Mallinckrodt Chemical Works v. Nemnich

BLAND, P. J. Plaintiff filed in the circuit court the following amended petition: “The Mallinekrodt Chemical Works as plaintiff, by the undersigned, its attorneys, state that it is a corporation under the laws of Missouri. Plaintiff for more than ten years last past has been, and it is now, engaged in the manufacture and sale of drugs and chemicals, and it has its principal office and manufactory in the city of St. Louis. The business of plaintiff is extensive. At, and for some years prior to, the time when plaintiff made the contract with defendant (hereinafter mentioned), the commercial operations of the plaintiff included numerous transactions for the sale of its manufactured drugs and chemicals, not only with persons in the city of St. Louis, but also in very many other parts of the United States of America, in a large number of the different states and territories thereofj and in the Dominion of Canada, in the Republic of Mexico, and in several of the countries in Europe, and of Asia and of Australia. Plaintiff’s business of selling drugs and chemicals is still as extensive as when said contract was made, and is enlarging in extent each year. Plaintiff’s business of manufacturing drugs and chemicals is moreover, to a great degree scientific in its nature. It requires a large measure of skill in the adoption and use of various processes for the manufacture of the drugs and chemicals sold by plaintiff as aforesaid, and many of the processes followed by its employees in the — 8 — plaintiff’s said manufactory are the products of discoveries, inventions and improvements by the officers and employees of plaintiff, belong to the plaintiff, and constitute valuable property of plaintiff. “The defendant, Rudolph Nemnich, and said corporation, June 15,. 1893, entered into a contract (which was signed by both parties), in the following terms: ■ “These articles of agreement entered into this fifteenth day of June, 1893, by and between the Mallinekrodt Chemical Works, a corporation, of the one part, and Rudolph Nemnich of the other part, witnesseth, that they the said parties for the considerations and the mutual covenants hereinafter mentioned, agree and covenant to and with each other in manner following, to wit: “First. That the said corporation will, for and during the space of five years, to commence on the first day of January, 1893, employ said Rudolph Nemnich as chemist in its factories and to do such other services therein as he will be directed to do by the officers of said corporation, and that said Rudolph Nemnich shall and will during said term diligently and faithfully serve in the employ of said corporation, as such chemist, or as directed to by its officers, and that he will devote all his time, skill and industry to the business of said corporation. “Second. That said Rudolph Nemnich shall at all times during said term fulfill and keep the lawful and reasonable commands and directions of said corporation and its officers, and that said Rudolph Nemnich shall, neither during said term not at any time afterwards, disclose the same or the secrets of his employment, or any of the processes, plans, operations, business dealings, or transactions, of said corporation to any person or persons whatsoever. . “Third. That all the discoveries, inventions and improvements which said Rudolph Nemnich during said term — 9 — may use, apply or make in any chemicals, pharmaceutical preparations, medicines, compounds, machinery, apparatus, or articles of any kind whatsoever, or in the several processes of manufacturing or compounding the same, whether they are patentable or unpatentable, shall become, be, and remain the property of said corporation; and said Rudolph Nemnich hereby and herewith sells, assigns, and transfers to said corporation the full and exclusive right to use and apply the same, said corporation to have the full and exclusive right to obtain and take out letters patent thereon. “Fourth. That as and for a consideration for such services to be done, observed and performed by said Rudolph Nemnich, as aforesaid, and as his annual salary therefor, said corporation will pay him the sum of one thousand dollars, together with an increase in his salary of two hundred dollars for each successive year during said term, over the preceding year. “Fifth. That if said Rudolph Nemnich shall be absent from his said employment by reason of sickness, disability, or other causes for periods exceeding three weeks, at a time, the said corporation shall be at liberty to make deductions from his annual salary in proportion to his time of absence. “Sixth. That he, the said Rudolph Nemnich, agrees and covenants and herewith binds himself that, for and within the period of six years after he has left the service of said corporation, and within the territory of the United States, he, the said Rudolph Nemnich, will not, in any manner