimmern claimed that his own knowledge of these items was a trade secret. Id. at 830, 833-834.
Following this favorable assessment of Zimmern's compressor, Worthington's management decided to pursue a Zimmern sublicense. Loree Paulson, in 1983 the Manager of Marine and Government Operations,
explained the decision:
"We knew Zimmern had worked on this machine for many years. We knew that he had probably seen success and failure. We knew that he probably had the basis to help us in our designs. We knew that he had a manufacturing technology.
"Mr. Smidansky [Paulson's boss] asked the manufacturing people to look at this and see if they could develop a machine tool. The report that came back was that it would cost well over a million dollars with no chance of success. They didn't know exactly how to machine this and if they could maintain the accuracy and the fits, and the interchange that was required. So, we felt that for the product technology and the manufacturing technology, Mr. Zimmern had years of experience and something concrete to show that would guarantee success, especially for the navy contract, where we would have to make contractual commitments to certain costs and certain timetables.
"And Mr. Zimmern's license would eliminate a lot of uncertainty and guarantee us success." Paulson (8/23/91) 18-19.
Paulson further testified that, at the time the decision to take a Zimmern sublicense was made, Worthington had no engineers with experience in designing or manufacturing single-screw compressors and reiterated that to attempt either task from scratch would be a lengthy and expensive process with no guarantee of success. Id. at 19-22. Derek Woollatt, in 1983 Worthington's Manager of Research and Development,
concurred with Paulson's view, testifying that to develop single-screw technology would take "certainly several years, maybe four to five years" and cost "a few million dollars" and that developing a method to manufacture the screw might have been an additional project. Woollatt (8/29/91) 26.
By May 14, 1982 Worthington had prepared and submitted to the Naval Sea Systems Command a "PROPOSAL FOR A SINGLE-SCREW AIR COMPRESSOR DESIGN AND DEVELOPMENT PROGRAM." Defendants' Exh. 326. The proposal is replete with references to Zimmern and his technology. It begins:
"Worthington has defined a program for the design and development of single-screw air compressors (SSAC) to meet the US Navy's low- and high-pressure air requirements. We will use the basic technology developed by Mr. B. Zimmern and the DTNSRDC
to design and develop a low pressure (9.5 atm) SSAC unit and will build and test two prototypes before delivering a unit to the US Navy." Defendants' Exh. 326, p. 1-1.
The proposal then discusses Worthington's plan to procure a Zimmern license:
"Having duly noted the potential advantages that the Zimmern single-screw compressor offer [sic] for shipboard use, Worthington has for more than a year been negotiating a non-exclusive license agreement with Mr. Zimmern. *** The agreement is essential to Worthington's participation in the future of the single-screw compressor technology, and with it we are confident that we can undertake and complete the program described herein to the US Navy's full satisfaction. The license agreement itself, and a satellite agreement devised especially for this program, will provide all the technical assistance from Mr. Zimmern and his staff that can reasonably be expected of a licensor. For the low-pressure (LP) prototype, Mr. Zimmern will manufacture the mainrotor and the (planar) gaterotors and he will supply the design drawings and manufacturing techniques for these components ***." Ibid. (Emphasis added.)
The technical section of Worthington's proposal to the Navy was prepared by Aquino. Aquino (4/16/91) 933-935. It clearly reveals Worthington's intention to rely on Zimmern for technical information pertaining to the design and manufacture of the single-screw compressor. For example, it states that "the basic technical data required to design and build a single-screw air end will be available to Worthington through its pending license agreement with Monovis, which is owned and controlled by Mr. Bernard Zimmern." Defendants' Exh. 326, p. 2-6; see also id. p. 2-5.
The parties disagree as to how much work was done on the Star Project between the submission of Worthington's proposal to the Navy in May of 1982 and the award of the Navy contract in November of 1983. Brown testified that Worthington's marketing people received early indications from the Navy that Worthington's bid was the most "responsive," leading them to believe Worthington would be awarded the contract. Brown (9/11/91) 20. Brown stated that he met with Worthington management in mid-1983 and that they decided to get a team in place and "get a jump on the project." Ibid. The plaintiffs acknowledge Worthington's substantial interest in the Navy contract and the considerable time that went into preparing its proposal. Plaintiffs' Memorandum, p. 59. They argue, however, that there was little incentive for Worthington to proceed with the project in the time between preparation of its bid and the contract award because it would not be paid for such work should the award not materialize. Ibid.; Paulson (8/28/91) 257-258; Brown (8/12/91) 227-228.
Starting in May or June of 1983, Aquino developed a computer program to assist him in the design and analysis of the single-screw compressor. Aquino (4/16/91) 1004. Zimmern testified that Aquino's program performs the types of calculations Zimmern was doing by hand in 1962, before he built his first compressors.
