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ALABAMA BINDER & CHEMICAL CORPORATION v. PENNSYLVANIA INDUSTRIAL CHEMICAL CORPORATION (03/19/63)

March 19, 1963

ALABAMA BINDER & CHEMICAL CORPORATION
v.
PENNSYLVANIA INDUSTRIAL CHEMICAL CORPORATION, APPELLANT.



Appeal, No. 72, March T., 1963, from decree of Court of Common Pleas of Allegheny County, Jan. T., 1963, No. 1665, in equity, in case of Alabama Binder & Chemical Corporation v. Pennsylvania Industrial Chemical Corporation and Calvin H. O'Brien. Decree affirmed.

COUNSEL

Walter J. Blenko and Paul Kern Hirsch, with them Herbert B. Sachs, C. John Tillman, and Baskin, Sachs and Craig, and Hirsch, Truxall and Weise, for appellants.

Elliott W. Finkel, with him David Roth, Bernard Kaplan, and Kaplan, Finkel and Roth, for appellee.

Before Bell, C.j., Musmanno, Jones, Cohen, Eagen, O'brien and Roberts, JJ.

Author: Cohen

[ 410 Pa. Page 215]

OPINION BY MR. JUSTICE COHEN

This is an appeal from an order of the court below granting a preliminary injunction to enforce a restrictive employment contract and to prevent the disclosure of trade secrets. In reviewing the grant or denial of a preliminary injunction our familiar rule is to examine the record only to determine "if there were any apparently reasonable grounds for the action of the court below, and we will not further consider the merits of the case or pass upon the reasons for or against such action, unless it is plain that no such grounds existed or that the rules of law relied on are palpably wrong or clearly inapplicable." Lindenfelser v. Lindenfelser, 385 Pa. 342, 343-44, 123 A.2d 626, 627 (1956). (Emphasis supplied). Summit Township v. Fennell, 392 Pa. 313, 140 A.2d 789 (1958).

The issues before the court below are: (1) whether a restrictive employment covenant is reasonable under the facts of this case; (2) whether the complainant has standing to enforce this covenant, as well as a covenant not to disclose trade secrets, where to complainant was not a party to the original contracts; and (3) whether the agreement not to disclose trade secrets contravenes the policy of the patent laws. Keeping in

[ 410 Pa. Page 216]

    mind our narrow scope of review, we shall examine the factual context of the instant controversy.

Appellant, Calvin H. O'Brien (O'Brien) has been associated with the floor tile business for most of his adult life. In 1949, O'Brien and National Southern Products Corporation (National) organized the Alabama Binder & Chemical Corporation (Alabama).*fn1 This corporation was to be the sales corporation for plasticizers and binders which were to be manufactured by National.*fn2 Under the 1949 arrangement, O'Brien was named president of the newly formed corporation with National owning 50% of the stock of Alabama and O'Brien and his wife owning the other 50%. From the time Alabama was formed until his employment terminated, O'Brien was the entire sales department of Alabama, selling to the various national manufacturers of floor tile.*fn3 In addition to this sales function, O'Brien was instrumental in developing formulas for different types of binders and plasticizers manufactured by National.*fn4

[ 410 Pa. Page 217]

This arrangement proved lucrative for all parties concerned. In June of 1957, O'Brien and his wife entered into two written agreements with Alabama. One of the agreements provided for the sale to Alabama of the stock owned by the O'Briens in return for a certain percentage of Alabama's gross profits to be computed over a five-year period in an amount not to exceed $500,000. This agreement also provided that all formulas and technical information in the possession of O'Brien and Alabama at the time of the agreement, and all formulas and technical information thereafter developed and acquired by O'Brien relating to the products sold through ...


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