or form, directly or indirectly, either by himself or with others, engage in the selling, dealing or manufacture of any of the articles now or then being manufactured, sold or dealt in by said Mallinekrodt Chemical Works. “Seventh. That said Rudolph Nemnich shall at no time whether during said term of employment or afterwards, directly or indirectly, with and by himself, or with and to any other person, firm or corporation, utilize, impart, or — 10 — apply the knowledge or information acquired by him during his said employment by said Mallinckrodt Chemical "Works regarding any secrets, discoveries, inventions or improvements in making, using, applying, or compounding any chemicals, pharmaceutical preparations, medicines, compounds, machinery, or apparatus, or regarding any discoveries, inventions, improvements, or secrets in the processes, art and science of manufacturing and compounding said articles, it being well understood that all such discoveries, inventions, improvements, or secrets made or acquired by said Rudolph Nemnich during his said employment are and shall always remain the exclusive property of said Mallinckrodt Chemical Works. “In witness whereof, said Mallinckrodt Chemical "W^orks has caused these presents to be signed by its president and its common corporate seal to be hereto affixed, and said Rudolph Nemnich has signed and sealed these presents at St. Louis, Missouri, this fifteenth day of June, 1893, in duplicate. “The said defendant, at the time of making said contract, was sojourning in the city of St. Louis, Missouri; but, nevertheless, was then a citizen of the Empire of Germany. Prior to the date of said contract he had come to the state of Missouri from Wiesbaden, Germany. He had practiced his profession as a chemist in Germany, his native country; and both then and at the present time defendant had an ample and extensive field in which his profession as chemist might be practiced in that country as well as in many other parts of the civilized world. Factories for the manufacture and sale of chemicals and drugs exist now (and have for more than ten years last past) in many parts of Great Britain, France, Germany, Austria, Italy, Belgium, and in other countries; and in said countries defendant might now find, and at any time in the past ten years might have found, professional employment as chemist, if he desired, at reason — 11 — able and remunerative terms of compensation for such services as chemist. The drugs and chemicals manufactured by plaintiff have for many years past been extensively used in various parts of the United States (and in the other countries in which plaintiff does business as hereinbefore mentioned) for compounding medicinal prescriptions, for scientific experiments, and in many other ways wherein drugs and chemicals of high order of purity are required. Plaintiff believes that the said products of its manufactory enjoy a good reputation for purity and efficiency in the drug trade throughout the United States and in said other countries into which its business extends; and plaintiff charges the fact so to be. “Defendant went into the service of plaintiff in its manufactory according to said contract, and remained in the employ of plaintiff under said contract until January, 1898, when his term of said employment by said plaintiff expired; and he took and enjoyed all the fruits of its provisions according to its terms until said contract had been fully complied with on the part of plaintiff. After the expiration of said term, defendant left the service of plaintiff, and at a more recent date heretofore in the year, 1898, in the city of St. Louis, defendant entered upon and is now engaged in the manufacture and sale of chemicals, drugs and other articles of the same land and character as those manufactured, sold and dealt in by the plaintiff at the present time (as well as dealt in at the time when said contract was entered into), that said acts on defendant’s part are a breach of the obligation imposed by his agreement aforesaid as part of the said contract. “During defendant’s stay in plaintiff’s service he had full and free access to Jhe working departments of plaintiff’s manufactory and acquired knowledge of many of the processes of manufacture in use by plaintiff and its employees for the manufacture of drugs and chemicals. De — 12 — fendant during said service also obtained information of the names of many of plaintiff’s regular customers, and of persons who purchased drugs and chemicals of plaintiff in various sections and states of the United States. Defendant in the manufacture and sale of chemicals and drugs (as aforesaid) is utilizing and applying for his own use the said knowledge and information so acquired and obtained by him while in plaintiff’s employ. “It would be against equity for defendant to take advantage of the information gained by him while in plaintiff’s employ under the aforesaid