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UNITED AIRCRAFT CORP. v. BOREEN

April 23, 1968

UNITED AIRCRAFT CORPORATION
v.
Henry I. BOREEN, Richard H. Moyer, John H. Kindregan, Achille Pollino, Alvin Atteson, Stephen Markoe, Louis N. Pomante and Eugene C. Conser



The opinion of the court was delivered by: LORD, III

 INTRODUCTION

 The defendants are Henry I. Boreen, Richard H. Moyer, John H. Kindregan, Achille Pollino, Alvin Atteson, Stephen Markoe, Louis N. Pomante, and Eugene Conser, all former employees of the plaintiff. *fn1"

 The cases were consolidated for trial by agreement of the parties.

 Jurisdiction is based on diversity of citizenship. 28 U.S.C. § 1332.

 FINDINGS OF FACT

 1. Plaintiff is a Delaware corporation with its main office and principal place of business in Connecticut. Each of the defendants resides in and is a citizen of Pennsylvania. The amount in controversy in each cause of action in each case exceeds $10,000 exclusive of interest and costs.

 2. Definitions:

 (a) Telemetry : the engineering science of transmitting information from an inaccessible location to an accessible location. The components of a telemetry system are a transducer, the sensing device which picks up information at the inaccessible location; the transmitter, which sends the information from the inaccessible place to the accessible place; and the receiver, which receives the information at the accessible place. In order to transmit these impulses or information, it is necessary to have an electrical circuit which consists basically of three parts: a tube or transistor, which provides the flow of electrons; a resistor, which impedes the flow of electrons; and a capacitor, which stores electrons.

 (b) Transistor: a semiconductor device which performs the function of amplification or switching.

 (c) Resistor: an electronic device which impedes the flow of electrons.

 (d) Capacitor: an electronic device which filters or stores electrons.

 (e) Diode: a semiconductor device that permits the flow of electrical current more readily in one direction than in the opposite direction (rectifying).

 (f) Semiconductor: one of a class of materials that falls in between a conductor and an insulator in regard to conductivity: e.g., silicon or germanium.

 (g) Solid-State: the name given to semiconductor devices by virtue of the fact that the semiconductor material in which the electronic action occurs is generally in a crystalline or solid form.

 (h) Integrated Circuit: a combination of inter-connected electronic devices that performs a useful circuit function.

 (i) Thick-film Technique: a method of building integrated circuits whereby the passive components are made by applying a film of material in the form of inks of the thickness of approximately 1/1000" onto a ceramic base.

 (j) Thin-film Technique: a method of building integrated circuits whereby the passive elements are made by sputtering or evaporating onto a silicon substrate a film of approximately 1/1,000,000."

 (k) Hybrid or Multichip Circuit: a circuit using the thick- or thin-film technology and hence composed of different kinds of materials on one substrate as opposed to a monolithic integrated circuit which is made of a single piece of silicon.

 (l) Tempistor: a temperature-sensitive resistor used as a temperature gauge.

 (m) Silicon Planar Technique: a method of making integrated circuits and components using photolithography First, the circuit must be designed. The components are assigned values and a schematic is prepared. The schematic is translated into a geometric layout. This pattern is cut out of a red plastic sheet (Rubylith) which is opaque to photographic light. The Rubyliths are reduced by about 400 times to produce glass masks. The medium used is a wafer of pure silicon on which a coating of silicon dioxide is formed in order to protect it from unwanted impurities. Five different glass masks are used to produce an integrated circuit. The first three masks are used with a photolithographic technique to etch out patterns on the oxide coating. After each etching the wafer is then placed in a diffusion furnace at about 1,000 degrees C. and various gases are used to introduce impurities for diffusion into the wafer. The last two masks locate the interconnection or wiring of the various components into a circuit. Testing or probing follows. After as many as 500 circuits are completed on the wafer they are separated into individual dice and packaged. A die is fastened mechanically and electrically to the bottom of the package. This is called die-bonding. The mineralization on the circuit is connected to the package leads by the use of small gold wires. This is called wire-bonding. Finally, the integrated circuit is hermetically sealed. Components may be formed using the same technology. A transistor, for example, may be formed in the following manner: a P-type impurity (positively charged: a deficiency of electrons) is etched onto the N-type pure silicon (negatively charged: an excess of electrons). Thereafter, an additional silicon dioxide protective coating may be formed over the wafer. Over the P-type impurity the oxide coating may be cut out to allow the P-type impurity to be etched with an N-type impurity. In this way an NPN transistor may be formed.