Zimmern (3/12/91) 234. Furthermore, Zimmern testified in detail why he considers that computer models for studying leakage paths in single-screw compressors, such as described in Bein's thesis, are less helpful than some designers believe. For example, Zimmern testified that to assess leakage accurately at any point in the compressor an engineer must know what is leaking -- gas, liquid or a mixture of the two. Bein's computer model, Zimmern said, does not take this into account. Zimmern (3/12/91) 253-254. Also, there is a difference between the clearances in a machine when it is sitting idle and the "running clearances" due to the various forces that come into being when the machine is in motion. Bein's computer model does not take such differences into account. Zimmern's approach to evaluating leakage is to "test, test, test." Zimmern (3/12/91) 256-257. Zimmern conceded that computer programs are helpful and even indispensable in confronting some design problems, but contended that they do not solve all of a designer's problems. Id. at 257; see also Paulson (8/23/91) 67 (responding in the negative when asked whether it was possible for Aquino to have designed the Star compressor from his computer program).
The purchased Mitsui unit was disassembled and some measurements taken therefrom by Aquino and recorded on six pages of hand-drawn sketches. See Defendants' Exh. 49. The measurements pertain to the bearing housing for the gaterotor shaft, the screw rotor, the gaterotor support and gaterotor, the drive-end view of the main housing and a cross section of the housing. Ibid.; Aquino (4/14/91) 993-1001. Aquino testified that during 1983 the Mitsui compressor was run for 1,000 hours but was subjected to monitored testing for only thirty-five hours. Aquino (3/28/91) 730-731; see also Defendants' Exh. 57. Aquino's measurements of the Mitsui machine did not provide Worthington with sufficient information to fabricate a single-screw compressor.
Omitted from Aquino's list were the location, size and shape of the discharge port, the existence of a gaterotor contact line, the gaterotor pin, the floating pin angle
, the contact line on the screw groove, the width of the screw groove, the angle of cooperation, the changing angles on the sides of the screw groove, critical tolerances
, the perpendicularity of the gaterotor and screw axes, the concentricity requirements of the gaterotor on its shaft and of the screw on its shaft, the existence of a plenum chamber, the types of materials and their finishes and the labyrinth seal on the screw. Paulson (8/28/91) 246-252. In sum, the measurements provide some dimensions but fall far short of a sufficiently detailed description of a single-screw compressor. Id. at 251-252. For instance, Aquino's measurements did not include critical clearances between certain moving parts which clearance, according to Paulson, are "virtually impossible" to measure because certain regions of an assembled compressor cannot be accessed with a measuring device. Id. at 243-245. Furthermore, even if such clearances were discernible, it is impossible to determine the dimensional tolerances on any part by looking at a single machine, because a tolerance is a range of acceptable dimensions. Id. at 245. See also Wehber (8/30/91) 49. Finally, it should be noted that the Mitsui unit examined at Worthington was of a smaller size than the Star compressor, so that even the dimensions of the Mitsui parts that were accurately measurable might well not be readily transferable to the Star.
Aquino also claims to have divined the existence of the contact line on the gaterotor by studying the Mitsui compressor. He testified that, when a gaterotor in the Mitsui unit broke in the Spring of 1983, he took it out of the machine and looked at it on a comparator
and observed a contact line, "even though the contacted area was a little worn out."
Aquino (4/16/91) 1014-1015. Aquino also says he saw contact lines on gaterotors when he visited the Navy laboratory. Id. at 980. Finally, Aquino stated that be had observed a contact line on a drawing of a gaterotor tooth in a patent issued to Zimmern January 13, 1976.
Aquino's explanation of gaterotor shapes in the technical proposal to the Navy implies that he did not then know of the existence of contact lines -- despite his claim at trial that he did -- or was for some unexplained reason not divulging his knowledge re such. His diagram of the "Present Gaterotor Design" depicts a gaterotor "'Rounded' From Wear Due To Vibration And Stopping (Observed On Test Compressor)." Defendants' Exh. 326, p. 2-40. It also shows with dashed lines a "Corner In New Condition" without a contact line.
Ibid. Whether or not Aquino knew of contact lines, his "Proposed Gaterotor Design" featured gaterotors with "curved side faces" -- id. pp. 2-40 & 2-41. The approach suggested in Zimmern's patent is not the trade secret approach Zimmern here claims has been misappropriated.