agreement, or to carry forward the business of manufacturing drugs and chemicals on which he has embarked, in competition with plaintiff, his said former employer. Defendant’s said acts are contrary to equity and good conscience. “Plaintiff asserts that no remedy that could lawfully be obtained by the recovery of damages of defendant would be adequate or efficient to redress the said breach of said agreement, which said breach continues from day to day. “Plaintiff therefore prays that defendant be perpetually restrained and enjoined from further manufacturing in the state of Missouri or Illinois, any drugs and chemicals, now or hereafter manufactured by plaintiff, until January 1, in the year 1901; and plaintiff prays for such further relief as may be just.” To this petition defendant filed the following demurrer: “Now comes the defendant herein and demurs to the amended petition of the plaintiff herein filed, and for grounds of said demurrer assigns: “Eirst. That said amended petition likewise fails to set forth facts sufficient to constitute a cause of action or ground of relief against the defendant. “Second. Because the contract fully set forth in said amended petition, so far as it attempts to restrain this de — 13 — fendant in the exercise of his profession in the United States, is contrary to public policy, and void. “Third. Because there is no equity in said bill. “Wherefore — ” etc. The court sustained the demurrer, and plaintiff declining to plead further judgment was entered for defendant, from which plaintiff appealed after filing an unavailing motion in arrest of judgment. The question raised by appellant’s assignment of error, is whether or not that portion of the contract contained in the sixth clause thereof is valid as being a reasonable restraint of trade, or invalid because an unreasonable restraint of trade, as creating a monopoly and void. A contract (for a valid consideration) of sale of a secret process for the manufacture or compositions of drugs, of other matter or of machinery, used in trade, which restricts the vendor from using the same, or imparting his knowledge to others, or selling the same article, is a reasonable restriction when necessary for the protection of the vendee, and the article is not one of prime necessity to the general public. Hagg v. Darley, 47 L. J. Ch. N. S. 567; Alcock v. Gibertson, 5 Duer. 76; Jarvis v. Peck, 10 Paige 118; Underwood v. Smith, 46 N. Y. 654; Hard v. Seeley, 22 L. R. A. 47; Toole v. Gross, 13 L. R. A. 625; Brown v. Lamar, 69 Ga. 656; Simmons Med. Co. v. Simmons, 81 Eed. Rep. 163. The defendant did not sell the plaintiff any secret process for compounding any drug or medicine, nor is it specifically alleged that the defendant by reason of his employment by the plaintiff obtained knowledge of, any of the secret processes used and possessed by plaintiff in the manufacture of drugs and medicines. On the contrary from the averments in the petition to the effect, that manufactories where drugs similar to those produced by the plaintiff exist in Continental Europe, whence defendant came, and where he practiced his profession as a chemist, the inference to be drawn is that plaintiff — 14 — acquired secrets for compounding drugs from him, rather than that defendant acquired such secrets from plaintiff. Nor is it specifically alleged that the articles being manufactured and sold by the defendant are compounded or manufactured by any of the secret processes possessed and used by the plaintiffs. Erom aught that appears by the allegations of the petition, the articles of the “same kind and character” as those manufactured by the plaintiff, which it is alleged defendant is manufacturing and selling, axe ordinary articles and the processes of manufacturing them matter of common knowledge. The petition reads to us more like an effort on the part of the pleader to throw a drag net around defendant’s manufactory, to drag it into court and then see what could be discovered, rather than to charge a specific violation of his contract relating to plaintiff’s secret processes. Since bills of discovery are not permissible in the administration of equity in this jurisdiction, the effort of plaintiff to travel in that road was effectually and correctly barred by the general demurrer. If the petition can be sustained it must be done on the ground that the contract sued on does not unreasonably restrain trade, and for that reason is valid and enforcible. The general doctrine is that agreements in restriction of trade will be upheld when the restriction does not go beyond some particular locality, is founded on a sufficient consideration, and is limited as to time, place and person. Peltz v. Eichele, 62 Mo. 171; Presbury v. Fischer, 18 Mo. 50; Capin v. Brown, 23 Am. S. R. 297; Hubbard v. Miller, 27 Mich. 15; Thomas v. Miles, 3 Ohio State 274; Boordmen v. Wheeler, 27 Hun. 616; Curtis v. Gokey, 68 N. Y. 