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Boost Co. v. Faunce

Decided: March 29, 1951.

BOOST COMPANY, A CORPORATION OF THE STATE OF NEW JERSEY, PLAINTIFF,
v.
RANDLE B. FAUNCE, E. LESTER STOCKTON, SR., RANDLE N. FAUNCE, E. LESTER STOCKTON, JR., AND DRINK ATOAST, A CORPORATION OF THE STATE OF NEW JERSEY, DEFENDANTS



Haneman, J.s.c.

Haneman

Plaintiff herein seeks to obtain an injunction against the defendants in the following respects: (1) from manufacturing, advertising or selling a certain soft drink known as "Atoast"; (2) from using the name "Atoast"; (3) from using the bottle allegedly imitative of that of a soft drink manufactured and sold by the plaintiff; (4) from using the label allegedly imitative of that used by plaintiff; (5) from using the color of the syrup allegedly imitative of that used by plaintiff; (6) in general, from falsely representing their product as that of plaintiff's and for discovery of profits and recovery of damages resulting from the foregoing.

The facts as set forth in the complaint are as follows: The plaintiff was incorporated on May 15, 1915 and from that time has been manufacturing and selling a certain soft drink or syrup known as "Tak-Aboost." This product was manufactured in accordance with an allegedly secret formula originated and perfected by one Benjamin R. Faunce, who sold said formula to the plaintiff and who, until his death on April 27, 1949, was plaintiff's president. The said Benjamin R. Faunce allegedly informed his sons, the defendants Randle B. Faunce and E. Lester Stockton, Sr., who were then plaintiff's employees, of said secret formula. Shortly after the death of the said Benjamin R. Faunce the said Randle B. Faunce and E. Lester Stockton, Sr., who were stockholders in plaintiff's corporation, had a falling out and disagreement with B. Paul Faunce, also a son of Benjamin R. Faunce and Maude F. Faunce, widow of Benjamin R. Faunce. Thereafter, on or about January 3, 1950 the defendants disassociated themselves from the plaintiff and incorporated "Drink Atoast," a corporation of the State of New Jersey, and commenced the manufacture of a soft drink or syrup which was sold in competition to that manufactured by the plaintiff, and known as "Atoast."

Although the cause was tried upon the theory that the plaintiff manufactured its product under a secret formula which became known to Randle B. Faunce and E. Lester Stockton, Sr., while they were employees of the plaintiff, the complaint alleges as follows:

"20. The defendants' product is not identical with plaintiff's; and, while it is otherwise imitative of plaintiff's product, defendants' product does not have the same taste."

Plaintiff's alleged basis for relief is, as expressed in its brief, a breach of trust on the part of defendants. Plaintiff contends that the defendants having acquired knowledge of a secret formula by reason of their confidential relationship, cannot utilize that secret or any variation of it to manufacture a product for the trade, in competition with plaintiff. Plaintiff seeks as well to restrain the defendants from alleged unfair trade practices, but also relies upon them as augmenting such breach of trust.

In order for plaintiff to succeed on its primary complaint in the restraint sought against defendants from the manufacture of the soft drink in which they are now engaged, it is elemental that there must be in existence a secret now being used by plaintiff, and which, or some variation of which, is being used by the defendants. After this has been established, plaintiff must bear the burden of proving that the defendants obtained the information or knowledge required to compound the soft drink, which they are manufacturing, in such a manner as would make them guilty of a breach of trust or confidential relationship by its use. Stone v. Grasselli Chemical Co. , 65 N.J. Eq. 756 (E. & A. 1903); Vulcan Detinning Co. v. American Can Co. , 72 N.J. Eq. 387 (E. & A. 1906); Maas & Waldstein Co. v. Walker , 100 N.J. Eq. 224 (Ch. 1926).

Restatement of the Law, Torts, sec. 757, p. 6, defines a trade secret as follows:

"Some factors to be considered in determining whether given information is one's trade secret are: (1) the extent to which the

information is known outside of his business; (2) the extent to which it is known by employees and others involved in his business; (3) the extent of measures taken by him to guard the secrecy of the information; (4) the value of the information to him and to his competitors; (5) the amount of effort or money expended by him in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others."

Also, Restatement of the Law, Torts, sec. 757, p. 5, as follows:

"b. Definition of trade secret. A trade secret may consist of any formula, pattern, device or compilation of information which is used in one's business, and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. It may be a formula for a chemical compound, a process of manufacturing, treating or preserving materials, a pattern for a machine or other device, or a list of customers. It differs from other secret information in a business (see sec. 759) in that it is not simply information as to single or ephemeral events in the conduct of the business, as, for example, the amount or other terms of a secret bid for a contract or the salary of certain employees, or the security investments made or contemplated, or the date fixed for the announcement of a new policy or for bringing out a new model or the like. A trade secret is a process or device for continuous use in the operation of the business. Generally, it relates to the production of goods, as, for example, a machine or formula for the production of an article. It may, however, relate to the sale of goods or to other operations in the business, such as a code for determining discounts, rebates or other concessions in a price list or catalogue, or a list of specialized customers, or a method of bookkeeping or other office management.

"Secrecy. The subject matter of a trade secret must be secret. Matters of public knowledge or of general knowledge in an industry cannot be appropriated by one as his secret. Matters which are completely disclosed by the goods which one markets cannot be his secret. * * *"

The defendants do not dispute the proposition as advanced by plaintiff, i.e. , that one who learns a trade secret by reason of a confidential relationship with the proprietor thereof may not divulge it or use it for his own benefit.

Plaintiff admits that if it were not for the breach of confidence the defendants would have the right to manufacture not only a product similar to plaintiff's, but even plaintiff's identical product.

The initial inquiry is, therefore, whether a trade secret or secret formula in fact exists.

The secret may consist of any one or all of the following -- the ingredients, the proportions of ingredients, or method of combining or mixing the ingredients. Plaintiff relies upon the entire formula containing all three elements.

The sole witness for plaintiff who testified as to the formula now used by it was Benjamin Paul Faunce, the next to the last witness to testify. His stepmother, who was the last witness, added very little to the case. Then, for the first time, did it become apparent that Randle R. Faunce, the originator of the alleged secret formula, had reduced the same to writing. When confronted with this evidence, Benjamin Paul Faunce was forced to produce the formula, which was in the custody of the stepmother. This is the alleged formula upon which plaintiff relies. He admitted that the instructions contained in this paper were insufficient to manufacture Tak-Aboost. In addition, he admitted that the formula was changed from the time it was ...


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