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Seal-O-Matic Machine Mfg. Co. v. C & M Engineering & Mfg. Inc.

Decided: August 26, 1952.

SEAL-O-MATIC MACHINE MFG. CO., INC., A CORPORATION OF NEW JERSEY, PLAINTIFF,
v.
C & M ENGINEERING & MFG., INC., A CORPORATION OF NEW JERSEY, JOHN MAYER AND JEREMIAH CASEY, DEFENDANTS



Grimshaw, J.s.c.

Grimshaw

[21 NJSuper Page 313] This action is concerned with the ownership of and right to manufacture an automatic machine for printing names and addresses on bank checks. The plaintiff corporation alleges that the design and manufacturing details of the machine constitute a trade secret which defendants have wrongfully appropriated to their own use. Defendants, on the other hand, claim as their own the property rights in the machine. An injunction against further manufacture and sale of the machine and an accounting of profits is sought by each party against the other.

The plaintiff corporation was organized in 1947 by Rupert Wilson and Philip Klein, for the purpose of manufacturing and developing special machines for use in the printing business. Of an authorized capital of 100 shares, Wilson, who was also president of the company, holds 37 shares and Klein 37 shares. The defendant Mayer, whose services were engaged by the corporation when it was organized, was the engineer and production manager. He was given, in addition to his salary, 10 shares of stock, and was also made a vicepresident and director. He later purchased 16 additional shares.

Wilson has been in the printing business for 50 years. During that period he designed and built various machines for use in that business. Defendant Mayer, who, prior to his association with the plaintiff, had had no experience in printing, is an expert tool and die maker.

The defendant Casey is engaged in the business of selling to banks ideas for improved service. His business is conducted through the medium of corporations. One of those corporations, ThriftiMatic Company, sells check imprinters. These machines are not new. Several companies were manufacturing them in 1949. None of them gave the performance which ThriftiMatic desired and, in December of 1949, Casey sent a representative to the plaintiff company with a view to having that concern undertake the job of building a new machine for ThriftiMatic which would incorporate the features desired by Casey. At the direction of Wilson, Mayer inspected the machine in the ThriftiMatic office and expressed the opinion that improvement of the machine would be easy. Plaintiff agreed to build the machine.

At a conference of the parties, Casey outlined the results desired. He also left with the plaintiff the machine then in use but which was not satisfactory. Work was started in April of 1949. It was done largely by Mayer, aided by suggestions from Wilson, Casey and others. The first model did not function properly. After further work had been done on it Casey ordered six machines. Three of the machines

were sent to California for exhibition at the bankers' convention, where they were advertised as a product of ThriftiMatic. One was placed in a bank in San Francisco and the remaining two machines were sent to Casey's office. For the six machines ThriftiMatic paid the plaintiff $6,000. Defects developed and Casey asked for changes, the cost of which was also paid by ThriftiMatic.

In February of 1950 the parties conferred with reference to a production contract. They could not agree on the terms of the contract and negotiations finally were broken off.

At about the same time, Casey had a meeting at his office with Mayer and another employee of the plaintiff, named Nelson. Nelson proposed that he and Mayer form a company, financed by Casey, for the manufacture of check imprinting machines for use by Casey's company. Casey testified that he refused to agree to such a proposition so long as Mayer and Nelson were employed by the Seal-O-Matic Company.

Mayer for some time had been dissatisfied with his working conditions. On February 24, 1950, he left the plaintiff's plant, presumably to go on a trip. He did not return. On February 27 he called Wilson to say that he was through and was resigning, and under date of February 28, 1950, Mayer sent a written resignation which was postmarked Washington, March 1, 1950.

On the evening of February 24, Mayer met with Casey at a conference in New York. They discussed the formation of a corporation to manufacture check imprinters and agreed upon the details of the corporate organization. That corporation, the defendant C & M Engineering & Mfg., Inc., was formed on February 27, 1950, and started operations immediately.

It is conceded that the imprinter built by Mayer at the plaintiff's plant, was used as a model for the one now manufactured by C & M. The latter machine contains improvements which make it function successfully, but basically ...


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