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National Tile Board Corp. v. Panelboard Manufacturing Co.

Decided: September 11, 1953.

NATIONAL TILE BOARD CORPORATION, A CORPORATION OF NEW YORK, AND ROXDALE BUILDING PRODUCTS CORPORATION, A CORPORATION OF NEW YORK, PLAINTIFFS,
v.
PANELBOARD MANUFACTURING COMPANY, INC., A CORPORATION OF NEW JERSEY, IRVING RICHARD BENNETT, JEROME J. LESSER, JACK L. PARKER, EMILIO SPALLONE, SALVATORE PORTOLANO, JOHN SHALLO, AUGUSTUS PERRI, NORMAN FEDER, JOINTLY AND SEVERALLY, DEFENDANTS



Grimshaw, J.s.c.

Grimshaw

The complaint in this cause is in three counts. In the first count it is alleged that the plaintiff is possessed of trade secrets, of which the defendants have knowledge, and that such knowledge was obtained by the defendants under circumstances which render it inequitable that they be permitted to use the trade secrets. Plaintiff seeks an injunction against further use by the defendants of the alleged trade secrets and an accounting of the profits realized as a result of such use. In the second count it is alleged that certain of the defendants conspired to obtain the trade secrets by fraud and use them for their own advantage. In the third count plaintiff charges that the individual defendants conspired to and did engage in sabotage of the products of the plaintiff with resultant damage of $100,000.

The third count was dismissed at the close of plaintiff's case because of a complete failure of proof, either of sabotage or damage. Plaintiff also failed to prove a conspiracy by the defendants as alleged in the second count. Therefore, if it is to succeed, plaintiff must do so on the first count.

The plaintiffs National Tile Board Corporation and Roxdale Building Corporation were organized under the laws of the State of New York. They will hereafter be referred to as National and Roxdale. The defendant Panelboard Manufacturing Company is a corporation of the State of New Jersey, and will hereafter be referred to as Panelboard.

National and Panelboard are both engaged in the manufacture of tileboard. Until 1949 National manufactured and distributed its product. Since 1949 the sale of National's product has been in the hands of Roxdale, which is a wholly-owned subsidiary of National. Panelboard manufactures and distributes its own product.

The individual defendants were employed at one time by one or other of the plaintiffs. They are now employed by Panelboard. Panelboard was formed in May 1951 by Parker, Bennett and Lesser and commenced operations in November of 1951.

Tileboard is a masonite board, grooved in squares to resemble tile, and is painted and baked so that it has a hard finish. It is sold in 4 or 8 foot sheets. There are 20 manufacturers of tileboard throughout the United States. The products of the various manufacturers are so similar as to be practically indistinguishable one from the other.

The masonite boards are purchased from the owner of the patent. They are then trimmed in order to make the edges even. The machine with which this cutting or trimming is accomplished is called a "trimmer." After the boards are trimmed they are placed in a machine called a "knifer," which applies paint evenly over the board. The board is then placed in a scoring machine which grooves it. Then it goes to the "striper," which applies different colored paint to the grooves. The trimmer, knifer, scorer and striper are the machines of which plaintiff claims the exclusive use as trade secrets.

A trade secret is a 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. 4 Restatement, Torts,

sec. 757. A trade secret must have a substantial element of secrecy. While it need not be patentable, it must contain elements which are unique and not generally known or used in the trade. And its possession must give its possessor an economic advantage over competitors.

Plaintiff lists as its trade secrets, in addition to its machinery, its list of customers, its advertising and its business methods. All of these alleged trade secrets ...


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