Laff v. John O. Butler Co.

381 N.E.2d 423, 64 Ill. App. 3d 603, 21 Ill. Dec. 314, 200 U.S.P.Q. (BNA) 373, 1978 Ill. App. LEXIS 3924
CourtAppellate Court of Illinois
DecidedOctober 6, 1978
Docket77-567
StatusPublished
Cited by22 cases

This text of 381 N.E.2d 423 (Laff v. John O. Butler Co.) is published on Counsel Stack Legal Research, covering Appellate Court of Illinois primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Laff v. John O. Butler Co., 381 N.E.2d 423, 64 Ill. App. 3d 603, 21 Ill. Dec. 314, 200 U.S.P.Q. (BNA) 373, 1978 Ill. App. LEXIS 3924 (Ill. Ct. App. 1978).

Opinions

Mr. JUSTICE MEJDA

delivered the opinion of the court:

Plaintiff, Robert M. Laff, a dentist, brought this action for breach of an alleged contract for royalties for the use of a trade secret. The trial court found that the defendant, John O. Butler Company, had agreed to pay royalties to plaintiff for the use of his formula in manufacturing a dental product. The trial court also found that the contract was still in effect and entered judgments against defendant, awarding damages to plaintiff for royalties due. Defendant’s motion for a new trial was denied and defendant appealed.

On appeal defendant contends that: (1) the decision of the trial court was against the manifest weight of the evidence; (2) the trial court committed reversible error in sustaining an objection to a question asking a witness his opinion as to the ownership of the trade secret in question; (3) the trial court improperly refused defendant’s offers of additional evidence in post-trial proceedings; (4) the trial court erred in denying defendant’s motion for new trial; and (5) the damages granted plaintiff are excessive. We affirm. The pertinent facts follow.

Plaintiff, a practicing dentist, filed a complaint alleging that he had conducted research and developed a formula, not generally known and amounting to a trade secret, for a disclosant for use in determining the location of plaque on human teeth. Defendant, a corporation which manufactures dental care products for sale to the public and dental profession and which did not then market such a product, entered into an oral agreement with plaintiff in 1961, to allow defendant to use plaintiff’s information in manufacturing a disclosant in tablet form. The agreement, as alleged in the complaint, was:

“Plaintiff would reveal his research, trade secrets, and information to the Defendant so that Defendant could manufacture a disclosing tablet that was useful in preventive dentistry, safe and profitable to sell.
The Defendant would manufacture and sell the Plaintiff’s disclosing tablet for an indefinite period of time, and
The Defendant would pay to the Plaintiff five percent (5%) of the sales of said product as a royalty for its use of the product disclosed to it by the Plaintiff, and
The Defendant would have the right to terminate royalty payments only upon its discontinuance of the product and return of all information relating thereto to the Plaintiff.”

Plaintiff alleged that production of the “disclosing tablet (known as ‘Red-Cote’)” began after plaintiff gave defendant his information regarding the tablet and his research.1 Defendant paid plaintiff royalties from 1962 to December 1972, when defendant informed plaintiff that he would no longer be paid. Plaintiff alleged further that he demanded the return of all materials relating to the product utilizing the formula and also demanded that defendant cease manufacturing the product. Defendant refused plaintiff’s demands and plaintiff filed this action.

Defendant’s answer alleged that the agreement was for plaintiff’s services and was terminated when those services were no longer needed. Defendant denied that plaintiff is the owner of the Red-Cote formula, and claimed that the formula for the disclosing tablet had been developed without plaintiff’s assistance and that the agreement between the parties was for plaintiff to assist defendant in further research and in promotion of sales of the final product. Defendant also claimed that the parties had later orally agreed to reduce the amount to be paid by defendant to three percent of the gross sales. Plaintiff, in his reply, specifically denied any agreement to reduce the payment from five percent to three percent.

At the trial, plaintiff testified that his first contacts with the defendant occurred in the 1950’s when Emmanuel Tarrson, then the defendant’s vice-president and now its president, came to plaintiff’s office to demonstrate defendant’s dental products. On one visit Tarrson noticed that plaintiff was using a product, which plaintiff said he had invented, to defog his dental hand mirror. Plaintiff and Tarrson entered into an oral agreement that defendant could manufacture the product, later called “Clear Dip,” in return for the payment of a five percent royalty to plaintiff. Plaintiff patented the Clear Dip formula in 1962 and is still receiving payments from defendant.

Plaintiff began staining teeth to disclose plaque in 1959 and first discussed the disclosant with Tarrson in 1959 or 1960. Plaintiff said that the solution he was using was messy and caused stains on clothing and that a disclosant in pill form would probably be better. Plaintiff then testified: “He [Tarrson] said, ‘Well, would you develop it with the same deal that we had with Clear Dip,’ which would be five percent of the gross and I said sure.” Plaintiff began his work on the disclosant tablet in early 1961, with defendant supplying plaintiff’s ingredients, and plaintiff experimenting with different formulas.

At the time he was working to develop the formula for the disclosant, plaintiff learned that a doctor in Texas, from whom plaintiff had taken a dentistry course, had begun to use a disclosant in wafer form. The doctor’s formula used a red dye which was different from the stain-causing dye in the solution plaintiff had originally used. Plaintiff began experimenting with the Texas doctor’s red dye adding a blue dye to make the coloring more vivid. He also experimented with flavorings to improve the taste of the formula. In early 1962, after having done all of the testing in his office, plaintiff informed Tarrson that he had found a satisfactory formula. Tarrson and plaintiff discussed packaging and naming the product. Tarrson suggested the name “Red-Cote” and arranged for packaging, while plaintiff developed the instructions for usage that would be printed on the packages. The pills were actually produced by the Savoy Drug Company with whom plaintiff was not involved, and defendant distributed and sold the tablets. Plaintiff tested the final batch before the product went on the market.

The royalty payments began in March 1962, and continued, every month, to December 1972. The check vouchers from the payments, which were admitted into evidence, described the payments as “royalties.” Occasionally royalties for both Red-Cote and Clear Dip were paid with the same check, but were designated separately. Every year defendant provided plaintiff with a Federal tax form which referred to the payments as royalties. Plaintiff stated he was not required to perform any services in order to receive his payments, nor was he paid while he was developing the formula. Plaintiff periodically tried out new products given to him by Tarrson and also worked on a Red-Cote disclosant liquid in 1972. Plaintiff received no payments for these services other than the regular monthly payments from defendant.

Plaintiff testified that Tarrson did not discuss the two percent reduction in Red-Cote payments with him and he had received no documents relating to the reduction. The payments continued until December 1972, when Tarrson told plaintiff that defendant was terminating payments of all Red-Cote royalties. Plaintiff objected to defendant’s action and filed this suit shortly thereafter.

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Bluebook (online)
381 N.E.2d 423, 64 Ill. App. 3d 603, 21 Ill. Dec. 314, 200 U.S.P.Q. (BNA) 373, 1978 Ill. App. LEXIS 3924, Counsel Stack Legal Research, https://law.counselstack.com/opinion/laff-v-john-o-butler-co-illappct-1978.