Hickory Specialties, Inc. v. B & L Laboratories, Inc.

592 S.W.2d 583, 207 U.S.P.Q. (BNA) 944, 1979 Tenn. App. LEXIS 369
CourtCourt of Appeals of Tennessee
DecidedJuly 6, 1979
StatusPublished
Cited by40 cases

This text of 592 S.W.2d 583 (Hickory Specialties, Inc. v. B & L Laboratories, Inc.) is published on Counsel Stack Legal Research, covering Court of Appeals of Tennessee primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Hickory Specialties, Inc. v. B & L Laboratories, Inc., 592 S.W.2d 583, 207 U.S.P.Q. (BNA) 944, 1979 Tenn. App. LEXIS 369 (Tenn. Ct. App. 1979).

Opinions

OPINION

FRANKS, Judge.

This is a suit for an injunction to protect alleged trade secrets from improper use by a former employee.

Following an evidentiary hearing, the Chancellor, without a jury, refused to issue an injunction and, in the course of his ruling, stated: “I am not satisfied, and my view of the matter is that the Plaintiffs have not made out their case by a greater weight of the proof, and that the Plaintiffs are not entitled to an injunction, temporary or otherwise, against the Defendants to effectively prevent the Defendants from undertaking to enter into the liquid smoke business.” Plaintiffs have appealed.

Hickory Specialties, Inc., is a manufacturer of a product known as “liquid smoke” which is applied to meat products to impart smoke flavoring and color. Due to environmental and health problems associated with the traditional smoking process, the demand for liquid smoke has increased dramatically in recent years.

The president of Hickory Specialties, Don Crace, developed his particular method of manufacturing hickory smoke by experimentation over a period of years. The co-plaintiff, Griffith Laboratories, Inc., developed a somewhat different process which has been patented. Hickory Specialties manufactures liquid smoke by its own process and also under contract with Griffith by Griffith’s process. According to the testimony, each process has unique features and there are only two other commercial manufacturers of liquid smoke in the United States, each apparently using a somewhat distinct process to manufacture the finished product.

Hickory produces several varieties of liquid smoke, varying the emphasis upon color and flavor in accordance with the desires of particular customers. These varieties are produced by altering the balance between temperature, airflow and moisture in the sawdust used in the manufacturing process. Crace testified that the parameters or range of values for each of these variables used to produce a certain grade of liquid smoke are trade secrets. Hickory has devised a process for the disposal of the tar by-product from the manufacturing process which is unique in industry and of considerable economic value, which it classifies as a trade secret.

The Griffith method uses a device called a “calciner”. The temperature, air and moisture parameters of that process and the method of maintaining airflow and temperature control are also alleged to be trade secrets.

Defendant, Ledford, is a principal in B & L Laboratories, a newly-formed corporation which proposes to manufacture liquid smoke commercially. Prior to entering into this venture, Ledford was employed by Hickory Specialties, first as a supervisor of its bottling operation and later as plant manager. In the latter capacity, he acquired a thorough working knowledge of all the processes regarded by plaintiffs as trade secrets. Before his tenure with Hickory Specialties, which was for a period of approximately 2 years, Ledford had been employed as a mechanic, repairing and adjusting gasoline pumps for an oil company located in North Carolina.

The Chancellor’s decree is accompanied by a presumption of correctness unless [585]*585the evidence preponderates against his findings upon which the decree is based. T.C.A., § 27-303. Our review is de novo, however, and if we conclude the evidence preponderates against the findings of the Chancellor it is our duty to enter such decree in this court as the law and evidence warrant. Loftis v. Stuyvesant Ins. Co., 54 Tenn.App. 371, 390 S.W.2d 722 (1964).

We note at the outset that a substantial amount of the material evidence is undisputed. Plaintiffs developed the respective processes for manufacturing liquid smoke by experimentation and at substantial cost. Defendant, Ledford, gained his knowledge concerning the manufacture of liquid smoke in his employment relationship with Hickory Specialties. Ledford testified as follows:

Q. You didn’t have any experience in making it [liquid smoke], did you?
A. No sir, I had never made liquid smoke before, but I knew the principle of how to make it.
Q. You’re testifying that when you came to Hickory Specialties, you already knew how to make liquid smoke?
A. No, I didn’t say that. I said I knew the principle of how you make liquid smoke . . . It’s just a distillation principle, and it is simple .
Q. Well, you said you had knowledge of the liquid smoke process before you came to Hickory Specialties.
A. I didn’t say I had knowledge of it. I said I had knowledge of how the process was used.

It is further undisputed that Ledford made numerous photographs, sketches and notes of the equipment used in the manufacturing processes and that he intends to manufacture liquid smoke following plaintiffs’ processes with slight changes and modifications.

The sharply controverted factual issue was the degree and nature of secrecy that plaintiffs imposed upon the processes they utilized in manufacturing liquid smoke. Thus, the primary issue presented by this appeal is whether the evidence preponderates against the holding of the Chancellor, i. e., whether the evidence meets the standards for injunctive relief in trade secret cases.

The parties are in basic agreement as to the law in this jurisdiction relating to trade secrets with one exception. Defendants insist that among the standards for injunctive relief is the element of product confusion.

The leading Tennessee cases on injunctive relief against appropriation of trade secrets by former employees are Hall v. Britton, 41 Tenn.App. 72, 292 S.W.2d 524 (1953) and Kelly Mig. Co. v. Brower, 1 Tenn.App. 428 (M.S.1925). Each of these cases involved a party who produced a product very similar to that of his former employer. In Hall, the products were functionally identical and the names were very similar. In Kelly, the former employee portrayed his product in a manner to deliberately create the misim-pression that it was manufactured by the former employer. Hall discusses the issue thusly:

When one is employed by another, and through that employment he obtains information of a confidential nature which enables him to manufacture a product, in competition with his employer, and of such nature as to be calculated to deceive the purchasing public, as to whose product they might be purchasing, he is under such an obligation, by virtue of his employment, that he should be restrained from performing such business to the detriment of his former employer. Kelly Manufacturing Co. v. Brower, 1 Tenn. App. 428; E. I. DuPont de Nemours Powder Co. v. Masland, 244 U.S. 100

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Bluebook (online)
592 S.W.2d 583, 207 U.S.P.Q. (BNA) 944, 1979 Tenn. App. LEXIS 369, Counsel Stack Legal Research, https://law.counselstack.com/opinion/hickory-specialties-inc-v-b-l-laboratories-inc-tennctapp-1979.