 (n) MOS: metal oxide semiconductor, another way of using the planar process to build devices and circuits.

 (o) Darlington: a Darlington is an electronic device used for amplification. Essentially, it employs two interconnected transistors. While we find it unnecessary for our decision, we conclude that plaintiff has not sustained its burden of proof on its assertion that the Darlington is an integrated circuit. *fn2"

 3. Vector Manufacturing Company, Inc. ("VMC") was incorporated in Pennsylvania on January 24, 1956. Originally a mechanical engineering firm, VMC gradually entered the business of manufacturing and selling telemetry products until, by June of 1960, it was engaged primarily in the telemetry business. In January, 1958, VMC employed Boreen, an electrical engineer specializing in telemetry. As a manufacturer of telemetry products and systems, especially aerospace telemetry, VMC continually sought to reduce the size of the electronic circuits which it used as components. This work began with the use of miniaturized vacuum tubes, the design of a solid-state diode beginning in 1960, and continued with the design and fabrication of highly sophisticated solid-state electronic devices. In 1961, VMC established a microminiaturization laboratory which became known as the Microlab or Solid-State Laboratory.

 4. In 1963 VMC was faced with a shortage of capital for expansion purposes and therefore sought acquisition by a larger corporation. To this end it began negotiations with United Aircraft Corporation. On December 30, 1963, VMC and UAC entered into a Plan and Agreement of Reorganization ("Plan"), which provided, inter alia, for the transfer to UAC "of substantially all the assets, properties, business and goodwill" of VMC "as a going concern."

 5. Pursuant to P8.14 of the Plan, Henry Boreen, then Vice President and Director of Research and Development, as well as the two other principals of VMC, Stanley Wulc, President and General Manager, and Dr. Emanuel Wolff, Treasurer, executed the following agreement not to compete, on February 14, 1964:

 
"VECTOR MANUFACTURING COMPANY, INC.
 
Southhampton, Pennsylvania
 
February 14, 1964
 
"United Aircraft Corporation
 
400 Main Street
 
East Hartford, Connecticut, 06108
 
"Dear Sirs:
 
"In order to induce you to purchase the assets of Vector Manufacturing Company, Inc. ("Vector") pursuant to the provisions of the Plan and Agreement of Reorganization dated December 30, 1963, between you and Vector and in consideration of your agreement to employ the undersigned, the undersigned, being an officer, director and one of the principal stockholders of Vector, hereby agrees that, for a period of five years from the date hereof or from the date the employment of the undersigned by you shall cease, whichever is later, the undersigned will not, without your prior written consent, directly or indirectly, on a full or part-time basis, engage in or perform any services as a principal, partner, substantial stockholder, trustee, officer, director, employee, consultant or otherwise in connection with the manufacture or sale of any product competitive with the products being manufactured or under development by Vector on the date hereof or which at the time of the termination of the undersigned's employment with you are being manufactured or developed by that portion of your business being carried on with substantially the assets acquired by you pursuant to the said Plan and Agreement of Reorganization.
 
Very truly yours,
 
VECTOR MANUFACTURING CO., INC.
 
/s/ Henry I. Boreen
 
Henry I. Boreen"

 6. Immediately following the acquisition of VMC by UAC Boreen was employed as Chief Engineer of what was then called the Vector Department of the Norden Division of UAC and Assistant Secretary of UAC at a salary of $28,000 a year.

 7. On May 1, 1965, when the Vector Department became the Vector Division of UAC, Boreen was promoted to Vice-President of the Vector Division, in which capacity he served until he left Vector on March 1, 1957.