There was much evidence and testimony concerning technical drawings of the Star compressor prepared by Aquino prior to his receipt of Zimmern's Know-How. While it is clear that some such drafting was done in that time frame, it is equally clear that Aquino did not have a single-screw compressor designed with precision "on paper." To appreciate this fact, an understanding of the steps in the drafting process is required. Preliminary or layout or conceptual drawings are the first step; generally speaking, they are used to orient the various parts of a machine in relation to one another and to begin to plot the machine's overall architecture Such drawings lack critical information such as tolerances and clearances which are supplied later in detailed design drawings. The latter are intended to convey enough information to permit the manufacture of parts and the assembly thereof into a working machine. See, e.g., Armbruster (9/13/91) 113-114.
Zimmern's Know-How book had been received at Worthington, about mid-December of 1983 and Aquino by then may have prepared some preliminary or layout drawings, but he clearly had not advanced to detailed design drawings. See Defendants' Proposed Finding of Fact 137 (Aquino's layout drawings "essentially complete" when Zimmern Know-How received; next step was to go to "detailed design and working drawings to make components"); id. 138 (layout design work "pretty well finished" before anything received from Zimmern). Furthermore, even the layout drawings prepared by Aquino described a machine with a 196 millimeter ("mm") screw and 196 mm gaterotor and later a 178 mm screw with a 184 mm gaterotor.
It is the defendants' position that Aquino's layout drawings could have easily been converted to detailed design drawings from which a single-screw compressor could have been manufactured and that such could have been accomplished without Zimmern's help. See Defendants Proposed Finding of Fact 134. In support of this assertion, the defendants point to the deposition testimony of Coleman (Coleman did not testify personally at trial) that "clearances could be established by reverse engineering of a single-screw compressor."
Defendants' Proposed Finding of Fact 135. Coleman also testified that, once Aquino had prepared the layout drawings, any further information required to convert them to detailed design drawings would "pop out" automatically. Coleman Tr. 57-58. Evidently, what Coleman was referring to was that tolerances are sometimes selected as a matter of "common sense engineering," or by consulting tables in an engineering handbook or by reference to "industry standards." For example, draftsman Raymond Armbruster testified that tolerances can be determined based on experience with previous jobs or studying similar drawings. Armbruster (9/13/91) 112-114. He further testified that clearances of two to three thousandths of an inch are common in the compressor industry. Id. at 127. The defendants thus note triumphantly that Zimmern cannot claim a monopoly on the use of certain clearances. Such attempt to demystify the clearances and tolerances of the Star compressor in this manner fails, however, because no one at Worthington had had any prior experience working with single-screw compressors.
Knowledge of the clearances and tolerances used in other types of compressors does not readily translate to such for single-screw compressors, in part because a novel machine tool must be employed to fabricate the main rotor. In such compressors, Zimmern is the industry standard, for the simple fact that no one without his help has ever built one that worked. By way of example, Zimmern testified that the tolerance on the groove width
"*** is something that I believe only us and our licensees know about because to be able to establish those tolerances, you have to be able to machine and as the machining is not that easy and there's a lot of constraints that you will see, you try to do your best and, in fact, the knowledge of the tolerance you can achieve come [sic] from experiment from results, not from just your will. So, the practical tolerance you can put on a drawing comes from experience and not from wish, so they are not common engineering practice. You cannot find them in any book nor in any course." Zimmern (3/12/91) 345.
In sum, the evidence indicates that Aquino began studying single-screw compressors before Zimmern's help was received, but fails to support the defendants' contention that Aquino had successfully and completely designed, or had brought his technical knowledge to the point where he could design, a working single-screw compressor prior to the receipt of Zimmern's Know-How. His preliminary evaluation, with its recommendation that a Zimmern license be pursued, the descriptions of the decision to seek Zimmern's aid, and the proposal to the Navy all indicate a perception at Worthington that Zimmern's assistance was critical to success. If Aquino had had as firm a handle on the situation as he claims, there would have been no need for Worthington to pay for a Zimmern license. Aquino may have completed on his own some preliminary design layouts and taken some general measurements from the Mitsui compressor, but he had produced neither detailed design drawings nor a machine tool, and he certainly had not built a working prototype. In short, Aquino had not provided Worthington with a single-screw compressor in 1983. The Star compressor was designed and developed into a working machine over the ensuing years, with Zimmern's help.
Zimmern had received his formal education in France, studying physics, mathematics, mechanics and business. He began to work on the development of a single-screw compressor around 1962. At that time he was employed by Cegos, a French management consulting firm, so he was limited to working on his single-screw compressor on Saturdays, Sundays, during vacation time and sometimes at night. In 1971 Zimmern reached the point of having to choose between continuing at Cegos or working full time on single-screw compressors; he chose the latter. Zimmern (3/11/91) 85. Zimmern set up his own company, Omphale, in Paris. He thereafter devoted all of his ...