Televation Telecommunication Systems, Inc. v. Saindon
169 Ill. App. 3d 8, 119 Ill. Dec. 500, 522 N.E.2d 1359 (1988)
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Rule of Law:
An employer's confidential schematics for custom-designed electronic circuitry can constitute a protectable trade secret, even if not highly novel, if it represents a significant investment and would be difficult and time-consuming for competitors to independently develop or reverse engineer, and the employer takes reasonable measures to guard its secrecy. An injunction against misappropriation should last no longer than the time required for a legitimate competitor to lawfully duplicate the product.
Facts:
- John Regan and Robert Groetzenbach established Televation Telecommunication Systems, Inc. (Televation) in 1978 to develop electronic products that would add features to existing in-house phone systems (PBX).
- Televation developed several products, including the PEP 100 automatic wake-up system (over two years), the Reveille system (one year), and the Echodyne recorded announcement system (first sold late 1983).
- Each of Televation’s products contains both analog and digital electronic circuitry, with the analog circuitry, designed exclusively by John Regan, being the subject of this dispute.
- William Saindon worked as Televation's production and quality control manager from March 1983 until April 1984, during which time he had complete access to the schematics, or blueprints, of Televation’s electronic circuitry.
- In October 1984, Saindon collaborated with Timothy Rex and Janusz Dobrowolski to establish Digital Systems Research, Inc. (Digital).
- From October 1984 until April 1987, Digital developed its own automatic wake-up system, the Prelude, whose analog circuitry is virtually identical to analog circuitry designed by Regan and contained in Televation’s products, using information Saindon remembered from his employment.
- Regan and Groetzenbach became aware of the Prelude in early 1987 when their supplier, Magnetic Components, Inc., informed them that Digital had attempted to order a transformer specially designed by Regan and manufactured by Magnetic only for Televation.
- Televation kept its schematics in an unlocked file cabinet in an employee work area, informed its few employees (including Saindon) that schematics were confidential and not to leave the building, and stamped documents provided to third parties (like draftsmen or manufacturers) with "proprietary" and Televation's name.
Procedural Posture:
- Televation Telecommunication Systems, Inc. (Televation) filed suit against William Saindon, Timothy Rex, and Digital Systems Research, Inc. in trial court on April 2, 1987, alleging misappropriation of trade secrets and seeking injunctive relief, damages, and an accounting.
- The trial court expedited the trial on the claim for injunctive relief.
- On September 9, 1987, the trial court entered a "preliminary and permanent injunction" prohibiting defendants from manufacturing or selling their product or otherwise using or disclosing Televation’s trade secrets for a period of three years.
- Defendants (William Saindon, Timothy Rex, and Digital Systems Research, Inc.) took an interlocutory appeal from that order to the Illinois Appellate Court.
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Issue:
Does an employer's custom-designed electronic circuitry, for which an ex-employee uses memorized schematics to create a competing product, qualify as a protectable trade secret, and is a three-year injunction prohibiting its use an appropriate remedy, even if the employer's security measures were not "stringent"?
Opinions:
Majority - Justice Unverzagt
Yes, Televation's analog circuitry schematics qualify as protectable trade secrets, and a three-year injunction prohibiting their use is an appropriate remedy given the circumstances. The trial court's finding that the schematics and circuitry were trade secrets was not against the manifest weight of the evidence. Regan spent approximately five years designing, developing, and modifying the intricate, custom-designed analog circuitry, which was not readily available or known outside Televation's business. While component parts were common, the specific arrangement, interfacing, and assigned values were unique, and expert testimony indicated that independent development or reverse engineering would be time-consuming, taking a skilled competitor 9 months to 2 years for certain analog circuits, and up to five years for a complete composite product like Prelude. The court emphasized that it is irrelevant whether Saindon took physical copies or memorized the schematics, as an employee "may not take with him confidential particularized plans or processes developed by his employer" that are unknown to others in the industry and give the employer a competitive advantage, citing Schulenburg v. Signatrol, Inc. The mere possibility of reverse engineering does not negate trade secret status if the process is time-consuming, as established in ILG Industries, Inc. v. Scott. The court also found Televation's security measures, while not "stringent," to be reasonable and sufficient; schematics were available only to a few employees who needed them, employees were informed of their confidentiality, and Saindon admitted knowing the materials were confidential. The case of Junkunc v. S. J. Advanced Technology & Manufacturing Corp. was distinguished because Saindon's knowledge derived exclusively from his employment. The three-year injunction period was deemed appropriate because it aligned with the principle from Schulenburg and Brunswick Corp. v. Outboard Marine Corp. that an injunction should last no longer than the time required for a legitimate competitor to lawfully duplicate the product. Given the expert estimates for lawful duplication ranging from 9 months to 5 years for various parts or the whole product, the three-year injunction was supported by the evidence, preventing Saindon from benefiting from his wrongdoing without placing an undue burden on competition. The injunction order was also found sufficiently specific by limiting its scope to Televation's specific analog and interfacing circuitry and its prohibition against products "based on" those secrets, consistent with ILG Industries.
Analysis:
This case significantly clarifies the scope of trade secret protection in Illinois, particularly against former employees. It establishes that detailed, custom-designed circuitry, even if composed of common parts, can qualify as a trade secret if its specific configuration represents substantial developmental effort and provides a competitive advantage. The ruling reinforces that misappropriation can occur through memorization, not just physical theft, and that an employer's security measures need only be reasonable, not "stringent," especially with clear communication to employees. Crucially, it provides a clear framework for setting the duration of injunctions in trade secret cases, linking it directly to the time required for independent, lawful duplication to ensure the wrongdoer gains no unfair head start.