300; Pom. Eq., p. 1335, sec. 434, and note; Skrainka v. Scharringhausen, 8 Mo. App. 522; Diamond Match Case, 106 N. Y. 473. The converse of this proposition, i. e., that a contract in restrain of trade which is not restricted as to time and place is against public policy as creating a monopoly and void, is well-settled law. Long v. — 15 — Towl, 42 Mo. 545; Taylor v. Saurman, 110 Pa. 3; Alger v. Thacher, 10 Pick. 51; Caswell v. Gibbs, 33 Mich. 331; Wiley v. Baumgartner, 97 Ind. 66; Wright v. Rider, 36 Cal. 342; Beard v. Dennis, 6 Ind. 200; Bishop v. Palmer, 146 Mass. 469; Hall’s Appeal, 100 Am. Dec. 584; Hodge v. Sloan, 1 Am. St. Rep. 816; Berlin Machine Works v. Perry, 71 Wis. 495; Taylor v. Blanchard, 13 Allen 370. Where there are special circumstances rendering the restriction reasonable and useful and the promisor is not restrained more than is needful for the protection of the promisee, a contract in restraint of trade supported by a valid consideration will be upheld. Dunlap v. Gregory, 61 Am. Dec. 746; California Steam Nav. v. Wright, 65 Am. Dec. 511, and the reasonableness of the limitation as to space will be judged by the extent of the territory which the trade takes in and of the nature of the article to which the restraint applies, Texas Oil Company v. Adorie, 83 Tex. 650; Badische v. Schott (1892) N. W. Rep. 133, ch. 447. Plaintiff alleges that its trade is extensive; that it is not confined to the city of St. Louis (where located), but extends in very many parts of the Hnited States and its territories, to Canada, Mexico, and South America. It does not allege that its trade is co-extensive with the territory of the Hnited States, or that it is world-wide, nor that its trade is in all of the states of the Hnion, or in all of its territories or in all parts of any state or territory of the Hnited States, but that it is in a large number of the different states, without naming any particular state of this number. It can not, therefore, be ascertained from the averments of the petition that it would be reasonable and necessary for the protection of the plaintiff or useful to it, to enforce the restriction in all the territory covered by the contract — the whole of the Hnited States; nor can it be ascertained from the petition that it would be reasonable and necessary to protect the plaintiff to apply the restriction to- the states of Missouri and Illinois, as prayed — 16 — for by plaintiff, for it is not specifically averred that plaintiff bas any trade in tbe state of Illinois or in Missouri, beyond the limits of the city of St. Louis. This class of contracts is always regarded with suspicion .by the courts, as their effect usually is to create a monopoly, and before any one of them will be upheld, it should clearly appear that no monopoly is created by it; that its enforcement will not prejudice the public; that it is reasonable as to time, space and person, not oppressive or injurious,, and that the contract is founded on a good consideration, and that its enforcement will be useful and beneficial to the promisee. The restriction as to time provided for in the contract in the case at bar is not unreasonable, but in the light of the allegations of the petition as to the extent of plaintiff’s trade, the space covered by the contract — the whole territory of the United States- — is unreasonable, and can not be enforced. Plaintiff seems to have appreciated this difficulty, and in its amended petition asks that the contract as to space be applied only to the states of Missouri and Illinois. Its contention is that while the contract as applied to the whole of the United States may be void, yet it may be applied to a ' particular part or parts of the territory of the Union and be held valid. This might be done, if the sixth clause of the contract had specifically mentioned the states of Missouri and Illinois and disjoined them from the territory of the United States as a whole, but it is not so written in the contract; the space mentioned in the contract is not divided, the parties did not choose to divide it, and what they did not do the court can not do for them, but must construe the contract as the parties made it; courts can not make contracts for parties, nor make that divisible which the parties have made indivisible. The space covered by the contract is all the territory of all the states and of all the territories of the \United States — not the territory of one, two or more of the states which the plaintiff might select. If a selection of ter — 17 — ritory has to be made to make valid the contract, then the defendant has as much right to make that selection as the plaintiff. To make such a selection it would be necessary for the parties to come together and make a new contract. "When this is done the plaintiff may have a contract that is enforcible. The present one is not, and we affirm the judgment. Judge Bond concurs; Judge Biggs dissents.