 8. During his employment with UAC, Boreen was employed at will.

 9. The Vector Department, and later the Vector Division, carried on and expanded the business of VMC. The assets acquired from VMC remained in the Vector Division on March 1, 1967, the date that Boreen terminated his employment with UAC.

 10. The VMC assets which UAC purchased pursuant to the Plan included equipment worth approximately $1,500,000 of which $1,400,000 was being used on March 1, 1967, in the main plant in the production of conventional telemetry equipment and $100,000 worth was being used in the Microlab to build solid-state devices for use in telemetry applications and for sale on the market as discrete devices. As of March 1, 1967, this $100,000 worth of VMC equipment constituted 10% of the value of the total equipment used in the Microlab.

 11. On February 14, 1964, VMC was manufacturing and had under development a variety of solid-state devices, including Darlingtons, several kinds of transistors, resistors, capacitors, diodes, tempistors, and hybrid thick-film integrated circuits.

 12. To this date VMC had never marketed any solid-state devices save in conjunction with its telemetry business.

 13. Several months before the acquisition, however, VMC had begun to negotiate with Jack Kindregan in an attempt to hire him as Sales Manager for solid-state devices, in regard to sales not connected with VMC's telemetry business. Kindregan agreed before the acquisition to accept the position with VMC, but did not actually come aboard until February 26, 1964.

 14. In September, 1965, Vector Division employed defendant Achille Pollino as Production Manager for Solid-State Components.

 15. On September 27 of that year, defendant Eugene Conser was hired for work in linear integrated circuits.

 16. On March 14, 1966, Jack Dale was hired to work on hybrid circuits.

 17. Tom Sikina was hired on August 15, 1966, as head of research and development.

 18. On October 24, 1966, defendant Stephen Markoe came to Vector to work in thin-film circuitry.

 19. Kindregan had established a sales department for solid-state devices by June of 1964 and by that time had produced the first sales brochure. The first sale to an outside customer was made on June 4, 1964: diode wafers without metallization to IT&T Semi-Conductor, Inc.

 20. On March 1, 1967, the products manufactured by the Vector Division included integrated circuits of the following varieties: monolithic, multiple-chip, thin-film, thick-film or hybrid, and metal oxide silicon field effect ("MOSFET"); various kinds of transistors; and discrete devices such as tempistors, silicon dioxide capacitors, resistors and capacitors, and several kinds of diodes. Vector's products included custom as well as standard devices.

 21. The genesis of the facts which gave rise to the present law suit began on March 1, 1967 when Boreen left the employ of the Vector Division of UAC. Several days afterward, Boreen contacted Richard Moyer, the Manager of the Microlab, and introduced to him the idea of forming a company to manufacture and sell solid-state devices. Moyer at that time was dissatisfied with his position at Vector for several reasons and he expressed an interest in Boreen's idea, contingent on Boreen's raising sufficient capital. The two men discussed the cost of purchasing the necessary equipment.

 22. During the third week of March, 1967, at the time of the Institute of Electrical and Electronic Engineers ("IEEE") Show in New York, Moyer began discussing the possibility of entering into a business venture involving Boreen, with other employes of the Microlab. These included the defendants Pomante, Atteson, Pollino, Conser, and Markoe, as well as Jack Dale.

 23. Moyer attended the show as a representative of UAC's Vector Division and spoke with several of the defendants on his way there as well as at the show itself on March 21. Boreen and Moyer also looked at the equipment displayed at the IEEE Show.

 24. Among those Moyer contacted at the Show was Harry Hellman, engineer for Goodyear Aerospace Company, to whom he offered an opportunity to join in forming a new company.

 25. Several of the defendants were dissatisfied with the situation at Vector which resulted from decisions taken by its management. These included Moyer, Kindregan, Pollino, and Markoe.

 26. On the evening of April 3, 1967, a meeting was held at Boreen's home which was attended by Boreen, Moyer, Pomante, Atteson, Conser, Markoe, and Pollino, at which time Boreen unfolded his ideas about the formation of the new company.

 27. Boreen showed those attending the restrictive covenant he had given to UAC pursuant to the ...


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